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2023
Annual
Report
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Financials
Table of Contents
1
ONWARD at a Glance
5
2
Message from the
Chairman & CEO
9
3
Achievements
in 2023
15
4
2024 Outlook
27
5
Overview
31
6
Culture at ONWARD
85
7
Privacy & Data Governance
93
8
Sustainability
97
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Operational Review
103
10
Financial Review
113
11
Governance
121
12
Risk-Management
& Control
143
13
Investor Relations
179
14
Report of the Non-Executive
Directors
185
In this Annual Report ‘ONWARD®’, ‘the Company’, ‘the
Group’, ‘we’, ‘us’ and ‘our’ are used interchangeably to refer
to ONWARD Medical N.V. and/or any of its subsidiaries, in
general or where no useful purpose is served by identifying the
particular company.
15
Board of Directors’
Statements
195
16
Remuneration Report
199
17
Consolidated Financial
Statements
217
18
Notes to the Consolidated
Financial Statements
233
19
Company Financial
Statements
297
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Other information
317
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ONWARD
at a Glance
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Founded in 2015
108 employees
1
HQ in Eindhoven, the Netherlands
Science and Engineering Center in Lausanne, Switzerland
US office in Boston, Massachusetts
IPO 2021, Euronext Brussels and Amsterdam; EUR 150M+
raised since inception
1
Technology: 2 purpose-built neuromodulation platforms
that stimulate the spinal cord via external (ARC
EX
®
) or
implantable (ARC
IM
®
) technologies; ARC
IM
is also being
studied in combination with a brain-computer interface
(BCI) called ARC
BCITM
ONWARD
at a Glance
Innovation: 10 US FDA Breakthrough Device Designations
and 240+ issued patents
2
Clinical validation: One pivotal trial completed with
positive top-line results reported for ARC
EX
; positive
interim outcomes also reported for ARC
IM
blood pressure
regulation indication
Market opportunity: Large total available market (EUR
19B+) with limited competition; strategic relationship with
Christopher & Dana Reeve Foundation
Commercialization: Launch and sale of first commercial
product expected in the US in the second half of 2024;
deep pipeline; clear reimbursement pathway
1
As of 31 December 2023
2
Issued patents include EP country validations
1
Message from
the Chairman
& CEO
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Dear Shareholders, Colleagues, Partners, and Collaborators,
Our vision is that empowered by movement, people with spinal cord injury (SCI) will
enjoy life in every way that matters to them.
Our team is pursuing this vision with urgency and determination, developing our
investigational technology platforms with the intent to commercialize and make our
solutions broadly available starting in the second half of 2024 in the United States
and thereafter in Europe. Though our current focus is the US and Europe, we hope to
eventually expand globally to positively impact the lives of the 7,000,000 people
worldwide living with spinal cord injury.
ONWARD is a pioneer and a leader in our field. We have been awarded 10 US Food
and Drug Administration (FDA) Breakthrough Device Designations across our two
ARC Therapy™ technology platforms. These awards recognize the innovative nature
of our work and its potential to address large unmet needs. The intellectual property
underlying these innovations was invented by the talented ONWARD engineering team,
while other patents have been exclusively licensed from top neuroscience research
universities around the world.
We are aided in the pursuit of our mission by our many strong relationships with global
SCI advocacy groups, such as the Christopher and Dana Reeve Foundation in the US.
2023 was an important and eventful year for ONWARD, filled with achievements and
milestones across our range of activities:
Message from the
Chairman & CEO
•
We continued to advance our development programs, validated by publications in
leading peer-reviewed journals and fueled by grant awards to support our progress
in developing therapies for restoring upper and lower limb mobility, improving blood
pressure regulation, and exploring the use of brain-computer interface technology to
augment ARC Therapy.
•
We made excellent progress with our implantable spinal cord stimulation platform,
ARC
IM
, announcing the first-in-human use of our ARC
IM
Lead and completing
development of the ARC
IM
Neurostimulator in preparation for our pivotal trial to
evaluate ARC
IM
Therapy for regulating blood pressure after SCI. This global trial is
called
Empower BP and is planned to start in late 2024.
•
In May, the journal
Nature
published results of our 2021 feasibility study pairing a brain-
computer interface (BCI) with our ARC
IM
Therapy, highlighting the first time ever that
a paralyzed human regained thought-driven control over their lower limbs, including
when walking. Later in 2023, we announced the successful first-in-human use of ARC
IM
Therapy paired with a BCI to restore thought-driven movement of the upper extremities.
We call this BCI-enabled therapy, ARC
BCI
.
•
The prestigious journal
Nature Medicine
also published an inspiring account of the first
person living with Parkinson’s disease to receive ARC
IM
Therapy, resulting in his ability
to walk without the previously noticeable gait interruptions.
2
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•
We released additional positive results from the Up-LIFT pivotal study that investigated
ARC
EX
Therapy to improve upper extremity strength and function after SCI. Our
clinical
partners presented these results at several prestigious conferences, including
the
American Academy of Neurology Meeting, the Paralyzed Veterans of America
Conference, and the International Spinal Cord Society Scientific Meeting.
•
Despite our many 2023 achievements, one disappointment was the delay in our
expected US launch of the ARC
EX
System. We postponed this planned launch in order
to
update the device’s printed circuit board assembly. The launch of the ARC
EX
System
is
now on track for the second half of 2024. In fact, we submitted the De Novo
application
to the FDA in late March 2024 to gain authorization to market the device in the US. We
intend to hire a field sales organization to align with the 2H 2024 launch date.
•
We added 50+ new patents to our portfolio in 2023, bringing our total number of issued
patents to more than 240 worldwide.
As we conveyed last year, it is a privilege to lead this company with its many wonderful
employees, research collaborators, and business partners. Our work is important and
meaningful, and together we are focused on creating sustainable long-term value
,
while
positively impacting the lives of people with SCI and those who care for them.
We are proud of our many achievements in 2023 and we have an ambitious set of goals for
2024 and beyond. Please sign up for updates on our website or follow ONWARD on social
media so we can keep you informed of our progress throughout the year.
Warm regards,
Jan Øhrstrøm & Dave Marver
Dave Marver
CEO
Jan Øhrstrøm
Chairman
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Achievements
in
2023
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Achievements in 2023
Innovation, Clinical, and Regulatory Developments
(see Operational Review for additional details)
Together with research partners at École Polytechnique Fédérale de Lausanne (EPFL),
Lausanne University Hospital (CHUV), and.NeuroRestore, ONWARD continued to make strong
progress in our quest to develop therapies to help people with SCI and movement disabilities
such as Parkinson’s disease. The past year’s achievements include:
•
At the American Academy of Neurology Annual Meeting, neurosurgeon Dr. James
Guest of the University of Miami and the Miami Project to Cure Paralysis shared that in
addition to meeting all primary safety and effectiveness endpoints, the Up-LIFT pivotal
(safety and effectiveness) study demonstrated that 72% of participants responded to
ARC
EX
Therapy
1
.
•
Nature
reported on the progress of a 2021 feasibility study pairing ARC
IM
Therapy with a
brain-computer interface (BCI) for the first time, which resulted in an individual gaining
thought-driven, augmented control over when and how he moved his paralyzed legs.
ONWARD also completed the successful first-in-human use of an implanted BCI paired
with ARC
IM
Therapy to help a person with SCI recover thought-driven movement in their
arms and hands.
•
We completed the successful first-in-human use of our ARC
IM
Lead, designed to
deliver targeted ARC Therapy to the area of the injured spine responsible for a specific
function, such as blood pressure regulation.
•
Nature Medicine
reported on the first-in-human use of ARC
IM
Therapy to address gait
challenges related to Parkinson’s disease.
•
We were awarded five new Breakthrough Device Designations (BDDs) by the US Food &
Drug Administration for our ARC Therapy platforms, bringing ONWARD’s total BDDs to
9 at the end of 2023. A 10th BDD was added for ARC
BCI
in February 2024.
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Intellectual Property
•
ONWARD added 50+ patents to its formidable IP portfolio. The IP portfolio now totals
more than 240+ issued patents worldwide.
Commercial
•
In September, we announced a partnership with Lovell Government Services (Lovell),
a Service-Disabled Veteran-Owned Small Business (SDVOSB). Lovell is a government
vendor and third-party logistics provider partnering with more than 100 US healthcare
providers. The two-year distribution agreement gives ONWARD contract access to the
US Veterans Health Administration, the world’s largest healthcare system providing
SCI care, and the US Department of Defense Military Health System, the world’s largest
military healthcare provider.
Corporate
We continued to enhance our organizational capabilities and augment our leadership
team in preparation for commercialization of our initial therapy, expected in the second
half of 2024. We also enhanced ONWARD’s visibility in the financial markets:
•
In Q1, we strengthened our leadership team, appointing Erika Ross Ellison as Vice
President, Global Clinical, Regulatory, and Quality, and Sarah Moore as Vice President,
Global Marketing. Erika joined ONWARD from Abbott Neuromodulation, where
she was Director, Global Clinical & Applied Research, and has extensive previous
experience in bringing both Class II and III neuromodulation therapies to market.
Sarah came to ONWARD from Nevro, an implantable neuromodulation company, and
has more than 20 years of experience in new product development and commercial
marketing in medical devices, including at Johnson & Johnson.
•
In Q3, Robert Odell joined ONWARD as Vice President of Operations. Robert was
formerly President and Chief Operating Officer of Cardiac Insight, Inc., a successful
startup that created and introduced cardiac monitoring technology. Prior to that, he
served as COO of Cardiac Science Corporation, a publicly traded manufacturer of
Class II and Class III medical devices. He brings to ONWARD decades of technology
and leadership experience in the medical device industry.
•
In Q3, Lara Smith Weber stepped down as Chief Financial Officer (CFO) to pursue a
new opportunity in the Boston area where she resides. Khaled Bahi joined ONWARD
as Interim CFO. Previously, Khaled served as CFO of Lausanne-based Symetis,
acquired by Boston Scientific in 2017 for USD 435 million, and Paris-based Stilla
Technologies. He was also a finance leader with Fresenius Medical Care in Europe,
Latin America, Middle East, and Africa. Khaled brings more than 20 years of finance
experience in the industry.
•
In April, Bryan, Garnier & Co, a leading investment bank focused on growth companies,
reinitiated research coverage of ONWARD.
1
A responder was defined as meeting or exceeding the minimally important difference criteria for at least one strength outcome and
at least one functional performance outcome.
3
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2024
Outlook
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Innovation, Clinical, and Regulatory
•
ONWARD submitted a De Novo application for FDA clearance for the ARC
EX
S
ystem in
late March 2024, with an anticipated marketing authorization to commercialize the
platform in the US in the second half of 2024. We also aim to apply for CE mark and
European authorization in 2025.
•
Based on positive feedback from potential customers on the value of the ARC
EX
System, expected to be the first-ever spinal cord stimulation therapy to improve hand
and arm function after SCI, we anticipate a list price of USD 30,000. In addition, we
expect to supplement revenue by offering tiered service packages.
•
ONWARD expects to announce detailed results from its Up-LIFT pivotal (
safety and
effectiveness
)
study in 2024, concurrent with publication of the study in a major
scientific journal.
We
have already announced that the study met both primary safety
and effectiveness
endpoints and that 72% of participants responded to ARC
EX
Therapy. A responder was
defined as meeting or exceeding the minimally important
difference criteria for at
least one strength outcome and at least one functional
performance outcome.
We intend to present the Up-LIFT findings and additional insights in several podium
presentations to support study investigators in peer-reviewed publications in 2024.
•
ONWARD plans to apply for FDA Investigational Device Exemption approval and
aims
to begin its global pivotal trial for ARC
IM
, called Empower BP, in the second half
of
2024. Empower BP
is designed
to provide the necessary evidence to ultimately submit
a pre-market approval (PMA) application to the FDA and other global regulatory
bodies.
2024 Outlook
•
We intend to gain additional clinical data and experience with our implantable ARC
IM
System in 2024, with several implants planned with support from the Michael J. Fox
Foundation for Parkinson’s Research and several ARC
IM
System implants planned in
combination with an implanted brain-computer interface (BCI) with support from the
European Innovation Council. This combined system is called ARC
BCI
.
Corporate
•
At year end 2023, we anticipated our cash position would fuel operations through
the end of 2024. In March 2024, we completed a EUR 20M equity financing that
strengthened our cash position to support investments in product development, clinical
trials, operational capabilities, and commercial capabilities. We will continue to pursue
opportunities to further strengthen our cash position.
Forward-looking information / statements
This document contains certain forward-looking statements with respect to the financial condition, results
of operations and business of ONWARD and certain of our plans and objectives with respect to these items.
In particular, the words “expect”, “anticipate”, “estimate”, “may”, “should”, “could”, “would”, “believe”, “outlook”,
“potential”, “will”, “planned”, “pipeline”, “seek” and similar expressions are intended to identify forward-looking
statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to events
and depend on circumstances that will occur in the future.
Actual results may differ materially from those expressed in these forward-looking statements, and you should
not place undue reliance on them. For a discussion of factors that could cause future results to differ from such
forward-looking statements, see also the Risk Management and Control section of this Annual Report. For this
reason, we can offer no assurances that the forward-looking statements published here will prove correct at a
future date, and ONWARD assumes no duty to update any such forward-looking statements.
4
Overview
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Overview
5
The Case for Innovative Therapies
Seven million people worldwide have a spinal cord injury (SCI)
1
, and the annual global
incidence of new injuries exceeds 768,000. In the US and Europe alone, approximately
650,000 people live with SCI, and the annual incidence of new cases is about 50,000
(31,800 in Europe and 18,000 in the US).
While most people associate SCI with paralysis and loss of sensation, there are often other
accompanying challenges such as infection, incontinence, pressure sores, poor blood
pressure regulation, and loss of sexual function. As a result, the quality of life following
spinal cord injury can be quite poor for the injured and their caregivers. SCI is also an
expensive condition, with high losses in productivity and healthcare expenditures. The
average lifetime cost to support a person with a severe SCI can exceed USD 5M. Injuries
to the spinal cord occur primarily as a result of accidents and falls and disproportionately
affect young men.
While conventional rehabilitation provides important benefits, most people reach a
plateau in their progress after three to six months. Thereafter, many of those injured face
decades of continuing challenges, declining quality of life, and dependence on others.
ONWARD seeks to solve this unmet need by delivering durable therapies to improve
strength, function, and independence, including for those injured many years ago.
1 Kumar et al. 2018, Traumatic Spinal Injury: Global Epidemiology and Worldwide Volume (traumatic spinal injury is broader than
traumatic spinal cord injury).
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A large unmet medical need
US
Prevalence
Incidence
302,000
1
18,000
1
1
2022 NSCISC Annual Statistical Report Complete Public Version
2
European prevalence calculated by annual Incidence* 25 years of additional lifetime expectancy
3
Kumar et al. 2018, Traumatic Spinal Injury: Global Epidemiology and Worldwide Volume
(traumatic spinal injury is broader than traumatic spinal cord injury).
Market
Europe
Prevalence
Incidence
352,000
2
31,800
3
Overview
5
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Damage to the spinal cord
resulting in loss of function
1
2022 NSCISC Annual Statistical Report Complete Public Version
2
NSCISC Traumatic Spinal Cord Injury Facts and Figures at a Glance (2023 SCI Data Sheet)
3
Global News Wire – Vantage Market Research (November 2023)
•
Nearly half of the injuries occur
between the ages of 16 and 30 years
1
•
79% of new SCI cases are male
2
Profile of SCI Patient
SCI Causes
Currently, the neuromodulation market
is comprised primarily of revenues
from spinal cord stimulation for pain
management and deep brain stimulation
for Parkinson’s disease, essential tremor,
dystonia, and epilepsy. The market is
forecast to
reach USD 14.8B by 2030 and
is expected to grow to exhibit a CAGR of
12.2% over the same period
3
.
SCI Causes &
Patient Profile
15.4% Violence
8.3% Sports
37.6% Vehicular
3.6% Medical, Surgical
31.5% Falls
3.6% Other
Overview
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Opportunity to create new segment, stimulating the
spinal cord for movement and autonomic functions
1
Sources: Global News Wire – Vantage Market Research, 2022; Fortune Business Insights Spinal Cord Stimulation Market; Harmsen,
Irene E et al. “Trends in Clinical Trials for Spinal Cord Stimulation.” Stereotactic and functional neurosurgery vol. 99, no. 2, 2021, pp.
123-134; Johnson, Rhaya L, and Christopher G Wilson. “A review of vagus nerve stimulation as a therapeutic intervention.” Journal of
inflammation research vol. 11, 2019, pp. 203-213; Mayo Clinic
$2.9B
8.0%CAGR
Spinal cord stimulation and Deep Brain Stimulation (DBS) are most well-developed
current applications
(2019)
(2020 - 2027)
Growth Trends:
•
Rising prevalence of neurological disorders
•
Increasing capital availability
•
Emergence of minimally invasive approaches
ONWARD is pioneering a new segment within neuromodulation, by stimulating the spinal
cord to restore mobility and autonomic functions in people with SCI, and potentially also
those with stroke and Parkinson’s disease.
$14.8B
12.5%CAGR
Neurostimulation has emerged as a dynamic field for treatment of a range of
clinical conditions
(2030E)
(2023 – 2030E)
1
1
Neurostimulation
Market
Emerging
Deep Brain Stimulation
Addiction, Autism, Chronic
pain, Cluster headache,
Dementia, Depression (major),
Huntington’s disease, MS,
Stroke, Tourette
syndromw
,
Traumatic brain injury, Sleep
disorder
Vagus Nerve Stimulation
Alzheimer’s, Anxiety,
Cardiovascular disease,
Diabetes, Lung injury, Obesity,
Pain management, Stroke
ONWARD Focus
Spinal Cord Stimulation
Bladder and bowel control,
Blood pressure control,
Mobility, Sexual function,
Spasticity, Trunk control,
Upper limb function
Sacral Nerve Stimulation
Interstitial cystitis
Deep Brain Stimulation
Depression, Dystonia,
Epilepsy, Essential tremor,
Obsessive-compulsive disorder,
Parkinson’s disease
FDA Approved
Hypoglossal Nerve Stimulation
Sleep apnea
Vagus Nerve Stimulation
Depression, Epilepsy
Spinal Cord Stimulation
Pain management
Sacral Nerve Stimulation
Fecal incontinence,
Urinary incontinence
Overview
5
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Our vision
Empowered by movement, people with spinal cord injury will enjoy life in every way
that matters to them.
Our team is pursuing this vision with urgency and determination, developing ARC
Therapy with the intent to commercialize and make our solutions broadly available
starting in the second half of 2024 in the United States
(US)
and then expanding into
other regions. Our goal is to reach as many of the 7,000,000 people worldwide with spinal
cord injury (SCI) as possible.
The work to complete and commercialize our ARC Therapy platforms is aided by 10 FDA
Breakthrough Device Designation awards (the tenth was awarded for our ARC
BCI
System
in February of 2024). While many of these innovations were created by our R&D team,
others have been exclusively licensed from top neuroscience research universities
around the world, underscoring ONWARD as a pioneer and a leader in our space.
We are supported in our pursuits by our many strong relationships with SCI advocacy
groups across the globe, such as the Christopher and Dana Reeve Foundation in the U
S
.
We are grateful for these partnerships and the insights they provide.
At ONWARD, our mission is to enable people with SCI to regain movement and other
bodily functions so they can enjoy life in every way that matters to them. We develop
and plan to commercialize therapies that address major challenges faced by people
with SCI, leveraging the Company’s ARC
IM
and ARC
EX
platforms to address a broad
spectrum of injury locations and impairment severities. While our primary objective is to
serve the needs of people with SCI, we envision that our therapies may also benefit other
populations with similar challenges, such as people who have suffered a stroke or who
have Parkinson’s disease or other neurodegenerative disorders. We also aim to reward
those who invest their capital, time, and ideas in ONWARD, while engaging in sustainable,
equitable, and inclusive business practices.
Our strategy
Our objective is to build an enduring, impactful, and successful medical device company
that creates sustainable long-term value and makes a meaningful difference in the lives of
people with SCI and those who care for them.
We are focused on the following priorities as we pursue this objective:
•
Short term (2024): Commercially launch our external ARC
EX
System, starting with
strength and function of the hands and arms as our first indication in the U
S
.
Begin our
Empower BP
pivotal clinical trial
to
evaluate
implantable ARC
IM
Therapy for regulating
blood pressure after SCI.
•
Medium term (2026): Commercially launch our implantable ARC
IM
System, starting with
improved blood pressure regulation as our first indication.
•
Long term (2026+): Expand labeling (new indications and populations) and platforms.
To execute our strategy;
•
We work with leading neuroscience researchers across the globe to identify
breakthrough therapies for people with SCI and other movement-related disorders for
which our therapies have shown promise.
•
We leverage our R&D, clinical, and regulatory capabilities to develop proprietary
technologies that are well suited to deliver our breakthrough therapies at scale, and we
protect these innovations with rigorous IP prosecution.
•
We plan to commercialize these breakthrough therapies in our target markets,
using a direct channel to SCI clinics with rehabilitation programs and hospitals with
neurosurgery expertise.
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Stages for the execution of our strategy
ARC Therapy
Product Development
Clinical Trials &
Regulatory Clearance
Commercialization
Research &
Pre-Clinical Development
Advanced Scientific and Clinical Research Network
ONWARD has relationships with leading academic research centers throughout the world.
Our primary relationship is with the ONWARD co-founders and their highly productive
laboratory at .NeuroRestore, a research initiative of CHUV and EPFL. .NeuroRestore
is led by Professor Grégoire Courtine and neurosurgeon Dr. Jocelyne Bloch. In 2014,
Professor Courtine and Dr. Bloch co-founded ONWARD’s predecessor entity alongside
other researchers in neuroscience and neurosurgery. Professor Courtine also serves as
ONWARD’s Chief Science Officer on a part-time basis.
Through its network of advanced research facilities in Switzerland, .NeuroRestore’s
research activities span basic science, preclinical research, and human proof-of-concept
studies. Several projects with potential for commercialization have already progressed to
the human proof-of-concept stage. ONWARD selects the most promising of these projects
to develop and commercialize, based primarily on clinical results and commercial viability.
Our ARC Therapy platforms can be leveraged for each of the indications with minor
software and firmware modifications.
The .NeuroRestore team has published extensively in some of the most prestigious
scientific journals. In 2023, they published groundbreaking research on the use of a brain-
computer interface (BCI) paired with ARC
IM
Therapy to enable a participant to walk with
augmented control o
f
his paralyzed legs. Researchers at .NeuroRestore also published a
pioneering study using ONWARD ARC
IM
Therapy to address gait challenges related to
Parkinson’s disease.
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Platform
Indication
FDA BDD
1
Pre-Clinical
Human PoC
Clinical Feasibility
2
Pivotal
ARC
EX
Upper Limb
ARC
IM
Blood Pressure
ARC
IM
Mobility / Second Indication
ARC
EX
Mobility
ARC
IM
Parkinson’s – Mobility
ARC
IM
Bladder
ARC
IM
BCI
Mobility
ARC
IM
BCI
Upper Limb
ARC
DBS
Mobility
Current Roadmap
Label Expansion
Platform Expansion
Short and medium term focus
Funded primarily through grants
and research partners
BDD Granted
2
9 indications under clinical or pre-clinical
evaluation, with 3 in current roadmap
Note: The company may modify the pipeline based on clinical progress and marketplace considerations
1
BDD = FDA Breakthrough Device Designation. ONWARD has been granted four additional BDDs for ARC
EX
Bladder, ARC
EX
Blood
Pressure, ARC
EX
Spasticity and ARC
IM
Spasticity
2
Includes both early feasibility (typically before device design finalized) and feasibility (near-final or final device design) studies
3
Funded by Christopher & Dana Reeve Foundation grant
Human PoC expected in 2024
3
Current Pipeline
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Current competition is standard of care:
3-6 months of rehab followed by costly
support for activities of daily life
•
Intellectual property
controlled by University of California, Los
Angeles (UCLA) and ONWARD
•
Limited
funding
raised to date
1
•
Academic
management teams
Similar Pre-Commercial Technologies
Note: For investigational use only
1
Less than $4M raised by Company A in private capital as of February 2024 (source: PitchBook); Company B’s total funding not
sufficiently material to be tracked by PitchBook
*Potential future competitors could include Medtronic, Abbott and/or Boston Scientific.
Competition
Potential future competition* from spinal cord stimulators for pain and other
existing indications
•
Currently
supporting academic research
with existing technology
•
Several years
required to reach parity with ONWARD and market a
competing technology
•
Likely to
enter space via M&A
, leveraging balance sheets
No Direct Competitors
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Technology, research, and medical expertise
across continuum of research stages
UNIFR – Fribourg
University of Fribourg
Pre-Clinical Center
CHUV – Lausanne
University Hospital of Lausanne #9
worldwide Newsweek magazine
Suva – Sion
Specialized Center for
Acute Spinal Cord Injury
EPFL – Geneva
More than 2,000 scientists
#1 Neuroscience hub in Europe
Network of Advanced
Research Facilities
Fribourg
Lausanne
Geneva
Sion
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Basic
Mechanisms
Preclinical
Therapy
Translation
Scale Up
Clinical
Proof of Concept
Commercial Engine
Therapy
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ARC Therapy: A breakthrough in neuromodulation technology
ONWARD ARC Therapy
is
targeted, programmed stimulation of the spinal cord
to restore movement,
function,
and
independence
in people with SCI.
It
can be delivered
by an implantable platform, called ARC
IM
, or an external, transcutaneous platform, called
ARC
EX
.
Spinal cord injury disrupts the brain-body connection
When the spinal cord is injured, communication between the brain and the parts of the
nervous system located beneath the lesion is interrupted, either completely or partially.
The person may lose all feeling or movement
1
– or both – in these areas. Functions and
organs controlled by the autonomic nervous system may also be affected, leading to
difficulty with breathing, swallowing, regulating blood pressure, sexual arousal, and bowel
and bladder function.
2,3
This disruption of the body-brain feedback loop can cause a
host of debilitating conditions. People with SCI at the thoracic or cervical level are most
affected by this loss of function.
Nevertheless, even in cases of complete SCI, some neural pathways in the spinal cord
remain intact but hypoactive. At present, rehabilitation approaches aim to mobilize these
latent nerve connections and promote regeneration through intensive physiotherapy.
Unfortunately, these activity-based therapies have limited benefits for people who
cannot produce movements voluntarily. Some symptoms and conditions can be managed
with medication, such as antispasmodics to reduce involuntary muscle contractions, or
with devices, such as catheters to facilitate urination. However, these solutions can be
cumbersome and carry the risk of harmful side effects.
There is an urgent need for more effective therapies that enable people with SCI to live
more independent, high-quality lives. This is where ONWARD ARC Therapy has the
potential to make a dramatic impact.
ARC Therapy activates intact nerve fibers with biomimetic stimulation
As detailed in the previous section, our ARC Therapy is based on pioneering research led
by Professor Courtine and Dr. Bloch over the last two decades to pinpoint the location of
neurons in the spinal cord responsible for triggering movement and function.
4
By delivering precisely timed and programmed electrical impulses to specific areas of
the spinal cord, ARC Therapy mimics the natural pattern of nerve signals sent by the
brain. When combined with voluntary efforts to move, this enables users to improve
motor control in the arms, legs,
5-7
or trunk,
8
making daily activities, like moving in and out
of a wheelchair, much easier. In addition, ARC Therapy has the potential to improve the
management of internal functions, such as regulation of blood pressure,
9
and improved
bowel and bladder control.
Most participants in clinical trials using ARC Therapy regain some degree of independent
movement, even when stimulation is switched off. ARC Therapy stimulates intact nerve
fibers responsible for carrying messages from the body back to the spinal cord (afferent
nerves), and “retrains” them to perform a different function, demonstrating the plasticity
of the nervous system.
1
A. S. Burns, R. J. Marino, A. E. Flanders, and H. Flett, “Chapter 3 - Clinical diagnosis and prognosis following spinal cord injury,” in
Handbook of Clinical Neurology, vol. 109, J. Verhaagen and J. W. McDonald, Eds. Elsevier, 2012, pp. 47–62. doi: 10.1016/B978-0-444-52137-
8.00003-6.
2
M. W. G. Brinkhof et al., “Health conditions in people with spinal cord injury: Contemporary evidence from a population-based
community survey in Switzerland,” Journal of Rehabilitation Medicine, vol. 48, no. 2, pp. 197–209, Feb. 2016, doi: 10.2340/16501977-2039
3
M. Walter and A. V. Krassioukov, “Autonomic Nervous System in Paralympic Athletes with Spinal Cord Injury,” Phys Med Rehabil Clin N
Am, vol. 29, no. 2, pp. 245–266, May 2018, doi: 10.1016/j.pmr.2018.01.001.
4
Kathe, C., Skinnider, M.A., Hutson, T.H. et al. The neurons that restore walking after paralysis. Nature 611, 540–547 (2022). https://doi.
org/10.1038/s41586-022-05385-7
5
F. B. Wagner et al., “Targeted neurotechnology restores walking in humans with spinal cord injury,” Nature, vol. 563, no. 7729, pp. 65–71,
Nov. 2018, doi: 10.1038/s41586-018-0649-2.
6
E. Formento et al., “Electrical spinal cord stimulation must preserve proprioception to enable locomotion in humans with spinal cord
injury.,” Nature neuroscience, pp. 1–49, 2018, doi: 10.1038/s41593-018-0262-6.
7
H. Lorach, G. Charvet, J. Bloch, and G. Courtine, “Brain–spine interfaces to reverse paralysis,” National Science Review, vol. 9, no. 10, p.
nwac009, Sep. 2022, doi: 10.1093/nsr/nwac009
8
A. Rowald et al., “Activity-dependent spinal cord neuromodulation rapidly restores trunk and leg motor functions after complete
paralysis,” Nat Med, pp. 1–12, Feb. 2022, doi: 10.1038/s41591-021-01663-5.
9
Squair, J.W., Gautier, M., Mahe, L. et al. Neuroprosthetic baroreflex controls haemodynamics after spinal cord injury. Nature 590,
308–314 (2021). https://doi.org/10.1038/s41586-020-03180-w
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Developing Two Platforms to Deliver ARC Therapy
ONWARD has developed two platforms to deliver targeted, programmable ARC Therapy
neurostimulation: a minimally-invasive implantable system, called ARC
IM
, and a non-
invasive, transcutaneous system, called ARC
EX
. In addition, the Company is developing
ARC
BCI
, which adds an implantable brain-computer interface (BCI) to its ARC
IM
platform.
ARC
EX
, ARC
IM
, and ARC
BCI
have all been awarded FDA Breakthrough Device Designation for
a range of indications.
Both platforms contain the same basic elements: an electrical pulse generator, electrodes
placed in proximity to the lesion on the spinal cord, and a programmer that enables
clinicians to set stimulation therapy parameters and users to control their therapy within
those parameters.
The two platforms share common components and have a similar user interface. This
optimizes our use of development resources while providing users with a consistent, easy-
to-use experience.
Implantable ARC
IM
ARC
IM
is currently targeted toward regulating blood pressure after SCI and improving
lower limb mobility. Other potential indications may be explored in the future, including
SCI-related bladder control, spasticity reduction, improved sexual function, and upper limb
mobility, each enabled by further development of our proprietary lead portfolio.
Implantable
ARC
IM
has four components:
1
•
A
Lead
implanted near the spinal cord in the area of injury corresponding to the
movement or function targeted by the therapy. We are currently developing a family
of leads that are optimized for precise placement in different areas of the spinal cord,
both in terms of their shape and the configuration of the electrodes.
•
A
Neurostimulator
implanted under the skin and connected to the lead through a wire.
When switched on, this device delivers precisely sequenced and calibrated bursts of
electricity to specific electrodes in the lead.
•
An external
Hub
that connects wirelessly to the Neurostimulator to turn therapy on or
off, set or update the frequency and intensity of the impulses, recharge the device, and
integrate external sensors via wireless connections and sensor-specific algorithms.
The hub is worn on a belt around the waist..
•
Dedicated apps for efficiency and ease of use.
Apps are available for both clinicians
and users of ARC Therapy. Clinicians use the professional app to create and adjust
stimulation programs using a tablet connected wirelessly to the Hub, and users employ
the personal app to control their therapy within clinician-prescribed programming
parameters. The personal app is expected to be deployed on a mobile phone or
smartwatch and enabled by voice commands as well.
Implantable ARC
BCI
The
ARC
BCI
System
is currently being investigated to enable thought-driven movement of
the legs and upper extremities. This research is supported by grants from the European
Innovation Council and the Christopher and Dana Reeve Foundation. The system consists
of an implanted brain-computer interface (BCI) from CEA-Clinatec, Grenoble, France.
The BCI is placed on top of the motor cortex, where it records brain signals that indicate
the intention to move. The ARC
BCI
System then uses artificial intelligence to decode those
signals and translate them into instructions for our ARC
IM
Neurostimulator, which sends
electrical impulses to our ARC
IM
Lead. Those electrical impulses are applied to the spinal
cord, enabling thought-driven movement.
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ARC
IM
Lead
Cervical Lead
Thoracic Lead
Lumbar 8-8 Lead
Lumbar 7-2-7 Lead
Sacral Lead
ARC
IM
Neurostimulato
r
ARC
IM
Hub
IPG and leads for direct, programmed
stimulation of the spinal cord
ARC
IM
PRO app
Via ARC
IM
Programmer
myARC
IM
App
Via ARC
IM
Controller
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ARC
IM
Leads
ARC
IM
is currently targeted toward improving lower limb mobility and regulating blood
pressure after SCI. Other potential indications may be explored in the future, including
SCI-related bladder control,
spasticity reduction, improved sexual function, and upper limb
mobility, each enabled by further development of the ONWARD proprietary lead portfolio.
ARC
IM
Lead Placement
Arm & Hand Function
Blood Pressure & Trunk Control
Mobility (Walking & Standing)
Bladder & Bowel Control,
Sexual Function
C4
T11
T10
T12
L1
S1
L5
S4
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An intention to move
originates in the brain.
The brain-computer interface
uses AI to decode that intention.
Think
Decode
The ONWARD® ARC
IM
® platform converts
that decoded information into precise
stimulation of the spinal cord, resulting in
thought-driven movement.
Move
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External ARC
EX
ARC
EX
is expected to launch in the US in the second half of 2024 to improve strength and
function of the upper limbs. It is built for use both for typical SCI rehabilitation during
the chronic phase in the clinic and at home. In the future, ARC
EX
may be used to target
additional indications, such as bowel control and lower limb strength and function.
The
ARC
EX
System
has three main components:
•
A
Stimulator
that delivers programmed electrical impulses through the skin to the
spinal cord.
•
Electrodes
placed externally on the skin of the neck near the area of the spinal cord
that controls movement in the arms and hands.
•
Dedicated apps for efficiency and ease of use:
the
ARC
EX
PRO app
, which connects
wirelessly to the Stimulator to program the therapy and adjust parameters, and the
myARC
EX
app
for users to easily control the stimulation during personal use in the
home setting.
Three Priority Indications to Improve Quality of Life after SCI
Upper limb mobility (initial ARC
EX
focus)
Since 2015, 60% of new SCIs in the US have resulted in some form of tetraplegia.
1
Injuries at the cervical level of the spine (C1-C7) can result in loss of sensory and motor
connections to all areas below the neck, including the arms and legs. Without the use of
our hands, most activities of daily life (such as grooming and eating) become extremely
challenging. Better arm and hand function is therefore an important rehabilitation goal for
a majority of people with SCI, consistently ranked ahead of walking or sexual function.
2
In 2022, we completed follow-up in our Up-LIFT pivotal and LIFT Home clinical trials. The
Up-LIFT study was designed to evaluate the safety and effectiveness of non-invasive
electrical spinal cord stimulation administered by a clinical version of ARC
EX
to treat
functional deficits of the upper limbs in people with chronic tetraplegia. Positive topline
results from the Up-LIFT study were announced in September 2022, showing that the
study had met its primary effectiveness endpoint of improvement in upper extremity
strength and function, with no reported serious device-related adverse events.
Blood pressure regulation (initial ARC
IM
focus)
Hemodynamic instability, including the inability to regulate blood pressure following an
SCI, has profound consequences in both the acute and chronic stages and affects nearly
40% of people with SCI.
3
Immediately after injury, blood rushes to the area of the lesion
and causes swelling, which starves the nerve cells of oxygen, compounding the initial
damage. The outcome for many patients could be vastly improved if clinicians were able
to intervene immediately to prevent inflammation by controlling blood pressure, blood
flow, and oxygenation.
At the chronic stage, after the injury has healed, fluctuations in blood pressure
drastically impact quality of life, especially for people with tetraplegia. It can cause a
range of debilitating conditions, including stroke, fatigue, and hemodynamic instability
which involves chronic hypotension, and a life-threatening form of hypertension known
as autonomic dysreflexia.
4
Chronic hypotension affects a person’s ability to perform
everyday movements like sitting up or leaning over, and can inhibit their ability to
engage in activity-based rehabilitation.
In 2022, we reported positive interim clinical outcomes from the first 10 people treated
with implantable ARC Therapy to regulate blood pressure. ARC
IM
Therapy immediately
improved blood pressure levels in all study participants, who also reported fewer
episodes of hypotension, improved quality of life, increased energy and vitality, and
reduced dizziness. Based on these promising interim outcomes,
5
our clinical feasibility
study was extended to the Netherlands with the first implant performed in Q3 of 2023.
Lower limb mobility (secondary ARC
IM
focus)
In addition to blood pressure regulation, we plan to further investigate the use of ARC
IM
to improve mobility by restoring movement in the lower limbs. This will build on the
success of STIMO, a first-in-human study that determined the safety and effectiveness
of ARC Therapy to restore walking in individuals with chronic SCI resulting in complete
or partial paraplegia.
Starting in 2016, the nine participants in this study received high-intensity
neurorehabilitation that combined precisely timed epidural stimulation with over-
ground, robot-assisted rehabilitation training. After completing the STIMO program, all
participants reported improvements in mobility and substantial neurological recovery.
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External system for non-invasive, programmed
stimulation of the spinal cord
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Active Electrodes
Splitter Box
Extension Cables
Return Electrodes
ARC
EX
® Stimulator
All ONWARD® therapies are investigational and not available for commercial use.
ARC
EX
® PRO & myARC
EX
™ app
Via ARC
EX
Programmer
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ARC
EX
Therapy
Programmed transcutaneous electrical
stimulation to the spinal cord
Designed to restore movement,
function, and indepenence in peiple
with SCI
ARC
EX
Stimulator
External system for non-invasive, programmed
stimulation of the spinal cord
ARC
EX
PRO & myARC
EX
app
Via ARC
EX
Programmer
ARC
EX
Therapy
Individual stimulation parameters
can be optimized for each patient’s
unique needs
All ONWARD® therapies are investigational and not available for commercial use.
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Several were able to walk on a treadmill without using their hands for support and to stand
and walk at will, even while the stimulation was inactive.
While walking may seem like an ambitious goal for many people with SCI, even modest
gains in lower limb function can make a big difference. Incorporating ARC
IM
Therapy in
post-acute clinical rehabilitation programs has the potential to vastly improve long-term
outcomes for the recently injured by promoting neurological recovery. Additionally, we
envision that ARC
IM
stimulation may someday be used “on the go” to enable a variety of
everyday movements, including standing and movement of the lower limbs, as part of a
person’s therapy and daily activities.
Additional Indications with Significant Clinical Impact Potential
ONWARD ARC
IM
Therapy paired with brain-computer interface
(BCI) to restore
augmented mobility after SCI
In May, an article in
Nature
reported that a wireless BCI can use a person’s intention to
move, originating in the brain, to control ARC
IM
Therapy. Researchers reported that when
paired with ARC
IM
Therapy, an implanted BCI allowed an individual to gain augmented
control over when and how he moved his paralyzed legs. The published data are part of
an ongoing clinical feasibility study investigating the safety and preliminary effectiveness
of brain-controlled spinal cord stimulation after SCI. The study is being coordinated
by .NeuroRestore co-directors Professor Grégoire Courtine and Dr. Jocelyne Bloch, a
neurosurgeon at Lausanne University Hospital (CHUV), in collaboration with Guillaume
Charvet, Head of the Medical Device Development Lab at CEA-Leti/Clinatec.
ONWARD ARC
IM
Therapy to restore mobility in people with Parkinson’s disease
In November, an article in
Nature Medicine
highlighted the potential for ONWARD ARC
Therapy to address gait challenges related to Parkinson’s disease. The study participant
described in the article has been living with Parkinson’s disease for nearly three decades.
He has a severe gait disorder that has not responded to conventional therapies. After the
introduction of ARC Therapy, followed by several weeks of rehabilitation, the participant
was able to walk without the previously noticeable gait interruptions.
.NeuroRestore was awarded a USD 1 million grant from The Michael J. Fox Foundation
for Parkinson’s Research (MJFF) to implant the ARC
IM
System and in six additional
participants with Parkinson’s disease to investigate the effect of ARC Therapy. This study
will assist ONWARD in determining whether to conduct additional clinical trials with a view
to commercialize ARC Therapy in the future for those living with Parkinson’s disease.
Clinical Trials and Regulatory Activity
The development, manufacture, and marketing of ONWARD ARC Therapy and associated
technology is subject to government regulation in the United States, the European Union,
the United Kingdom, and other countries. To apply for regulatory clearance or approval to
market our new devices in any of these jurisdictions, we must complete extensive human
clinical trials that demonstrate their safety and effectiveness.
Medical devices are regulated according to their risk level and require a certain level of
supporting safety and effectiveness data to demonstrate their risk to benefit ratio for
global regulatory authority consideration prior to market approval. ARC
EX
is expected to
be designated as a lower risk device (Class IIa) and ARC
IM
is expected to be considered
a higher risk device (Class III), requiring different levels of supporting clinical evidence.
ONWARD continues to partner with regulatory authorities globally to ensure that clinical
trials are designed and executed in accordance with the requirements for these different
medical device classifications. For more information on ONWARD’s clinical trials, please
refer to the relevant section in the operational review.
Commercialization
ONWARD does not currently offer any products for commercial sale. We have submitted
ARC
EX
System regulatory documentation to the FDA, with expected clearance for
commercial sale in the second half of 2024. We subsequently expect to pursue regulatory
clearance in select European markets. Our pivotal trial for the ARC
IM
System, Empower BP,
is expected to start in the second half of 2024. Empower BP will focus on the safety and
effectiveness of ARC
IM
Therapy for regulating blood pressure to achieve hemodynamic
stability in patients after SCI. Our plans to commercialize our products depend on
our ability to demonstrate their safety and effectiveness to regulatory authorities, as
described in the previous section.
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Call Points
US
Tier 1 and Tier 2 specialist rehab centers
Initial Focus:
~50 accounts including VA
SCI hub centers, Up-LIFT investigational
sites and other US flagship SCI clinics
Pursue highly concentrated customer
base with direct ﬁeld organization
Geographical Focus
US and select European markets with
sophisticated neurorehabilitation
infrastructure, clinical partnerships,
and/or favorable reimbursement for
medical innovation
~330
~250
(2023)
Commercial Strategy
Europe
Germany (DE)
Netherlands (NL)
Specialist rehab centers
Initial Focus:
~30 accounts including
DMGP member paraplegia centers in
Germany, chiefly BG SCI Kliniks
France (FR)
United Kingdom (UK)
Switzerland
~80
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Geographical focus and commercial objectives
We plan to market our ARC Therapy platforms in the US and Europe, where most people
with SCI are cared for by a limited number of trauma and rehabilitation centers.
When people suffer an SCI, they typically undergo emergency surgery in a trauma center,
after which they spend one week in intensive care. Subsequently, they begin acute phase
rehabilitation training, lasting from three to twelve months, which is generally provided by
specialized clinics with the necessary expertise and equipment. A year post-injury, people
with SCI are considered to be in the chronic phase, after which many insurance companies
cover only a limited amount of continued outpatient physical therapy for the purpose of
maintaining strength and functional gains.
Based on market research and outcomes from our studies (including our Up-LIFT pivotal
study), we believe people with SCI may benefit from ARC Therapy, even when applied
many years after their injury. Given these promising outcomes and ongoing demand
for innovative therapies in the rehabilitation space, it is likely that there is considerable
demand that can be realized when we commercialize our first product, ARC
EX
. In fact, those
with chronic spinal cord injuries may reinitiate rehabilitation in response to the availability
of these new therapies.
In the initial period following commercial launch of ARC
EX
, our focus will be on the U
S
and
five select European markets: Germany, France, the UK, the Netherlands,
and Switzerland. These markets were selected based on the sophistication of their
rehabilitation and/or reimbursement infrastructure, the presence of ONWARD clinical
study collaborators, and perceived demand for our investigational therapies. We may
modify target markets or change the sequence of introductions to optimize likelihood of
commercial success based on evolving considerations.
We plan to deploy a direct sales and service organization, given that the total number of
facilities to be targeted — whether to market therapies or to support surgical interventions
— is around 330. Where FDA clearance or approval or CE marking supports entry into non-
target European or Asian markets, we will likely do so via a distribution partner.
ONWARD intends to continue to evolve its commercial strategy to optimize our probability
of success.
Rehabilitation clinics
Our marketing efforts will focus on clinicians managing SCI patients in rehabilitation
clinics. These include rehabilitation physicians such as physical medicine and
rehabilitation (PM&R) physicians – also called physiatrists – as well as physical and
occupational therapists who provide post-injury rehabilitation training and ongoing
support to those who are chronically injured. The latter constitutes the largest pool of SCI
patients globally.
We expect clinicians to use our therapies as follows:
•
Use ARC
EX
in clinics during therapy sessions
•
Prescribe ARC
EX
for use at home
•
Refer patients to neurosurgeons and orthopedic spine surgeons for implantation of
ARC
IM
There are a limited number of specialty rehabilitation clinics in our selected markets. In
the U
S
, there are approximately 250 Tier 1 and Tier 2 specialist rehabilitation clinics. Our
initial focus will be on approximately 50 Tier 1 accounts including Veterans Affairs (VA) SCI
hub centers, Up-LIFT investigational sites, and other US flagship SCI clinics. These clinics
will provide a robust referral base for the ONWARD’s products and will serve as focused
and fertile marketing targets.
In four of the five selected European markets, there are a total of 83 SCI specialty
rehabilitation centers: 27 in Germany,
6
10
in the UK,
7
8
in the Netherlands,
8
and 38 in
France.
9
Hospitals and ambulatory surgery centers
When patients are referred for an ARC
IM
implant, surgery will likely be carried out on an
outpatient basis in hospitals or ambulatory surgery centers (ASCs) by neurosurgeons
or orthopedic surgeons focused on the spine. These surgeons are already familiar with
neuromodulation and routinely perform implants for spinal cord stimulation to treat
chronic pain. Primary targets will include those hospitals and ASCs with established
neuromodulation referral pathways from physiatrists, as well as integrated SCI systems
with multi-disciplinary approaches to caring for acute and chronic stages of SCI.
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Speciﬁc customer targets at
each stage in patient journey
Injury
Decompression
Surgery
24 hours
Intensive
Care
~7 days
Acute Phase
Sub-Acute Phase
Trauma
Centers
Neurosurgeons, ortho/
spine surgeons
Clinician Customers
in Patient Journey
Rehabilitation
3-6 months
Plateau
12+ months
Intermediate Phase
Chronic Phase
SCI
Rehabilitation
Clinics
Rehabilitation physicians
(physiatrists), therapists
(PTs/OTs), and
neurologists
Patients and caregivers
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Physicians will prescribe ARC
EX
for clinic or home
use and refer patients for ARC
IM
implants
•
Order clinic use
•
Prescribe home use
Referral to functional
neurosurgeon for implant
surgery (likely <2hr)
Decision–Maker
Neurologists &
Rehabilitation Clinicians
Referral Pathway
Overview
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Reimbursement
In both US and non-US markets, ONWARD’s ability to successfully commercialize our
products depends on the availability of adequate financial coverage and reimbursement
from third-party payors, including governmental payors, managed care organizations,
and private health insurers. Third-party payors decide which treatments they will cover
and establish reimbursement rates for those treatments, and they increasingly examine
the cost-effectiveness of medical devices as well as safety and efficacy when making
coverage and payment decisions.
The path forward in Europe is more varied than in the US, given that no uniform policy for
coverage and payment exists across our European target markets and reimbursement can
differ significantly from payer to payer. As such, our commercialization efforts to identify
optimized pathways for reimbursement, coverage, and payment started in 2022 and will
continue through 2024.
The first likely European market for ARC
EX
is Germany, based on the initial evaluation
criteria for reimbursement, the sophistication of SCI rehabilitation infrastructure, and the
fact that the country has the largest SCI population. All five markets are also viable ARC
IM
targets, with plans to further undertake reimbursement planning in 2024.
Reimbursement in the United States
ARC
EX
Upon FDA clearance of ARC
EX
in the US, we plan to sell the devices to specialty
rehabilitation clinics to be used in patient rehab sessions, as well as directly to SCI
patients for personal use in the home as prescribed by rehabilitation physicians.
We believe we will have rapid access to almost one-third of covered lives in the US by
targeting patients cared for by the Veterans Affairs (VA) healthcare system, those covered
by workers’ compensation insuranc
e
, and the estimated 10-15% of patients with the means
to self-pay for the ARC
EX
System.
ARC
EX
is designed as Durable Medical Equipment (DME) and will be categorized under a
set of codes called HCPCS. Given the novelty of ARC
EX
and its potential to restore upper
limb strength and function after SCI (an indication that was awarded a Breakthrough
Device Designation by the FDA), we plan to pursue a new HCPCS code for Medicare
reimbursement. To support this effort, our clinical and economic evidence generation
plan for ARC
EX
includes the necessary data collection to achieve optimized coverage and
reimbursement that reflects of the clinical benefit of the therapy in the US within five years.
The Company plans to establish claims and invoicing history by focusing on patients with
VA coverage, the world’s largest healthcare system providing care to
V
eterans with SCI.
ONWARD has partnered with Lovell Government Services (Lovell), a service-disabled
veteran-owned small business (SDVOSB) to gain access to the VA market for ARC
EX
sales
for both in-clinic and home use. Under this agreement, Lovell will add ONWARD therapies
to its relevant federal contracts once those technologies are authorized by the FDA for
sale in the US. That is expected to provide the Company with rapid access to the Federal
Supply Schedule (FSS), General Services Administration (GSA), Distribution and Pricing
Agreement (DAPA), and Electronic Catalog Contract (ECAT).
In addition to the claims and invoicing data from sales to the VA, we also plan to capture
patient-reported real-world evidence via an ARC
EX
mobile companion app to strengthen
coverage and payment opportunities with Medicare and private payors, which will
ultimately give more than 90% of the total US SCI population access to ARC
EX
.
In November of 2021, the Centers for Medicare and Medicaid Services (CMS) rescinded the
Medicare Coverage of Innovative Technology (MCIT) final rule. This rule was originally
proposed in September of 2020 to ensure Medicare coverage upon FDA clearance for
devices which were awarded FDA Breakthrough Device Designation (BDD). Concerns
regarding lack of controls to ensure Medicare populations were studied, and lack of a
mechanism to remove coverage if safety concerns arise, were cited as reasons for repeal.
Despite the repeal, CMS reiterated its commitment in 2023 to create a pathway for
coverage upon FDA clearance for devices with BDD and is working with industry
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stakeholders, physician societies, and patient groups to develop an alternate pathway
called Transitional Coverage for Emerging Technologies (TCET). While this pathway is
still under consideration, it could positively affect devices with BDD, such as ARC
EX
, by
providing Medicare coverage from day one through a post-FDA clearance period.
ARC
IM
Procedure codes (CPT) exist today for physician, hospital outpatient, and ambulatory
surgery center (ASC) payment for spinal cord stimulation (SCS) for chronic pain. However,
we believe that ARC
IM
may need to pursue separate coding, given the procedural intensity
differences of implanting this novel technology compared to traditional SCS. With the
potential for new codes, we will pursue provider payment levels commensurate with the
value that ARC
IM
provides to people with spinal cord injury (SCI), who otherwise have no
treatment options. We are also designing our global pivotal clinical trial for stabilizing
blood pressure after SCI, Empower BP, to take into account the data required to pursue a
new procedural code for ARC
IM
.
We believe patients will have rapid access to the ARC
IM
System in the US by using a Category
3 code, which we expect will be available upon FDA approval of the initial indication.
Facility payments include the cost of the technology but not physician services, which are
billed separately. Medicare pays the hospital outpatient department a single amount for
the full system implant, while the ASC is paid separately for the lead and neurostimulator
implantation. Private payers tend to pay ~25% more than Medicare, and Medicare
payment systems tend to lag for new technology.
These facility payment systems are prospective and payment rates for a given procedure
are based on historical claims data. Thus, the cost of new technology cannot be included
in the current payment rates. Because the Centers for Medicare and Medicaid Services
(CMS) employs a prospective payment system, the payment levels “underpay” for new
technologies. To enable payment for new innovation, therefore, Medicare has established
two pathways to potential incremental payment for the ARC
IM
implant procedure, one for
hospital inpatient and one for hospital outpatient procedures.
In the inpatient setting, Medicare’s New Technology Add-on Payment (NTAP) provides
additional payment for implantable devices for a limited duration, typically up to two
years. Similarly, Medicare provides a Transitional Pass Through (TPT) payment for the
outpatient setting for three years.
ONWARD’s Breakthrough Device Designations for ARC
IM
for multiple indications,
including the expected first indication for hemodynamic stability after SCI, increase the
probability of securing incremental payments in both settings and we plan to apply for
both as appropriate.
Reimbursement in Germany
ARC
EX
While ARC
EX
will be immediately available upon CE marking for clinics to purchase for use
with patients during in-clinic rehabilitation sessions, preliminary analysis indicates that
the timeframe for home-use reimbursement of ARC
EX
will be up to two to four years from
CE marking.
In Germany, medical devices in the outpatient and physician clinic setting require a new
Einheitlicher Bewertungsmaßstab (EBM; Uniform Assessment Standard) code. Devices
used in the home setting are governed by the Hilfsmittelverzeichnis (HMV), a positive
coverage list for home-use medical equipment. HMV categories tend to be highly specific
to indication; as a result, ARC
EX
will likely need a new HMV category. To achieve a new
product category, a positive evaluation by the Gemeinsamer Bundesausschuss (G-BA;
Federal Joint Committee) will be necessary. Following successful inclusion in the home-
use medical aids directory by the GKV-Spitzenverband, these products are recommended
as reimbursable, but are subject to different price and contractual reimbursement rules
and will be negotiated between statutory health insurance funds and medical suppliers as
part of individual contracts for the provision of ARC
EX
.
ARC
IM
Among our selected five entry markets in Europe, Germany has the largest population
living with SCI and may offer the most accessible pathway for ARC
IM
. Germany
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operates a diagnosis-related group (DRG)-based system to compensate hospital
inpatient admissions and provides an existing pathway for supplemental payment, or
Zusatzentgelte (ZE), for high-cost medical services, such as the ARC
IM
procedure.
For the regulation of blood pressure after SCI, diagnosis (ICD) and procedure codes
(OPS) are already in place. They initiate a specific DRG and supplementary fee (ZE). The
reimbursement of ZEs is negotiated by hospitals with the payors as part of the annual
budget negotiations and depends on the additional costs for the new treatment compared
to the costs defined in the DRG. This means that there is already a method of payment in
place to reimburse hospitals for the costs of treatment with ARC
IM
.
In Germany, it is also required that work-related spinal cord injuries be treated at one of
nine national BG Clinics. These specialty clinics, which provide integrated surgical and
rehabilitation services, also care for patients who are not injured on the job and are highly
familiar with and skilled at the process of negotiating supplemental payment for their
spinal cord injury patients.
1
National Spinal Cord Injury Statistical Center (NSCISC), Facts and Figures at a Glance, Birmingham, AL: University of Alabama at
Birmingham, 2021
2
Candy Tefertiller, PT, DPT, PhD, NCS, Executive Director of Research, Craig Hospital, presented at Unite2Fight Paralysis Conference,
2020. Adapted from Anderson (2004). Targeting Recovery: Priorities of the Spinal Cord-Injured Population. J Neurotrauma. 21(10): 1371-83.
3
Krassioukov A., Claydon V.E. The clinical problems in cardiovascular control following spinal cord injury: an overview. Prog Brain Res.
2006;152:223-9. doi: 10.1016/S0079-6123(05)52014-4. PMID: 16198703
4
Carlozzi, N. E., Fyffe, D., Morin, K. G., Byrne, R., Tulsky, D. S., Victorson, D., Lai, J.-S., & Wecht, J. M. (2013). Impact of blood pressure
dysregulation on health-related quality of life in persons with spinal cord injury: Development of a conceptual model. Archives of
Physical Medicine and Rehabilitation, 94(9), 1721–1730. https://doi.org/10.1016/j.apmr.2013.02.024 Wecht, J. M. (2022). Management of
blood pressure disorders in individuals with spinal cord injury. Current Opinion in Pharmacology, 62, 60–63. https://doi.org/10.1016/j.
coph.2021.10.003
5
ONWARD press release issued 8 December 2023 - ONWARD Reports Interim Clinical Outcomes for Implantable ARC Therapy
Demonstrating Potential to Improve Blood Pressure Regulation after Spinal Cord Injury
6
German-speaking Medical Society for Paraplegiology (DMGP)
7
Medical Management Advice :: Royal National Orthopaedic Hospital (rnoh.nhs.uk)
8
InSCI International Spinal Cord Injury Community Survery - Netherlands
9
Nature Article: Rehabilitation of SCI in France. There are 148 rehab clinics in France, but only 38 clinics treated six or more SCI in past year.
Overview
5
Culture at
ONWARD
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Culture at ONWARD
With our compelling vision, highly innovative technology, and competitive rewards,
ONWARD seeks talented and bold people who bring creativity to everything they do. Our
Company is diverse, with 20 nationalities represented.
We strive to differentiate ONWARD as an employer of choice by creating a positive
culture inspired by the ONWARD Code, which reinforces a culture of continuous learning,
feedback, and development, providing the necessary tools and opportunities for people to
enhance their skills and grow in their abilities and careers.
The ONWARD Code is communicated as part of employee onboarding and reconfirmed
in our monthly all-company meetings. We believe it is important to cultivate an open and
transparent culture that allows employees to express, in good faith, any concern they may
have. Employees are encouraged to raise concerns without fear of retaliation, knowing that
these will be treated confidentially, seriously, fairly, and promptly.
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We are OPEN
We seek great ideas from any source. We are hungry for feedback.
We accept criticism with humility.
We are TRUSTING
We assume positive intent. We count on each other to deliver.
We speak truth to our leaders and teammates.
We are COLLABORATIVE
We are a team. We ﬁnd ways to work well together.
We value our external partnerships.
We are PASSIONATE
We admire the courage of those we serve.
We are driven to fulﬁll our Vision. We will not fail.
We are EMPOWERED
We encourage ideas. We allow mistakes.
Everyone is accountable.
We are COMMITTED
We pursue a noble cause. We are never distracted nor
deterred. We are grateful for the responsibility we shoulder.
We are PRAGMATIC
We ﬁnd a way. We surmount obstacles. We ﬁnd
fulﬁllment in overcoming.
We are INNOVATIVE
We dream big. Limits do not contain us.
Our imagination deﬁnes the possible.
The ONWARD Code
Culture at ONWARD
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Competitive hiring
We endeavor to attract the best candidates, people who are motivated by our vision and
the opportunity to work on true breakthroughs, rather than incremental gains.
Our in-house recruitment capacity allows us to better control our hiring process and
leverage our professional network and partnerships with key academic institutions to
attract the greatest talents on the market.
Our employee referral program also incentivizes our employees to leverage the power of
their networks to recruit people who are a good cultural and organizational fit.
We offer competitive compensation and benefits packages, which are key to attracting
and retaining talent. Long-term incentives are offered to our senior management and key
individuals as part of our remuneration philosophy. We encourage share ownership among
all our employees through a stock-option plan. This aligns our long-term incentives with
our long-term objectives, as grants are conditional on continued employment until the time
of vesting.
A great place to work
In 2023, ONWARD continued to implement improvements to ensure a smooth and
positive experience for new team members, including a check-in survey after the first
90 days of employment, employee journey interviews, and comprehensive offboarding
interviews. These initiatives ensure that valuable insights are collected at every point
in the employment lifecycle, enabling us to optimize our employment practices and
organizational performance.
Also in 2023, a formal speaker series was added to monthly all-company meetings. Guest
speakers included clinicians, people with lived experience of SCI and their caregivers, and
leaders from key SCI advocacy groups. Their testimonials keep employees connected to
the ONWARD vision and the meaning and urgency of what we do.
Employee well-being
The well-being of employees is important to us.
Workshops and other activities centered
on mental health and well-being continued to be offered in 2023. In addition, employees
were offered more flexible, hybrid ways of working where possible, unless their work
required access to specialized equipment and facilities, necessitating regular presence
in the office.
Culture at ONWARD
6
Privacy & Data
Governance
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ONWARD is committed to ensuring that data security and confidentiality are built into
our products and processes. The personal data we process in the course of our operations
– including health and medical information – cover our suppliers and business contacts,
applicants, visitors and website visitors, employees, and customers. When we collect
patient health data, we do so with the sole purpose of continually improving the efficiency
and safety of our therapies.
Privacy & Data
Governance
We are subject to various regional, national, and state laws that protect the confidentiality
and security of patient health information, including patient medical records and other
forms of personal information. We are committed to applying the two most rigorous
privacy regulations to our global operations, namely the United States’ Health Insurance
Portability and Accountability Act (HIPAA) and the European Union’s General Data
Protection Regulation ((EU) 2016/679; GDPR). This legislation includes the data subject’s
right to access or amend certain records containing protected health information or to
request that their use or disclosure be restricted.
To that end, we have appointed an external Data Protection Officer. This service is
provided by DPO Consulting, a firm with extensive experience in Data Protection
Regulations. In addition, we have established a Data Privacy Committee and a Global Data
Protection Policy implemented through a series of procedures and mechanisms to ensure
compliance with GDPR and HIPAA, as applicable.
Through the creation of the position of VP of Legal, we are strengthening the integration
of legal and privacy assessments across the organization in collaboration with the Data
Protection Officer.
We have also strengthened the compliance of our products with cybersecurity and data
protection requirements under GDPR and HIPAA. We have started to create traceability in
accordance with relevant standards and build evidence that our products are compliant
with the regulations. We continue to evaluate and improve our processes for compliance
with GDPR and HIPAA requirements, as we prepare for commercialization in 2024. We are
strengthening our data management and processes, and we regularly train our staff on
security and privacy issues.
7
Sustainability
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Additional details regarding ONWARD’s sustainability priorities, approach and
performance can be found in a separate sustainability summary
,
available on ONWARD’s
investor website.
ONWARD is committed to being a responsible organization that creates sustainable
long-term value for all stakeholders. Sustainability principles are integral to the way we
do business. They are captured in the ONWARD Code, Articles of Association (AOA),
Code of Conduct (COC), a
nd
the Company’s culture, business practices, operations, and
supplier agreements.
Sustainability Principles
ONWARD’s sustainability strategy rests on five core principles:
•
Innovating for the underserved.
There is no cure for SCI. ONWARD therapies are
among the first to offer the potential to help people with SCI regain movement and
other functions, improving quality of life for a large, underserved group of people. The
Company’s products also have potential to benefit large populations of stroke sufferers
and people with Parkinson’s disease. Underscoring the innovative nature of its work,
ONWARD has been granted 10 Breakthrough Device Designations (BDD) by the US FDA
(as of February 2024) and have nearly 240+ issued patents worldwide. The Company
continuously innovates and strives to get such designations for other indications to be
able to make a difference in the lives of even more people.
•
Partnering with patient groups.
ONWARD enjoys excellent relationships with the
world’s leading patient advocacy groups for people
with
SCI. The Christopher and Dana
Reeve Foundation, the world’s largest such organization, is an investor in ONWARD.
The Company also collaborates with Wings for Life in Europe, the Praxis Foundation in
Sustainability
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Canada, and International Spinal Research Trust in the UK.
This collaboration enables
ONWARD to innovate in ways that make the greatest difference for people with SCI.
•
Attracting and retaining the best talent.
To deliver on its vision, ONWARD is
committed to creating an unrivaled and inclusive environment for employees. The
Company cares deeply about the well-being and continuous development of its staff
as evidenced by the various programs that it has put in place, such as its well-being
program. Having a highly motivated and engaged workforce enables the Company
to retain and attract top talent. It also engages with people with SCI as consultants,
enabling staff to have a better understanding of the challenges that they face.
ONWARD recognizes and welcomes the value of diversity with respect to age, gender,
race, ethnicity, nationality, sexual orientation, and other important cultural differences.
•
Minimizing our environmental footprint.
In its operations, the Company strives to
reduce its carbon footprint by replacing air travel with videoconferencing except for the
most pressing business needs, and by encouraging a hybrid workplace, thus reducing
employees’ commute. Additionally, ONWARD works with suppliers to minimize waste
in the manufacturing process, consume electricity generated almost exclusively from
renewable sources, and implement recycling programs in its offices.
•
Maintaining high ethical standards.
ONWARD strives to act with openness and
integrity. The Company is committed to high ethical standards in dealing with
business partners as outlined in the Code of Conduct, which covers anti-bribery and
anti-money laundering, government relations and political affairs, and international
business practices. The Code of Conduct ensures that employees understand what is
expected of them when acting on behalf of the Company. ONWARD aims to comply
with all applicable anti-bribery laws, including the US Foreign Corrupt Practices Act.
The highest quality and safety standards are applied to all ONWARD’s activities, and
the Company ensures strong labor practices in our supply chain. ONWARD also works
hard to secure key personal data and comply with GDPR (General Data Protection
Regulations) and HIPAA, uphold human rights, and operate in geographies with a strong
track record on this area.
ONWARD was awarded a bronze medal by EcoVadis in 2023, placing us in the top 40th
percentile for Sustainability among companies in our field.
8
Sustainability
Operational
Review
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Science and Intellectual Property
As the pioneer in its space, ONWARD has forged relationships and exclusively licensed
important intellectual property from many of the world’s leading neuroscience research
laboratories, such as Caltech US, University of California at Los Angeles US, University of
Louisville US, and University of British Columbia (Canada).
The Company’s primary research partnership is with .NeuroRestore, a joint research
initiative of EPFL and CHUV in Lausanne, Switzerland, with whom ONWARD has an
exclusive IP licensing agreement. In 2021, the Company signed a framework agreement
with .NeuroRestore governing future research initiatives, as well as contracts covering
existing and ongoing research on blood pressure, mobility, brain-computer interfaces (BCI)
and brain controlled spinal cord stimulation. In addition, ONWARD supported
.NeuroRestore research on upper limb mobility and incontinence.
Benefitting from these research collaborations, and combined with its own innovations, the
Company added 50+ patents to its formidable IP portfolio, which now totals 240+ issued
patents, further reinforcing the Company’s pioneering science and first-mover advantage.
Research and Development
ONWARD’s engineering team made advancements across several development initiatives:
•
ARC
EX
System development: Considerable progress was made on all aspects of the
system. The design is now complete and the System passed the Verification and
Validation testing phase in early 2024. Work continues on design transfer, procuring
production materials, and supply-chain activities.
•
ARC
IM
Lead development: The ARC
IM
Thoracic Lead is under clinical investigation and
has now been implanted as part of several clinical feasibility studies. Development and
Operational Review
verification of the two ARC
IM
Lumbar Lead models are complete and are now ready for
clinical investigation following notified body review.
ONWARD formed part of a research consortium of partners in the US, Canada, and
Switzerland that has been awarded research funding by the US Department of Defense
Advanced Research Projects Agency (DARPA) to advance innovative SCI therapies. In
response to the DARPA Bridging the Gap Plus funding call, the consortium proposed
developing a new clinical intervention to modulate blood pressure and spinal cord
perfusion and oxygenation in the hours following SCI. The intervention included spinal cord
stimulation using ARC
IM
, combined with implanted sensors for blood pressure and spinal
cord perfusion, as well as stem cells and scaffolds implanted in the lesion site to promote
neural regrowth across the injury.
The DARPA grant was envisioned to be a five-year project (October 2021 to September
2025) for a total of USD 36M, of which ONWARD could potentially receive up to USD 6.3M.
To receive the funding in full, the Company had to meet specific milestones at each stage:
•
Phase 1: System design, IPG software and firmware update for spinal cord stimulation
for blood pressure control (already granted and funding received)
•
Phase 2: System development completion (already granted and receipt of funding
ongoing), development of a dedicated lead (contingent), and clinical evaluation in 10
chronic patients in Switzerland and Canada (contingent)
•
Phase 3: US Food and Drug Administration (FDA) Investigational Device Exemption
secured and clinical proof of concept demonstrated in at least one acute patient
(to be granted)
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ONWARD believes its involvement in the DARPA consortium has contributed to its
leadership and expertise in blood pressure management. Unfortunately, due to funding
limitations, the Company was informed the DARPA project will not advance to Phase 3.
Clinical and Regulatory
ONWARD’s clinical and regulatory team had a productive 2023, advancing ARC
EX
and
ARC
IM
Therapy for initial indications and filling the Company’s pipeline with additional
promising indications. With completion of the Up-LIFT pivotal study demonstrating the
safety and effectiveness of ARC
EX
and preparation for the upcoming ARC
IM
Empower
BP pivotal study, the team is poised to deliver on several major regulatory and clinical
milestones in 2024.
ONWARD announced four new Breakthrough Device Designations (BDD) from the US Food
and Drug Administration (FDA) in the first half of 2023. These included BDDs for the use of
our ARC
EX
platform for bladder control (awarded late 2022), alleviation of spasticity, and
blood pressure regulation in people with SCI. We later received an additional BDD for its
ARC
IM
platform for spasticity in people with SCI. At the end of 2023, we had a total of nine
BDDs, which afford us priority FDA review and the opportunity to interact with FDA experts
throughout the premarket review phase prior to commercialization. We were awarded our
10th BDD in Q1 2024 for ARC
BCI
therapy.
ARC
EX
Therapy clinical trials
•
In April, at the American Academy of Neurology Annual Meeting, Dr. James Guest,
Professor of Neurological Surgery at the University of Miami and the Miami Project
to Cure Paralysis, shared additional results from the Up-LIFT pivotal study that
investigated the Company’s ARC
EX
Therapy for improving upper extremity strength
and function after SCI. In addition to meeting all primary safety and effectiveness
endpoints, the study demonstrated that 72% of participants responded to ARC
EX
Therapy, showing improvement in both strength and function.
•
These results were presented by Dr. Guest and other lead study investigators at six
prestigious conferences in 2023.
ARC
IM
Therapy clinical trials
•
In April, the
New England Journal of Medicine
highlighted the use of ONWARD’s
innovative approach to treating orthostatic hypotension (low blood pressure) with
ARC
IM
Therapy in a patient with MSA-P, a form of Parkinson’s disease that affects the
sympathetic nervous system.
•
In May, the Company announced that its ARC
IM
Therapy was paired with an
investigational implanted wireless BCI, resulting in an individual gaining thought-
driven, augmented control over when and how he moved his paralyzed legs. This
breakthrough was published in the journal
Nature
and highlighted in major media
outlets around the world.
•
Also in May, we announced the successful first-in-human use of our investigational
ARC
IM
Lead to deliver targeted electrical pulses to the thoracic spinal cord at the
location responsible for a specific function, such as blood pressure regulation. The
ARC
IM
Lead is a key component of the ONWARD ARC
IM
System and is designed to
deliver ARC Therapy generated by the ARC
IM
Neurostimulator (IPG). Together, this
purpose-built system is engineered to restore movement and function in people
with SCI.
•
In August, ONWARD marked the successful first-in-human use of an investigational
implanted wireless BCI paired with ARCIM Therapy to help a person with SCI recover
use of paralyzed arms and hands with thought-driven movement. The implant was part
of a clinical feasibility study with partners at CEA-Clinatec, CHUV, and EPFL that is
supported by a grant from the European Innovation Council. BCI-augmented ARCIM
implants will continue throughout 2024 as part of this study.
•
In November, ONWARD announced a publication in Nature Medicine using
investigational ONWARD ARC Therapy to address gait challenges related to
Parkinson’s disease. The breakthrough was covered widely by the global media,
demonstrating the potential for ARCIM Therapy to address mobility challenges
stemming from Parkinson’s disease in addition to those resulting from SCI.
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•
Also in Q4, ONWARD research partner .NeuroRestore was awarded a USD 1 million
grant from The Michael J. Fox Foundation for Parkinson’s Research (MJFF) to implant
the ARC
IM
System and investigate the effect of ARC Therapy in six additional
participants with Parkinson’s disease. This study will assist ONWARD in determining
whether to conduct additional clinical trials and potentially commercialize ARC
Therapy in the future for those living with Parkinson’s disease.
ONWARD has had a highly productive year preparing for several key submissions and
discussions with the FDA and EU-MDR in 2024 and beyond. The Company made clear
progress in finalizing the study design and gearing up for FDA investigational device
exemption (IDE) study submission and start of Empower BP, the pivotal clinical trial
investigating the safety and effectiveness of ARCIM therapy on hemodynamic instability
following SCI.
Quality
ONWARD has a global quality system for all company employees based in the
US
, the
Netherlands, and Switzerland that complies with applicable regulations and standards
related to the medical devices industry (MDR and QSR, respectively, for EU and USA). In
2018, the Company obtained the ISO 13485 certification for design and development. In
2022, the certification scope was expanded to include clinical applications
targeted by
ARCEX Therapy and new activities to support the upcoming manufacturing and
distribution of ARCEX devices.
The most recent audit was conducted and passed in late 2023 by TÜV SÜD, a respected
notified body with global reach for neuromodulation devices.
A Quality Plan was established to support the growth of the organization in the coming
years, and to ensure the operational excellence of the teams and delivery of safe and
effective therapies.
ONWARD has continued to strengthen its Quality function by hiring additional qualified
leadership and staff, bringing competencies in medical software, supplier quality
management, design control, and risk management.
Commercial operations
ONWARD does not currently offer any products for commercial sale. However, with
successful FDA regulatory clearance, we plan to commercialize ARC
EX
for improving
strength and function of the upper extremities after SCI. Expected timing for US launch is
in the second half of 2024, with launch in Europe to follow in the first half of 2025.
In late 2026, assuming positive clinical results from our Empower BP global pivotal trial
and subsequent regulatory authority approvals, ONWARD aims to launch ARC
IM
commercially in the U
S
and select European markets to restore hemodynamic stability
after SCI. Additionally, the Company will continue to investigate the use of ARC
IM
for
additional indications, for instance, to improve mobility by restoring movement in the legs
and feet, with the goal of bringing these therapies to market in the near future.
Given the small number of centers and clinicians responsible for providing rehabilitation
training, managing SCI patients, and performing accompanying surgeries, the Company
plans to deploy its own direct sales and service organization in the United States and
select European markets, and use distribution partners elsewhere, where appropriate.
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Financing
To support operational goals, ONWARD will continue to invest in R&D activities, conduct
clinical trials, and prepare for commercialization. The Company has successfully raised
more than EUR 150M since its founding, with EUR 29.8M net cash (please refer to Non-
IFRS financial measure included in Other Information for the definition of net cash) on the
balance sheet at the end of 2023.
At the end of 2023, the Company expected its current cash to propel operations through
the end of 2024. The Company successfully completed a EUR 20M equity financing in
March 2024, extending its cash runway into mid-2025.
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This financial review should be read with the operational review and the Company’s
consolidated financial statements in this Annual Report, which have been prepared in
accordance with International Financial Reporting Standards (IFRS) as published by the
International Accounting Standards Board and as adopted by the European Union and
with Part 9 of Book 2 of the Dutch Civil Code.
EUR’ Million
2023
2022
Total Revenues & Other Income
0.5
2.1
Total Operating Expenses
Research & Development Expenses
Clinical & Regulatory expenses
Marketing & Market Access Expenses
Patent Fees & Related Expenses
Quality Assurance Expenses
General & Administrative Expenses
(36.0)
(13.8)
(4.9)
(2.9)
(1.5)
(1.5)
(11.3)
(34.2)
(13.1)
(5.7)
(2.0)
(1.5)
(1.2)
(10.6)
Operating Loss for the Period
Net Finance Expense
Income Tax Expense
(35.5)
(0.6)
(0.1)
(32.0)
(1.5)
0.8
Net Loss for the Period
(36.2)
(32.8)
At
EUR’ Million
31 December
2023
31 December
2022
Net cash position at the end of the period
Interest-bearing loans
Equity
29.8
(15.3)
17.9
61.8
(12.7)
52.6
Financial Review
Total Revenues & Other Income
Other income, mainly grant income, decreased because the grants received from
European Innovation Council and SMEs Executive Agency (EISMEA) focusing on brain-
computer interfaces are under review for amendment. The amendment is to align the
funding received (and receivable) with the origin of the activities being performed.
Activities in the European Union will continue to be funded by EISMEA. For the activities
performed by the subsidiary in Switzerland, ONWARD is in discussion with a Swiss State
Agency for replacement funding. We reassessed our original estimate for grant income
recognition, and conservatively adjusted the income recognized based on the change in
estimate to reflect the progress of the amendment and discussions at 31 December 2023.
This includes a payable balance for the estimated portion of the advance received to be
repaid. No new grants were awarded in 2023.
Research & Development Expenses
Research and development (R&D) expenses increased by 5%, from EUR 13.1M in 2022 to
EUR 13.8M in 2023, driven mainly by the focused efforts to finalize all components of the
ARC
EX
platform for US FDA submission, as described in the operational review.
R&D expenses consist of product development, engineering to develop and support our
products, testing, consulting services, and other costs directly attributable to the ARC
technology platforms and related therapies. These expenses primarily include salaries
for R&D staff and related expenses, including expenses for share-based compensation,
and outsourced development expenses. These expenses do not meet the criteria for
capitalization given the status of development activities.
R&D expenses also include the costs of sponsored research activities undertaken by
universities with which ONWARD collaborates. This includes the close working relationship
with one of the founders, Grégoire Courtine, CSO, Director at .NeuroRestore and Professor
at EPFL.
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Clinical & Regulatory Expenses
Clinical expenses decreased by 14%, from EUR 5.7M in 2022 to EUR 4.9M in 2023. Clinical
expenses in 2023 relate to supporting clinical activities including consulting services and
costs associated with the different ongoing studies for the regulation of blood pressure
with ARC
IM
Therapy; preparation for our pivotal clinical study on blood pressure, Empower
BP; and supporting FDA submission for ARC
EX
. In 2022, expenses primarily related to the
completion of the Up-LIFT pivotal and LIFT Home clinical trials. These expenses comprise
employee salaries and related expenses, including share-based compensation, clinical
trial management and monitoring, payments to clinical investigators, data management,
and travel expenses to the various clinical trial locations.
Marketing & Market Access Expenses
Marketing and market access expenses increased by 45%, from EUR 2.0M in 2022 to
EUR 2.9M in 2023. The increase in costs has been driven
by market access investigative
activities in Europe and the US as part of ARC
EX
launch preparations, including market
pricing studies and attendance at key events to build awareness of, and generate interest
in, ONWARD ARC Therap
y
within the SCI
C
ommunity. Employee costs increased to
support the marketing effort required.
Patent Fees & Related Expenses
Patent fees and related expenses remained unchanged at EUR 2.0M in 2023. These
expenses consist primarily of costs associated with obtaining and maintaining patents
and other intellectual property included in ONWARD’s growing portfolio.
Quality Assurance Expenses
Quality assurance expenses increased by 25% from EUR 1.2M in 2022 to EUR 1.5M in 2023.
Quality assurance expenses are related to efforts to strengthen ONWARD’s capability to
meet quality and regulatory requirements in support of upcoming regulatory submissions
and expected commercialization. These expenses include employee salaries and related
expenses, including share-based compensation, consulting, testing, and travel related to
quality and risk assurance activities.
General & Administrative Expenses
General and administrative expenses increased by 7%, from EUR 10.6M in 2022 to EUR
11.3M in 2023. As ONWARD prepares to launch its first commercial product, the Company
has made investments in technology systems, consulted with specialists on licensing,
legal
,
and regulatory compliance, and expanded its overall operational capabilities.
Net Finance Expense
The net financial expense decreased by 53%, from EUR 1.5M in 2022 to EUR 0.7M in 2023.
The expense for 2022 relates to the innovation loan from RVO NL and bank interest paid
on the positive cash balance in the first half of 2022. The Company has started investing
excess cash in short-term deposits with reputable banks yielding interest income. In 2023,
the interest earned has positively offset the interest expense on the innovation loan.
Income Tax Expense
The 2022 expense was mainly the result of the recognition of a deferred tax asset relating
to the net operating losses in the US entity to offset the reversable temporary difference
recognized as part of the purchase price allocation in 2019. The 2023 expense derives from
the activities of the Swiss subsidiary.
Cash Position
The Company ended the year with a positive net cash balance of EUR 29.8M (2022: EUR
61.8M). The full amount comprises cash and cash equivalents since none of the short-term
fixed deposits exceeds a period of 3 months.
The table below summarizes the Company’s cash flows for the years 2023 and 2022.
EUR’ Million
2023
2022
Net cash generated / (used) from operating activities
Net cash generated / (used) from investing activities
Net cash generated / (used) from financing activities
Effect of exchange rates on cash and cash equivalent
(32.2)
19.6
0.8
(0.1)
(26.7)
(20.4)
(0.6)
(0.0)
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The cash outflow from operating activities increased from EUR 26.7M in 2022 to EUR
32.2M in 2023. The increase in cash used was attributable to higher operating costs, as
explained above, offset by an increase in interest earned on short-term fixed deposits and
an increase in non-cash adjustments relating to share-based compensation.
Cash flow from investing activities in 2023 reflects the withdrawal of fixed-term deposit
investments offset by the acquisition of property, plant, and equipment.
The cash inflow in 2023 was from two additional installments received on the interest-
bearing loans (see below) offset by the payment of the lease liability.
The impact of exchange rates amounted to EUR 113k for 2023.
Interest-bearing Loans
Interest-bearing loans increased by 20%, from EUR 12.7M in 2022 to
EUR
15.3M in 2023.
This is due to an increase in the loan capital amount of EUR 1.3M and interest that
accumulated on the innovation loan from RVO NL (Dutch government).
Equity
The Company’s equity at the end of 2023 remained positive at EUR 17.9M, decreasing
by EUR 34.7M from the previous year. The movement is due to the loss for period of EUR
36.2M, adjusted for share-based compensation of EUR 2.6M, the actuarial loss on the
remeasurement of post-employment benefits of EUR 0.9M, and currency translation
differences of EUR 0.2M.
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General
ONWARD is a public limited liability company established under the laws of the
Netherlands, with common shares listed on Euronext Brussels and Euronext Amsterdam.
The Group is composed of ONWARD Medical N.V. (incorporated as a private limited
liability company (B.V.) on 20 November 2015) and its wholly owned subsidiaries:
•
ONWARD Medical S.A. (Swiss subsidiary established on 12 December 2014)
•
ONWARD Medical Inc. (US subsidiary established on 13 September 2013)
The Company and its subsidiaries act as one company.
ONWARD’s corporate governance is guided by the rules and principles set out in the
Dutch Corporate Governance Code (the CGC), the Company’s Articles of Association
(AOA) and Dutch law. The AOA are available on the ONWARD website (onwd.com) under
the Investors/Governance tab.
ONWARD maintains a Code of Conduct in order to promote a culture of good governance,
excellence, and consistency that applies to all directors, officers, and employees.
A copy of the Code of Conduct is available on the ONWARD website (onwd.com)
under the Investors/Governance tab. The Code of Conduct outlines our commitment
to be a responsible social partner and the way in which we attempt to interact with
our stakeholders, including shareholders, suppliers, customers, employees, and SCI
community. The Code of Conduct expresses our dedication to an economically, socially,
and ethically sustainable way of working. The Board has received no indications that the
Code is not effective or of any non-compliance.
Governance
Governance Framework
The Company’s overall governance framework and key governance elements at each level
are the following:
•
For shareholders: the Articles of Association and Shareholder Dialogue Policy
•
For the Board: the Board Rules, the Charter of the Audit Committee, the Charter of the
Compensation Committee, and the Charter of the Nomination Committee
Board of Directors
ONWARD has a one-tier board consisting of one or more Executive Directors
(uitvoerend
bestuurders)
and one or more Non-Executive Directors
(niet-uitvoerend bestuurders)
, all of
whom are individuals. Our CEO, as Executive Director, with the support of the Management
Team, is charged primarily with the Company’s day-to-day business and operations and the
implementation of the Company’s strategy. The
N
on-
E
xecutive Directors are primarily
responsible for supervising the performance of the Executive Director.
In a one-tier governance structure such as that adopted by ONWARD, Non-Executive
Directors and Executive Directors share responsibility for managing the company for those
tasks and duties that are not delegated to one or more other specific Directors by virtue of
Dutch law, the Articles of Association, or any other arrangement catered for therein (e.g., the
Rules of the Board). It is therefore important that the Board ensure sufficient independent
supervision by Non-Executive Directors.
In accordance with the CGC, the Board’s role is to provide leadership and supervision to the
Company on matters of strategy, risk management, and policies. It has overall responsibility
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for the management and control of the Company and is authorized to take all actions it
deems necessary to achieve the Company’s purpose.
In performing their duties, Directors must be guided by the best interests of the Company
and its stakeholders, including business partners, employees, and shareholders. The
Board has drawn up Rules concerning its organization, decision-making, and other
internal matters. These Rules are available on the ONWARD website (onwd.com) under the
Investors/Governance tab.
The composition of the Board aims to ensure a broad diversity of experience, knowledge,
and skills. The directors are appointed by the Company’s Annual General Meeting of
shareholders upon nomination by the Board. The general meeting may dismiss a Director
at any time by a two-thirds majority vote if less than half of the issued share capital is
represented at the General Meeting, unless the resolution for dismissal is passed at the
Board’s proposal.
Dutch law does not set a limit on the maximum number of consecutive terms that a
Director may serve. According to the CGC, Non-Executive Directors may be elected for a
maximum of two consecutive four-year terms and, subsequently, for a maximum of two
consecutive two-year terms.
The Board meets as often as any Director considers necessary or appropriate. Resolutions
are passed by a simple majority of votes cast. In the case of a tie in the vote of the
Board, the resolution is not passed. Any resolutions concerning a material change to the
character or identity of the Company or its business must be submitted to the Annual
General Meeting for approval.
a: Reappointed at the Annual General Meeting held in 2023 for a period of four years.
Name
Year of Birth
Nationality
Gender
Position
Year of
First
Appointed
End of Term
Jan Øhrstrøm
1957
Danish
Male
Independent
Non-Executive
Director &
Chairperson
2016
Annual General
Meeting of 2024
Dave
Marver
1968
American
Male
Executive
Director & CEO
2020
Annual General
Meeting of 2025
Grégoire
Courtine
1975
French
Male
Non-Executive
Director & CSO
2016
Annual General
Meeting of
2027
a
Ian Curtis
1968
British
Male
Independent
Non-Executive
Director &
Vice-Chair
2019
Annual General
Meeting of 2025
Fredericus
Colen
1952
Dutch
Male
Independent
Non-Executive
Director
2017
Annual General
Meeting of 2025
John
de Koning
1968
Dutch
Male
Non-Executive
Director
2016
Annual General
Meeting of 2024
Kristina
Dziekan
1968
German,
Swiss
Female
Independent
Non-Executive
Director
2022
Annual General
Meeting of 2026
Vivian
Riefberg
1960
American
Female
Independent
Non-Executive
Director
2023
Annual General
Meeting of 2027
Composition of the Board of Directors
The Company has a one-tier Board consisting of 8 members.
Governance
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Board Members’ Biographies
Jan Øhrstrøm
has more than 30 years’ experience in the medical technology and
pharmaceutical industries, with a proven track record of driving successful product
approvals, private financings, and IPOs. He has held senior management roles at
NovoNordisk, ProFibrix B.V., and ZymoGenetics, among others. He is currently Chairman
of VarmX B.V., a company specializing in blood clotting agents, and is Chairman of Blaze
Bioscience Inc. He holds an MD from the University of Copenhagen. Jan is the Board
Chair, Chair of the Compensation Committee, and Chair of the Nomination and Corporate
Governance Committee.
Dave Marver
(CEO) is an accomplished chief executive and director with more than 25
years’ international experience in public, private, and emerging companies. He combines
expertise in medical and consumer technology, wearables, and health monitoring.
Previously, Dave spent almost 15 years with Medtronic, holding a variety of leadership
positions in the US and Europe, including vice-president roles in sales, marketing, strategy,
and business development. He then joined Nasdaq-listed Cardiac Science Corporation as
CEO before co-founding two startups. He holds a BA in psychology from Duke University
and an MBA from University of California, Los Angeles.
Grégoire Courtine
is a full-time professor of neuroscience and neurotechnology at
EPFL and Director of .NeuroRestore, a research center at EPFL and CHUV that develops
innovative therapies using neurostimulation and other approaches. His groundbreaking
research in neuroscience has been recognized by prestigious prizes including the Rolex
Award, Schellenberg Research Prize, and Chancellor’s Award of the University of California.
He holds a PhD in neurosciences from INSERM, Paris, and a PhD in medicine from the
University of Pavia, Italy. As a founding Board member, Grégoire serves as a non-executive
Director in addition to his role as CSO. Gregoire was reappointed for a second term at the
Annual General Meeting in 2023.
Ian Curtis
is a member of the Board of the Christopher and Dana Reeve Foundation and
the International Spinal Research Trust. As the father of a young woman living with SCI, Ian
is deeply committed to advancing research and treatment for SCI. He holds a BA in history
from Durham University, is a fellow of the Institute of Chartered Accountants in England
and Wales, former partner with PwC and Chairman of HPC plc. Ian is the Board Vice-Chair
and Chair of the Audit Committee.
Fred Colen
has more than 40 years’ experience in the medical device industry, with a
track record of building strong organizations to bring new technology to market. Fred was
the President and CEO of Neovasc Inc., a Canadian publicly traded company developing
products for the cardiovascular marketplace, which was acquired by Shockwave Medical
during 2023. Previously, he held senior executive roles at Boston Scientific and St. Jude
Medical. He holds a MA in electrical engineering and specialized in medical technology
from RWTH Aachen University, Germany. Fred is a Member of the Audit Committee and
the Compensation Committee.
John de Koning
is a General Partner at EQT Group (formerly LSP), one of the largest
European investment firms providing financing for life sciences and healthcare companies.
Since joining EQT Group in 2006, John has led some of its most successful investments
and served on the board of several companies, including argenx, Merus, and Prosensa. He
holds an MS in molecular biology from the University of Utrecht and a PhD in oncology from
the Erasmus University Rotterdam. John is a Member of the Nomination and Corporate
Governance Committee.
Kristina Dziekan
is a senior advisor in market access, market development, and policy for
life sciences companies. She previously served as She previously served in leadership roles
as Head of Market Access, Government Affairs, and Tendering for Alcon’s Surgical Division
in Europe,Senior Global Reimbursement and Health Economics Director for Medtronic
Neuromodulation, and Health Outcomes Manager for GlaxoSmithKline in the UK and
parts of Asia. She earned an MSc in health policy, planning, and financing from the London
School of Economics, an MA in international economics and European Studies from Johns
Hopkins University, a BA in philosophy, politics, and economics from Oxford University,
and a Vordiplom in business administration and economics from Georg August University.
Kristina is a Member of the Audit Committee.
Vivian Riefberg
iis currently the David C. Walentas Jefferson Scholars Chair Professor
of Practice at the Darden School of Business at the University of Virginia and serves on
the boards of Signify Health, K Health, and Lightrock, an impact investing firm, as well as
the boards of the Public Broadcasting System (PBS), Johns Hopkins Medicine, the Lorna
Breen Heroes Foundation, and the National Education Equity Lab. She is also an advisory
board member for the Smithsonian’s planned American Women’s History Museum. She
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retired from McKinsey & Company in 2020 after 31 years, having served as c
o
-leader of the
US healthcare practice, leader of the public sector practice, and on McKinsey’s global board
of directors. She previously served on the US National Institutes of Health (NIH) Clinical
Center Board of Governors and the NIH Advisory Board for Clinical Research. She holds a
BA, magna cum laude in history from Harvard-Radcliffe College and an MBA with distinction
from Harvard Business School. Vivian is a Member of the Compensation Committee and the
Nomination and Corporate Governance Committee.
Director Independence
In accordance with best practice provision 2.1.7 of the CGC, the majority of the Non-
Executive Directors must be independent; at most, one Non-Executive Director does not
have to meet the independence criteria. A Board member is considered “not independent” if
he or she, a spouse, partner, or close family member (related by blood or marriage up to the
second degree) meet any of the conditions listed below:
•
Has been an employee or member of the management board of the Company, including
associated companies (as referred to in Section 5:48 of the Financial Supervision Act
Wet op het financieel toezicht/ Wft) in the five years prior to their appointment.
•
Receives personal financial compensation from the Company, or an associated company,
other than the compensation received for the work performed as a Board member.
•
Has had an important business relationship with the Company or an associated company
in the year prior to the appointment.
•
Is an executive of a company in which a member of the management board of the
company which he supervises is a non-executive Board member.
•
Has temporarily performed management duties during the previous twelve months in the
absence or incapacity of a member of the management board.
•
Has a shareholding in the Company of at least 10%.
•
Is a member of the management board or supervisory board, or a representative in
some other way, of a legal entity that holds at least 10% of the shares in the company,
unless the entity is a group company.
At the date of this Annual Report, the Board consists of eight members, of whom seven
are Non-Executive Directors. Two of these Non-Executive Directors are deemed “not
independent” based on meeting certain of the conditions above. Prof. Courtine, one of the
Company’s founders, is considered “not independent” as he is the Chief Science Officer
of the Company and receives personal compensation for such a role. John de Koning is
considered “not independent” as he is a representative of a major shareholder holding at
least 10% of the shares in the Company (EQT Group (formerly LSP)). The requirements for
independence as per best practice provision 2.1.7 of the CGC are met.
Committees within the Board of Directors
The Board has established the following three committees:
•
the Audit Committee
•
the Compensation Committee
•
the Nomination and Corporate Governance Committee
Non-Executive Directors are appointed to committees by the Board. The committees
report their findings to the Board, which is ultimately responsible for all decision-making.
The role, responsibility, and functioning of each committee is summarized below.
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Audit Committee
The Audit Committee comprises three members: Ian Curtis (Chair), Fred Colen, and
Kristina Dziekan.
In accordance with its charter, the Audit Committee is charged with the following matters:
a.
Monitoring the Board with respect to:
•
relations with the internal audit function and the external auditor, as well as
compliance with recommendations and follow-up of comments
•
the Company’s funding
•
the application of information and communication technology by the Company,
including risks relating to cybersecurity
•
the Company’s tax policy
b.
Issuing recommendations concerning the appointment and the dismissal of the
head of the internal audit function, as relevant, and reviewing and discussing the
performance of the internal audit function.
ONWARD has not yet established a separate internal audit function and the related
responsibilities as per the charter do not apply.
c.
Reviewing and discussing the Company’s audit plan, including with the internal audit
function and the external auditor.
d.
Reviewing and discussing the essence of the audit results, also with the internal audit
function, including:
•
flaws in the effectiveness of the Company’s internal risk management and control
systems (“Internal Controls”)
•
findings and observations with a material impact on the Company’s risk profile
•
failings in the follow-up of recommendations made previously by the internal
audit function
e.
Monitoring the audit of the Company’s annual accounts, annual report, and financial
reporting processes, and making proposals to safeguard the integrity of these processes.
f.
Reviewing and discussing the effectiveness of the design and operation of the Internal
Controls with the Board, the CEO, and the CFO, including identified material failings
in the Internal Controls and material changes made to, and material improvements
planned for, the Internal Controls.
g.
Reviewing and monitoring the independence of the external auditor, also considering
any non-audit services rendered by the external auditor.
h.
Submitting proposals to the Board concerning the external auditor’s engagement
to audit the Company’s financial statements, including the scope of the audit, the
materiality standard to be applied, and the external auditor’s fees.
The members of the Audit Committee are appointed and dismissed by the Board. More
than half of all its members, including the chairperson, must be independent within the
meaning of the CGC and at least one committee member must have competence in
accounting and/or auditing.
The Audit Committee shall meet as often as it determines is appropriate to carry out its
responsibilities and each meeting shall be presided over by the chairperson and, in the
absence of the chairperson, one of the other members shall be designated as the acting
chairperson of the meeting.
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Compensation Committee
The Compensation Committee comprises three members: Jan Øhrstrøm (Chair), Fred
Colen, and Vivian Riefberg. In deviation from best practice provision 2.3.4/5.1.4 of the
CGC, the Compensation Committee is led by Jan Øhrstrøm, who is also chairperson
of
the Board. (Refer to ‘Deviations from the Best Practices Provisions of the Dutch
Corporate Governance Code’.). The Board considers that the experience and continuity
of Dr. Øhrstrøm being chair of the Compensation Committee outweighs the
disadvantages of him holding both positions.
In accordance with its charter, the Compensation Committee is charged with the
following matters:
a.
Submitting proposals to the Board concerning changes to the Company’s
compensation policy.
b.
Submitting proposals to the Board concerning the compensation of individual
Directors, covering:
•
compensation structure
•
amount of the fixed and variable compensation components
•
applicable performance criteria
•
scenario analyses that have been carried out
•
pay ratios within the Company’s group
•
views of the Director concerned regarding the amount and structure of his or her
own compensation
c.
The preparation of the Company’s compensation report for the Board.
Nomination and Corporate Governance Committee
The Nomination and Corporate Governance Committee comprises three directors:
Jan Øhrstrøm (Chair), John de Koning, and Vivian Riefberg. Jan Øhrstrøm serves as
chairpersonof the Nomination and Corporate Governance Committee.
In accordance with its charter, the Nomination and Governance Committee is charged
with the following matters:
a.
Drawing up selection criteria and appointment procedures for the Directors.
b.
Reviewing the size and composition of the Board and submitting proposals for the
composition profile of the Board.
c.
Reviewing the functioning of individual directors and reporting on such reviews to
the Board.
d.
Drawing up a plan for the succession of directors.
e.
Submitting proposals for (re)appointment of directors.
f.
Supervising the policy of the Board regarding the selection criteria and appointment
procedures for the Company’s senior management and executive officers
Management Team
The Management Team is responsible for running the Company in accordance with the
strategies, policies, and budgets determined by the Board. It has all powers except for
those reserved for the Board and the General Meeting of shareholders by law and by the
Company’s Articles of Association.
The members of the Management Team commit to carrying out their duties in accordance
with the highest business, ethical, moral, and legal standards laid out in the Company’s
Code of Business Conduct and Ethics (see onwd.com, Investors/Governance). They strive
to lead by example by embodying the ONWARD code of values in everything they do. The
Management Team meets at least once a week.
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Name
Position
Member Since
Dave Marver
Chief Executive Officer
2020
Grégoire Courtine
Chief Science Officer
2016
John Murphy
Chief Technology Officer
2020
Khaled Bahi
Chief Financial Officer
2023*
Erika Ross Ellison
VP Clinical
,
Regulatory
& Quality
2023
Sarah Moore
VP Global Marketing
2023
Andy Dolan
VP Sales
2021**
Robert Odell
VP Operations
2023***
*Khaled Bahi joined as interim CFO on 1 October 2023, succeeding Lara Smith Weber who stepped down 30 September 2023.
**Andy Dolan stepped down as VP Sales on 26 January 2024.
***Robert Odell joined as VP Operations on 1 July 2023, succeeding Zouhir Mechta.
Biographies of the Management Team
Dave Marver
(see biography p. 127).
Grégoire Courtine
(see biography p. 127).
John Murphy
has over 25 years of experience driving the development of medical implants
and neurostimulation devices at LivaNova, Abbott, and Medtronic. His leadership expertise
spans the continuum of R&D, with a focus on consumer-centric design, IP generation, and
agile processes. Prior to joining ONWARD in 2020, John was the Chief Technology Officer
of LivaNova Neuromodulation. He holds a BS in electrical engineering from the University
of North Carolina at Charlotte and a PhD in production systems and robotics from EPFL.
Khaled Bahi
brings more than 20 years of finance experience in the medtech industry.
Early in his career, he was a corporate and investment banker with Crédit Lyonnais and the
Industrial Bank of Japan. Prior to joining ONWARD, Khaled served as CFO of Lausanne-
based Symetis, acquired by Boston Scientific in 2017 for USD 435 million, and Paris-based
Stilla Technologies. He was also a finance leader with Fresenius Medical Care for 15 years
in different corporate and regional roles in Europe, Latin America, Middle East, and Africa.
Khaled holds a MSc in Physics from the ETH Zurich.
Erika Ross Ellison
joined ONWARD from Abbott Neuromodulation, where she was
Director, Global Clinical & Applied Research. Previously, as Neuroscience Director at
Cala Health, she managed the scientific research program that led to de novo clearance
and launch of the company’s neurostimulation technology. Erika also served as Deputy
Director, Medical Device Innovation Accelerator, Department of Surgery and Assistant
Professor, Department of Neurologic Surgery at Mayo Clinic. Erika holds a BSc in Biology
and Business and an MSc in Molecular Biology from the University of Denver, and a PhD in
Neuroscience from Mayo Clinic
Sarah Moore
has over 20 years of experience in marketing and general management.
Sarah comes to ONWARD from Nevro, an implantable neuromodulation company, where
she served as Head of Commercial Marketing. Prior to that, she held various leadership roles
in global marketing across multiple Johnson & Johnson medical device franchises, most
recently as the business unit leader for J&J’s Advanced Imaging business. Sarah earned an
MBA from Duke University and a BA in German from Washington and Lee University.
Andy Dolan
has 20 years of experience in marketing, business development, and
organizational leadership at medical device companies, both private and public. Before
joining ONWARD in 2021, Andy held senior roles in sales and marketing at ReWalk
Robotics, Boston Scientific, Johnson & Johnson, and Integra LifeSciences. He holds an MBA
from the University of Massachusetts and a graduate certificate in bioengineering from
Tufts University. He also serves as a United States Navy Reserve Public Affairs Officer.
Robert Odell
brings to ONWARD decades of technology and leadership experience in
the medical device industry. Prior to joining ONWARD, Robert was President and Chief
Operating Officer of Cardiac Insight, Inc., a successful startup that created and introduced
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disruptive cardiac monitoring technology. Prior to Cardiac Insight, he served as COO for
Cardiac Science, a publicly traded manufacturer of Class II and Class III devices. Robert has
held executive assignments in Operations, Engineering, Marketing, Business Development,
Information Technology, and QA/RA with such notables as GE Healthcare, Siemens Medical
Solutions, Philips Medical Systems, Medtronic, and Analogic. The foundation for his career
is a degree in electrical engineering from Syracuse University.
Diversity and Inclusion
The diversity policy as adopted does not define specific targets. It is the ambition that
both the Board and Management Team should comprise one-third of female members,
while also ensuring diversity in terms of background, skills, and age. This policy is available
on the ONWARD website (onwd.com) under the Investors/Governance tab. ONWARD’s
Board consists of 6 male directors (1 being an executive director) and 2 female directors
(both Non-Executive Directors), therefore 2 of the 5 Non-Executive Directors are female.
The Management team consists of 6 male members and 2 female members. ONWARD
will continue its efforts to recruit independent Directors and management team members
with backgrounds that would help it achieve its independence and diversity ambitions. In
deviation with best practice provision 2.1.6 of the CGC, the Company’s existing policy does
not include specific goals for diversity and inclusion.
ONWARD takes pride in the inclusive culture it has created, founded on the principles of the
ONWARD code. A culture where every employee feels valued and respected, has access
to equal opportunities regardless of identity. In deviation with best practice provision 2.1.5
of the CGC, ONWARD’s efforts to create an inclusive culture have not yet been formalized
within the diversity policy.
Stakeholder Dialogue
The Company has drawn up an outline policy for effective dialogue with stakeholders. The
company is prepared to engage in a dialogue and will facilitate this dialogue unless, in the
opinion of the Board and Management Team, this is not in the interests of the Company and
its affiliated enterprise. This policy is available on the ONWARD website (onwd.com) under
the Investors/Governance tab.
Conflicts of Interest
According to principle 2.7.4 of the CGC, the Company must report on directors’ conflicts
of interest in transactions in its management report where the conflict of interest is of
material significance to the Company or to the relevant director. Directors and members
of management are expected to arrange their personal affairs so as to avoid conflict of
interest. Any potential conflict of interest must be brought to the attention of the Board.
Certain directors and members of the Management Team have a direct or indirect
beneficial interest in ONWARD’s share capital or serve as a representative of a legal entity
that is a major shareholder. In their capacity as non-executive directors, their primary
duty is to supervise the performance of the executive directors and the management
of the Company and its business. A conflict of interest may arise if a decision aimed at
contributing to the Company’s long-term and sustainable success negatively impacts its
share price in the short term, thereby reducing the value of the shareholding of which the
non-executive director is a representative.
As of 31 December 2023, the potential conflicts of interests between the duties to the
Company of each of the directors and members of the Management Team and their
private interests or other professional duties were as follows:
a.
Grégoire Courtine is the Chief Science Officer and a Non-Executive Director of
the Company.
b.
John de Koning represents EQT, a major shareholder of the Company and Non-
Executive Director of the Company.
No transactions that would result in a conflict of interest were reported to the Board in 2023.
Related Party Transactions
While ONWARD does not have a related party transaction policy, it complies with the
recommendations of the Dutch Civil Code (DCC) in this respect.
The Dutch act to implement the EU Shareholder Rights Directive II (
Bevordering van de
langetermijnbetrokkenheid van aandeelhouders
, “Dutch SRD Act”), which entered into
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force on 1 December 2019, added new rules on related party transactions to the DCC.
These rules stipulate that “material transactions” with “related parties” that are not
entered into within the ordinary course of business or not concluded on normal market
terms must be approved by the Board and be publicly announced at the time of or before
the transaction takes place. The Board is required to establish an internal procedure to
periodically assess whether transactions with related parties are concluded in the ordinary
course of business and on normal market terms.
In particular, all transactions between ONWARD and a shareholder holding 10% or more of
issued share capital should be agreed on customary terms. Decisions to enter into such
a transaction that is of material significance to the Company and/or to the shareholder
concerned should be approved by the Board. Any such transaction should be disclosed
in the Company’s Board report, together with an affirmative statement that these
recommendations of the Code have been complied with.
No related party transactions with a shareholder holding 10% or more of the issued share
capital were reported to the Board in 2023.
General Meeting
The main powers of the General Meeting relate to:
•
the issuance of shares or rights to shares, restriction, or exclusion of pre-emptive rights
of shareholders, repurchase of shares, and reduction of the issued share capital
•
the amendment of the Articles of Association
•
the appointment, suspension, and dismissal of members of the Board
•
decisions of the Board involving a significant change in the Company’s identity of character
•
the approval of the remuneration policy of the Board
•
the adoption of the financial statements and declaration of dividends
•
the appointment of the Company’s external auditor
The Annual General Meeting is held within six months after the end of the financial year to
discuss and, if applicable, approve, the Annual Report, the Annual Accounts, and any of the
other topics mentioned above.
The Annual General Meeting and, if necessary, other General Meetings, are convened by
the Board. The agenda and explanatory notes are published on the Company website.
The last Annual General Meeting was held on 8 May 2023. The agenda, explanatory notes
and minutes are published on the Company website. The next Annual General Meeting is
scheduled for 14 June 2024.
Deviations from the Best Practices Provisions of the Dutch Corporate Governance Code
ONWARD acknowledges the importance of good governance and is committed to
adhering to the best practices of the CGC as much as possible. As of the date of this
Annual Report, we report the following deviations from the CGC:
•
Best practice provision 2.1.5. and 2.1.6
The CGC provides that the diversity policy
should include appropriate targets for inclusion and the creation of psychological
safety. Despite ONWARD’s efforts to create an inclusive culture, this has not yet been
formalized within the diversity policy. The CGC also requires that the policy includes
clear goals for diversity and inclusion and a plan to achieve these. The existing policy
does not include specific diversity and inclusion goals nor a plan for achievement. The
Company will update the existing diversity policy to formally reflect its approach to
inclusion, defining goals and a plan to achieve this for measurement in future.
•
Best practice provision 2.1.5. and 2.1.6
requires that the periodic evaluation of the
functioning of the Board and Board committees should be performed under the
supervision of an external expert. The 2023 evaluation was not performed under
external supervision. External supervision will be considered for future evaluations.
•
Best practice provision 2.3.4/5.1.4.
The CGC provides that the Compensation
Committee should not be chaired by the Chairperson of the Board. In deviation from
the CGC, the Compensation Committee is chaired by the Chairperson of the Board.
The Board considered that the experience and continuity of Jan Øhrstrøm being
chairperson of the Compensation Committee outweighs the disadvantages of him also
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being the Chairperson of the Board. For the reasons provided, the Company does not
intend to fully comply with this best practice provision.
•
Best practice provision 3.1.2 v
The CGC recommends that variable remuneration
should be linked to measurable performance criteria determined in advance. To
align the employees’ interest with the interests of the shareholders and to allow
the participation in the long-term growth of the Company, options were granted
to the Management Team (including the Executive Director). There are no specific
performance conditions associated to these options, only a service condition. However,
considering that the value of the option is linked to the share price of ONWARD, it
includes an inherent performance criterion. Furthermore, the size of the stock option
is linked to the position and job grade of the individual and is contingent on the
performance of the individual. We will consider if more clear measurable performance
criteria should be added to future grants.
•
Best practice provision 3.3.3.
The CGC recommends that shares held by a non-
executive director in the company on whose Board of Directors they serve should be
held as a long-term investment. The Company’s Compensation Policy does not include
such a requirement.
•
Best practice provision 4.3.3.
The CGC recommends that the General Meeting should
be capable of passing a resolution cancelling the binding nature of a nomination or
dismissal by simple majority, representing no more than one-third of the issued share
capital. Under the Articles of Association, directors can only be appointed or dismissed
by the General Meeting by simple majority of votes cast, provided that the Board
proposes the appointment or dismissal. In other cases, the General Meeting can only
pass a resolution to appoint or dismiss a director by a two-thirds majority representing
more than half of the issued share capital. The Company deems this appropriate
considering the remaining shareholdings and involvement of the Company’s current
significant shareholders.
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Management
& Control
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Risk
Management
& Control
Analyzing, monitoring, and managing internal and external risks is crucial to ensuring
that we meet our ambitious targets, that our financial information is reliable, and that
our activities comply with all applicable laws and regulations. Current risks mainly
concern research and development of our ARC Therapies, securing regulatory approvals,
protecting our intellectual property, and maintaining equity in the Company’s mid- to long-
term financing.
The Management Team is responsible for developing, implementing, and operating
adequate risk
management and internal control systems. The Board has a control function
with respect to these systems. Our risk
management and internal control systems are
reviewed, updated, and optimized as an ongoing process based on internal evaluations,
discussions with the Board and the Audit Committee, and audits from external parties.
The outcome of the annual risk review, as initiated in 2022, has been incorporated into
this report. With the support of an external consultant, we formalized our internal control
framework which will be implemented in 2024. Except for this, there were no major
changes in the risk
management and control systems in the year under review.
As ONWARD has not established a separate internal audit function, the Board annually
assesses whether adequate alternative measures have been taken. Based on the Audit
Committee’s recommendations, Directors may consider whether it is necessary to
establish an internal audit function. In 2023, no material failings in the internal risk-
management and control systems were discovered.
It should be noted that these systems cannot provide absolute assurance that the
Company will realize its targets, nor can they prevent all misstatements, errors, and non-
compliances with legislation, rules, and regulations.
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Risk Control Matters
The Company has deployed a risk detection, evaluation, and management system fitting
to its size and history. The Board and Management Team continuously analyze potential
risks, evaluate their (financial) impact and likelihood, and determine appropriate measures
to minimize these risks. Risk assessments are updated in line with changing internal and
external circumstances.
The Board and Management Team meet regularly to review developments, set targets
and milestones, and evaluate progress towards realizing them. During these meetings,
they also review ONWARD’s financial position and present budgets/cashflow forecasts,
which are followed up and regularly adjusted to changing prospects. The Management
Team monitors risks as they arise and evolve, assesses their development, and implements
necessary countermeasures as required.
To manage our business risks, we use highly experienced staff and external consultants
for our research and clinical studies. The results of our studies are monitored constantly,
closely, and systematically. This enables us to react early to new findings, and to conduct
pre-clinical and clinical activities. By closely monitoring the costs associated with these
activities through our regular internal budget and monitoring processes, we can recognize
any deviations from our financial plans early on and initiate appropriate countermeasures.
We are highly dependent on third parties to enable us to meet our regulatory requirements
and our own quality standards. We therefore take special care in selecting our contractors.
Major clinical trial and component service providers are selected through a stringent
selection process driven by the Management Team, in which we assess the quality and
experience of several candidates. We constantly review and assess the operational
performance of the organizations we work with.
We work with only highly specialized consultants and attorneys to secure and monitor our
intellectual property (IP). In addition, the Management Team regularly monitors ongoing
patent protection and potential conflicts.
In relation to our financial reporting process, our risk
management and internal control
systems are designed to provide reasonable assurance that our books and records
accurately reflect the transactions necessary to permit preparation of financial
statements; that the financial reporting is consistent and compliant with legal regulations
and generally accepted accounting principles; and that published financial data do not
contain any material misstatements. The systems also provide reasonable assurance that
all receipts and expenditures are only made by people authorized to do so and that assets
are safeguarded. To manage risks associated with valuation uncertainties, we engage
specialists with the required skills to assist with these valuations for financial reporting
purposes. This includes but is not limited to the valuation of the defined benefit obligation
and the determination of the fair value of options granted.
As part of this system, we have adopted various internal rules and regulations, including
standard operating procedures, the dual-control principle, spot checks, automated
expenses reimbursement tooling, internal contract approval processes, and signatory rules.
Risk Appetite
Our risk appetite differs according to the various risk categories ONWARD is exposed
to, namely:
Risks related to our business, strategy and industry
iinclude adverse, unexpected
developments resulting from internal processes, people, and systems or from our external
research partners and external events, which are linked to the operation of the business.
We are prepared to take moderate risks to achieve our ambitions and to balance risk and
long-term reward.
Risks related to legal and government regulation
rrelate to unanticipated failures to
comply with applicable laws and regulations. We aim to minimize these risks by aiming to
comply fully with these laws and regulations.
Risks related to intellectual property.
We aim to minimize these risks, only accepting a
low level, to ensure that intellectual property is protected.
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Risks related to our financial position, need for additional capital, and taxation
occur
in connection with funding, treasury, tax, accounting, and reporting. ONWARD is prudent
with respect to these financial risks, with the aim of maintaining long-term solvency. We
are committed to transparent and truthful accounting and reporting that allow users
of financial statements to make decisions considering these risks. We currently do not
engage in any hedging activities. Our financial risk management is set out in note 4.3 of
our consolidated financial statements.
Description of the Principal Risks Associated with the Company’s Activities
at all the FDA clearance and CE-mark for its platforms in different indications in the
US and the EU. ONWARD proactively manages this risk through a dedicated skilled
regulatory team, continuous communication, and mitigating quality issues with our third-
party suppliers.
The following section describes the main risks and uncertainties that we consider the
major threats to achieving our objectives and that may affect the future operating
and financial performance on the Company and the value of an investment in the
Company’s securities. Additional risks and uncertainties not presently known, or that
management currently believes to be immaterial, may also have an adverse effect on our
business, financial condition, results of operations, and prospects. If any of those risks or
uncertainties occur, the price of the Company’s securities may decline and subscribers
for the Company’s securities could lose all or part of their investment. All of these risks are
contingencies which may or may not occur and have not been listed here.
Risks Related to the Company’s Business, Strategy & Industry
The Company wholly depends on the success of two investigational devices, the ARC
IM
and ARC
EX
platforms. Even if the Company completes clinical development and obtains
favorable clinical results for the initial indications it is pursuing, it may not be able to
obtain regulatory clearance or approval for, or successfully commercialize, its ARC
IM
and
ARC
EX
platforms.
ONWARD currently has two investigational devices in clinical development — the ARC
IM
and ARC
EX
platforms — and our business depends almost entirely on the successful
clinical development, regulatory clearance or approval, and commercialization of these
investigational devices, which may never occur. We currently have no products available
for sale, generate no revenues from sales of products, and may never successfully develop
marketable products.
Our ARC
IM
platform will require substantial additional clinical development, testing,
manufacturing process development, and regulatory clearance or approval before we are
permitted to commence their commercialization. For example, before obtaining Premarket
Approval Application (PMA) approval from the FDA for our ARC
IM
platform, we must show,
among other things, that the product is safe and effective for use in each target indication,
a process that can take many years.
If we opt to seek approval via the FDA’s Humanitarian Device Exemption (HDE) pathway
for the commercial sale of ARC
IM
, we must show through extensive pre-clinical testing and
clinical trials that the product candidate does not pose an unreasonable or significant
risk of illness or injury, and that the probable benefit to health outweighs the risk of injury
or illness from its use, considering the probable risks and benefits of currently available
devices or alternative forms of treatment.
Of the substantial number of medical devices in development in the US, only a small
percentage successfully complete the regulatory clearance or approval process required
by the FDA and become commercialized. Similarly, many medical devices currently
in development will ultimately not obtain the certificate of conformity required for
commercialization in the European Economic Area (EEA). Therefore, even if we obtain the
requisite capital to continue funding our development and clinical programs, we may be
unable to successfully develop or commercialize our ARC
IM
and ARC
EX
platforms or any
other product candidate.
Enrollment and retention of patients in clinical trials is an expensive and time-consuming
process and could be made more difficult, or rendered impossible, by multiple factors
outside the Company’s control. This could significantly delay the completion of such trials
or may cause the Company to abandon one or more clinical trials.
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ONWARD may encounter delays or difficulties in enrolling — or may be unable to enroll — a
sufficient number of patients to complete any of its clinical trials on its current timelines,
or at all. Even once candidates are enrolled, the Company may be unable to retain a
sufficient number of patients to complete any of its trials.
Patient enrollment in clinical trials, and completion of patient follow-up, depend on
many factors, including the size of the patient population, the nature of the trial protocol,
the proximity of patients to clinical sites, eligibility criteria for the clinical trial, patient
compliance, competing clinical trials, and clinicians’ and patients’ perceptions as to the
potential advantages of the product being studied in relation to other available therapies,
including any new treatments that may be cleared or approved for the indications we
are investigating.
Patients may be discouraged from enrolling in ONWARD’s clinical trials if the trial protocol
requires them to undergo extensive post-treatment procedures or follow-up to assess the
safety and effectiveness of a product candidate, or they may be persuaded to participate
in contemporaneous clinical trials of a competitor’s product candidate. Patients
participating in our clinical trials may drop out before completion of the trial or experience
adverse medical events unrelated to the products. Delays in patient enrollment, or failure
of patients to continue participating in a clinical trial, may delay commencement or
completion of the clinical trial, increase in the costs of the clinical trial, or result in failure
of the clinical trial.
Since some of the indications that our investigational devices are intended to treat
are limited, ONWARD expects only a subset of patients with spinal cord injury (SCI) to
be eligible for its clinical trials. The protocols for our clinical trials generally mandate
that a patient cannot be involved in more than one clinical trial for the same indication.
Therefore, subjects who participate in ongoing clinical trials for products that compete
with our investigational devices are not eligible to participate in our clinical trials.
ONWARD cannot guarantee that any of its programs will identify a sufficient number of
patients to complete clinical development, pursue regulatory clearance or approval, or
market its investigational devices, if cleared or approved.
An inability to recruit and enroll a sufficient number of patients for any of its current
or future clinical trials would result in significant project delays, or may require us to
abandon one or more clinical trials altogether, which could impact ONWARD’s ability
to develop its investigational devices and may have a material adverse effect on its
business, results of operations, and financial condition.
If cleared or approved, the Company may not be able to successfully commercialize
its ARC
EX
and ARC
IM
platforms. Failure to gain market acceptance would impact the
Company’s revenues and may materially impair its ability to continue its business.
Even if ONWARD receives regulatory clearances or approvals, the commercial success
of our products will depend in part on their acceptance by critical stakeholders as
a therapeutic and cost-effective alternative to competing products and treatments
for people with SCI. Critical stakeholder to adopt our therapies include medical
professionals working in the rehabilitation clinic setting ( such as physicians,
physical therapies, occupational therapies, neurologists, and physiatrists), functional
neurosurgeons, patients, third-party payors such as health insurance companies, and
other members of the medical community. There can be no assurance that medical
professionals, hospitals, and rehabilitation clinics will adopt the use of ARC
EX
and ARC
IM
and establish training and procedures to implement them. Market acceptance of, and
demand for, any product we may develop and commercialize will depend on many
factors, both within and outside of our control. Payors may view new or recently launched
products, or products where limited clinical data is available, as investigational,
unproven, or experimental, and on that basis may deny coverage of procedures involving
use of these products or require additional clinical trials and data before providing
coverage. If our investigational devices fail to gain market acceptance, ONWARD may be
unable to earn sufficient revenue to continue our business.
If the Company obtains clearance or approval for its products, their commercial success
will depend in part on the level of reimbursement it receives from third parties for the
cost of its products to users.
In most markets, third parties such as health insurers, government-managed healthcare
schemes, or managed care organizations decide which treatments they will cover and
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how much of the cost they will reimburse. These reimbursement systems vary widely,
meaning that approval for reimbursement must be obtained on a country-by-country
basis. ONWARD’s business could be adversely affected if hospitals or other users are not
able to obtain and maintain coverage and adequate reimbursement for procedures using
our devices.
Additionally, third-party payors, especially in the US, are increasingly examining not
only product safety and effectiveness but also their cost-effectiveness when making
coverage and payment decisions. It is uncertain whether ONWARD’s current products,
or any planned or future products, will be viewed as sufficiently cost-effective to warrant
coverage and adequate reimbursement levels in any given jurisdiction.
The Company relies on a limited number of third-party suppliers and contract
manufacturers to produce and assemble its products. Loss or degradation in performance
of these suppliers and contract manufacturers could have a material adverse effect on the
Company’s business, financial condition, and results of operations.
Reliance on a limited
number of third-party suppliers and in some cases single-source suppliers, makes the
Company vulnerable to supply shortages and problems and price fluctuations, which could
further harm our business.
We rely on a limited number of third parties, some of whom are sole suppliers, to purchase
materials and components, and/or to manufacture and assemble our ARC
EX
and ARC
IM
platforms. Our ability to supply our products for clinical trials and, ultimately, to market
them and to develop future products, depends on the availability of sufficient quantities of
materials, components, and manufacturing services that meet regulatory requirements.
While we seek to maintain sufficient levels of inventory at all times, this may not fully
protect us from supply interruptions.
Our suppliers and contract manufacturers have generally met our demand for their
products and services on a timely basis. However, relationships with suppliers may be
disrupted due to a number of factors, such as unforeseen events that delay production or a
decision by either party to terminate the relationship.
If that occurs, we are confident that we will find alternative suppliers to meet all our
needs. However, due to the relatively low volume of orders and the bespoke nature of our
requirements, establishing new relationships would be a time-consuming and expensive
process. We would need to verify that the new supplier or third-party manufacturer
maintains their facilities, procedures, and operations in accordance with ONWARD’s
quality standards and all applicable regulatory requirements. In addition, our contract
manufacturers could require that we move production to a different facility or use
alternative materials or components. Any of these events could require us to modify the
designs or specifications of our products, and to secure new regulatory approval before
implementing the change, which could result in further delay or a refusal to grant clearance.
The Company’s operations and reputation may be impaired if its information technology
systems fail to perform adequately or if it is the subject of a data breach or cyberattack.
Our information technology (IT) systems are essential to the successful operation of our
business. We seek to allocate and manage the necessary resources to build, maintain, and
protect our IT systems and infrastructure, as well as oversee third-party service providers.
Any failure of our IT systems to perform as anticipated could disrupt our operations and
result in transaction or reporting errors that could harm our business.
Our IT systems may be vulnerable to cyberattacks or other security incidents, service
disruptions, or other system or process failures. Such incidents could result in unauthorized
access to vendor, consumer, or other types of confidential data, as well as disruptions to
operations. While we have experienced such incidents in the past, none have been material
to date.
We rely on third-party vendors for some of our IT processes and data management needs,
which makes our operations vulnerable to a failure by any one of these vendors to perform
adequately or to maintain effective internal controls.
To address these risks, we maintain an information security program that includes
updating technology, developing security policies and procedures, implementing and
assessing the effectiveness of controls, conducting risk assessments of third-party service
providers, and adopting business processes designed to mitigate the risk of security
breaches. However, there can be no assurance that these measures will prevent or limit the
negative impact of a future incident on our operations or business reputation.
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A pandemic, epidemic, or outbreak of an infectious disease in Europe, the US, or worldwide,
including the outbreak of the novel strain of coronavirus disease (COVID-19), could
adversely affect the Company’s business.
A future wide-scale outbreak of infectious disease similar to COVID-19 could negatively
affect our business in numerous ways. Our sales representatives, clinical specialists,
and other personnel may be unable to travel and access customers for training and case
support. Our production schedule may be affected if suppliers cannot manufacture or
deliver parts and components on time. Pandemic-related restrictions could lead to,
inventory shortages or obsolescence; delays in approval of our devices by regulatory
authorities; delays in decisions by insurance companies regarding coverage of our
products; delays in clinical trials; delays in growing our sales organization; adjustments
or disruptions to the business of third parties we work with, including suppliers, medical
institutions, and clinical investigators; decreases in collectability of our account receivables
due to the adverse impact of the pandemic on our clients’ cash flows; and reduced capacity
of our suppliers to advance our investigational devices through clinical trials.
While it is difficult to predict the potential economic impact and duration of a future
outbreak, the current pandemic has resulted in significant disruption of global financial
markets, reducing our ability to access capital, which could in the future negatively affect
our liquidity. In addition, a recession or market correction could have an adverse effect on
our long-term business as hospitals reduce capital spending.
To the extent that a pandemic adversely affects our business and financial results, it
may also heighten many other risks described in this section, including those relating
to incurring future operating losses, advance of the ARC
EX
and ARC
IM
platforms through
regulatory pathways, and, if cleared or approved, successful commercialization, supply
chain, and distribution channels.
The Company’s success depends on its ability to retain its management, consultants and
other key personnel.
ONWARD depends on its senior management as well as key scientific personnel. In 2020,
Dave Marver was appointed as Chief Executive Officer. ONWARD’s Chief Scientific Officer,
Prof. Courtine, has been on the team since inception, in 2015, and currently serves as a
consultant. The loss of any members of senior management or key scientific personnel
could harm our business and significantly delay or prevent the achievement of research,
development, or business objectives.
Our future success also depends on our ability to attract, hire, train, and retain other highly
skilled scientific, technical, marketing, managerial, and financial personnel, as well as
sales personnel once commercialization begins. Although we will make every effort to hire
and retain qualified employees whose experience and abilities meet our needs, there is
no assurance that we will succeed. Competition for personnel in the medical technology
industry is intense, and any failure to attract and retain the necessary personnel would have
a material adverse effect on our business.
The Company may face substantial competition, which may result in others discovering,
developing, or commercializing products before or more successfully than it does.
Currently, ARC
IM
does not have any direct commercial competitors. However, several large
medical technology companies market spinal cord stimulation platforms for different
indications, such as pain management. Though we believe our IP rights would prevent
competitors from being able to commercialize similar devices utilizing ONWARD’s IP-
protected waveform, there can be no guarantee that we will be able to enforce our IP
rights. The outcome of any potential IP dispute to protect our rights is hard to predict, and
an adverse result could negatively impact our position in the competitive landscape of
SCI therapies.
Current therapeutic options and technological approaches for people with SCI include
exoskeletons, functional electrical stimulation FES, epidural electrical stimulation EES,
peripheric nerve stimulation PNS, scaffolds, and stem cells. Additionally, there are
numerous pharmacological treatments available for people with SCI to address symptoms
of associated comorbidities such as spasticity, blood pressure, and mood disorders.
In general, the medical device industry is subject to intense competition and rapid and
significant technological change. ONWARD has many potential competitors, including
specialized biotechnology firms, academic institutions, government agencies, and private
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and public research institutions. These competitors may have significantly greater
financial and technical resources than ONWARD, and superior experience and expertise
in research and development, pre-clinical testing, design and implementation of clinical
trials, regulatory processes and approval for products, production and manufacturing,
and sales and marketing of approved products. Smaller or early-stage companies and
research institutions may prove to be significant competitors, particularly if they have
collaborative arrangements with larger and more established medical device companies.
The Company’s business involves the use of hazardous materials such as lithium batteries
and the Company and its third-party manufacturers must comply with environmental laws
and regulations, which may be expensive and restrict how it does business.
ONWARD’s activities and those of our third-party manufacturers’ may involve the
controlled storage, use, and disposal of hazardous materials. For example, our ARC
IM
and ARC
EX
investigational devices use lithium batteries. ONWARD and our third-party
manufacturers are subject to federal, state, local, and foreign laws and regulations
governing the use, generation, manufacture, storage, handling, and disposal of these
hazardous materials. The Company currently carries no insurance specifically covering
environmental claims relating to the use of hazardous materials. Despite the safety
procedures put in place by ONWARD and its manufacturers for handling and disposing
of these materials and waste, we cannot eliminate the risk of accidental injury or
contamination from the use, storage, handling, or disposal of hazardous materials. In
the event of an accident, state or federal or other competent authorities may curtail
ONWARD’s or its manufacturers’ use of these materials and interrupt their business
operations, which could adversely affect our business.
Healthcare reform initiatives and other administrative and legislative proposals in the
United States may adversely affect the Company’s business, financial condition, results of
operations and cash flows in one of its key markets.
There have been and continue to be proposals by the federal government, state
governments, regulators and third-party payors to control or manage the increased
costs of healthcare and, more generally, to reform the US healthcare system. Certain
proposals could limit the prices we are able to charge for our products, or the coverage and
reimbursement available for our products, and could limit the acceptance and availability
of our product candidates. The adoption of proposals to control costs, such as the Patient
Protection and Affordable Care Act, as amended by the Health Care and Education
Reconciliation Act of 2010 (collectively, the “Affordable Care Act”), could have a material
adverse effect on ONWARD’s business, financial condition, and results of operations. There
is no certainty that the Affordable Care Act, as currently enacted or as amended in the
future, will not harm our business and financial results, and it is not possible to predict how
future federal or state legislative or administrative changes relating to healthcare reform
will affect our business.
There likely will continue to be legislative and regulatory proposals at the federal and state
levels directed at containing or lowering the cost of healthcare. It is not possible to predict
the initiatives that may be adopted in the future or their full impact. The continuing efforts
of the government, insurance companies, managed care organizations, and other payors
of healthcare services to contain or reduce costs of healthcare may harm:
•
ONWARD’s ability to set a price that it believes is fair for its products
•
ONWARD’s ability to generate revenue and achieve or maintain profitability
•
The availability of capital
Further, there has recently been heightened governmental scrutiny over the manner
in which manufacturers set prices for their marketed products, which has resulted in
several US Congressional inquiries, as well as proposed and enacted federal legislation
designed to bring transparency to product pricing and reduce the cost of products and
services under government healthcare programs. Adoption of price controls and other
cost-containment measures, and adoption of more restrictive policies in jurisdictions with
existing controls and measures, may prevent or limit ONWARD’s ability to generate
revenue and attain profitability.
In the European Union, there are currently no concrete legislative proposals in this regard.
However, the cost-effectiveness of healthcare is part of the EU agenda on effective,
accessible, and resilient health systems. This does not exclude that legislation on
maximum pricing for medical devices (e.g., in terms of their reimbursement ) may be
applied
or developed at the national level.
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Interruption or distress in the supply chain due to geopolitical, climate-related, and other
uncertainties beyond the Company’s control.
Geopolitical uncertainties and other business threats could damage or disrupt
ONWARD’s operations and those of our suppliers, partners, or collaborators. Interruptions
to our operations could adversely affect the anticipated timing, completion, and/or
results of clinical trials, and potential future commercialization efforts. Geopolitical
tensions could lead to sharply rising energy prices, which would have a negative impact
on raw materials of our products. Uncertainty in global markets may have a wide impact
on the availability and price of various materials and services and may also sustainably
affect global financial markets. Cost inflation may negatively impact our cash reach,
while capital markets disruptions may adversely affect our future financing possibilities.
All these changes may materially affect ONWARD’S business and negatively affect its
liquidity and financial position. Climate change presents risks to our operations, including
the potential for additional regulatory requirements and associated costs. The potential
for more frequent and severe weather events and water availability challenges could
impact our facilities and those of our suppliers. We cannot provide assurance that
physical risks to our facilities or supply chain due to climate change will not occur in the
future. We have assessed the impact of climate-related risks on our Financial Statements
and conclude that the effects of climate-related risks do not have a material impact on
accounts and disclosures, including judgements and estimates in the Financial
Statements.
Risks Related to Legal & Government Regulation
The Company must obtain FDA clearance or approval before it can sell any of its products
in the US, and CE Certification before it can sell any of its products in the European Union
(EU). Approval of similar regulatory authorities in countries outside the US and
the EU is required before it can sell its products in countries that do not accept FDA
clearance or approval or CE Certification. The Company may incur additional costs or
experience delays in completing, or ultimately be unable to complete, the development
and commercialization of its products if such clearance or approval is denied or delayed.
ONWARD is seeking De Novo classification by the FDA to market ARC
EX
for use in clinics in
the US. If this is granted, we intend to pursue additional regulatory clearances, including
for at-home use. ARC
IM
is a Class III device that will require PMA approval to be marketed
in the US, while for at least one indication, it may pursue HDE approval. In Europe, under
the MDR, ARC
EX
is expected to be designated as a Class IIa device and ARC
IM
as Class III.
The development, manufacture, and commercialization of our products are subject to
government regulation. In the US, Europe, and most other countries, ONWARD must
complete rigorous pre-clinical testing and extensive clinical trials that exhibit the safety
and effectiveness of our devices before we can apply for regulatory clearance or approval
to market them. Regulatory bodies such as the FDA may limit approval to specific
indications, restrict the distribution of a device, or refuse to grant clearance for additional
or expanded indications, which could limit our potential revenues.
The road to regulatory approval of a new medical device is long, expensive, and uncertain.
The FDA and other regulatory authorities can delay, limit, or deny approval, grant of a De
Novo classification, orclearance of a device for many reasons, including:
•
Inability to show that the products are safe or effective for their intended uses (or, for
a
510(k) device, that they are substantially equivalent to the predicate)
•
Disagreement with the design or implementation of clinical trials or the interpretation
of data
•
Serious and unexpected adverse device effects experienced by participants in
clinical trials
•
Insufficiently supportive data from pre-clinical studies and clinical trials
•
Inability to show that the clinical and other benefits of the device outweigh the risks
•
Failure of manufacturing process or facilities in meeting applicable requirements
•
Changes in policies or regulations that increase cost of compliance or render clinical
data and filings insufficient for approval or clearance
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Despite the time, effort, and cost invested, our investigational devices may not pass
these stringent regulatory hurdles, which could harm our business. In addition, regulatory
authorities may place restrictions on the indicated uses of the device, limiting its market
size. If the FDA requires us to go through a longer, more rigorous process than expected
for future products, or for modifications to existing products, their introduction could be
delayed or cancelled, which could adversely affect our ability to grow our business.
In the EEA, compliance with the requirements of the Council Directive 93/42/EEC (EU
Medical Devices Directive) is a prerequisite to be able to affix the Conformité Européenne
(CE) mark to our products, without which they cannot be sold or marketed in the EEA.
The EU Medical Devices Directive is being replaced by a new Medical Devices Regulation
(MDR) in the EEA (Regulation (EU) 2017/745). The MDR, which became fully applicable on
26 May 2021, imposes the same basic requirements as the EU Medical Devices Directive
(MDD), but is generally more stringent, especially in terms of risk classes and the oversight
provided by notified bodies that perform conformity assessments of devices.
Following its departure from the EU, on 31 January 2020, the UK continued to follow the
same regulations as the EU during a transitional period, which ended on 31 December
2020. Since then, all medical devices must be registered with the Medicines and
Healthcare products Regulatory Agency (MHRA) before being sold on the UK market.
European CE marks continued to be recognized in UK until 30 June 2023, after which a UK
Conformity Assessed (UKCA) mark has been required for a medical device to be marketed
in the UK. Since the new MDR will not automatically apply in the UK, regulation of medical
devices in the UK may diverge from EU regulations in the future. On 28 November, 2022,
the Swiss Parliament reached a key decision by instructing the Swiss Federal Council to
adapt national laws to enable Switzerland to accept medical devices with FDA approval.
In general, if ONWARD fails to remain compliant with all applicable European laws and
regulations, we would be unable to continue to affix the CE mark to our products, which
would prevent us from selling them within the EEA, adversely affecting our business.
Similarly, our ability to market our products in the UK could be affected by any failure to
maintain compliance with UK regulations.
The clinical development process required to obtain regulatory clearances or approvals is
lengthy and expensive, with uncertain outcomes. Data generated in clinical trials is
subject to interpretation by EU regulators, the FDA, and foreign regulatory authorities. If
clinical trials of the current ARC
EX
platform and ARC
IM
platform and future products do not
produce the results necessary to support regulatory clearance or approval, De Novo
classification, or clearance in the US or with respect to the Company’s current or future
products elsewhere, it will be unable to commercialize these products. It therefore may
incur additional costs or experience delays in completing, or ultimately be unable to
complete and commercialize those products.
Significant setbacks or failure can occur at any time during the clinical development
process, adversely affecting the cost, timing, or successful completion of trials. The
following circumstances could harm our ability to complete development or
commercialize our products:
•
The FDA may reject our investigational device exemption (IDE) application and
notify us that we may not begin investigational human clinical trials
•
Regulatory authorities may disagree as to the design or implementation of our
clinical trials
•
Regulators and/or institutional review boards (IRBs) may not authorize us or our
research partners to begin or continue a clinical trial at a particular site
•
We may be unable to agree on acceptable terms with prospective contract research
organizations (CRO) and clinical trial sites, the terms of which can vary significantly and
require long negotiations
•
Clinical trials may produce negative or inconclusive results, or we may not agree with
regulatory authorities on the interpretation of these results; consequently, we may
decide, or be required by regulators, to conduct additional clinical trials or abandon the
development of a product
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The number of subjects or patients required for clinical trials may be larger than we
anticipated, enrollment in these trials may be insufficient or slow, and/or the number
of trials being conducted at any given time may be high, resulting in fewer available
patients for our clinical trial, or patients may drop out at a higher than expected rate
•
Our third-party contractors may fail to comply with regulatory requirements or meet
their contractual obligations in a timely manner, or at all
•
We may have to suspend or terminate clinical trials for various reasons, including a
finding that the subjects are being exposed to unacceptable health risks
•
We may have to amend clinical trial protocols or conduct additional studies to reflect
changes in regulatory requirements or guidance
•
We may be required to terminate clinical research for various reasons, including safety
issues or non-compliance with regulatory requirements
•
The cost of clinical trials may be greater than anticipated
•
Clinical sites may not adhere to the clinical protocol or may drop out of a trial
•
We may be unable to recruit a sufficient number of trial sites or trial subjects
•
Regulators, IRBs, or other reviewing bodies may fail to approve or subsequently find
fault with our manufacturing processes; the supply of devices or other materials
necessary to conduct clinical trials may be insufficient, inadequate, or not available at
an acceptable cost
•
Approval policies or regulations may change in a manner that renders our clinical data
insufficient for approval
•
Our current or future products may have undesirable side effects or other unexpected
characteristics
We depend on CROs to conduct clinical trials in a timely manner and in compliance
with good clinical practice (GCP) requirements. If a CRO fails to comply fully with GCP
standards or experiences delays in conducting the trial, this could result in increased costs
and/or program delays. In addition, conducting clinical trials in countries outside the US
and Europe may entail additional delays, shipment costs, or regulatory requirements, as
well as risks associated with clinical investigators who are unknown to the FDA, or with
different standards of diagnosis, screening, and medical care. Any of these occurrences
could adversely affect our business, financial condition, and results of operations.
We may from time to time publicly announce the date at which we expect to reach
various clinical, regulatory, or product development milestones. These could include the
submission of an IDE application to the FDA to begin a clinical trial, the enrollment of
patients in a trial, or the release of data from clinical trials. However, the actual timing of
these milestones may vary dramatically compared to our estimates, in some cases for
reasons beyond our control, potentially delaying the commercialization of our products or
causing our share price to decline.
Failure to comply with post-marketing regulatory requirements could subject the Company
to enforcement actions, including substantial penalties, and might require the Company to
recall or withdraw a product from the market.
If we receive regulatory clearance or approval for our investigational devices, we will be
subject to ongoing and pervasive regulatory requirements governing, among other things,
their manufacture, marketing, labeling, packaging, advertising, medical device reporting,
sale, promotion, registration, storage, distribution, and listing. For example, ONWARD must
submit periodic reports to the FDA as a condition of PMA approval. These reports include
safety and effectiveness information about the device after its approval. Failure to submit
such reports or to do so in a timely manner could result in enforcement action by the FDA.
Following its review of the periodic reports, the FDA might ask for additional information or
initiate further investigation.
In addition, the PMA approval for ARC
IM
Therapy may be subject to several conditions of
approval, including a post-market extended follow-up of the premarket study cohort. Any
failure to comply with the conditions of approval could result in the withdrawal of PMA
approval and the inability to continue to market the device. Adverse outcomes in these
studies could also be grounds for withdrawal of approval of the PMA.
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The regulations to which ONWARD is subject are complex and have become more
stringent over time. Regulatory changes could result in restrictions on our ability
to continue or expand our operations, higher than anticipated costs, or lower than
anticipated sales. Even after the proper regulatory authorization to market a device
has been obtained, we have ongoing responsibilities under FDA and EU regulations and
applicable laws and regulations of other countries.
Any failure to comply with applicable regulatory requirements could result in enforcement
action by the FDA, state, EU or national regulatory authorities. Sanctions could include
warning letters, fines, injunctions, consent decrees or civil penalties; recalls, termination
of distribution, administrative detention, or seizure of products; suspension of one or more
clinical studies; customer notifications, repair, replacement or refunds; restriction, partial
suspension or total shutdown of production; delays in or refusal to grant requests for
future regulatory approvals of new products, uses, or modifications to existing products;
withdrawals or suspensions of current regulatory approvals; prohibitions on sales, imports,
or exports of our products; FDA refusal to issue certificates to foreign governments needed
to export our products for sale in other countries; and criminal prosecution.
Any of these sanctions could result in higher than anticipated costs or lower than
anticipated sales and have a material adverse effect on our reputation, business, financial
condition, and operating results.
Even if cleared or approved by regulatory authorities, the Company’s products may cause
or contribute to adverse medical events or be subject to failures or malfunctions that
the Company is required to report to the FDA. If it fails to do so, the Company would be
subject to sanctions that could harm its reputation, business, financial condition, and
results of operations. The discovery of serious safety issues with its products, or a recall
of its products, either voluntarily or at the direction of the FDA or another governmental
authority, could have a negative impact on the Company. In the course of conducting
our business, the Company must adequately address quality issues that may arise with
the ARC
EX
and ARC
IM
systems, including defects in third-party components included in our
products. Additionally, even if free of quality issues, our products may not meet the
expectations of physicians or patients with respect to achieving desired results.
The internal procedures designed to minimize risks that may arise from quality issues may
not sufficiently eliminate or mitigate occurrences of these issues and associated liabilities.
Moreover, even in the absence of quality issues, we may be subject to claims and liability if
our products’ performance does not meet physicians’ or patients’ expectations.
In the event that we receive clearance or approval by regulatory authorities, we will be
subject to the FDA’s medical device reporting regulations and similar foreign regulations.
This will require us to report to the FDA when we become aware of information that
reasonably suggests that our products may have caused or contributed to a death or
serious injury or malfunctioned in a way that, if it were to recur, could cause or contribute
to a death or serious injury. The timing of this obligation to report is triggered by the
date we become aware of the adverse event, as well as the nature of the event. We may
inadvertently fail to report adverse events within the prescribed timeframe. We may also
fail to recognize that we have become aware of a reportable adverse event, especially if it
is not reported to us as such, or if the adverse event is unexpected or removed in time from
the use of our products. If we fail to comply with our reporting obligations, the FDA could
take action, including warning letters, untitled letters, administrative actions, criminal
prosecution, civil monetary penalties, revocation of device approvals, seizure of our
products, or delay in clearance or approval of modifications to our products.
The FDA and foreign regulatory authorities have the power to require the recall of
commercialized products in the event of material deficiencies or defects in design or
manufacture of a product, or in the event that a product poses an unacceptable risk to
health. The FDA’s authority to require a recall of our products must be based on a finding
that there is reasonable probability that they may cause serious injury or death. We may
also choose to voluntarily recall products if any material deficiency is found. A government-
mandated or voluntary recall could occur as a result of an unacceptable risk to health,
component failures, malfunctions, manufacturing defects, labeling or design deficiencies,
packaging defects, or other deficiencies or failures to comply with applicable regulations.
Depending on the corrective action that we take to redress deficiencies or defects that
may occur in the future, the FDA may require, or we may decide, that we need to obtain
new approvals for our products before marketing or distributing the corrected device.
Seeking such approvals may delay our ability to replace the recalled devices in a timely
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manner. Moreover, if we fail to adequately address problems associated with our products,
we may face additional regulatory enforcement action.
Companies are required to maintain certain records of recalls and corrections, even if they
are not reportable to the FDA. In the future, ONWARD may initiate voluntary withdrawals or
corrections to our products that we may determine do not require notification of the FDA.
If the FDA disagrees with our determinations, it could require us to report those actions as
recalls and subject us to enforcement action. Such a recall announcement could harm our
reputation with customers, potentially lead to product liability claims, and negatively affect
sales. Any lawsuit or corrective action, whether voluntary or involuntary, would require the
dedication of considerable time and capital, possibly impacting our financial results.
Additionally, the identification of undesirable side effects or other previously unknown
problems caused by our products could lead to a number of negative consequences.
Among others, regulatory authorities might withdraw approvals; impose product recalls;
require us to add warnings, contraindications, or narrower indications in the product
labeling, or to issue of field alerts to physicians and pharmacies; require us to create a
guide outlining the risks of such side effects for distribution to patients; impose limitations
on how we promote our products; require us to change the way the product is administered
or modify the product; and/or require additional clinical trials or costly post-marketing
testing and surveillance to monitor the safety or efficacy of the product. Any of these
requirements could prevent us from achieving or maintaining market acceptance of our
products, substantially increase the costs of commercializing our products, or impacts
our sales. The demand for our products could also be negatively impacted by any adverse
effects of a competitor’s product or treatment.
If the Company or its suppliers fail to comply with FDA regulatory requirements, or if
it experiences unanticipated problems with any cleared or approved products, these
products could be subject to restrictions or withdrawal from the market.
Any product for which we obtain regulatory clearance or approval, as well as the
manufacturing processes, reporting requirements, post-approval clinical data, and
promotional activities for such a product, will be subject to continued regulatory
review and oversight by the FDA. In particular, ONWARD and its third-party suppliers
will be required to comply with the FDA’s Quality System Regulations
(
QSR
)
. These FDA
regulations cover the methods and documentation of the design, testing, production,
control, quality assurance, labeling, packaging, sterilization, storage, and shipping of
products. Compliance with applicable regulatory requirements is subject to continual
review and is monitored rigorously through periodic inspections by the FDA. If we, or our
manufacturers, fail to adhere to QSR requirements, this could delay production of our
products and lead to fines, difficulties in obtaining regulatory clearances and approvals,
recalls, enforcement actions, including injunctive relief or consent decrees, or other
consequences, which could, in turn, have a material adverse effect on our financial
condition and results of operations.
In addition, ONWARD and its suppliers are required to comply with Good Manufacturing
Practices for the manufacture of our products, and other regulations which cover
the methods and documentation of the design, testing, production, control, quality
assurance, labeling, packaging, storage, and shipping of any product for which we obtain
clearance or approval.
The FDA audits compliance with the QSR and other similar regulatory requirements
through periodic announced and unannounced inspections of manufacturing and other
facilities. If ONWARD or one of its suppliers fail to comply with applicable statutes and
regulations administered by the FDA, or the fail to timely and adequately respond to any
adverse inspectional observations or product safety issues, this could result in any of the
following enforcement actions:
•
Untitled letters, warning letters, fines, injunctions, consent decrees, and civil penalties
•
Unanticipated expenditures to address or defend such actions
•
Customer notifications or repair, replacement, refunds, recall, detention, or seizure of
our products
•
Operating restrictions or partial suspension or total shutdown of production
•
Refusing or delaying our requests for premarket approval of new products or
modified products
•
Withdrawing PMAs that have already been granted
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•
Refusal to grant export approval for our products
•
Criminal prosecution
Any of these sanctions could have a material adverse effect on our reputation, business,
results of operations, and financial condition.
Risks Related to the Company’s Intellectual Property (IP)
It is difficult and costly to protect its IP and its proprietary technologies, and the Company
may not be able to ensure their protection.
We rely on a combination of patents and trade secrets to protect the IP related to
our proprietary technologies. Patents and other proprietary rights provide uncertain
protections, and we may be unable to protect our IP for various reasons, including complex
factual and legal issues that create uncertainty as to the validity, scope, and enforceability
of a particular patent. As a result, we may be unsuccessful in defending our patents and
other proprietary rights against third-party challenges, which could have a material
adverse effect on our business.
Patents do not automatically provide a competitive advantage. Competitors may be able
to design around our patents and develop products that provide comparable or superior
outcomes. Any changes we make to our products, including design improvements that we
believe make them more marketable, may not be covered by previously licensed patents.
We may be required to file new applications and/or seek other forms of protection covering
these alterations.
Changes in either patent laws or their interpretation in the US and other countries may
diminish our ability to stop third parties from making, using, selling, or importing products
that infringe on our IP. Infringement and/or misappropriation suits are expensive and
time-consuming to prosecute and could result in a court deciding that one or more of our
patents is invalid, unenforceable, or both. Even if the validity of our patents is upheld, a
court may refuse to stop the other party from using the technology on the grounds that
their activities are not covered by the patents.
In the future, we may obtain certain IP related to our technology from third parties. If that
is the case, we cannot be certain that these third parties took the necessary actions to
maintain the IP rights or that their transfer to us was proper and effective. As a result, we
may be subject to claims challenging their ownership or enforceability, which would limit
our ability to prevent competitors from making or selling duplicate or similar technologies
for which, or in countries where, we have no patent protection.
In addition to patents, we rely on trade secrets to protect our technology. We have
established policies to protect our trade secrets, but these may not be effective in
preventing misappropriation or unauthorized disclosure. Litigating a trade secret claim
is expensive and time-consuming, and the outcome may be unexpected. In addition,
courts outside the US are sometimes less willing to protect trade secrets. Moreover, our
competitors may independently develop knowledge and/or methods allowing them to create
substantially similar products or services without misappropriating our trade secrets.
Patent terms may be inadequate to protect the Company’s competitive position on its
future products for an adequate amount of time.
In both the US and Europe, a patent’s lifespan is generally 20 years from its earliest filing
date. Various extensions may be available, but the life of a patent, and the protection it
affords, is limited. Even if patents covering the Company’s future products are obtained,
once the patent has expired, it may be open to competition.
ONWARD’s current patent portfolio will begin to naturally expire in 2031. However, given
the amount of time required for the development, testing, and regulatory review of new
products, certain patents protecting our future products may expire before or shortly after
commercialization begins. As a result, our patent portfolio may not provide the Company
with sufficient rights to exclude others from commercializing similar or identical products
for a sufficient amount of time.
Risks Related to the Company’s Financial Position, Need for Additional Capital & Taxation
The Company has incurred significant operating losses since inception, expects to incur
operating losses in future, and it may not be able to achieve or sustain profitability.
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ONWARD is a medical technology company with no commercial operating history. To date,
we have substantially invested all of our efforts in the research and development of, and in
seeking regulatory clearance or approval for, our ARC
EX
and ARC
IM
platforms. We are not
profitable, have incurred losses each year since beginning operations in 2014, and have
no commercial operating history upon which to evaluate our business and prospects. Any
predictions of future success, performance, or viability may not be as accurate as they could
be if the Company had a longer operating history or commercial revenues.
ONWARD has not yet derived sufficient revenues to support operations, as our activities
have consisted of developing our technology and conducting pre-clinical studies and clinical
trials. As of 31 December 2023, the loss for the period amounted to EUR 36.2M. These losses
have resulted primarily from costs incurred in the development of the ARC
EX
and ARC
IM
platforms, and from general and administrative costs associated with operations.
The current or future clinical trials of any current or future investigational devices are, and
the manufacturing and marketing of any such investigational devices will be, subject to
extensive and rigorous review and regulation by the FDA and other government authorities
in the US and in other countries where the Company intends to test and, if cleared or
approved, market such investigational devices. We expect our operating expenses to
continue to increase as we;
1.
Continue research and development activities for our ARC
EX
and ARC
IM
technology
platforms and related technologies
2.
Seek FDA regulatory clearances and approvals for the ARC
EX
and ARC
IM
platforms
or other future investigational devices in the US, regulatory approvals in Europe, and
potentially other regulatory approvals in other jurisdictions
3.
Build our commercial infrastructure
4.
Incur additional operational costs associated with being a public company
As a result, ONWARD expects to continue to incur operating losses for the foreseeable
future. The expected future operating losses, combined with prior operating losses, may
adversely affect the market price of our Ordinary Shares and our ability to raise capital and
continue operations.
We expect sales of our ARC
EX
and ARC
IM
platforms, if cleared or approved, to account for
the majority of our future revenue. If the ARC
IM
and/or ARC
EX
platforms do not achieve
regulatory clearance or approval, or if the platforms do not generate sufficient revenue, the
Company may not be able to achieve profitability.
Even if we do achieve profitability, we may not be able to sustain or increase profitability
in subsequent periods or on an ongoing basis. In this case, it will be more difficult for us to
finance our business and realize our strategic objectives, which would have a material and
adverse effect on our business, financial condition, and results of operations and would
cause the market price of our Ordinary Shares to decline.
The Company will require additional capital to finance its planned operations, which may
not be available to it on acceptable terms or at all. Raising additional capital may cause
dilution to our existing shareholders.
As of 31 December 2023, ONWARD had net cash of EUR 29.8M. Based on cash flow
forecasts for 2024, this will be sufficient to meet our capital requirements and fund our
operations to the end of 2024. We have based these estimates on assumptions that may
prove to be incorrect and could spend our available financial resources much faster than
currently expected. Additional funding was raised in March 2024 that will fund operations
for at least 12 months from the date of this Annual Report.
Our expenses will also increase substantially in connection with any potential
commercialization of our products in the US and Europe, including the hiring of qualified
and sales personnel. Additional expenditures will include costs associated with
manufacturing and supply, expenses related to the deployment of a direct sales and
service organization, costs and expenses incidental to being a public company, and
general operations. In addition, other unanticipated costs may arise.
ONWARD’s present and future funding requirements will depend on many factors, including:
•
Continuing our research and development efforts, completing ongoing and planned
clinical trials, and applying for (i) De Novo classification granting marketing
authorization for ARC
EX
for use in clinics, and thereafter 510(k) clearance for use of
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ARC
EX
in the home, and (ii) PMA approval, which will be required for ARC
IM
, though we
expect to pursue approval to legally market at least one indication via HDE
•
Conducting additional clinical trials of our ARC
EX
and ARC
IM
platforms for future indications
•
Our ability to retain and compensate the highly qualified personnel necessary to execute
our plans
•
If cleared or approved, the costs associated with manufacturing, selling, and marketing
our products in Europe and the US, as well as other foreign jurisdictions, including
the cost and timing of implementing our sales and marketing plan and expanding
manufacturing capabilities
•
Our ability to effectively market and sell, and achieve sufficient market acceptance and
market share for our products
•
The costs to maintain, expand, and defend the scope of our IP portfolio, as well as
any other action required in connection with licensing, preparing, filing, prosecuting,
defending, and enforcing any patents or other IP rights
•
The emergence of competing technologies and other adverse market developments,
and the need to enhance our products and/or develop new products to maintain
market share
•
Our ability to establish and maintain strategic licensing or other arrangements and the
financial terms of such agreements
•
Our need to implement additional internal systems and infrastructure, including
financial and reporting systems, incidental to being a public company
ONWARD will likely need to raise additional capital. If we do so through public or private
equity offerings, the ownership interest of existing shareholders will be diluted, and the
terms of these securities may include liquidation or other preferences that adversely affect
these shareholders’ rights. If the Company raises additional capital through debt financing,
we may have to provide new liens on our assets and be subject to covenants limiting or
restricting our ability to take specific actions, such as incurring additional debt or liens,
making capital expenditures, or declaring dividends. If we raise additional capital through
marketing and distribution arrangements or other collaborations, strategic alliances,
or licensing arrangements with third parties, we may have to relinquish certain valuable
rights to our ARC
EX
and ARC
IM
platforms, technologies, future revenue streams, or research
programs, or grant licenses on terms that may not be favorable to us. In addition, the
exercise by our employees of stock options under stock option plans within the scope of
existing and/or future management or employee participation would lead to a dilution of the
shareholders.
If we are unable to obtain adequate financing when needed, and on terms that are
acceptable
to us, we may have to delay, reduce the scope of, or suspend the implementation of our sales
and marketing plan and our ongoing research and development efforts, which would have a
material adverse effect on our business, financial condition, and results of operations.
The Company’s operating results may vary significantly from period to period, which may
negatively impact the price of its Ordinary Shares in the future.
ONWARD’s financial and operating results may fluctuate from period to period due to,
among others:
•
The cost of obtaining and maintaining FDA and other regulatory clearances or approvals
for our ARC
EX
and ARC
IM
platforms, as well as any other future indication we may seek to
develop our investigational devices to address
•
Potential revenue generated by sales of our ARC
EX
and ARC
IM
platforms for cleared or
approved indications, if any
•
Expenses incurred in manufacturing and selling our ARC
EX
and ARC
IM
platforms, if
cleared or approved
•
Costs associated with scaling up and expanding our manufacturing capacity
•
Costs associated with building and expanding our sales and marketing efforts in the US,
Europe, and internationally
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•
Costs associated with conducting research and development efforts for future
improvements to, or versions of, our ARC
EX
and ARC
IM
platforms
•
Cost of complying with regulatory requirements
•
Costs associated with capital expenditures
•
Costs associated with any future litigation
•
Costs and timing of preparing, filing, and prosecuting patent applications, maintaining
and enforcing our IP rights, and defending any IP-related claims
•
The severity, duration, and impact of the COVID-19 pandemic, which may adversely
impact our business and planned development and future commercialization of our
ARC
EX
and ARC
IM
platforms
Due to these and other factors, it is likely that ONWARD will experience fluctuating
revenues, operating results, and cash flows. In that case, period-to-period comparisons
of financial results may not necessarily be meaningful, and results of operations in prior
periods should not be relied upon as an indication of future performance, as this will not
meet investor expectations or those of public market analysts. Unanticipated or new
information may cause investors and analysts to revalue our business, which could cause a
decline in the price of our Ordinary Shares.
The Company’s ability to use its net operating losses and research and development credit
carryforwards to offset future taxable income may be subject to certain US federal income
tax and Dutch tax limitations.
In general, under Sections 382 and 383 of the US Internal Revenue Code of 1986, as
amended, a corporation that undergoes an “ownership change” — generally defined as
a greater than 50% change by value in its equity ownership over a three-year period —
is subject to limitations on its ability to use its pre-change net operating losses (NOL)
and its research and development credit carryforwards to offset future taxable income.
The Company’s existing NOLs and research and development credit carryforwards may
be subject to limitations arising from previous ownership changes, and if it undergoes
an ownership change, our ability to use NOLs and research and development credit
carryforwards could be further limited by Sections 382 and 383 of the Internal
Revenue Code.
In addition, our ability to deduct net interest expense may be limited if the Company has
insufficient taxable income for the year during which the interest is incurred, and any
carryovers of such disallowed interest would be subject to the limitation rules similar to
those applicable to NOLs and other attributes. Future changes in share ownership, some
of which might be beyond our control, could result in an ownership change under Section
382 of the Internal Revenue Code.
For these reasons, in the event that ONWARD experiences a change of control, we may
not be able to use a material portion of the NOLs, research and development credit
carryforwards, or disallowed interest expense carryovers, even if we attain profitability.
The Company’s results may be impacted by changes in foreign currency exchange rates.
If ONWARD’S investigational devices are cleared or approved and we commence
commercial operations, we may enter into a number of transactions denominated in
various currencies, which could expose the Company to changes in currency exchange
rates. We do not currently engage in any hedging transactions. If we are unable to address
these risks and challenges effectively, our international operations may not be successful
and our business could be harmed.
If securities or industry analysts do not publish research or reports about the Company’s
business or industry, or if such analysts (if any) change their recommendations regarding
the Ordinary Shares adversely, the market price and trading volumes of the Ordinary
Shares could decline.
The trading market for the Ordinary Shares will be influenced by the research and reports
that securities or industry analysts publish about ONWARD’s business or industry. If
securities or industry analysts do not publish or cease to publish research or reports about
ONWARD’s business or industry, we could lose visibility in the financial markets, which
could cause the market price or trading volume of the Ordinary Shares to decline. Also, if
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one or more of the analysts covering our business or industry recommends selling Ordinary
Shares, or if negative research is published on the industry or geographic markets we
serves, the market price of the Ordinary Shares could decline.
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Investor
Relations
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We engage in and maintain open dialogue with investors and analysts through several
communication channels, including the Annual General Meeting, roadshows, investor
conferences, presentations, and webcasts.
Up-to-date financial information about ONWARD is published on our Investor Relations
website
(ir.onwd.com)
. Investors and analysts are encouraged to visit the website regularly
for detailed coverage of the share price, shareholder meetings, half-year and annual
results, press releases, presentations, webcasts, and investor relations events.
Financial Calendar 2024
•
25 April:
Annual Report publication
•
13 June:
Annual General Meeting
•
17 September:
Interim Report publication
Closed periods based on the 2024 financial calendar are:
•
26 March – 24 April 2024
•
18 August – 16 September 2024
Investor Relations
Dividend Policy
ONWARD has not declared or paid dividends on its shares in the past and does not
currently have the intention to pay dividends. Any declaration of dividends will be based
on the Company’s earnings, financial condition, capital requirements, and other factors
considered important by the Board.
Dutch law and ONWARD’s Articles of Association do not require the Company to
declare dividends. Currently, the Board expects to retain all earnings, if any, generated
by ONWARD’s operations for the development and growth of the business and does not
anticipate paying dividends to shareholders in the near future.
Under the terms of the Innovation loan received from the RVO NL (Dutch Government),
ONWARD is not allowed to pay dividends until the Innovation loan has been repaid.
Capital Structure & Voting Rights
ONWARD’s authorized share capital (maatschappelijk kapitaal) amounts to EUR
12,225,000 divided into 50,937,500 Ordinary Shares and 50,937,500 Preferred Shares with
a nominal value of EUR 0.12 each. All of the issued Ordinary Shares are fully paid-up and
represent capital in the Company. Each shareholder of the Company is entitled to one vote
per share. No shareholders have any voting rights different from any other shareholder. At
31 December 2023, 30,184,388 Ordinary Shares represented all issued capital.
The Board is authorized by a resolution of the General Meeting to issue shares, or grant rights
to subscribe for shares, limited to 10% of the issued share capital. A separate resolution of
the General Meeting is not required for the issuance of shares under this authorization.
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The Board remains of the view that it is in the company’s best interests to be able to react
promptly when business opportunities arise that require the issuance of Ordinary Shares.
For this purpose the Board was also authorized to issue Ordinary Shares, or grant rights
to subscribe for shares, for an additional 50% of the Company’s issued share capital in
connection with a potential capital raise. A separate resolution of the General Meeting is
not required for the issuance of shares under this authorization.
There are no convertible securities or securities with warrants in the Company. No
shareholders have any voting rights different from any other shareholder, and no voting
rights are limited in any manner.
ONWARD is not aware of any agreements that may result in a limitation of the
transferability of voting rights on shares in its capital.
Shareholder Structure
Pursuant to the Dutch Financial Supervision Act (Wet op het financieel toezicht),
substantial holdings in the Company must be disclosed to the Netherlands Authority for
Financial Markets (Stichting Autoriteit Financiële Markten, AFM). According to the register
kept by the AFM, the following shareholders disclosed that they have a direct or indirect
(potential) interest of between 3% and 25% in the Company’s total issued share capital as
of 31 December 2023:
•
INKEF Capital B.V. (12.11%)
•
LSP Advisory B.V. (11.76%)
•
Gimv (Private Equity) (10.61%)
•
Wellington Partners GmbH (8.74%)
•
Invest-NL N.V. (3.60%)
•
Dave Marver (CEO) (3.16%)
Listing
Shares of ONWARD Medical N.V. trade on Euronext in Brussels (primary listing) and
Euronext Amsterdam (secondary listing) under the symbol “ONWD.”
Share Price
Analyst Coverage
ONWARD was covered by three brokers at the end of 2023.
Broker
Analysts
Degroof Petercam
David Seynnaeve, PhD
Kepler Cheuvreux
Jon Berggren
Bryan, Garnier & Co
Maria Vara
In February 2024, KBC Securities initiated research coverage of the Company.
In April 2024, Stifel initiated research coverage of the Company.
Investor Relations
13
Report of the
Non-Executive
Directors
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Below is the report of the Non-Executive Directors of the Company for the financial year 2023,
as referred to in best practice provision 5.1.5 of the Corporate Governance Code (CGC).
Supervision by the Non-Executive Directors
The Board has a duty to ensure that the actions of the Executive Director and Management
Team align with the company’s strategic priorities and values. The Non-Executive Directors
supervise the policies implemented by the Executive Director and Management Team, and
the general affairs of the Company and its affiliated entities.
The Board has remained closely involved in the strategy and monitoring the progress as the
Company prepared for to submit a De Novo application for FDA clearance for the ARCEX
system through frequent discussions with the Executive Director and Management Team.
Throughout these dialogues, the Board took the responsibility of challenging and testing the
propositions made supporting the company’s overall goal of bringing a commercial solution
to an underserved community.
With a view to maintaining supervision of the Company, the Non-Executive Directors
regularly discussed strategic matters with the Executive Director and Management Team
during Board meetings. During these meeting
s
, the Board was updated on development,
clinical and commercial launch activities, and the status of potential funding opportunities.
The Board received a comprehensive overview of the developments, achievements,
challenges, and opportunities in each respective functional area.
Report of the
Non-Executive Directors
The Board has allocated certain specific responsibilities to the Audit Committee,
Compensation Committee, and Nomination and Corporate Governance Committee.
Further details on how these Committees have carried out their duties are set forth in
the sections below pertaining to each committee. The Non-Executive Directors have
been regularly informed by each committee of the results and recommendations of
these meetings in accordance with best practice provision 2.3.5 of the CGC, and the
conclusions of those committees were considered when drafting this report of the Non-
Executive Directors. The Non-Executive Directors were able to review and evaluate the
performance of each Committee. There is no need to amend the size or composition of
any of the above committees.
Audit Committee
In 2023, the Audit Committee held six meetings (attendance details provided in the table
below). During its meetings, the Audit Committee among others reviewed and discussed
the financial reporting process, the 2022 full year and 2023 half year results and reports,
the internal control processes and ongoing improvements, and the funding/financing
requirements. The Audit Committee assessed the declarations regarding internal
control and risk management in the 2022 Annual Report. It also discussed the
cooperation with the external auditor of the Company. The external auditor attended all
the Audit Committee meetings and presented the audit plan for 2023. The Audit
Committee reported systematically to the Board of Directors, making recommendations
and issuing advice for approval (where applicable), and ensured the cooperation of the
Management Team and the finance department of the Company where required.
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Compensation Committee
In 2023, the Compensation Committee held three meetings (attendance details provided in
the table below). The Compensation Committee discussed and approved the achievement
of the 2022 company goals and related variable remuneration of the Executive Director. It
supervised the preparation of the Compensation report that was subsequently approved
by the Board and included in the 2022 Annual Report. The Compensation Committee
set the 2023 company goals and objectives (the progress of which was reviewed by the
committee throughout the year). Moreover, it reviewed and discussed the remuneration
policy and the individual remuneration of the members of the Board, the Board committees
and the Executive Director. The Compensation Committee reported systematically to the
Board of Directors and ensured the cooperation of the Board,
M
anagement
T
eam and the
People and Culture team of the Company where required.
Nomination & Corporate Governance Committee
In 2023, the Nomination and Corporate Governance Committee held two meetings
(attendance details provided in the table below). The Nomination and Corporate
Governance Committee discussed the composition and size of the Board of Directors,
Board committees and Management Team and led
the search for open senior leadership
positions. It discussed the HR and operational strategy of the Company, as well as
succession planning. It supported the Board evaluation exercise. The Nomination and
Corporate Governance Committee reported systematically to the Board of Directors and
ensured the cooperation
of the Board, Management Team and the People and Culture
team of the Company where required.
Evaluation
The Board is responsible for the quality of its own performance. Once per year, it discusses
its own performance and the performance of its individual members and committees.
Adhering to good governance, the Non-Executive Directors performed a Board
effectiveness assessment on a no-name basis in Q4 of 2023 based on a detailed
questionnaire completed.
The assessment focused on five categories of Board governance:
1.
Information sharing between the Company and Board
2.
Chairing of the Board and Board culture
3.
Composition of the Board
4.
Accountability
5.
Standard of conduct
The outcomes were discussed at the following Board meeting, recommendations for
improvement were identified and a defined list of next steps agreed upon.
It was concluded that both the Board and its committees perform well and operate efficiently.
Contrary to the requirement of best practice provision 2.2.6 of the CGC, the 2023
evaluation was not performed under the supervision of an external expert. This will be
considered for future evaluations.
Internal Audit Function
As per the Audit Committee’s recommendation, the Board concluded that — due to the
size of the Company — it does not yet require an internal audit function. The Board has
assessed whether adequate alternative measures have been taken and will reconsider
annually if it is necessary to create an internal audit department.
In reaching this conclusion, the Board took into consideration that the Company has
provided for management to support the assessment and testing of our risk
management
and control systems.
Report of the Non-Executive Directors
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Independence of the Non-Executive Directors
Each Non-Executive Director has a duty to the Company to properly perform the duties
assigned to them and to act in the Company’s corporate interest. Under Dutch law, the
Company’s corporate interest extends to the interests of all stakeholders, including
shareholders, creditors, and employees.
The Board confirms that the Non-Executive Directors meet the independence
requirements of the CGC. For details, refer to Director Independence included in the
Governance section.
Report of the Non-Executive Directors
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a: Chairperson of the respective committee.
b: Vivian has attended all Board and Compensation Committee meetings since 26 September 2022. Vivian also joined and attended all
Nomination and Corporate Governance Committee meetings since her appointment at the AGM in May 2023.
2023
Board of Directors
Audit Committee
Compensation Committee
Nomination & Corporate
Governance Committee
Member & Principal Position
Independent
According to DCGC
% of Attendance at
Meetings
Member
Attendance % at
Meetings
Member
Attendance % at
Meetings
Member
Attendance % at
Meetings
Dave Marver
Executive Director & CEO
No
100%
Jan Øhrstrøm
Non-Executive
Director & Chairperson
Yes
100%
X
a
100%
X
a
100%
Grégoire Courtine
Non-Executive Director and
CSO
No
100%
Ian Curtis
Non-Executive Director and
Vice-Chairperson
Yes
100%
X
a
100%
Fredericus Colen
Non-Executive Director
Yes
100%
X
100%
X
100%
John de Koning
Non-Executive Director
No
100%
X
100%
Kristina Dziekan
Non-Executive Director
Yes
100%
X
100%
Vivian Riefberg
b
Non-Executive Director
Yes
100%
X
100%
X
100%
Number of Meetings Held:
5
6
3
2
Meetings of the
Board & Committees
Report of the Non-Executive Directors
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The Board of Directors’ Report (the Report), consisting of pages 4-183 inclusive and
such parts of the financial statements as referred to in the Report, comprise the
Bestuursverslag, as defined in Article 2:391 of the Dutch Civil Code (DCC).
In accordance with best practice provision 1.4.3 of the Dutch Corporate Governance Code
(CGC), the Board of Directors state that, to the best of its knowledge:
•
The report provides sufficient insights into any failings in the effectiveness of the
internal risk
management and control systems with regard to the risks as referred to
in
best practice provision 1.2.1. In the 2023 financial year, no material failings have been
detected or reported;
•
The aforementioned systems provide reasonable assurance that the financial reporting
does not contain any material inaccuracies. Details are set out in the Risk
Management
and Control section;
•
Based on the current state of affairs, it is justified that the financial reporting is
prepared on a going concern basis. At the end of 2023, the Company expected its
current cash to propel operations through the end of 2024. The Company successfully
completed a EUR 20M equity financing in March 2024, extending its cash runway
into mid-2025. The cash and cash equivalents including the offering in March 2024
supports the going concern basis; and
Board of Directors’
Statements
•
The report states the material risks, detailed in the Risk
Management and Control
section, as referred to in best practice provision 1.2.1, and the uncertain¬ties, to the
extent that they are relevant to the expectation of the company’s continuity for the
period of twelve months after the preparation of the report.
With reference to Section 5.25c, Paragraph 2c of the Financial Markets Supervision Act,
the Board states that, to the best of its knowledge:
•
The consolidated financial statements as at and for the year ended 31 December 2023
— which have been prepared in accordance with International Financial Reporting
Standards as adopted by the European Union and with Part 9 of Book 2 of the DCC
-- give a true and fair view of the assets, liabilities, financial position, and loss of the
Company and the undertakings included in the consolidation taken as a whole.
•
The Report provides a fair view of the situation on the balance sheet date and of
developments during the financial year of the issuer and of its affiliated companies,
whose information has been included in its financial statements, together with a
description of the main risks the issuer faces.
Amsterdam, 24 April 2024 –
Board of Directors
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Remuneration
Report
This report provides an overview of the remuneration of the Board in 2023 and explains
how this relates to the Company’s policy regarding the remuneration of its Non-Executive
and Executive Directors (the Compensation Policy), which was previously adopted at the
Company’s 2022 Annual General Meeting (AGM). The adoption of the 2022 report was
through an advisory vote with 87.9% of voting in favor of adoption.
The 2023 Remuneration Report has been prepared in line with Section 2:135b of the Dutch
Civil Code (DCC) and best practice provision 3.4.1 of the Corporate Governance Code
(CGC). This report will be submitted to the 2024 AGM for an advisory vote. The Company’s
2024 AGM is scheduled for 14 June.
The Compensation Policy is available on the ONWARD website
(onwd.com)
under
Investors/Governance tab.
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Executive Director Remuneration
The annual remuneration of the Executive Director comprises the following two components:
•
Fixed remuneration, comprising an annual base salary and optional benefits, such
as medical insurance, life insurance, retirement benefits, travel expenses, and/or
representation allowances
•
Variable remuneration, comprising an annual performance-based compensation
(depending on the individual’s achievement and corporate objectives as defined on an
annual basis) and share-based remuneration
Fixed Remuneration
The amount of the fixed remuneration depends on the Executive Director’s function
and responsibilities and on typical compensation levels in the industry and the market,
especially in comparison to similar listed companies in the MedTech sector. The fixed
remuneration is paid out as a monthly salary.
Variable Remuneration
Short-term variable remuneration consists of annual performance-based compensation
(a bonus) defined on a yearly basis. The Company currently only considers corporate
objectives. Corporate objectives are centered around strategic clinical and development
deliverables, including key regulatory milestones, operational and commercial readiness,
and people and financing goals. These objectives are measured via a set of specific targets
that help track progress towards their completion.
Long-term variable remuneration consists of periodic grants of stock options that
vest monthly over a four-year vesting period. For more details, refer to Note 2.9 in
the
Consolidated Financial Statements. Stock options create an ownership opportunity for
executives linked to the long-term performance of the Company’s share price, aligning their
interests with those of shareholders over the options’ 10-year term. If the share price does
not increase from the date of grant, no value is realized under the scheme.
Stock options are commonly leveraged as the primary equity vehicle among our industry
peer group in Europe and the US. Award sizes are determined at the point of grant in
relation to competitive award values and percentage of ownership delivered within our
peer group.
The Company has implemented share-based remuneration as follows:
•
Share-based remuneration takes the form of options for shares
•
These options may not be transferred, pledged, or otherwise encumbered; subject to,
among others, the applicable yearly exercise periods, they may be exercised for up to 10
years after the grant date once vested
•
In cases of termination of an Executive Director’s management agreement (other than
termination by the Executive Director for good cause) who holds share options, or if
that Executive Director is dismissed, such options are subject to reverse vesting (and as
such will be forfeited) over a period of 36 months after their grant
•
This plan is not based on the achievement of specific performance-related Key
Performance Indicators (KPI’s); however, the size of the stock option grant is linked to
the position’s job grade and is contingent on an individual’s performance in the previous
calendar year
•
The plan is based on the premise that stock options contain an inherent performance
criterion for the recipient, who is invested in the successful performance of the
Company, thereby leading to an increase in the share price
There are no specific performance conditions associated with this plan, only a service
condition. This deviates from the requirements of best practice provision 3.1.2 v of the CGC.
In addition, refer to the section “Deviations from the Best Practices Provisions of the Dutch
Corporate Governance Code” of the Governance section for further information.
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The following awards have been granted to the Company’s Executive Director. The main
conditions for exercising these options are described above.
Executive
Director
Financial
Year
Grant
Date
Type of
Security
Options
Vested /
Unvested
Exercise
Price
Expiration
Date
Dave Marver
2021
15/12/2021
Stock
Options
Vested:
95,957
Unvested:
92,043
EUR 9.70
15/12/2031
Dave Marver
2023
03/01/2023
Stock
Options
Vested:
0
Unvested:
385,000
EUR 6.12
03/01/2033
Reduction or Claw-Back of Variable Remuneration
Pursuant to Dutch law, the variable remuneration of the Executive Director may
be reduced, or the Executive Director may be obliged to pay part of their variable
remuneration to the Company, if certain circumstances apply as follows:
•
Test of reasonableness and fairness: According to Dutch law, the Board may adjust
any variable remuneration payable to an Executive Director to an appropriate level
if payment of the variable remuneration is deemed unacceptable according to the
criteria of reasonableness and fairness
•
Claw-back: Under Dutch law, the Board has the authority to recover from an Executive
Director any variable remuneration paid based on incorrect financial or other data
Contribution to Long-Term Performance & Value Creation
Remuneration of the Executive Director is consistent with and supports ONWARD’s
strategy. It also supports our ongoing efforts to improve our overall performance, facilitate
growth and sustainable success, and enhance our long-term value and interests.
As a result, our compensation packages are designed to enable us to compete in a global
market, including the challenging US labor market. We aim to attract top talent to execute
our long-term strategy and create sustainable value and growth in the best interest of the
Company and stakeholders. . Executive compensation packages were review
ed
in Q4 of
2022 and 2023 respectively, based on benchmarks provided by AON, an independent third
party.
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Executive Director’s Remuneration
A detailed breakdown of the Executive Director’s remuneration is presented in the table below:
EUR’000
Dave Marver CEO
2023
2022
Base Salary
425
410
a
Pension Benefits
64
44
Other Benefits
78
109
Total Fixed Compensation
567
563
34%
39%
Annual Performance-Based Compensation
200
398
Share-Based Remuneration / Stock Options
916
469
Total Variable Compensation
1,116
867
66%
61%
Total Compensation
1,683
1,430
a: The increase in the base salary was to align the salary of the CEO with ONWARD’s peer group based on benchmarking performed by an
external consultant.
Scenario Analyses
the annual performance-based compensation was discussed by the Compensation
Committee in 2023 to assess if there are any risks that the performance criteria could lead
to inappropriate outcomes. The Compensation Committee concluded that the range of
potential remuneration outcomes were reasonable considering the current maturity and
activities. The Compensation Committee makes recommendations to the Board, however,
the final decision regarding percentages based on achievements relating to executive
compensation will remain up to the discretion of the Board.
Performance Assessment
The Board determines the Executive Director’s variable remuneration (whereby the Executive
Director has not taken part in the discussions and decision-making by the Board) based on
an annual performance assessment and professional judgment. Variable remuneration is
linked to the individual’s performance against a set of financial and non-financial goals that
supports and is consistent with the Company’s strategy and long-term interests.
These goals include, among other topics, performance, business development, strategy,
investor relations, and general management. Risk alignment is considered in target setting
to promote sound and effective risk management. Variable remuneration is paid out
according to how the Company’s business develops, the scope of the Executive Director’s
achievement, and the realization of the Company’s general objectives.
In 2023, the Board approved a set of company goals for our Executive Director, containing
both financial and non-financial KPIs in the following functional areas:
•
Clinical & Development:
These goals require cross-functional collaboration between
clinical, regulatory, and product development teams to ensure progress toward FDA
submission milestones while adhering to regulations and guidelines throughout
the development process. Product development activities are tracked, and product
performance is optimized during the relevant development and validation stages.
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•
Operational & Commercial:
These goals focus on preparedness for manufacturing
and assembly, including supplier readiness and process development activities. They
include implementation of a sufficiently robust quality management system (QMS)
to ensure compliance with regulatory requirements. They also include supporting
readiness for market entry and executing necessary training and support activities
following commercial launch.
•
People:
This goal’s focus is to recruit and retain the talent required to execute the
Company’s strategies.
•
Strategic & Financial:
This goal is to secure additional funding to support the
Company’s strategies.
Performance Criteria
Functional Area
Criteria
Weight
On-target
Performance
Actual
Performance
Measured
Performance
Clinical & Development
Operational & Commercial
People
Strategic & Financial
40%
30%
10%
20%
100%
100%
100%
100%
55%
44%
120%
0%
22%
13%
12%
0%
Total
47%
Corresponding amount
(EUR’000)
200
After the conclusion of the financial year, the Board assesses to what extent the
performance criteria have been met and determines the measured performance
percentage and corresponding amount for the Executive Director. Bonus compensation is
at the discretion of the Compensation Committee and, ultimately, the Board.
Evaluating the Executive Director’s performance against the performance criteria set forth
at the beginning of 2023, the Remuneration Committee recommended, and the Board
granted the CEO a variable compensation payout of 47% of target for 2023.
Non-Executive Director Remuneration
It should be in the Non-Executive Directors’ interest to focus on the Company’s sustainable
and long-term successful development. As such, the Company believes that fixed
remuneration for the Non-Executive Directors is effective. Regardless of their remuneration,
all Non-Executive Directors are entitled to reimbursement for their travel expenses.
The fees are as follows:
EUR’000
Chairman
Member
Board of Directors
45
45
Audit Committee
12
6
Compensation Committee
10
5
Nomination and Corporate Governance Committee
8
4
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Determination of Non-Executive Directors’ Remuneration
Non-Executive Director remuneration amounted to:
In EUR
Name
2023
2022
2021
Jan Øhrstrøm
a
160,889
208,134
533,577
Gregoire Courtine
b
512,297
300,725
980,918
Fred Colen
c
66,149
59,839
96,820
Kristina Dziekan
51,000
26,538
–
Vivian Riefberg
d
95,414
25,275
–
a: Compensation includes cost of stock options EUR 49,314 (2022: EUR 94,755) and the reimbursement of travel expenses EUR 3,575
(2022: EUR 5,379).
b: Compensation includes the remuneration paid in relation to his role as CSO EUR 143,837 (2022: EUR 146,124), as well as the vesting of
stock options under the long-term incentive plan EUR 368,460 (2022: EUR 154,601).
c: Compensation includes the reimbursement of travel expenses EUR 10,149 (2022: EUR 3,839).
d: Compensation includes cost of stock options EUR 23,252 (2022: EUR 6,941) and the reimbursement of travel expenses EUR 20,162 (2022:
EUR 5,291). Served as interim Director since 26 September 2022 and was appointment as Director at the 2023 Annual General Meeting.
Liability Insurance (D&O) and Indemnity
The Company maintains D&O insurance covering the Executive Directors and all Non-
Executive Directors.
Pursuant to Article 23 of the Articles of Association, the Directors are indemnified, held
harmless, and reimbursed by the Company for all expenses, financial effects of judgments,
fines, and amounts paid in settlement actually and reasonably incurred by them in
connection with an action, suit, proceeding, or investigation against them in their capacity
as Executive or Non-Executive Director.
Historical Development
The table below provides an overview of the annual compensation of the Executive
Director and full-time equivalent (FTE) employees for the financial years 2023 and 2022.
The amounts mentioned in the table are gross amounts before the impact of social-
security or income-tax deductions.
EUR’000
2023
2022
2021
2020
Net loss of the period
36,181
32,772
34,314
20,014
Executive Director
1,683
1,430
3,331
1,008
a
Annual change
18%
-57%
230%
a
Average FTEs
104.5
86.6
76,7
55
Annual change
21%
13%
-11%
Remuneration of FTEs
21,498
18,282
15,519
8,534
Annual change
23%
18%
82%
Average remuneration per FTE
206
212
202
155
Annual change
-3%
4%
104%
Pay Ratio
8
7
16
13
b
Annual change
21%
-59%
62%
Non-Executive Directors
886
621
1,616
959
Annual change
43%
-62%
69%
a: The CEO was appointed on 1 July 2020.
b: For a meaningful comparison, as the CEO was appointed on 1 July 2020, the 2020 pay ratio was calculated by extrapolating the CEO
remuneration in 2020 for 12 months (EUR 2,016 thousand).
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Pay Ratio
Based on best practice provision 3.4.1 of the CGC, the Company shall disclose the pay
ratio between the remuneration of the Executive Directors and that of a representative
reference group of Company employees and, if applicable, comment on any important
variation in pay ratios compared to the previous financial year.
The reference group includes the Company’s entire workforce expressed in the form of
full-time equivalent (FTE) employees. The FTE of each employee is calculated based on the
number of hours an employee works in each period, compared to the maximum number of
hours/periods allowed, as per the local law prevalent in the country of operation. As of 31
December 2023, there were 99.2 FTEs (2022: 96.1).
Pay ratios are calculated based on the average remuneration received by employees of
the reference group. The remuneration taken into account is the amount received during
the year concerned. If all or part of the remuneration was paid in a foreign currency, the
exchange rate used was the average exchange rate of the relevant currency into euros for
the year ending 31 December 2023.
The Company used both fixed and variable remuneration components in determining the
pay ratio for a given year. The pay ratio disclosed by the Company reflects the previous
financial year. The average Executive Director-to-employee pay ratio stands at 8 in 2023,
compared with 7 in 2022. The variance from 2022 to 2023 is driven by the cost of stock
options awarded on 3 January 2023, this is a non-cash component of the CEO’s variable
compensation. The variance from 2020 to 2021 and 2021 to 2022 is due to the successful
IPO in October 2021 that positively impacted the performance-based remuneration and
triggered the accelerated vesting of the Employee Investment Plan.
Remuneration Report
16
Financials
Consolidated Statement
of Proﬁt & Loss
For the Year Ended 31 December
All amounts in EUR ‘000
Notes
2023
2022
Grants & Other Income
2.1
532
2,148
Total Revenues & Other Income
532
2,148
Research & Development Expenses
Clinical & Regulatory Expenses
Marketing & Market Access Expenses
Patent fees & Related Expenses
Quality Assurance Expenses
General & Administrative Expenses
2.2,2.8
2.3,2.8
2.4,2.8
2.5,2.8
2.6,2.8
2.7,2.8
(13,841)
(4,911)
(2,943)
(1,509)
(1,464)
(11,327)
(13,138)
(5,747)
(1,951)
(1,549)
(1,228)
(10,563)
Total Operating Expenses
(35,995)
(34,176)
Operating Loss for the Period
Financial Income
Financial Expense
4.5
4.5
(35,463)
972
(1,583)
(32,028)
62
(1,572)
Net Finance Expense
(611)
(1,510)
1
2
3
4
5
6
7
8
9
10
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Consolidated Financial Statements
Loss for the Period Before Taxes
Income Tax expense
2.10
(36,074)
(107)
(33,538)
766
Net Loss for the Period
(36,181)
(32,772)
Attributable to:
Equity holders of the parent
Non-controlling interests
(36,181)
–
(32,772)
–
(36,181)
(32,772)
Earnings Per Share (EUR):
Basic earnings per share:
Diluted earnings per share:
4.1
4.1
(1.20)
(1.20)
(1.09)
(1.09)
1
2
3
4
5
6
7
8
9
10
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Consolidated Financial Statements
Consolidated Statement
of Comprehensive Income
For the Year Ended 31 December
All amounts in EUR ‘000
Notes
2023
2022
Net Loss for the Period
Remeasurement of post-employment benefits
5.0, 2.10
(36,181)
(928)
(32,772)
427
Other comprehensive income that will not be
reclassiﬁed to proﬁt or loss in subsequent pe-
riods (net of tax)
Currency translation differences
(928)
(155)
427
602
Other comprehensive income that will be
reclassified to profit or loss in subsequent
periods (net of tax)
(155)
602
Total Comprehensive Result for the Year, Net
of Tax
(37,264)
(31,743)
Attributable to:
Equity holders of the parent
Non-controlling interests
(37,264)
–
(31,743)
–
(37,264)
(31,743)
1
2
3
4
5
6
7
8
9
10
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Consolidated Financial Statements
Consolidated Statement
of Financial Position
For the Year Ended 31 December
All amounts in EUR ‘000
Notes
2023
2022
Assets
Non-Current Assets
Intangible assets
Property, plant & equipment
Right of use assets
Deferred tax assets
3.0
3.1
3.2
2.10
9,804
609
1,483
310
10,158
415
1,681
163
12,206
12,417
Current Assets
Indirect tax receivables
Receivable from related parties
Other current assets
Fixed term deposits
Cash and cash equivalents
3.3
3.4
3.5
3.5
117
37
1,501
–
29,768
709
251
1,456
20,000
41,760
31,423
64,176
43,629
76,593
1
2
3
4
5
6
7
8
9
10
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Consolidated Financial Statements
Equity & Liabilities
Equity & Reserves
Issued capital
Share premium
Other reserves*
Retained earnings
4.0
4.0
4.0
3,622
155,249
4,488
(145,428)
3,622
155,249
2,079
(108,319)
Total Equity Attributable to Shareholders
17,931
52,631
Non-Current Liabilities
Interest-bearing loans
Deferred tax liability
Lease liability
Post-employment benefits
4.2
2.10
3.2
5.0
15,255
631
1,051
2,081
12,656
670
1,294
1,121
19,018
15,741
Current Liabilities
Income tax liabilities
Lease liability
Trade payables
Other payables
3.2
3.6
3.7
221
568
1,369
4,522
219
427
1,909
5,666
6,680
8,221
43,629
76,593
* Other reserves include the foreign currency translation reserve that qualifies as a legal reserve under Dutch Law.
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Consolidated Financial Statements
Consolidated Statement
of Changes in Equity
Consolidated Financial Statements
All amounts in EUR ‘000
Notes
Issued Capital
Share Premium
Other Reserves*
Retained Earnings
Total Equity
As at 1 January 2022
3,622
155,249
(214)
(75,974)
82,683
Loss for the year 2022
Other comprehensive income
–
–
–
–
–
602
(32,772)
427
(32,772)
1,029
Total comprehensive result
Share-based payments: LTIP
2.9
–
–
–
–
602
1,691
(32,345)
–
(31,743)
1,691
As at 31 December 2022
4.0
3,622
155,249
2,079
(108,319)
52,631
As at 1 January 2023
3,622
155,249
2,079
(108,319)
52,631
Loss for the year 2023
Other comprehensive income
–
–
–
–
–
(155)
(36,181)
(928)
(36,181)
(1,083)
Total comprehensive result
Share
-
based payments: LTIP
2.9
–
–
–
–
(155)
2,564
(37,109)
–
(37,264)
2,564
As at 31 December 2023
4.0
3,622
155,249
4,488
(145,428)
17,931
* Other reserves include the foreign currency translation reserve that qualifies as a legal reserve under Dutch Law.
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Consolidated Statement
of Cash Flows
For the Year Ended 31 December
All amounts in EUR ‘000
Notes
2023
2022
Cash Flows from Operating Activities
Loss for the Period Before Taxes
(36,074)
(33,538)
Adjusted for:
•
Depreciation and impairment of property, plant and
equipment and right-of-use assets
3.1, 3.2
726
735
•
Share-based payment transaction expense
2.9
2,564
1,691
•
Post-employment benefits
76
154
•
Net finance costs
611
1,510
•
Other non-cash items
197
106
Changes in working capital:
Increase (-) Decrease (+) in Trade and other receivables
491
140
Increase (+) Decrease (-) in Trade and other payables
(1,654)
2,813
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Consolidated Financial Statements
Interests received
Interests paid
Income tax paid
Bank charges paid
4.5
916
–
(106)
(17)
15
(229)
(49)
(33)
Net cash generated/(used) from operating activities
(32,270)
(26,685)
Cash flows from investing activities
Investments in fixed assets
Investments in intangible fixed assets
Investment in fixed term deposits
Withdrawal of term deposits
3.1
3.0
3.5
(422)
–
–
20,000
(386)
(31)
(20,000)
–
Net cash generated/(used) from investing activities
19,578
(20,417)
Cash flows from financing activities
Proceeds from interest-bearing loans
Payment of principal portion of lease liabilities
Proceeds from issuance of shares
Transaction costs on issuance of shares
4.2
3.2
4.0
1,292
(479)
–
–
–
(557)
–
–
Net cash generated/(used) from financing activities
813
(557)
Movement in cash and cash equivalents
Cash and cash equivalents at 1 January
Effect of exchange rates on cash and cash equivalents
Changes in cash and cash equivalents during the period
41,760
(113)
(11,879)
89,443
(24)
(47,659)
Cash and cash equivalents at 31 December
3.5
29,768
41,760
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Consolidated Financial Statements
Notes to the
Consolidated
Financial
Statements
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Notes to the Consolidated
Financial Statements
1. General Information & Basis of Preparation
1.0 Corporate Information
General
Onward Medical N.V. (“ONWARD”) is a public limited company under Dutch law
(naamloze vennootschap). The registered office is located at Schimmelt 2, Eindhoven,
the Netherlands. ONWARD is registered in the Commercial Register of the Chamber of
Commerce under number 64598748.
ONWARD and its subsidiaries (the “Group”) are developing both an Implantable Neuro-
stimulation System (INS) and a non-invasive system for electrical stimulation of specific
areas of the spinal cord.
The financial statements for the year ended 31 December 2023 have been prepared
by the Board of Directors and were authorized for issue on 24 April 2024. The financial
statements will be submitted for adoption to the General Meeting on 14 June 2024.
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1.1 Group Information
Information about subsidiaries
The consolidated financial statements of the Group include:
•
ONWARD Medical SA, Switzerland (holding 100%)
•
ONWARD Medical Inc, United States of America (holding 100%)
1.2 Basis of Preparation
The consolidated financial statements of the Group have been prepared in accordance
with International Financial Reporting Standards (IFRS) and IFRIC interpretations as
adopted by the European Union and with Part 9 of Book 2 of the Dutch Civil Code.
The consolidated financial statements have been prepared on a historical cost basis,
unless otherwise stated. Income and expenses are accounted for on an accrual basis.
The consolidated financial statements provide comparative information in respect of the
previous period.
The consolidated financial statements are presented in euros and all values are rounded
to the nearest thousand (EUR 000), except when otherwise indicated, and for the
number of shares and the per share amount. Due to rounding, amounts may not add up
to totals provided.
1.3 Basis of Consolidation
The consolidated financial statements comprise the financial statements of the Group
and its subsidiaries as at 31 December 2023. Control is achieved when the Group is
exposed, or has rights, to variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the investee. Specifically, the
Group controls an investee if and only if the Group has:
•
Power over the investee (i.e., existing rights that give it the current ability to direct the
relevant activities of the investee)
•
Exposure, or rights, to variable returns from its involvement with the investee, and
•
The ability to use its power over the investee to affect its returns
The Group reassesses whether or not it controls an investee if facts and circumstances
indicate that there are changes to one or more of the three elements of control.
Consolidation of a subsidiary begins when the Group obtains control over the subsidiary
and ceases when the Group loses control of the subsidiary.
Profit or loss and each component of other comprehensive income (OCI) are attributed to
the equity holders of the parent of the Group. When necessary, adjustments are made to
the financial statements of subsidiaries to bring their accounting policies into line with the
Group’s accounting policies. All intragroup assets and liabilities, equity, income, expenses,
and cash flows relating to transactions between members of the Group are eliminated in
full-on consolidation.
1.4 Going Concern
In determining the appropriate basis for preparing the financial statements for the year
ended 31 December 2023, Management considered the cash flow forecasts over a time
horizon of one year after the date of these financial statements. The 2024 cash flow
forecasts, include significant expenses and cash outflows in relation to -among others- the
ongoing clinical trials, the continuation of research and development projects and FDA
submission and approval for the ARC
EX
indication. Inherent uncertainties in these forecasts
may have an impact on the Company’s cash position. To continue development and reach
commercialization as planned, the Company will need to attract additional funding in
future. The Company’s long-term success and existence is contingent on achieving FDA
approval and CE mark of its products.
At 31 December 2023 the Company had cash and cash equivalents of EUR 29.8M. This
was expected to fund operations to the end of 2024. On 25 March 2024, the Company
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completed a private placement and French retail public offering, adding EUR 20M gross
to the year-end cash position. The cash and cash equivalents including the offering in
March 2024 amounted to EUR 42M at 31 March 2024.
The Company believes that this cash position, after the offering, will be sufficient to meet
the Company’s capital requirements and fund its operations for at least 12 months as
from the date of this Annual Report. We anticipate this would extend our cash runway
to May 2025. The Company is currently in the process of attracting additional funding,
which would extend the runway to Q3 2025. In case this or other funding opportunities are
not successful, management sees cost savings opportunities to further extend the cash
run rate beyond May 2025.
In view of the above, and notwithstanding a loss brought forward of EUR 145M as of 31
December 2023, the consolidated financial statements have been prepared on a going
concern basis.
1.5 Summary of Material Accounting Policies
a) Current Versus Non-Current Classification
The Group presents assets and liabilities in the statement of financial position based on
current/non-current classification. An asset is current when it is:
•
Expected to be realized or intended to be sold or consumed in normal operating cycle
•
Held primarily for the purpose of trading
•
Expected to be realized within twelve months after the reporting period, or
•
Cash or cash equivalent unless restricted from being exchanged or used to settle a
liability for at least twelve months after the reporting period
All other assets are classified as non-current.
A liability is current when:
•
It is expected to be settled in normal operating cycle
•
It is held primarily for the purpose of trading
•
It is due to be settled within twelve months after the reporting period, or
•
There is no unconditional right to defer the settlement of the liability for at least twelve
months after the reporting period
The Group classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
b) Foreign Currencies
The Group’s consolidated financial statements are presented in euros, which is also the
parent company’s functional currency. For each entity, the Group determines the functional
currency and items included in the financial statements of each entity are measured using
that functional currency.
Transactions & Balances
Transactions in foreign currencies are initially recorded by the Group entities at their respective
functional currency spot rates at the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are retranslated at the
functional currency spot rate of exchange at the reporting date.
Differences arising on settlement or translation of monetary items are recognized in profit
or loss with the exception of monetary items that are designated as part of the hedge of the
Group’s net investment of a foreign operation. These are recognized in other comprehensive
income until the net investment is disposed of, at which time, the cumulative amount is
reclassified to profit or loss. Tax charges and credits attributable to exchange differences on
those monetary items are also recorded in other comprehensive income.
Non-monetary items that are measured in terms of historical cost in a foreign currency are
translated using the exchange rates as at the dates of the initial transactions. Non-monetary
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items measured at fair value in a foreign currency are translated using the exchange rates
at the date when the fair value is determined. The gain or loss arising on translation of non-
monetary items measured at fair value is treated in line with the recognition of gain or loss on
change in fair value of the item (i.e., translation differences on items whose fair value gain or
loss is recognized in other comprehensive income or profit or loss are also recognized in other
comprehensive income or profit or loss, respectively).
Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments
to the carrying amounts of assets and liabilities arising on the acquisition are treated as
assets and liabilities of the foreign operation and translated at the spot rate of exchange at the
reporting date.
Group Companies
On consolidation, the assets and liabilities of foreign operations are translated into euros
at the rate of exchange prevailing at the reporting date and their income statements are
translated at the monthly average exchange rates.
The exchange differences arising on translation for consolidation are recognized in
other comprehensive income. On disposal of a foreign operation, the component of other
comprehensive income relating to that particular foreign operation is recognized in profit
or loss.
1.6 Significant Accounting Judgments, Estimates & Assumptions
The preparation of the Group’s consolidated financial statements requires Management
to make judgments, estimates, and assumptions that affect the reported amounts of
revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the
end of the reporting period. However, uncertainty about these assumptions and estimates
could result in outcomes that require a material adjustment to the carrying amount of the
asset or liability affected in future periods.
The Group based its assumptions and estimates on parameters available when
the consolidated financial statements were prepared. Existing circumstances and
assumptions about future developments, however, may change due to market changes or
circumstances arising beyond the control of the Group. Such changes are reflected in the
assumptions when they occur.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognized in the period in which the estimate is revised if the
revision affects only that period, or in the period of revision and the future periods if the
revision affects both current and future periods.
The key assumptions concerning the future and other key sources of estimation
uncertainty at the reporting date, that are most relevant to the carrying amounts of assets
and liabilities within the next financial year, are included in each of the respective notes as
referenced below:

Research & Development | Note 2.2
Share-Based Payments | Note 2.9
Impairment of Intangible Assets | Note 3.0
Post-Employment Benefits | Note 5.0
Taxes | Note 2.10

1.7 New Accounting Standards & Developments
1.7.1 New and Amended Standards and Interpretations
Several amendments applied for the first time in 2023:
•
IFRS 17 Insurance Contracts, effective 1 January 2023
•
Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice Statement
2, effective 1 January 2023
•
Definition of Accounting Estimates - Amendments to IAS 8, effective 1 January 2023
•
Deferred Tax related to Assets and Liabilities arising from a Single Transaction –
Amendments to IAS 12, effective 1 January 2023
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243
None of these had a material impact on the consolidated financial statements of the
Group in 2023.
1.7.2 Standards Issued but Not Yet Effective
The new and amended standards and interpretations that are issued, but not yet
effective, up to the date of issuance of the Group’s financial statements are listed below.
The Group has not early adopted any standards, interpretations or amendments that
have been issued but are not yet effective. The Group intends to adopt these new and
amended standards and interpretations, if applicable, when they become effective.
•
Classification of Liabilities as Current or Non-current - Amendments to IAS 1,
effective 1 January 2024
•
Lease Liability in a Sale and Leaseback – Amendments to IFRS 16, effective 1
January 2024
•
Disclosures: Supplier Finance Arrangements - Amendments to IAS 7 and IFRS 7,
effective 1 January 2024
•
Lack of exchangeability – Amendments to IAS 21, effective 1 January 2025
•
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
- Amendments to IFRS 10 and IAS 28. In December 2015, the IASB postponed the
effective date of this amendment indefinitely pending the outcome of its research
project on the equity method of accounting.
Based on the nature and impact of each of the new standards, amendments and/or
interpretations, the Group expects no material impact considering the
circumstances as at the date of
the
Annual Report.
2.
Results of The Year
2.0 Segment Reporting
Based on the organizational structure, as well as the nature of financial information
available and reviewed by the Company’s chief operating decision-makers to assess
performance and make decisions about resource allocations, the Company has concluded
that its total operations represent one reportable segment and that the consolidated
disclosures address the requirements.

| 2023 | 2022
Non-current assets |  |
Netherlands | 118 | 61
Switzerland | 2,273 | 2,194
United States of America | 9,815 | 10,162
Non-current assets | 12,206 | 12,417

2.1 Revenues & Other Income
Accounting Policy:
Government subsidies are recognized where there is reasonable
assurance that the subsidy will be received, and all attached conditions will be complied
with. When the subsidy relates to an expense item, it is recognized as income on a
systematic basis over the periods that the related costs, for which it is intended to
compensate, are expensed. Any outstanding receivables related to these subsidies are
recorded as grants receivable. The government subsidies are presented on a gross basis
except for the WBSO (“Wet Bevordering Speur & Ontwikkeling”) that is presented on a net
basis with the expensed amount for personnel expenses.

| 2023 | 2022
Government subsidies (EU) | 464 | 2,044
Other income | 68 | 104
Total revenues and other income | 532 | 2,148

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Government subsidies have been received for the research and development of several
development projects. There are no unfulfilled conditions or contingencies attached to
these subsidies.

|  |  |  | Recognized | Grant
|  | Recognized | Recognized | as Grant | received in
Grants | Total | as Grant | as Grant | Income | advance as
| Grant* | Income 2023 | Income 2022 | cumulative | per 31-12-
|  |  |  | before 2022 | 2023
CONFIRM | 416 | – | (12) | 416 | –
SWISS LOCAL (one-offs)** | – | – | 85 | 65 | –
PREP2GO | 362 | 15 | 104 | 243 | –
DARPA | 3,004 | 419 | 1,412 | 1,173 | –
ZonMW | 250 | 83 | 83 | 83 | –
EISMEA – Reverse Paralysis*** | 292 | (237) | 273 | – | 183
EISMEA – NEMO BMI*** | 144 | (85) | 85 | – | 108
Eurostars Impulse | 500 | 160 | 14 | – | –
Rewire | 347 | 56 | – | – | 122
SH-ARC | 500 | 53 | – | – | 60
Total |  | 464 | 2,044 | 1,980 | 473

* Please refer to the terms and conditions of the subsidies included below.
** Except for the Swiss local grant received by ONWARD Medical SA (In Switzerland), all other grants were received by ONWARD Medical
N.V. (In the Netherlands).
*** Refer to EISMEA pending amendment note included below
Terms & Conditions
CONFIRM
This Eurostars funding agreement with the Swiss Innovation Agency Innosuisse for a
total amount of EUR 416k started in May 2019 and ended in October 2021, with follow
up reporting resulting in the additional 25.75% granting of the allocated amount. The
remainder of the grant was receivable in 2022 after submission of the final report. Due
to lesser expenses declared, the final amount was decreased. In this project, ONWARD
collaborated with Inomed A.G., Universitätsklinikum Heidelberg, and EPFL to develop
an intra-operative neuromonitoring system and algorithms facilitating the surgical
implantation of ARC
IM
.
PREP2GO
This Eurostars funding agreement with the Netherlands enterprise agency RVO for a total
amount of EUR 348k started in April 2020 and ended in September 2022. An amount equal
to 90% of the grant is paid during the grant period in tranches in 2020, 2021, and 2022. The
remaining 10% of the grant is payable after evaluation of the final report. In this project,
ONWARD collaborated with Zurich Medtech A.G., IT’IS Foundation, Universitair Medisch
Centrum Utrecht and EPFL to automatize the simulation framework that was developed in
the RESTORE project, to facilitate the pre-operative planning for ARC Therapy for clinicians.
DARPA
The DARPA grant is a five-year project that started in October 2020. The award has been
divided into 3 phases. The funding agreement for phase 1 and phase 2 was approved for a
total amount of EUR 3.172M (or USD 3.402M). The grant amounts are being charged on a
monthly basis over the period based on actual costs incurred. In this project, ONWARD is
collaborating with a large consortium of academic partners, companies, and consultants
to develop a new clinical intervention to modulate blood pressure and spinal cord perfusion
and oxygenation in the hours following SCI. This corresponds to a roadmap development
of ARC
IM
to be used in the hours following SCI. ONWARD completed its contributions to the
DARPA project in 2023 within the final cumulative amount being recognized amounting to
EUR 3.004M (or USD 3.307M). The US government has announced that the DARPA project
is cancelled and phase 3 will not continue.
ZonMW
This Dutch funding agreement is with the Netherlands Organisation for Health Research
and Development for a total amount of EUR 250k that started in January 2021 and ends in
January 2024. An amount equal to 80% of the grant is being paid during the grant period
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in three equal tranches in 2021, 2022, and 2023. The remaining 20% of the grant will be
paid after submission of the final report. In this project, ONWARD is collaborating with the
University of Bordeaux, CHUV, and EPFL to develop a research interface for ARC
IM
and
evaluate its use to alleviate locomotor deficits in Parkinson’s disease.
EISMEA – Reverse Paralysis
The European Innovation Council and SMEs Executive Agency (EISMEA) awarded a
grant to support the development of an innovative Brain-Spine Interface technology for
restoring mobility and upper limb function. The EUR 3.6M grant was awarded to ONWARD
and its research partners EPFL, CEA-Clinatec and Sint Maartenskliniek. Under the
terms of the award, ONWARD receives EUR 1.2M. The project started 1 May 2022 and has
an end date of 30 April 2025, a duration of 36 months. ONWARD has received 75% as
prefinancing; an additional 15% is receivable 90 days after the first periodic reporting, and
the final payment 90 days after receiving the second periodic reporting. See note EISMEA
pending amendment.
EISMEA – NEMO BMI
The European Innovation Council and SMEs Executive Agency (EISMEA) awarded a grant
to support the development of Motor Brain-Machine Interfaces (BMIs). BMIs translate
brain neural signals into commands to external effectors. The NEMO BMI project will
conduct the exploration of assistance-free and easy-to-use portable neuroprosthetics
including wireless neuronal activity recorder, a real-time neuronal activity decoder
based on integrated technologies, and a spinal cord stimulator. The EUR 3.8M grant
was awarded to ONWARD and its research partners Ecole Polytechnique Federale de
Lausanne (EPFL), Commissariat a l Energie Atomique et aux energies alternatives (CEA),
and Institute of Information and Communication Technologies (IICT). Under the terms of
the award, ONWARD receives EUR 1M. The project started 1 October 2022 and has an
end date of 30 September 2025, a duration of 36 months. ONWARD has received 75% as
prefinancing; an additional 15% (up to 90% of the total grant) is receivable 90 days after
the first periodic reporting, and the final payment is receivable 90 days after receiving the
second periodic reporting. See note below, EISMEA pending amendment.
EISMEA Pending Amendment
The Company was awarded two grants from the European Innovation Council and SMEs
Executive Agency (EISMEA), Project 101057450 — ReverseParalysis and Project 101070891
— NEMO BMI. Both projects work on the development, refinement, and clinical validation
of a brain-computer interface for reversing paralysis after SCI. During the application
process for both projects, the Company’s research and development activities were
primarily based at its headquarters in Eindhoven, the Netherlands, however, the Company
opened an office and shifted R&D activities to Lausanne, Switzerland to be closer to its
primary clinical partner, EPFL. The Company’s headquarters are in the Netherlands and
will continue to be responsible for the launch of products on the European market as legal
manufacturer, ensuring European patients across the European Union benefit from these
projects. Both projects were applied for and awarded to the Company. While there are
personnel in the Netherlands office working on both ReverseParalysis and NEMO-BMI,
certain R&D personnel are now located in Switzerland. The Company recognized grant
income, in terms of the accounting policy in the Financial Statements, assuming that
the effort and hours of Swiss employees could be leveraged under the definition of an
affiliated entity or a beneficiary. During the first yearly project review of ReverseParalysis,
the EISMEA project coordinators inquired about the location of personnel whose hours
were declared. As Switzerland is not in the European Union and no longer associated to
the European Horizon framework, ONWARD Medical SA cannot be added as a beneficiary
in the grant agreement and have funding dispersed by the EISMEA. An amendment to the
grant agreement is required to show what work and budget has been/will be transferred
from the Dutch entity to the Swiss entity. The EISMEA will only fund the work to be
performed in the Netherlands (EU). The grant amendment has been drafted and submitted
to EISMEA for review. The Company has started discussions with a Swiss State Agency
(SSA) regarding replacement funding. This SSA is an organization in Switzerland that
covers costs associated with work done by Swiss entities in innovation Horizon Europe. A
formal application with SSA can only be submitted, once the amendment with EISMEA has
been approved. For the year ended 31 December 2023, the Company updated the grant
income recognized to take into account this change in recognition in accordance with IAS
8.34 as required by IAS 20.32. This resulted in the reversal of grant income that is expected
(but not yet confirmed) to be taken over by SSA. An accrual for EUR 1,358k was also raised
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for the advance received, which the Company expects to repay to EISMEA following
approval of the amendment. The impact on grant income recognized for the year ended 31
December 2022 amounted to EUR 325k.
Eurostars Impulse
The Eurostars Independent Evaluation Panel has provided a subsidy for a total amount of
EUR 500k that started 1 December 2022 and ends 30 November 2025, a duration of 36
months. The Impulse project focuses on closed-loop control of blood pressure for people
with SCI.
ReWIRE
ONWARD has joined other global neuroscience and rehabilitation stakeholders to create
ReWIRE, a groundbreaking initiative aimed at equipping next-generation scientists with
the skills to develop therapeutic solutions for patients with paralysis caused by SCI.
ReWIRE will build on recent technological breakthroughs by leveraging multiple PhD
projects that will drive effective combinatorial treatments for SCI. The project is funded by
the European Research Executive Agency (REA) as part of the Marie Skłodowska-Curie
Actions (MSCA) Doctoral Networks for an amount of EUR 360k and started in 1 January
2023 and ends 31 December 2026.
SH-ARC
The Eurostars Independent Evaluation Panel has provided a subsidy for a total amount of
EUR 500k that started 1 April 2023 and ends 31 March 2026, a duration of 36 months. SH-
ARC works to integrate NUSHU sensorised shoes in a clinical-grade neuroprosthesis that
will utilize spinal cord stimulation to alleviate parkinsonian gait deficits.
2.2 Research & Development Expenses
Accounting Policy:
Research costs are expensed as incurred. Development expenditures on
an individual project are recognized as an intangible asset when the Group can demonstrate:
•
The technical feasibility of completing the intangible asset so that it will be available for
use or sale
•
Its intention to complete and its ability to use or sell the asset
•
How the asset will generate future economic benefits
•
The availability of resources to complete the asset
•
The ability to measure reliably the expenditure during development
•
The ability to use the intangible asset generated
Significant Estimate:
The Group has evaluated the nature of the project research and
development costs and concluded that all expenses incurred were related to research
and pre-development of future products. Therefore, all costs have been expensed and are
recognized in the statement of profit and loss.

| 2023 | 2022
Staff expenses | 9,200 | 8,385
Operating expenses | 4,641 | 4,753
| 13,841 | 13,138

The Company’s research and development expenses consist primarily of the cost of
external suppliers and third-party contractors involved in the design and development of
the ARC
EX
and ARC
IM
systems, as well as employee-related expenses including salaries
and benefits. The increase in 2023 is driven by advancements made on our ARC
EX
and
ARC
IM
platforms and preparing for FDA submission of ARC
EX
in the first half of 2024.
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2.3 Clinical & Regulatory Expenses

| 2023 | 2022
Staff expenses | 3,472 | 3,204
Operating expenses | 1,439 | 2,543
| 4,911 | 5,747

The Company’s clinical and regulatory expenses consist of the employee-related
expenses including salaries and benefits for employees working on clinical trials.
Clinical
expenses in 2023 primarily relate to the clinical proof-of-concept studies, HemonNL and
supporting the preparation of ARC
EX
for FDA submission.
2.4 Marketing & Market Access Expenses

| 2023 | 2022
Staff expenses | 1,830 | 949
Operating expenses | 1,113 | 1,002
| 2,943 | 1,951

The Company’s marketing and market access expenses include the investigating
activities on the future therapy reimbursement performed by third-party consultants
and attendance of key events to create awareness within the SCI community of our ARC
therapies and technology.
2.5 Patent fees & Related Expenses

| 2023 | 2022
Staff expenses | 373 | 400
Operating expenses | 1,136 | 1,149
| 1,509 | 1,549

The Company’s patent fees and related expenses include the cost for patent prosecution
applications, consulting fees for new innovative ideas, as well as annuity maintenance
fees and license fees for existing ideas, related employee expenses, including salary and
benefits in the area of business development.
2.6 Quality Assurance Expenses

| 2023 | 2022
Staff expenses | 1,204 | 1,045
Operating expenses | 260 | 183
| 1,464 | 1,228

Quality assurance expenses consist primarily of quality control and quality assurance
expenses. These expenses include employee expenses, including salary benefits for
personnel, consulting, testing, and travel expenses.
2.7 General & Administrative Expenses

| 2023 | 2022
Staff expenses | 5,419 | 4,299
Depreciation and amortization | 726 | 735
Other operating expenses | 5,182 | 5,529
| 11,327 | 10,563

The Company’s general and administrative expenses consist of employee expenses,
including salary and benefits for personnel and contractors in executive, finance,
accounting, tax, and human resources, as well as operating expenses relating to audit,
legal, and supply chain.
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2.8 Employee Benefit Expenses
Accounting Policy:
Short-Term Employee Benefits
Short-term employee benefits include salaries and social security contributions, social
taxes, paid vacation, and bonuses. They are recognized as expenses for the period in which
employees perform the corresponding services. Outstanding payments at the end of the
period are shown as other current liabilities.
Post-Employment Benefits
Group companies operate various pension schemes. The schemes are funded through
payments to insurance companies or trustee-administered funds, determined by periodic
actuarial calculations. The Group has both defined benefit and defined contribution plans.
Defined Contribution Plan
A defined contribution plan is a pension plan under which the Group pays fixed
contributions into a separate entity. The Group has no legal or constructive obligations
to pay further contributions if the fund does not hold sufficient assets to pay all benefits
to employees relating to employee services in the current and prior periods. For defined
contribution plans, the Group pays contributions to publicly or privately administered
pension insurance plans on a mandatory, contractual, or voluntary basis. The Group has no
further payment obligations once the contributions have been paid. The contributions are
recognized as personnel expenses in the consolidated income statement when due.
All related expenses are recognized in the consolidated statement of profit and loss.
Contributions payable or prepaid contributions as at year-end are recognized under
accruals and deferred income, and prepayments and accrued income, respectively.
Defined Benefit Plan
The Group operates a defined benefit pension plan in Switzerland, which requires
contributions to be made to a separately administered fund. The cost of providing benefits
under the defined benefit plan is determined using the projected unit credit method.
Remeasurements, comprising of actuarial gains and losses are recognized in the
statement of financial position with a corresponding debit or credit to retained earnings
through OCI in the period in which they occur. Remeasurements are not reclassified to
profit or loss in subsequent periods.
Past service costs are recognized in profit or loss on the earlier of:
•
The date of the plan amendment or curtailment, and
•
The date that the Group recognizes related restructuring costs
Net interest is calculated by applying the discount rate to the net defined benefit liability
or asset. The Group recognizes the changes in the net defined benefit obligation due to
service costs comprising current service costs, past-service costs, gains and losses on
curtailments and non-routine settlements as part of operating expenses, and the net
interest expense or income as part of net finance costs in the consolidated statement of
profit and loss.
Significant Estimate:
The cost of the defined benefit pension plan and the present value
of the pension obligation are determined using actuarial valuations. An actuarial valuation
involves making various assumptions that may differ from actual developments in the
future. These include the determination of the discount rate, future salary increases,
mortality rates, and future pension increases. Due to the complexities involved in the
valuation and its long-term nature, a defined benefit obligation is sensitive to changes in
these assumptions. All assumptions are reviewed at each reporting date.

| 2023 | 2022
Wages and salaries | 15,356 | 11,653
Social security costs | 1,512 | 1,275
Pension costs – defined benefit plan | 720 | 604
Pension costs – other | 69 | 82
Share-based benefit expenses | 2,564 | 1,691
Other labor costs | 1,277 | 2,977
| 21,498 | 18,282

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The increase in wages and salaries is driven by the composition of new hires versus leavers
and not full-time equivalents. This shift in expertise aligns with the Company’s strategic
goals. As at 31 December 2023, the Group employed 99.2 full-time equivalents, including
white-collar employees and contractors. The following table presents a breakdown of the
Company’s full-time equivalents as at 31 December 2023 and 2022:

| 2023 | 2022
Research & Development | 50.0 | 48.8
Clinical & Regulatory | 14.6 | 18.9
Marketing & Market Access | 5.0 | 3.8
Patent Fees & related | 1.0 | 1.0
Quality Assurance | 8.8 | 7.8
General & Administrative | 19.8 | 15.8
| 99.2 | 96.1

As at 31 December 2023, the Company had 11.9 full-time equivalents located in the
Netherlands (2022: 16.3), 75.3 full-time equivalents located in Switzerland (2022: 68.3), and
12 (2022: 11.5) full-time equivalents located in the United States.
2.9 Share-Based Payments
Accounting Policy:
Employees (including senior executives) of the Group receive
remuneration in the form of share-based payments, whereby employees render services as
consideration for equity instruments (equity-settled transactions).
Equity-Settled Transactions
The cost of equity-settled transactions is determined by the fair value at the date when the
grant is made using an appropriate valuation model.
That cost is recognized, together with a corresponding increase in other reserves in
equity, over the period in which the performance and/or service conditions are fulfilled
in employee benefits expense. The cumulative expense recognized for equity-settled
transactions at each reporting date until the vesting date reflects the extent to which
the vesting period has expired and the Group’s best estimate of the number of equity
instruments that will ultimately vest. The statement of profit or loss expense or credit
for a period represents the movement in cumulative expense recognized as at the
beginning and end of that period and is recognized in operating expenses.
No expense is recognized for awards that do not ultimately vest, except for equity-
settled transactions for which vesting is conditional upon a market or non-vesting
condition. These are treated as vesting irrespective of whether or not the market or
non-vesting condition is satisfied, provided that all other performance and/or service
conditions are satisfied.
When the terms of an equity-settled award are modified, the minimum expense
recognized is the expense had the terms not been modified, if the original terms of the
award are met. An additional expense is recognized for any modification that increases
the total fair value of the share-based payment transaction or is otherwise beneficial to
the employee as measured at the date of modification.
Significant Estimate:
The Group measures the cost of equity-settled transactions with
employees by reference to the fair value of the equity instruments at the date at which
they are granted. Estimating fair value for share-based payment transactions requires
determination of the most appropriate valuation model, which is dependent on the
terms and conditions of the grant.
Long-Term Incentive Plan (LTIP)
The LTIP plan is aimed at aligning the employee’s interest with the interests of the
Shareholders and to allow the employee to participate in the long-term growth of the
Company. The LTIP is an omnibus plan with the flexibility to issue different type of
equity incentives.
ONWARD awarded options over its Ordinary Shares to participants (referred to as
the “Award” or “Grant’) on the Grant Dates as specified in the table below. Each option
represents the right to receive one Ordinary Share of ONWARD against payment of the
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exercise price. The options expire 10 years after the Grant Date and become exercisable
on vesting. The Grant is subject to continued provision of services to the Company under
a graded vesting schedule, with 25% of the Grant vesting on the first anniversary of the
Grant Date, and the remaining 75% of the Grant vesting in equal, monthly tranches over the
three years following the first anniversary of the Grant Date (i.e, 2.083% per month). The
number of options that will vest and become unconditional is only subject to a continued
service condition. All options granted have the same conditions. Options do not settle
automatically and are exercised at the option of the participant.

|  |  | Number |  |  |
Financial | Grant | Type of | of Options | Exercise | Expiration | Fair
Year | Date | Security | Granted | Price | Date | Value
2021 | 15/12/2021 | Stock | 612,000 | EUR 7.41 | 15/12/2031 | EUR 4.89
|  | Options |  |  |  |
2022 | 1/4/2022 | Stock | 169,800 | EUR 7.64 | 1/4/2032 | EUR4.18
|  | Options |  |  |  |
2022 | 26/9/2022 | Stock | 166,350 | EUR 5.70 | 26/9/2032 | EUR 3.19
|  | Options |  |  |  |
2023 | 3/1/2023 | Stock | 978,050 | EUR 6.12 | 3/1/2033 | EUR 3.37
|  | Options |  |  |  |
2023 | 28/2/2023 | Stock | 132,000 | EUR 4.95 | 28/2/2033 | EUR 2.73
|  | Options |  |  |  |
2023 | 3/7/2023 | Stock | 308,175 | EUR 5.18 | 3/7/2033 | EUR 2.85
|  | Options |  |  |  |

This fair value per option has been applied to the options granted for the recognition of the
share-based payment expense recognized:

| 2023 | 2022
Share-based payment expense | 2,564 | 1,691
| 2,564 | 1,691

The table below summarizes the number and weighted average exercise prices (WAEP) of,
and movements in, share options during the year:

| 2023 | 2023 | 2022 | 2022
| Number | WAEP | Number | WAEP
Outstanding at 1 January | 873,125 | EUR 7.41 | 612,000 | EUR 9.70
Granted during the year | 1,418,225 | EUR 5.81 | 336,150 | EUR 6.68
Forfeited during the year | (462,700) | EUR 6.90 | (75,025) | EUR 9.40
Exercised during the year | – | – | – | –
Outstanding at 31 December | 1,828,650 | EUR 6.85 | 873,125 | EUR 7.41

| 2023 | 20223
| Number | WAEP
Exercisable at 31 December 2023 | 298,961 | EUR 9.10
Exercisable at 31 December 2022 | 143,089 | EUR 9.70

The weighted average remaining contractual life for the share options outstanding at 31
December 2023 was 8.79 years (2022: 9.2 years).
The weighted average fair value of options granted during the year was EUR 3.20 (2022:
EUR 3.69).
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The range of exercise prices for options outstanding at the end of the year was EUR 4.95 to
EUR 9.70 (2022: EUR 5.70 to EUR 9.70).
The fair value of the awarded options was determined by applying a Binomial Option
Pricing Model that allows for exercising of the option before the end of the option’s life.
As the options cannot be exercised between the Grant Date and the vesting date, the Hull-
White binomial formula, commonly used to value American options, was used. With the
Hull-White model the impact of a certain time-based event – such as a vesting period, or
an early exercise – can be taken into account.
Due to the different vesting dates for the different tranches in the option, we have
calculated the unique option values per tranche according to each vesting date. The total
option value per employee is then derived using a weighted average overall calculated
option value for each vesting date.
The following parameters were used in the option model for the calculation of the fair value
of the options as per each grant date:

| 2023–07 | 2023–02 | 2023–01 | 2022–09 | 2022–04
Fair value on date of |  |  |  |  |
measurement (EUR) | 2.85 | 2.73 | 3.37 | 3.19 | 4.18
Share price (EUR) | 5.18 | 4.97 | 6.12 | 5.70 | 7.64
Exercise price (EUR) | 5.18 | 4.95 | 6.12 | 5.70 | 7.64
Expected volatility | 56.10% | 57.20% | 57.80% | 59.30% | 59.20%
Term of the option | 4 a | 4 a | 4 a | 4 a | 4 a
Expected dividend | - | - | - | - | –
Risk-free interest rate | 2.44% | 2.65% | 2.38% | 2.1% | 0.55%
Time to expiration | 10 | 10 | 10 | 10 | 10

a: Vesting period is 1 – 4 years and depends on the vesting date of the specific tranche.
2.10 Income Tax
Accounting Policy:
Current Income Tax
Current income tax assets and liabilities for the current period are measured at the
amount expected to be recovered from or paid to the taxation authorities. The tax rates
and tax laws used to compute the amount are those that are enacted or substantively
enacted, at the reporting date in the countries where the Group operates and generates
taxable income.
Current income tax relating to items recognized directly in equity is recognized in equity
and not in the statement of profit or loss. Management periodically evaluates positions
taken in the tax returns with respect to situations in which applicable tax regulations are
subject to interpretation and establishes provisions where appropriate.
Deferred Tax
Deferred tax is provided using the liability method on temporary differences between
the tax basis of assets and liabilities and their carrying amounts for financial reporting
purposes at the reporting date.
Deferred tax liabilities are recognized for all taxable temporary differences, except:
•
When the deferred tax asset relating to the deductible temporary difference arises
from the initial recognition of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit
nor taxable profit or loss
•
In respect of deductible temporary differences associated with investments in
subsidiaries, associates and interests in joint ventures, deferred tax assets are
recognized only to the extent that it is probable that the temporary differences will
reverse in the foreseeable future and taxable profit will be available against which the
temporary differences can be utilized
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Deferred tax assets are recognized for all deductible temporary differences, the carry
forward of unused tax credits and any unused tax losses. Deferred tax assets are
recognized to the extent that it is probable that taxable profit will be available against
which the deductible temporary differences and the carry forward of unused tax credits
and unused tax losses can be utilized, except:
•
When the deferred tax asset relating to the deductible temporary difference arises
from the initial recognition of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit
nor taxable profit or loss.
•
In respect of deductible temporary differences associated with investments in
subsidiaries, associates and interests in joint ventures, deferred tax assets are
recognized only to the extent that it is probable that the temporary differences will
reverse in the foreseeable future and taxable profit will be available against which the
temporary differences can be utilized.
The carrying amount of deferred tax assets is reviewed at each reporting date and
reduced to the extent that it is no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred tax asset to be utilized. Unrecognized
deferred tax assets are reassessed at each reporting date and are recognized to the
extent that it has become probable that future taxable profits will allow the deferred tax
asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to
apply in the year when the asset is realized or the liability is settled, based on tax rates
(and tax laws) that have been enacted or substantively enacted at the reporting date.
Significant Estimate:
The Group has losses before tax which arose in the Netherlands
that are available to offset against future profits of the Dutch entity in which the loss
arose. However, these losses may not be used to offset taxable income elsewhere in the
Group. The Group evaluated and judged that at this moment it is not sufficiently likely that
future profits will be generated in the Dutch entity that can offset a deferred tax asset.
All Switzerland operations have a cost-plus agreement. The taxable amounts are settled.
There are no NOL
’s. Last fiscal year settled is 2021. Due to expected profits based on the
cost-plus the Swiss deferred tax assets relating to temporary differences have
been recognized.
NOL
’s in the US entity prior to 2018 can be carried forward for 20 years. NOL
’s after 2018
can be carried forward indefinitely, limited to 80% of taxable income. On the acquisition
of ONWARD Medical Inc. (formerly known as NeuroRecovery Technologies Inc) a deferred
tax liability was recognized for the intangible asset (in-process R&D) identified in the PPA.
In 2022, the Company, after reassessment, recognized a deferred tax asset of EUR 987k in
the US entity that offsets the deferred tax liability as allowed under IAS 12, with no impact
on previously reported results.

| 2023 | 2022
Current income tax | (148) | (185)
Deferred income tax | 41 | 951
Total corporate income tax in profit and loss | (107) | 766
Current income Tax charge at tax rate of 25.8% | 9,307 | 8,653
Tax rate differences in foreign jurisdictions | 152 | 208
Non-deductible expenses | (662) | (433)
Non-recognized deferred tax asset on temporary differences | 66 | (111)
Non-recognized deferred tax asset on permanent differences | (203) | –
Net operating losses not recognized | (8,709) | (8,527)
Recognition of prior year deferred tax adjustments | – | 976
Other | (58) | –
| (107) | 766

The effective tax rate was -0.3% in 2023 (2022: 2.3%), which is lower than the statutory
income tax rate of 25.8% (2022: 25.8%) in the Netherlands. The difference is primarily due
to the net operating losses and temporary differences for which no deferred tax asset
can be recognized. The uncertainty is based on insufficient evidence of future sources of
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income to support the realization of a deferred tax asset due to the Company being loss-
making with limited tax planning opportunities.
Recognized Deferred Tax Assets & Liabilities

2023 | Assets | Liabilities | Net
Intangible assets, including Goodwill | – | (1,639) | (1,639)
Right of use assets | – | (209) | (209)
Lease liability | 228 | – | 228
Post-employment benefits | 291 |  | 291
Losses available for offset against future | 1,008 | – | 1,008
Taxable income |  |  |
Set-off of deferred tax | (1,217) | 1,217 | –
Net deferred tax liability | 310 | (631) | (321)
2022 | Assets | Liabilities | Net
Intangible assets, including Goodwill | – | (1,656) | (1,656)
Right of use assets | – | (235) | (235)
Lease liability | 240 | – | 240
Post-employment benefits | 157 |  | 157
Losses available for offset against future | 987 | – | 987
T axable income |  |  |
Set-off of deferred tax | (1,221) | 1,221 | –
Net deferred tax liability | 163 | (670) | (507)
|  | 2023 | 2022
Opening balance at 1 January |  | (507) | (1,991)
Recognized in profit & loss |  | 41 | 951
Remeasurement (gain)/loss on actuarial gains and losses in OCI |  | 125 | (59)
Foreign currency translation difference |  | 20 | 26
Addition |  | – | –
Reclassification |  | – | 566
Net deferred tax liability at 31 December |  | (321) | (507)

Of the estimated amount of tax losses carried forward and available as at 31 December
2023, a deferred tax asset of EUR 1,007k has been recognized to offset the reversal
of temporary differences in the US. For the remaining unused operating losses in the
Netherlands of EUR 120M (2022: EUR 91M) and in the US of EUR 28.5M (2022: EUR 16M)
no deferred tax is recognized. These losses can be carried forward indefinitely subject to
local tax rules, except for approximately EUR 3.1M of losses in the US, which can be carried
forward for 20 years (ultimately by 2037).
The Company offsets tax assets and liabilities if it has a legally enforceable right to set off
current tax assets and current tax liabilities, and the deferred tax assets and deferred tax
liabilities relate to income taxes levied by the same tax authority.
The deferred tax liability initially arose on the acquisition of NRT Inc (subsequently
renamed to ONWARD Medical Inc.).
3. Non-Current Asset & Working Capital
3.0 Intangible Assets

| 2023 | 2022
Goodwill | 1,845 | 1,902
In-Process R&D | 5,698 | 5,873
License fees | 2,261 | 2,383
Net book value at 31 December | 9,804 | 10,158

Goodwill
Accounting Policy:
Goodwill is initially measured at cost, being the excess of the
aggregate of the consideration transferred and the amount recognized for non-controlling
interests, and any previous interest held, over the net identifiable assets acquired and
liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate
consideration transferred, the Group reassesses whether it has correctly identified all of
the assets acquired and all of the liabilities assumed, and reviews the procedures used
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to measure the amounts to be recognized at the acquisition date. If the reassessment
still results in an excess of the fair value of net assets acquired over the aggregate
consideration transferred, then the gain is recognized in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment
losses. For the purpose of impairment testing, goodwill acquired in a business combination
is, from the acquisition date, allocated to each of the Group’s cash-generating units that
are expected to benefit from the combination, irrespective of whether other assets or
liabilities of the acquiree are assigned to those units.
Where goodwill has been allocated to a cash-generating unit and part of the operation
within that unit is disposed of, the goodwill associated with the disposed operation is
included in the carrying amount of the operation when determining the gain or loss on
disposal. Goodwill disposed in these circumstances is measured based on the relative
values of the disposed operation and the portion of the cash-generating unit retained.

| 2023 | 2022
Cost | 1,902 | 1,702
Accumulated changes | – | –
Net book value at 1 January | 1,902 | 1,702
Additions | – | –
Foreign currency translation difference | (57) | 200
Impairments | – | –
Net change | (57) | 200
Cost | 1,845 | 1,902
Accumulated changes | – | –
Net book value at 31 December | 1,845 | 1,902

In-Process R&D
Accounting Policy:
The cost of in-process R&D acquired in a business combination is the
fair value at the date of acquisition.
Following initial recognition of the development expenditure as an asset, the asset
is carried at cost less any accumulated amortization and accumulated impairment
losses. Amortization of the asset begins when development is complete and the asset is
available for use. It is amortized over the period of expected future benefit. Amortization is
recorded in operating expenses. During the period of development, the asset is tested for
impairment annually.

| 2023 | 2022
Cost | 6,025 | 6,261
Accumulated changes | (152) | (152)
Net book value at 1 January | 5,873 | 6,109
Foreign currency translation difference | (175) | 334
Additions | – | –
Reclassification | – | (570)
Amortization for the year | – | –
Impairments | – | –
Net change | (175) | (236)
Cost | 5,850 | 6,025
Accumulated changes | (152) | (152)
Net book value at 31 December | 5,698 | 5,873

License Fees
Accounting Policy:
License fees for the exclusive right to certain patents, critical in
the development of the ARC Therapies, are capitalized and measured at cost on initial
recognition. Following initial recognition of the license fees as an asset, the asset is
carried at cost less any accumulated amortization and accumulated impairment losses.
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Amortization of the asset begins when development of the ARC Therapies (ONWARD R&D)
is complete, and the asset is available for use. It is amortized over the period of expected
future benefit. Amortization is recorded in operating expenses. During the period of
development, the asset is tested for impairment annually.

| 2023 | 2022
Cost | 2,383 | 2,218
Accumulated changes | – | –
Net book value at 1 January | 2,383 | 2,218
Additions | – | 31
Foreign currency translation difference | (72) | 134
Reversals | (50) | –
Amortization for the year | – | –
Impairments | – | –
Net change | (122) | 165
Cost | 2,261 | 2,383
Accumulated changes | – | –
Net book value at 31 December | 2,261 | 2,383

In 2023, the Company reassessed the capitalization of the annual license fee component
and reversed amounts previously capitalized (EUR 50k) to profit and loss.
Impairment Assessment
The in-process R&D was acquired through the acquisition of GTX Medical SA (now
ONWARD Medical SA) and the business combination with NRT Inc. (now ONWARD Medical
Inc.). The value of the in-process R&D is contingent on the success of the FDA approval
of the NRT product. In terms of the NRT acquisition agreement, ONWARD also received
and assumed responsibility for the exclusive license agreements with the Regents of the
University of California (“UCLA”) and the California Institute of Technology (“Caltech”). In
terms of these agreements, the occurrence of the IPO triggered the change in ownership
clauses and resulted in additional payments to be made. These payments, as well as the
annual license fee payments, are recognized as a separate class of intangible assets.
As per the accounting policies above goodwill, in-process R&D and license fees are tested
for impairment annually. ONWARD performed its annual impairment test at year-end
(consistent with the prior year) based on the most recent budgets and forecast calculations.
Significant Estimates:
Key assumptions used in the impairment test was the growth rate
and the rate for discounting the projected cash flows.
•
Cash flows are based on the expectation of receiving FDA approval. Revenue is only
expected to occur towards the end of 2024. This is a one-year delay from previous
expectations because of delayed submission of the Company’s first De Novo product
application for clearance to the FDA. Upon FDA clearance, sales will start in the US
focusing on patients with Veterans Affairs (VA) coverage,
and home use will follow .
CE marking is expected in 2025, after which,
sales in Europe will follow. Operating
costs will increase to support sales and marketing efforts, as well as to maintain
ongoing development and clinical research, including the next pivotal trial. Based on
management’s estimate, EBITDA is not expected to be positive prior to 2027.
•
Cash generating unit: As stated in the Annual Report, ONWARD has developed two
targeted, programmable neurostimulation platforms: an implantable system, ARCIM,
and a non-invasive, transcutaneous system, ARCEX. Both systems contain the same
basic elements: an electrical impulse generator, electrodes placed in proximity to
the
spinal cord, and a programmer that enables clinicians to set stimulation therapy
parameters and allows users to control their therapy within those parameters. The
two ARC Therapy platforms share common components and have a similar user
interface. This optimizes the use of development resources while providing users
with
a consistent, easy-to-use experience. Based on the aforementioned, in the pre-
commercial phase the Company is viewed as one cash generating unit.
•
Growth rate estimate: Rate is based on published industry research.
•
Discount rate: Discount rates represent the current market assessment of the
risks specific to ONWARD. The discount rate calculation is based on the specific
circumstances of the Group and is derived from its weighted average cost of capital
(WACC). The WACC measures the expected returns required by both debt and equity
investors of a company, weighted by their respective contributions of capital.
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The cash flow projections were determined using management’s internal forecasts that
cover an initial period from 2024 to 2031, after which a terminal value was calculated.
Using projected cash flows covering a period of more than five years is not considered
unusual for pre-commercial lifescience companies. Due to long development timelines
and regulatory approval requirements, it is not atypical for Companies in the industry to
use a period that extends beyond five years. The values assigned to the key assumptions
represent management’s assessment of future expectations. ONWARD performed a
sensitivity analysis and noted that a reasonable change in either the discount rate (to
20%) or terminal growth rate (to 0%), or both the discount rate (to 20%) and terminal
growth rate (to 0%), would not cause the carrying amount to exceed its recoverable
amount. As shown by recent history, should the expected revenues move out by another
year, this would not cause the carrying amount to exceed its recoverable amount.

| 2023 | 2022
Discount rate | 13.4% | 14.3%
Terminal value growth rate | 1.70% | 1.70%

3.1 Property, Plant & Equipment
Accounting Policy:
Property, plant, and equipment is stated at cost, net of accumulated
depreciation and accumulated impairment losses, if any. Such costs include the cost
of replacing part of the property, plant, and equipment and borrowing costs for long-
term construction projects if the recognition criteria are met. When significant parts of
property, plant
,
and equipment are required to be replaced at intervals, the Group
recognizes such parts as individual assets with specific useful lives and depreciates
them accordingly. Likewise, when a major inspection is performed, its cost is recognized
in the carrying amount of the plant and equipment as a replacement if the recognition
criteria are satisfied. All other repair and maintenance costs are recognized in profit or
loss as incurred.
Property, plant, and equipment transferred from customers is initially measured at the
fair value at the date on which control is obtained.
Depreciation is calculated on a straight-line basis over the estimated useful lives of the
assets as follows:

• | Office equipment – 3 years
• | Leasehold improvements – 5 years

The useful life of leasehold improvements is the same or less than the lease term.
An item of property, plant, and equipment and any significant part initially recognized is
derecognized upon disposal or when no future economic benefits are expected from its
use or disposal. Any gain or loss arising from derecognition of the asset (calculated as
the difference between the net disposal proceeds and the carrying amount of the asset)
is included in the income statement when the asset is derecognized.
The residual values, useful lives, and methods of depreciation of property, plant, and
equipment are reviewed at each financial year end and adjusted prospectively, if
appropriate.
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Notes to the Consolidated Financial Statements
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Cost

| Office | Leasehold |
| Equipment | Improvements | Total
At 1 January 2022 | 802 | – | 802
Additions | 121 | 265 | 386
At 31 December 2022 | 923 | 265 | 1,188
Additions | 352 | 70 | 422
Disposals | – | – | –
At 31 December 2023 | 1,275 | 335 | 1,610

Depreciation

| Office | Leasehold |
| Equipment | Improvements | Total
At 1 January 2022 | (612) | – | (612)
Depreciation for the year | (135) | (26) | (161)
At 31 December 2022 | (747) | (26) | (773)
Depreciation for the year | (141) | (87) | (228)
At 31 December 2023 | (888) | (113) | (1001)

Net Book Value

| Office | Leasehold |
| Equipment | Improvements | Total
At 31 December 2022 | 176 | 239 | 415
At 31 December 2023 | 387 | 222 | 609

3.2 Right of Use Assets & Lease Liabilities
Accounting Policy:
The Group assesses at contract inception whether a contract is, or
contains, a lease. That is, if the contract conveys the right to control the use of an identified
asset for a period of time in exchange for consideration.
Group as a Lessee
The Group applies a single recognition and measurement approach for all leases, except
for short-term leases and leases of low-value assets. The Group recognizes lease liabilities
to make lease payments and right-of-use assets representing the right to use the
underlying assets.
Right-of-Use Assets
The Group recognizes right-of-use assets at the commencement date of the lease (i.e., the
date the underlying asset is available for use). Right-of-use assets are measured at cost,
less any accumulated depreciation and accumulated impairment losses, and adjusted for
any remeasurement of lease liabilities. The cost of right-of-use assets includes the initial
measurement amount of lease liabilities recognized, initial direct costs incurred, and lease
payments made at or before the commencement date, less any lease incentives received.
Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease
term and the estimated useful lives of the assets.
If ownership of the leased asset transfers to the Group at the end of the lease term or
the cost reflects the exercise of a purchase option, depreciation is calculated using the
estimated useful life of the asset.
Lease Liabilities
At the commencement date of the lease, the Group recognizes lease liabilities measured
at the present value of lease payments to be made over the lease term. The lease
payments include fixed payments (including in-substance fixed payments) less any lease
incentives receivable, variable lease payments that depend on an index or a rate, and
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amounts expected to be paid under residual value guarantees. The lease payments also
include the exercise price of a purchase option reasonably certain to be exercised by the
Group and payments of penalties for terminating the lease, if the lease term reflects the
Group exercising the option to terminate.
Variable lease payments that do not depend on an index or a rate are recognized as
expenses (unless they are incurred to produce inventories) in the period in which the event
or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses its incremental
borrowing rate at the lease commencement date because the interest rate implicit in
the lease is not readily determinable. After the commencement date, the amount of
lease liabilities is increased to reflect the accretion of interest and reduced for the lease
payments made. In addition, the carrying amount of lease liabilities is remeasured if there
is a modification, a change in the lease term, a change in the lease payments (e.g., changes
to future payments resulting from a change in an index or rate used to determine such
lease payments), or a change in the assessment of an option to purchase the underlying
asset. The Group’s lease liabilities are included in lease liabilities.
Short-Term Leases & Leases of Low-Value Assets
The Group applies the short-term lease recognition exemption to its short-term leases
of office space (i.e., those leases that have a lease term of 12 months or less from the
commencement date and do not contain a purchase option). It also applies the lease of
low-value assets recognition exemption to leases of office equipment that are considered
to be low value. Lease payments on short-term leases and leases of low-value assets are
recognized as expense on a straight-line basis over the lease term.
Right-of-Use Assets
The Group entered into a five-year lease for offices in Lausanne, Switzerland in November
2021. This lease is classified as a right-of-use asset. The office lease in Eindhoven, in the
Netherlands, ended in October 2023 and was classified as a short-term office lease. In
November 2023, a new lease was entered into for the Eindhoven office for one year.
Key movements relating to right-of-use assets are presented below:

| 2023 | 2022
Net book value at 1 January | 1,681 | 2,190
Additions | 299 | 90
Depreciation for the year | (497) | (575)
Onerous lease contract | – | (24)
Net book value at 31 December | 1,483 | 1,681

The office buildings are leased for office space. The lease in Lausanne includes an
extension option exercisable up to one year before the end of the non-cancellable lease
term.
The lease in Eindhoven includes an extension option for an additional one year; the
extension was included in the calculation of the right-of-use asset recognized over a full
period of two years.
Lease Liabilities
The maturity of the lease liability in relation to the office building is as follows:

| 2023 | 2022
Less than one year | 568 | 427
One to five years | 1,051 | 1,294
More than five years | – | –
Total lease liability | 1,619 | 1,721

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Movement of the Lease Liability

| 2023 | 2022
Balance as at 1 January | 1,721 | 2,214
Additions | 299 | 90
Onerous lease contract | - | (26)
Interest accretion | 69 | 84
Repayments | (548) | (641)
Foreign currency impact | 78 | –
Total lease liability | 1,619 | 1,721

The incremental borrowing rate applied is 4% for the Lausanne office and is 7.4% for the
Eindhoven office.
On 1 November 2022, the Group entered into a short-term office lease for 12 months for
which the Group elected not to recognize a right-of-use asset and lease liability. Amount
recognized in relation to this short-term lease amounted to EUR 8.8k.
For the maturity analysis of the undiscounted cash flows, refer to note 4.3.
3.3 Indirect Tax Receivables
The tax receivables consist of refundable VAT and are collectable within 12 months. The
decrease in the receivable is a direct result of quarterly filing of VAT returns and claims
received throughout the year.
3.4 Other Current Assets

| 2023 | 2022
Advance payments | 936 | 905
Grants and other receivables | 260 | 266
Rental guarantee | 305 | 285
| 1,501 | 1,456

The Group provided a guarantee of EUR 305k (2022: EUR 285k) to fulfill collateral
requirements relating to the Lausanne office rental agreement. This guarantee places no
restriction on the cash position and is payable on demand if the Company fails to meet its
commitments. Advance payments mostly relate to prepaid D&O insurance for which the
premium decreased in 2023.
3.5 Cash and Cash Equivalents and Fixed Term Deposits
Accounting Policy:
Cash and short-term deposits in the statement of financial position
comprise cash at banks and on hand, and short-term deposits with a maturity of three
months or less, that are readily convertible to a known amount of cash and subject to an
insignificant risk of change in value.
For the purpose of the consolidated statement of cash flows, cash and cash equivalents
consist of cash and short-term deposits as defined above, net of outstanding bank
overdrafts, as they are considered an integral part of the Group’s cash management.

| 2023 | 2022
Cash at bank | 3,568 | 21,760
Short-term deposits | 26,200 | 20,000
Cash and cash equivalents | 29,768 | 41,760
Fixed term deposits | – | 20,000
| – | 20,000
Cash and cash equivalents and fixed term deposits | 29,768 | 61,760

Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-
term deposits are made for varying periods of between one day and three months,
depending on the immediate cash requirements of the Group, and earn interest at the
respective short-term deposit rates.
Fixed term deposits represent deposits made for varying periods exceeding three months
but less than 12 months from inception.
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At 31 December
2023, the Group had no bank overdrafts. All cash is freely at the disposal
of the company.
3.6 Trade Payables
Trade payables and accrued expenses are non-interest bearing and are normally
settled on 30-90 day terms. The decrease is a direct result of delay in ARC
EX
and the
timing of settlement.
3.7 Other Payables
The other payables can be broken down as follows:

| 2023 | 2022
Wage tax and social security | 485 | 466
Grants received in advance | 473 | 1,328
Bonus | 1,243 | 1,856
Invoices to be received | 538 | 732
Other | 425 | 1,284
Grant-related payable | 1,358 | –
| 4,522 | 5,666

The decrease in Other Payables is due to decrease in the bonus accrual and amounts
that were due to subcontractors (on grants) paid in early 2023. An accrual was raised in
response to the pending grant amendment with EISMEA, refer to Note 2.1 EISMA, and is the
estimated amount the Company may be required to repay for grant amounts received in
advance in 2022.
4. Financing, Financial Risk Management & Financial Instruments
4.0 Issued Capital & Reserves
Share Capital & Share Premium
Accounting Policy:
Ordinary Shares are classified as
share capital
. Equity instruments
are recorded at the proceeds received, net of direct issue costs.
The share premium represents the amount by which the fair value of the consideration
received exceeds the nominal value of shares issued. Incremental costs directly
attributable to the issue of new shares or options are shown in equity as a deduction, net of
tax, from the proceeds.
The authorized share capital (“maatschappelijk kapitaal”) amounts to EUR 12,225,000
divided into 50,937,500 Ordinary Shares and 50,937,500 Preferred Shares with a nominal
value of EUR 0.12 each.
At 31 December 2023, 30,184,388 Ordinary Shares were issued (31 December 2022:
30,184,388 shares). All of the issued Ordinary Shares are fully paid-up and represent
capital in the Company. No shareholders have any voting rights different from any other
shareholder.
Other Reserves

| Currency | Stock |
| Translation | Compensation | Total Other
| Differences | Reserve | Reserves
Balance at 1 January 2022 | (283) | 69 | (214)
Share-based payment expense: LTIP | – | 1,691 | 1,691
Currency translation differences | 602 | – | 602
Balance at 31 December 2022 | 319 | 1,760 | 2,079
Share-based payment expense: LTIP | – | 2,564 | 2,564
Currency translation differences | (155) | – | (155)
Balance at 31 December 2023 | 164 | 4,324 | 4,488

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279
Currency Translation Reserve
Exchange gains and losses arising from the translation of the functional currency of
foreign operations to the reporting currency of the parent are accounted for in this legal
reserve. In the case of the sale of a participating interest, the associated accumulated
translation differences are transferred to the profit and loss account and presented therein
as part of the result on the sale.
The foreign currency translation reserve relates to the investment in United States.
Stock Compensation Reserve
The stock compensation reserve is used to recognize the value of equity-settled share-
based payments provided to employees, including key management personnel, as part of
their remuneration.
4.1 Earnings Per Share (EPS)
Accounting Policy:
Basic EPS is calculated by dividing the profit for the year attributable
to ordinary equity holders of the parent by the weighted average number of Ordinary
shares outstanding during the year.
Diluted EPS is calculated by dividing the profit attributable to ordinary equity holders
of the parent (after adjusting for interest on the convertible Preference shares) by the
weighted average number of Ordinary shares outstanding during the year plus the
weighted average number of Ordinary shares that would be issued on conversion of all the
dilutive potential Ordinary shares into Ordinary shares.
The objective of determining diluted EPS is to reflect the maximum possible dilutive
effect arising from potential Ordinary shares outstanding during the period. The Group is
currently loss-making and there are currently no anti-dilutive potential Ordinary shares to
be considered. Therefore, diluted EPS is disregarded for 2023. The share options granted
under the LTIP (refer to Note 2.9) could have a potential dilutive effect in the future, but had
no impact in 2023.
There have been no other transactions involving Ordinary shares or potential Ordinary shares
between the reporting date and the date of authorization of these financial statements.
The following tables reflect the income and share data used in the EPS calculation:
Profit (Loss) Attributable to Ordinary Shareholders

| 2023 | 2022
Profit (loss) for the year, attributable to equity holders of the parent | (36,181) | (32,772)
Weighted-Average Number of Ordinary Shares |  |
| 2023 | 2022
| Thousands | Thousands
Weighted average number of ordinary shares for basic EPS | 30,184 | 30,184

4.2 Financial Liabilities
Accounting Policy:
Financial Instruments – Initial Recognition & Subsequent Measurement
A financial instrument is any contract that gives rise to a financial asset of one entity and
a financial liability or equity instrument of another entity. Financial assets and financial
liabilities are initially recognized when the Company becomes a party to the contractual
provisions of the instrument.
Financial Liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value
through profit or loss, loans and borrowings, payables, or as derivatives designated as
hedging instruments in an effective hedge, as appropriate. A financial liability is classified
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as FVPL if it is classified as held-for-trading, it is a derivative or it is designated as such
on initial recognition. Financial liabilities at FVPL are measured at fair value and net gains
and losses, including any interest expense, are recognized in profit or loss. Other financial
liabilities are subsequently measured at amortized cost using the effective interest
method. Interest expense and foreign exchange gains and losses are recognized in profit or
loss. Any gain or loss on derecognition is also recognized in profit or loss
All financial liabilities are recognized initially at fair value and, in the case of liabilities at
amortized cost , net of directly attributable transaction costs.
The Group’s financial liabilities include trade payables, other payables, loans, and borrowings.
For purposes of subsequent measurement, financial liabilities are classified in two categories:
•
Financial liabilities at fair value through profit and loss
•
Financial liabilities at amortized cost
Financial liabilities at fair value through profit or loss (FVPL
)
Financial liabilities at fair value through profit or loss include financial liabilities held for
trading and financial liabilities designated upon initial recognition as at fair value through
profit or loss.
Financial liabilities are classified as held for trading if they are incurred for the purpose of
repurchasing in the near term. This category also includes derivative financial instruments
entered into by the Group that are not designated as hedging instruments in hedge
relationships as defined by IFRS 9. Separated embedded derivatives are also classified as
held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognized in the statement of profit or loss.
Financial liabilities designated upon initial recognition at fair value through profit or
loss are designated at the initial date of recognition, and only if the criteria in IFRS 9 are
satisfied. The Group has not designated any financial liability as at fair value through profit
or loss.
Financial Liabilities at Amortized Cost
This is the category most relevant to the Group. After initial recognition, interest-bearing
loans and borrowings are subsequently measured at amortized cost using the effective
interest rate (“EIR”) method. Gains and losses are recognized in the profit or loss when the
liabilities are derecognized, as well as through the EIR amortization process.
Amortized cost is calculated by taking into account any discount or premium on
acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is
included as finance costs in the statement of profit or loss.
Derecognition
A financial liability is derecognized when the obligation under the liability is discharged
or cancelled or expires. When an existing financial liability is replaced by another from
the same lender on substantially different terms, or the terms of an existing liability are
substantially modified, such an exchange or modification is treated as the derecognition
of the original liability and the recognition of a new liability at fair value. The difference in
the respective carrying amounts is recognized in the statement of profit or loss.
Offsetting of Financial Instruments
Financial assets and financial liabilities are offset and the net amount is reported in the
consolidated statement of financial position if there is a currently enforceable legal right to
offset the recognized amounts and there is an intention to settle on a net basis, to realize
the assets and settle the liabilities simultaneously. No offsetting is currently applied.

| 2023 | 2022
Balance as at 31 December | 15,255 | 12,565

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283

| Innovation Loan
Balance as per 1 January 2022 | 11,451
Loan amount received | –
Interest/cumulative dividend accrued during the year | 1,205
Balance as per 31 December 2022 | 12,656
Loan amount received | 1,292
Interest accrued during the year | 1,307
Balance as per 31 December 2023 | 15,255

Innovation Loan
On 5 February 2016, the Group was granted a loan from RVO NL (Dutch Government) of
EUR 10M payable according to a set payment scheme. The loan is advanced in installments
based on progress. In 2023, two installments were received amounting to EUR 1.3M.
The loan carries interest at 10% per annum and is accrued on a yearly basis.
The current redemption plan for the loan is as presented below:

Date | % of Loan Amount
1 January 2026 | 15.0
1 April 2026 | 15.0
1 July 2026 | 17.5
1 October 2026 | 17.5
1 January 2027 | 17.5
1 April 2027 | 17.5
1 July 2027 | All due interest

Certain Intellectual Property (patents registered), have been pledged to the RVO NL in
case of default of repayment of the loan. These patents have not been capitalized as at 31
December 2023.
4.3 Financial Risk Management Objectives & Policies
The Group’s principal financial liabilities comprise of loans and borrowings and trade and
other payables. The main purpose of these financial liabilities is to finance the Group’s
operations and to provide guarantees to support its operations.
The Group is responsible for implementing and evaluating policies which govern the funding,
investments, and any use of derivative financial instruments. The Group is exposed to
various risks. The Group monitors risk exposure on an ongoing basis, as summarized below:
Capital Management
Capital includes issued capital, share premium, and all other equity reserves attributable to
the equity holders of the parent. The primary objective of the Group’s capital management
is to continue as a going concern while maximizing shareholder value. The Group manages
its capital structure and will consider adjustments in light of changes in economic
conditions. To maintain or adjust the capital structure, the Group may issue new shares.
Liquidity Risk
The Group manages liquidity risk by continuously monitoring forecast and actual cash
flows. The Group’s objective is to maintain a balance between continuity of funding
and flexibility through the use of subsidies and grants, and sufficient progress towards
regulatory approval, which is related to future financing rounds.
Cash is invested in low-risk investments such as short-term bank deposits or savings
accounts. The Group mainly makes use of liquid investment in current accounts (in Euros)
or short-term deposit accounts. The ability of the Group to maintain adequate cash
reserves to support its activities in the medium term is highly dependent on the Group’s
ability to raise additional funds.
The following table details the undiscounted remaining contractual maturity for the
Group’s financial liabilities with agreed repayment periods, including both interest and
principal cash flows:
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As at 31 December 2023:

| Less than |  |  | More than |
| 1 Year | 1-3 Years | 3-5 Years | 5 Years | Total
Innovation loan | – | 6,500 | 14,295 | – | 20,795
Lease liability | 615 | 1,084 | – | – | 1,699
Trade payables | 1,369 | – | – | – | 1,369
Total | 1,984 | 7,584 | 14,295 | – | 23,863

As at 31 December 2022:

| Less than |  |  | More than |
| 1 Year | 1-3 Years | 3-5 Years | 5 Years | Total
Innovation loan | – | – | 19,298 | – | 19,298
Lease liability | 512 | 1,452 | – | – | 1,964
Trade payables | 1,909 | – | – | – | 1,909
Total | 2,421 | 1,452 | 19,298 | – | 23,171

Market Risk
Market risk is the risk that the fair value of future cash flows of a financial instrument
will fluctuate because of changes in market prices. The Group’s activities may expose it to
changes in foreign currency exchange rates and interest rates. The Group is not
exposed to any equity price risk or commodity price risk, as it does not invest in these
classes of investments.
Credit Risk
Because of the absence of sales to third parties and therefore trade receivables, credit
risk arises mainly from cash and cash equivalents and deposits with banks and financial
institutions. The Group only works with international reputable commercial banks and
financial institutions when investing surplus funds. Short-and fixed-term deposits are
subject to approval in line with internal policy. The Group holds accounts with ING, Belfius,
UBS, First American Bank, Deutsche Bank and Banque Cantonale Vaudoise (BCV). The
number of banks and financial institutions is to minimize concentration risk and therefore
mitigate financial loss through a counterparty’s potential failure to make payments.
Currency Risk
Currency risk is the risk that reported financial performance, or the fair value or future
cash flows of a financial instrument, will fluctuate because of changes in foreign exchange
rates. The Group is exposed to currency risk for the activities mainly in the US, as the
accounting is performed in US dollars, whereas the functional currency of the Group is
the euro. The risk is currently managed by replenishing the US bank account at regular
intervals to account for both the positive and negative changes.
4.4 Fair Value & Fair Value Hierarchy of the Financial Statements
Accounting Policy:
All assets and liabilities for which fair value is measured or disclosed
in the financial statements are categorized within the fair value hierarchy, described as
follows, based on the lowest level input that is significant to the fair value measurement as
a whole:
•
Level 1 — Quoted (unadjusted) market prices in active markets for identical assets
or liabilities
•
Level 2 — Valuation techniques for which the lowest level input that is significant to the
fair value measurement is directly or indirectly observable
•
Level 3 — Valuation techniques for which the lowest level input that is significant to the
fair value measurement is unobservable
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The carrying amounts and fair values of the Group’s financial instruments are as follows,
including its fair value hierarchy:

| Carrying | Estimated
2023 |  |
| Amount | Fair Value
Financial liabilities |  |
Innovation credit loan (Level 2) | 15,255 | 15,460
Total financial liabilities | 15,255 | 15,460
| Carrying | Estimated
2022 |  |
| Amount | Fair Value
Financial liabilities |  |
Innovation credit loan (Level 2) | 12,656 | 13,689
Total financial liabilities | 12,656 | 13,689

Management has assessed that the fair values of cash and cash equivalents, accounts
payable, taxes and social securities and other payables approximate to their carrying
amounts largely due to the short-term maturities of these instruments.
The fair values of the financial assets and liabilities are included at the amount at which the
instrument could be exchanged in a current transaction between willing parties, other than in
a forced or liquidation sale. The following methods and assumptions were used to estimate
the fair values:
The fair value of Innovation credit loan and due interest have been calculated by discounting
the expected future cash flows using rates currently available for instruments with similar
terms, credit risk and remaining maturities.
During the period, there were no transfers of fair value measurements between Level 1 and
Level 2 and no transfers into or out of Level 3 for both financial assets and financial liabilities.
4.5 Financial Income & Expense
Accounting Policy:
Interest income is recognized by applying the effective interest rate,
except for short-term receivables when the effect of discounting is immaterial. The
Company’s financial assets include cash and cash equivalents and other long term and
current receivables.
Borrowing costs directly attributable to the acquisition, construction, or production of
an asset that necessarily takes a substantial period of time to get ready for its intended
use or sale are capitalized as part of the cost of the asset. All other borrowing costs are
expensed in the period in which they occur. Borrowing costs consist of interest and other
costs that an entity incurs in connection with the borrowing of funds.

| 2023 | 2022
Interest income from deposits | 972 | 62
Interest on loans | (1,307) | (1,205)
Interest post-employment benefits | – | –
Interest banks | – | (226)
Interest on lease liabilities | (69) | (84)
Exchange losses | (190) | (24)
Bank charges | (17) | (33)
Net Finance expense | (611) | (1,510)

5. Other Disclosures
5.0 Post-Employment Benefits: Defined Benefit Obligation
Accounting Policy:
Group companies operate various pension schemes. The schemes
are funded through payments to insurance companies or trustee-administered funds,
determined by periodic actuarial calculations. The Group has both defined benefit and
defined contribution plans.
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Defined Benefit Plan
The Group operates a defined benefit pension plan in Switzerland, which requires
contributions to be made to a separately administered fund. The cost of providing benefits
under the defined benefit plan is determined using the projected unit credit method.
Remeasurements, comprising of actuarial gains and losses, are recognized in the
statement of financial position with a corresponding debit or credit to retained earnings
through OCI in the period in which they occur. Remeasurements are not reclassified to
profit or loss in subsequent periods.
Past service costs are recognized in profit or loss on the earlier of:
•
The date of the plan amendment or curtailment, and
•
The date that the Group recognizes related restructuring costs
Net interest is calculated by applying the discount rate to the net defined benefit liability
or asset. The Group recognizes the changes in the net defined benefit obligation due to
service costs comprising current service costs, past-service costs, gains and losses on
curtailments and non-routine settlements as part of operating expenses, and the net
interest expense or income as part of net finance costs in the consolidated statement of
profit and loss.

| 2023 | 2022
Plan assets | 4,289 | 3,879
Obligation | (6,370) | (5,001)
Net liability | 2,081 | 1,121

A defined benefit plan is a pension plan that is not a defined contribution plan. Typically,
defined benefit plans specify an amount of pension benefit that an employee will receive
upon retirement, typically dependent on one or more factors such as age, years of service,
and compensation. The benefits paid to employees in Switzerland qualify as a defined
benefit plan.
The pension plan for Swiss employees (“the Pension Fund”) is a defined benefit plan. The
Pension Fund provides benefits for retirement, disability, and surviving dependents that
meet or exceed the minimum benefits required under the Federal Law on Occupational
Retirement, Survivors’ and Disability Insurance (“BVG”), including the legal coordination
charge, which is also insured. The monthly premium to fund the Pension Fund’s benefits
is split equally between the employer and the employees. Contributions, which vary by
the age of the employees, range from 6-13% of the covered salary and are credited to the
employees’ individual retirement savings accounts. The Pension Fund is responsible for
capital investments and pursues an investment strategy with a prescribed investment
policy. The Group assumes an average retirement age of 64 (female) and 65 (male),
respectively. Upon retiring (including early and partial retirement), insured persons are
entitled to a lifelong retirement pension if employees do not choose to withdraw the entire
balance, or portion thereof, of their individual retirement savings accounts in the form of a
capital payment.
The Pension Fund is administered by Allianz Suisse, Switzerland, which is legally separate
from the Group and is governed by a foundation board. In addition, there is a pension fund
commission comprised of two employee and two employer representatives. The duties of
the foundation board, as well as the pension fund commission, are laid out in the BVG and
the specific pension fund rules. They are required by law to act in the best interest of the
participants and are responsible for setting certain policies (e.g. investment, contribution,
and indexation policies) for the Pension Fund. At least four times a year, the foundation
board, as well as the pension fund commission, meet to analyze consequences and decide
on adjustments in the investment strategy.
Pursuant to the BVG, additional employer and employee contributions may be imposed
whenever a significant funding deficit arises in accordance with the BVG. In addition to
investment risk, the Pension Fund is exposed to actuarial risk, longevity risk, currency risk,
and interest rate risk.
In addition to the pension plan for Swiss employees, a defined benefit plan for Swiss
management also provides retirement benefits and risk insurance for death and disability
for components of remuneration in excess of the maximum insurable amount of salary
under the plan described above.
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Movement of Net Defined-Benefit Liability

| 2023 | 2022
Balance as at 1 January | 1,121 | 1,388
Service costs | 652 | 562
Admin costs | 45 | 43
Past service costs | 23 | –
Employee benefit expenses | 720 | 605
Net interest costs/(income) | 15 | 3
Included in statement of profit and loss | 735 | 608
Actuarial gains/(losses) |  |
– Financial assumptions | 932 | (1,956)
– Demographic assumptions | – | –
– Experience adjustment | (449) | 1,286
– Return on assets excluding interest income | 321 | 184
| 804 | (486)
Exchange rate differences | 80 | 65
Included in statement of comprehensive income* | 884 | (421)
Contributions by employer | (659) | (454)
Balance as at 31 December | 2,081 | 1,121

*Excluding tax impact
The principal assumptions used in determining post-employment (pension) benefit
obligations for the plan are shown below:

| 2023 | 2022
Discount rate | 1.35% | 2.30%
Salary increase | 2.50% | 2.50%
Interest credit rate | 1.00% | 1.00%
Mortality base table | BVG2020 | BVG2020
Longevity improvement | CMI2018; 1.25% | CMI2018; 1.25%

A quantitative sensitivity analysis for significant assumptions as at 31 December is
shown below:

| 2023 | 2022
Discount rate |  |
+ 25bps | (271) | (190)
- 25bps | 292 | 203
Salary increase |  |
+ 25bps | 119 | 84
- 25bps | (113) | (80)
Interest credit rate |  |
+ 25bps | 101 | 76
- 25bps | (98) | (73)
Mortality base table |  |
Life expectancy + 1 year | 44 | 27
Life expectancy - 1 year | (42) | (26)

The sensitivity analyses have been determined based on a method that extrapolates
the impact on the defined benefit obligation as a result of reasonable changes in key
assumptions occurring at the end of the reporting period. The sensitivity analyses are
based on a change in a significant assumption, keeping all other assumptions constant.
The sensitivity analyses may not be representative of an actual change in the defined
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benefit obligation as it is unlikely that changes in assumptions would occur in isolation
from one another.
The following are the expected payments or contributions to the defined benefit plan in
future years:

| 2023 | 2022
Within the next 12 months | 350 | 281
Between 2 and 5 years | 1,702 | 1,426
Beyond 5 years | 3,172 | 2,540
Total expected payments | 5,224 | 4,247

The average duration of the defined benefit plan obligation at the end of the reporting
period is 18 years (2022: 16 years).
Plan Assets Allocation
The asset allocation in the Swiss pension plan at
31
December was as follows:

| 2023 | 2022
Bonds | 2,709 | 2,309
Equities | – | –
Loans | 93 | 134
Mortgages | 507 | 504
Real Estate | 922 | 872
Cash, derivatives and funds | 58 | 60
| 4,289 | 3,879

Plan assets in 2023 and 2022 do not include property occupied by or financial instruments
issued by ONWARD.
5.1 Commitments & Contingencies
Legal Claim Contingencies
As at December 31 2023, the Group had no legal claim contingencies.
Guarantees
The Group has provided a guarantee to Wincasa for EUR 305k as collateral for the lease of
the office space in Lausanne and paid a deposit of EUR 8k to SPACES for the lease of the
office space in Eindhoven.
Royalties
The Group has entered into three license agreements with EPFL that will pay out royalties
in case the Company is able to generate revenues in the future for products directly linked
to these licenses. The royalty scheme with EPFL is based on net sales. To date, no royalties
have been paid as there is no product generating revenue.
On 27 September 2019, Neurorecovery Technologies Inc. (now ONWARD Medical Inc.)
entered into a license agreement with the Regents of the University of California acting
through Technology Development Group UCLA campus granting an exclusive license on
certain patents in certain fields of neuromodulation and spinal cord stimulation, and a
non-exclusive license on certain other patent rights. Various revenue milestone payments
are due under the exclusive license and royalty payments are due under the non-exclusive
license. The agreement contains various milestone and diligence obligations ranging from
USD 10k to USD 50k payable upon entering a phase III clinical trial, regulatory approval,
and/or first commercial sale. To date, none of the milestones triggering the obligations
have occurred.
On 8 October 2019, Neurorecovery Technologies Inc. entered into a license agreement with
the California Institute of Technology (Caltech), the latter on behalf of various intellectual
property owners, including UCLA, University of Louisville, DEI and USC, granting an
exclusive license on certain technology in certain fields of epidural and transcutaneous
neuromodulation and a non-exclusive license of certain other intellectual property.
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Various revenue milestone payments, diligence obligations, and royalty payments are due
under the license. These payments range from USD 20k to USD 75k payable upon FDA
approval, CE Mark, and/or first commercial sale.
To date, no payments are outstanding for
requirements that have been met.
5.2 Related Party Transactions
Note 1.1 provides the information about the Group’s structure including the details of
the subsidiaries. Transactions between the Company and its subsidiaries have been
eliminated on consolidation and are not disclosed in the notes.
The Group considers the Board and the Management Team to be key management as
defined in IAS 24 ‘Related parties.’ Full details of the remuneration of the board (CEO and
non-executives) are included in the Remuneration report.

| Salary, |  |  |
| Bonuses | Pension |  |
| & Other | Premiums |  |
| (Short-Term | (Post- | Share- |
| Employee | Employment | Based |
2023 | Benefits) | Eenefits) | Payment | Total
Management T eam, excluding | 2,827 | 98 | 643 | 3,568
CEO CEO | 703 | 64 | 916 | 1,683
Non- E xecutive D irectors | 445 | – | 441 | 886
| 3,975 | 162 | 2,000 | 6,137

| Salary, |  |  |
| Bonuses | Pension |  |
| & Other | Premiums |  |
| (Short-Term | (Post- | Share- |
| Employee | Employment | Based |
2022 | Benefits) | Eenefits) | Payment | Total
Management Team, excluding CEO | 2,574 | 105 | 596 | 3,275
CEO | 917 | 44 | 469 | 1,430
Non-Executive Directors | 364 | – | 256 | 621
| 3,855 | 149 | 1,321 | 5,326

5.3 Events After the Reporting Period
On 25 March 2024, ONWARD issued a total of 4,444,444 new Ordinary shares at a price
per share of EUR 4.50 as part of an accelerated bookbuild offering through a private
placement with institutional investors, certain founders, management, and members of the
Board of Directors (4,307,641 shares) and a separate public offering with retail investors in
France (136,803 shares). The total capital raised was EUR 20 million.
On 15 January 2024, the Group granted 710,975 stock options to the Management Team,
including the CEO, CTO, and CSO with an exercise price of EUR 2.94. The conditions of the
existing plan as explained in Note 2.9 apply to this grant.
Company
Financial
Statements
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Company Statement
of Income
For the Year Ended 31 December
All amounts in EUR ‘000
Notes
2023
2022
Grants
532
2,076
Total operating income
General and administrative expenses
B
532
(29,679)
2,076
(31,003)
Total operating expenses
Operating result for the period
Net finance expense
C
D
(29,679)
(29,147)
(392)
(31,003)
(28,927)
(1,453)
Result before tax
Income tax expense
Share in result from participating interests
E
F
(29,539)
–
(6,642)
(30,380)
–
(2,392)
Result after tax
(36,181)
(32,772)
The notes on pages 305 to 315 are an integral part of these separate financial statements.
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Company Financial Statements
Company
Balance Sheet
(Before appropriation on result)
For the Year Ended 31 December
All amounts in EUR ‘000
Notes
2023
2022
Assets
Non-current assets
Tangible fixed assets
Financial fixed assets
G
H
118
807
61
1,139
925
1,200
Current assets
Trade and other receivables
Fixed term deposits
Cash at bank and in hand
I
J
J
26,748
–
13,854
16,900
20,000
31,501
40,602
68,401
41,527
69,601
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Equity & Liabilities
Equity and reserves
Issued capital
Share premium
Other reserves
Legal reserve: Currency translation differences
Retained earnings
Result for the year
K
3,622
155,248
4,199
165
(109,122)
(36,181)
3,622
155,249
1,760
319
(75,547)
(32,772)
Total equity
17,931
52,631
Provisions
L
5,233
256
Non-current liabilities
M
15,297
12,656
Current liabilities
N
3,066
4,058
41,527
69,601
The notes on pages 305 to 315 are an integral part of these separate financial statements.
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Notes to the Company
Financial Statements
A. Presentation of Financial Statements and Recognition and Measurement Principles
The description of the activities of ONWARD Medical NV (the company) and the company
structure, as included in the notes to the consolidated financial statements, also applies to
the company financial statements.
The company is the sole shareholder of the following subsidiaries:
•
ONWARD Medical SA, based in Switzerland
•
ONWARD Medical Inc, based in the United States of America
These separate financial statements have been prepared in accordance with Title 9, Book
2 of the Dutch Civil Code. For setting the principles for the recognition and measurement of
assets and liabilities and determination of results for its separate financial statements, the
Company makes use of the option provided in section 2:362(8) of the Dutch Civil Code. This
means that the principles for the recognition and measurement of assets and liabilities
and determination of the result (hereinafter referred to as principles for recognition and
measurement) of the separate financial statements of the Company are the same as those
applied for the consolidated EU-IFRS financial statements. These principles also include
the classification and presentation of financial instruments, being equity instruments
or financial liabilities. In case no other principles are mentioned, refer to the accounting
principles as described in the consolidated financial statements. For an appropriate
interpretation of these statutory financial statements, the separate financial statements
should be read in conjunction with the consolidated financial statements.
Information on the use of financial instruments and on related risks for the group is
provided in the notes to the consolidated financial statements of the group.
B. Operating Income
Operating income relates to grant and other income received. Government subsidies have
been received for the research and development of several development projects. There
are no unfulfilled conditions or contingencies attached to these subsidies.
2023
2022
Government subsidies (EU)
Other income
464
68
1,972
104
Total revenues and other income
532
2,076
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20
(In EUR 000)
Grants
Total Grant*
Recognized
as Grant
Income
2023
Recognized
as Grant
Income
2022
Recognized
as Grant
Income
cumulative
before 2022
Grant
received in
advance as
per 31-12-
2023
PREP2GO
DARPA
ZonMW
EISMEA – Reverse Paralysis
EISMEA – NEMO BMI
Eurostars Impulse
Rewire
SH-ARC
362
3,004
250
292
144
500
347
500
15
419
83
(237)
(85)
160
56
53
104
1,412
83
273
85
14
–
–
243
1,173
83
–
–
–
–
–
–
–
–
183
108
–
122
60
Total
464
1,972
1,499
473
C. Operating Expenses
Operating expenses by nature are as follows:
2023
2022
Wages and salaries
Social security costs (includes WBSO benefit)
Pension costs – other
Share-based benefit expenses
Other labor costs
Other operating expenses
Depreciation and amortization
(1,242)
54
(69)
(148)
(724)
(27,492)
(58)
(1,797)
32
(82)
(1,691)
(1,739)
(25,515)
(211)
(29,679)
(31,003)
The increase in Other operating expenses is driven by Research and Development
expenses due to advancements made on our ARC
EX
and ARC
IM
platforms (mainly in
Switzerland) which increased the charge from Switzerland to the Netherlands under the
existing agreement.
During 2023, the Company had on average 15.9 full-time equivalents located in the
Netherlands (2022: 16.3), 74.2 full-time equivalents located in Switzerland (2022: 68.3) and
14.5 (2022: 11.5) full-time equivalents located in the United States.
D. Net Finance Expense
2023
2022
Interest income
Interest on loans
Interest banks
Interest on lease liabilities
Exchange losses
Bank charges
891
(1,307)
–
(5)
35
(6)
52
(1,434)
–
–
(48)
(23)
Net Finance expense
(392)
(1,453)
The decrease is the result of interest income earned from positive cash balances in 2023.
E. Income Tax Expense
2023
2022
Current income tax
Deferred income tax
–
–
–
–
Total corporate income tax in profit and loss
–
–
Current income tax charge at tax rate of 25.8%
Non-deductible expenses
Non-recognized deferred tax asset on temporary differences
Non-recognized deferred tax asset on permanent differences
Net operating losses not recognized
7,621
(38)
66
(203)
(7,446)
7,838
(436)
(111)
–
(7,291)
–
–
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The effective tax rate was 0% in 2023 (2022: 0%), which is lower than the statutory income
tax rate of 25.8% (2022: 25.8%) in the Netherlands. The difference is primarily due to non-
deductible expenses relating to share-based compensation and the net operating losses
for which no deferred tax asset can be recognized. The uncertainty is based on insufficient
evidence of future sources of income to support the realization of a deferred tax asset due
to the Company being loss-making with limited tax planning opportunities.
For the unused operating losses of EUR 120M (2022: EUR 91M) no deferred tax is
recognized. These losses can be carried forward indefinitely subject to local tax rules.
F. Share in Results from Participating Interests
An amount of EUR 6.642M (2022: EUR 2.392M) of share in results from participating
interests relates to Group companies.
G. Tangible Fixed Assets
Cost
Office
Equipment
Right-of-
use-asset
Total
At
1
January 2022
Additions
Disposal
1,171
18
(465)
–
–
–
1,171
10
(465)
At
31
December 2022
716
–
716
Additions
Disposal
18
–
97
–
114
–
At
31
December 2023
734
97
830
Accumulated Depreciation
Office
Equipment
Right-of-
use-asset
Total
At
1
January 2022
Depreciation for the year
Disposal
(974)
(102)
421
–
–
–
(974)
(102)
421
At
31
December 2022
(655)
–
(655)
Depreciation for the year
Disposal
(49)
–
(9)
(58)
–
(704)
(9)
(713)
At
31
December 2023
Net Book Value
Office
Equipment
Right-of-
use-asset
Total
At
31
December 2022
61
–
61
30
88
118
At
31
December
2
023
H.
Financial Fixed Assets
Financial fixed assets consist of participating interests in Group companies. Financial
fixed assets are accounted for in the Company financial statements at net asset value.
They are tested for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss is recognized for the
amount by which the asset’s carrying amount exceeds its recoverable amount.
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2023
2022
Cost
Accumulated impairments
1,139
–
2,459
–
Net book value at 1 January
1,139
2,459
Revaluations through OCI
Exchange differences
Group share-based payment scheme
Share in result of participating interests
Addition: license fees paid on behalf of subsidiary
Provision: negative participating interest
(928)
(155)
2,416
(6,642)
–
4,977
858
172
–
(2,392)
–
42
Net change
Cost
Accumulated impairments
(332)
807
–
(1,320)
1,139
–
Net book value at 31 December
807
1,139
The Company has the firm intention to support its subsidiary, ONWARD Medical Inc, to
meet its obligations to third parties. A provision has been recognized for the negative value
of the investment to the amount of EUR 4,977k (2022: 42k).
I. Trade & Other Receivables
Amounts due from Group companies are recognized initially at fair value and subsequently
at amortized cost. Amortized cost is determined using the effective interest rate. The
Company recognized a credit loss for financial assets (such as a loan) based on an
expected credit loss (ECL), which will occur in the coming twelve months or – after a
significant decrease in credit quality or when the simplified model can be used – based on
the entire remaining loan term.
For intercompany receivables, the ECL would be applicable as well, however this could
cause differences between equity in the consolidated and separate financial statements.
For this reason, the Company elected to eliminate these differences through the respective
receivable account in the separate financial statements.
2023
2022
Indirect tax receivable
Receivables from related parties – group companies
Receivables from related parties – other
Other
Advance payments made
76
25,596
37
239
800
458
15,174
190
257
821
26,748
16,900
The Company funds the operations of the subsidiaries. The increase in the receivable is a
result of the increase in operations in 2023.
J. Cash at Bank, in Hand & Fixed Term Deposits
2023
2022
Cash at bank
Short-term deposits
2,654
11,200
21,501
10,000
Cash at bank and in hand
13,854
31,501
Fixed term deposits
–
20,000
–
20,000
Cash at bank, in hand, and fixed term deposits
13,854
51,501
Cash at banks earns interest at floating rates based on daily bank deposit rates.
Short-term deposits are made for varying periods of between one day and three months,
depending on the immediate cash requirements of the Group, and earn interest at the
respective short-term deposit rates. Fixed term deposits are made for period exceeding
three months but less than one year and earn interest at the respective fixed term
deposit rates.
At December 31 2023, the Group had no bank overdrafts. All cash is freely at the disposal
of the company.
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K.
Shareholders’ Equity
For the statement of changes in equity for the year ended 31 December 2023, please
refer to
the
consolidated statement of changes in equity in the consolidated financial
statements. Additional information on the shareholders’ equity is disclosed in note 4.0 of
the consolidated financial statements.
L.
Provisions
2023
2022
Opening balance as at 1 January
Negative participating interest
256
4,977
214
42
Balance as at 31 December
5,233
256
The Company has the firm intention to support its subsidiary, ONWARD Medical Inc, to
meet its obligations to third parties. A provision has been recognized for the negative
participating interest to the amount of EUR 5,233k (2022: 256k).
The amount is considered current.
M. Non-Current Liabilities
2023
2022
Balance as at 31 December
15,297
12,656
2023
Innovation Loan
Loan as at 1 January
12,656
Loan amount received
Interest/cumulative dividend accrued during the year
Long term lease liability
1,292
1,307
42
Net book value as 31 December
15,297
N. Current Liabilities
Amounts due to Group companies recognized as financial liabilities at amortized cost as
per the policy in the consolidated financial statements.
2023
2022
Trade payables
Tax liabilities
Payables from related parties
Other payables
Grant-related payables
734
4
–
970
1,358
1,899
63
–
2,096
–
3,066
4,058
O. Compensation of the Board Of Directors
The members of the Board and the Management Team are considered key management
personnel as defined in IAS 24 ‘Related party disclosures.’ For details on their
remuneration, reference is made to note 5.2 of the consolidated financial statements. Full
details of the remuneration of the board (CEO and non-executives) are included in the
Remuneration report.
P. Fees for Audit & Other Services
In accordance with article 382.a of Part 9, Book 2, of the Netherlands Civil Code, the total
audit cost can be specified as follows:
Ernst & Young Accountants LLP
2023
2022
Audit of financial statements
Audit of special purpose financial statements
Other assurance services
259
–
–
478
–
8
259
486
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Q. Subsequent Events
For subsequent events, please refer to Note 5.3 of the Consolidated Financial Statements.
R. Proposed Appropriation of Result
The Board of Directors proposes to deduct the net loss in full to the retained earnings.
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Other
Information
Independent auditor’s report
To: the shareholders and board of directors of ONWARD Medical N.V.
Report on the audit of the financial statements 2023 included in the annual report
Our Opinion
We have audited the financial statements 2023 of ONWARD Medical N.V. based in
Amsterdam, the Netherlands.
The financial statements comprise the consolidated and company financial statements.
In our opinion:
•
The accompanying consolidated financial statements give a true and fair view of the
financial position of ONWARD Medical N.V. as at 31 December 2023 and of its result
and its cash flows for 2023 in accordance with International Financial Reporting
Standards as adopted in the European Union (EU-IFRSs) and with Part 9 of Book 2 of
the Dutch Civil Code
•
The accompanying company financial statements give a true and fair view of the
financial position of ONWARD Medical N.V. as at 31 December 2023 and of its result for
2023 in accordance with Part 9 of Book 2 of the Dutch Civil Code
The consolidated financial statements comprise:
•
The consolidated statement of financial position as at 31 December 2023
•
The following statements for 2023: the consolidated statement of profit and loss,
comprehensive income, changes in equity and cash flows
•
The notes comprising material accounting policies and other explanatory information
The company financial statements comprise:
•
The company balance sheet as at 31 December 2023
•
The company statement of income for 2023
•
The notes comprising a summary of the accounting policies and other
explanatory information
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Basis for our opinion
We conducted our audit in accordance with Dutch law, including the Dutch Standards
on Auditing. Our responsibilities under those standards are further described in the Our
responsibilities for the audit of the financial statements section of our report.
We are independent of ONWARD Medical N.V. (‘the company’) in accordance with the
EU Regulation on specific requirements regarding statutory audit of public-interest
entities, the Wet toezicht accountantsorganisaties (Wta, Audit firms supervision act), the
Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten (ViO,
Code of Ethics for Professional Accountants, a regulation with respect to independence)
and other relevant independence regulations in the Netherlands. Furthermore we have
complied with the Verordening gedrags- en beroepsregels accountants (VGBA, Dutch
Code of Ethics).
We believe the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Information in support of our opinion
We designed our audit procedures in the context of our audit of the financial statements
as a whole and in forming our opinion thereon. The following information in support of our
opinion and any findings were addressed in this context, and we do not provide a separate
opinion or conclusion on these matters.
Our understanding of the business
ONWARD Medical N.V. and its subsidiaries (the ’group‘) are developing both an Implantable
Neuro-stimulation Systems (INS) and a non-invasive system for electrical stimulation of
specific areas of the spinal cord.
We determined materiality and identified and assessed the risks of material misstatement
of the financial statements, whether due to fraud or error in order to design audit
procedures responsive to those risks and to obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion.
Materiality
Materiality
€1,100,000 (2022: €890,000)
Benchmark applied
3% of operating expenses
Explanation
R&D companies such as ONWARD Medical N.V. which are
in the start-up phase, report no or modest revenues. The
stakeholders expect the entity to operate at a loss during
the R&D phase. The value that owners or others generally
attribute to these entities is primarily based on the promise
of future success of the products. Based on these factors we
deem operating expenses to be a suitable basis, as it is one of
the most important measures of the company’s performance.
We have also taken into account misstatements and/or possible misstatements that in our
opinion are material for the users of the financial statements for qualitative reasons.
We agreed with the audit committee of the board of directors that misstatements in
excess of €55,000, which are identified during the audit, would be reported to them, as well
as smaller misstatements that in our view must be reported on qualitative grounds.
Scope of the group audit
ONWARD Medical N.V. is at the head of a group of entities. The financial information of this
group is included in the consolidated financial statements.
Because we are ultimately responsible for the opinion, we are also responsible for directing,
supervising and performing the group audit. In this respect we have determined the nature
and extent of the audit procedures to be carried out for group entities. Decisive were the
size and/or the risk profile of the group entities or operations. As
t
he processes of
ONWARD Medical are highly centralized and all transactions are initiated, recorded,
processed and reported on central level
w
e have applied a centralized audit approach on
the full group consisting of 3 components in
which all audit procedures are performed by
the same team.
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In total these procedures represent 100% of the group’s total assets, operating expenses
and net loss.
By performing the centralized procedures mentioned above at all components of the group,
together with additional procedures at group level, we have been able to obtain sufficient
and appropriate audit evidence about the group’s financial information to provide an
opinion on the consolidated financial statements.
Teaming and use of specialists
We ensured that the audit team included the appropriate skills and competences which
are needed for the audit of a listed client in the medical technology industry. We included
specialists in the areas of IT audit, forensics, share based payments, valuation of intangible
assets and income tax.
Our focus on fraud and non-compliance with laws and regulations
Our responsibility
Although we are not responsible for preventing fraud or non-compliance and we cannot
be expected to detect non-compliance with all laws and regulations, it is our responsibility
to obtain reasonable assurance that the financial statements, taken as a whole, are free
from material misstatement, whether caused by fraud or error. 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.
Our audit response related to fraud risks
We identified and assessed the risks of material misstatements of the financial
statements due to fraud. During our audit we obtained an understanding of the company
and its environment and the components of the system of internal control, including the
risk assessment process and management’s process for responding to the risks of fraud
and monitoring the system of internal control and how the board of directors exercises
oversight, as well as the outcomes.
We refer to section “Risk Management and Control” of the board of director’s report for
management’s (fraud) risk assessment.
We evaluated the design and relevant aspects of the system of internal control and in
particular the fraud risk assessment, as well as the code of conduct. We evaluated the
design and the implementation of internal controls designed to mitigate fraud risks.
As part of our process of identifying fraud risks, we evaluated fraud risk factors with
respect to financial reporting fraud, misappropriation of assets and bribery and
corruption in close co-operation with our forensic specialists. We evaluated whether these
factors indicate that a risk of material misstatement due to fraud is present.
We incorporated elements of unpredictability in our audit. We also considered the
outcome of our other audit procedures and evaluated whether any findings were
indicative of fraud or non-compliance.
We addressed the risks related to management override of controls, as this risk is present
in all companies. For these risks we have performed procedures among other things to
evaluate key accounting estimates for management bias that may represent a risk of
material misstatement due to fraud, in particular relating to important judgment areas
and significant accounting estimates as disclosed in Note 1.6 to the financial statements
including research & development, share-based payments, impairment of intangible
assets, post-employment benefits and income taxes. We have also used data analysis
to identify and address high-risk journal entries and evaluated the business rationale (or
the lack thereof) of significant extraordinary transactions, including those with related
parties. We considered available information and made enquiries of relevant executives
and directors.
The fraud risks, we identified, enquiries and other available information did not lead to
specific indications for fraud or suspected fraud potentially materially impacting the view
of the financial statements.
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Our audit response related to risks of non-compliance with laws and regulations
We performed appropriate audit procedures regarding compliance with the provisions
of those laws and regulations that have a direct effect on the determination of material
amounts and disclosures in the financial statements. Furthermore, we assessed factors
related to the risks of non-compliance with laws and regulations that could reasonably
be expected to have a material effect on the financial statements from our general
industry experience, through discussions with the board of directors, reading minutes,
and performing substantive tests of details of classes of transactions, account balances
or disclosures.
We also inspected internal lawyers’ letters and correspondence with regulatory authorities.
We remained alert to any indication of (suspected) non-compliance throughout the audit.
Finally we obtained written representations that all known instances of non-compliance
with laws and regulations have been disclosed to us.
Our audit response related to going concern
The board of directors made a specific assessment of the company’s ability to continue
as a going concern and to continue its operations for the foreseeable future. As disclosed
in Note 1.4 to the financial statements, as a result of the completed private placement and
French retail public offering in March 2024, the Company believes that its cash position
will be sufficient to meet the Company’s capital requirements and fund its operations for
at least 12 months as from the date of preparing the financial statements. Furthermore
is stated that to continue development and reach commercialization as planned the
Company will need to attract additional funds in the future and that the Company’s long
term existence is contingent on achieving FDA approval and CE mark on its products. The
financial statements have been prepared on a going concern basis.
We discussed and evaluated the specific assessment with the board of directors
exercising professional judgment and maintaining professional skepticism. We considered
whether the board of directors
'
going concern assessment, based on our knowledge
and understanding obtained through our audit of the financial statements or otherwise,
contains all relevant events or conditions that may cast significant doubt on the company’s
ability to continue as a going concern. If we conclude that a material uncertainty exists,
we are required to draw attention in our auditor’s report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to modify our opinion.
Based on our procedures performed, we did not identify material uncertainties about going
concern. 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 a company to cease to
continue as a going concern.
Our 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. We have communicated the key audit
matter to the board of directors
.
The key audit matter is not a comprehensive reflection of
all matters discussed.
The nature of this key audit matter did not change in comparison with previous year.
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Valuation of intangible fixed assets
Note 3.0 intangible assets
Risk
At year-end 2023, ONWARD Medical N.V. carried an
intangible asset balance of € 9.8 million, consisting of
goodwill (€ 1.8 million), capitalized in-process R&D (€ 5.7
million) and capitalized license fees (€ 2.3 million). The
goodwill as well as the capitalized in-process R&D and
license fees relate to the acquisition of ONWARD Medical
Inc in 2019. In accordance with EU-IFRS, ONWARD Medical
N.V. is required to perform an impairment test on an annual
basis. The impairment test is significant to our audit because
the assessment process is complex, requires management
judgement and is based on assumptions that are affected
by expected future market conditions. For these reasons, we
consider this a key audit matter.
Our audit approach
As part of our audit procedures we audited the assumptions
and methodologies used by the company, and also the
robustness of the planning process to evaluate whether the
company is able to prepare reliable estimates.
The value of the in-process R&D is contingent on the success
of the US Food and Drug Association (FDA) approval and CE
mark of the company’s products, as well as successfulness of
bringing the products to the market.
In order to assess the reasonability of input data, the
valuation model and the discount rate we have, among
other procedures:
•
verified the appropriateness and consistent application of
the impairment model and related inputs;
•
compared the data with external data such as expected
inflation rate, external market growth expectations and
market capitalization of the Company;
•
analyzed the sensitivities in the company’s impairment
testing model.
We specifically focused on the risk of not achieving regulatory
approvals and whether a reasonable possible change in the
assumptions could trigger an impairment.
We also evaluated the adequacy of the company’s
disclosure in note 3.0 of the annual report, including
disclosures regarding assumptions and sensitivities as
well as consistency between the going concern forecasts
as disclosed in Note 1.4 and the inputs in the company’s
impairment testing model.
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Key observations
We have evaluated management’s key assumptions and
estimates to be within an acceptable range. We agree with
management’s conclusion that no impairment of intangible
assets is required and conclude that the disclosures in note
3.0 of the annual report are in accordance with EU-IFRS.
Report on other information included in the annual report
The annual report contains other information in addition to the financial statements and
our auditor’s report thereon.
Based on the following procedures performed, we conclude that the other information:
•
is consistent with the financial statements and does not contain material misstatements
•
contains the information as required by Part 9 of Book 2 of the Dutch Civil Code for the
Board of Director’s report and the other information as required by Part 9 of Book 2 of
the Dutch Civil Code and as required by Sections 2:135b and 2:145 sub section 2 of the
Dutch Civil Code for the remuneration report.
We have read the other information. Based on our knowledge and understanding obtained
through our audit of the financial statements or otherwise, we have considered whether the
other information contains material misstatements. By performing these procedures, we
comply with the requirements of Part 9 of Book 2 and Section 2:135b sub-Section 7 of the
Dutch Civil Code and the Dutch Standard 720. The scope of the procedures performed is
substantially less than the scope of those performed in our audit of the financial statements.
The board of directors is responsible for the preparation of the other information, including
the Board of Directors’ report in accordance with Part 9 of Book 2 of the Dutch Civil Code
and other information required by Part 9 of Book 2 of the Dutch Civil Code. The board of
directors is responsible for ensuring that the remuneration report is drawn up and published
in accordance with Sections 2:135b and 2:145 sub section 2 of the Dutch Civil Code.
Report on other legal and regulatory requirements and ESEF
Engagement
We were engaged by the general meeting as auditor of ONWARD Medical N.V. on 11
October 2021, as of the audit for the year 2021 and have operated as statutory auditor ever
since that date.
No prohibited non-audit services
We have not provided prohibited non-audit services as referred to in Article 5(1) of the EU
Regulation on specific requirements regarding statutory audit of public-interest entities.
European Single Electronic Reporting Format (ESEF)
ONWARD Medical N.V. has prepared the annual report in ESEF. The requirements for this
are set out in the Delegated Regulation (EU) 2019/815 with regard to regulatory technical
standards on the specification of a single electronic reporting format (hereinafter: the RTS
on ESEF).
In our opinion the annual report prepared in the XHTML format, including the partially
marked-up consolidated financial statements as included in the reporting package by
ONWARD Medical N.V., complies in all material respects with the RTS on ESEF.
The board of directors is responsible for preparing the annual report, including the
financial statements, in accordance with the RTS on ESEF, whereby the board of directors
combines the various components into a single reporting package.
Our responsibility is to obtain reasonable assurance for our opinion whether the annual
report in this reporting package complies with the RTS on ESEF.
We performed our examination in accordance with Dutch law, including Dutch Standard
3950N, ”Assurance-opdrachten inzake het voldoen aan de criteria voor het opstellen van
een digitaal verantwoordingsdocument” (assurance engagements relating to compliance
with criteria for digital reporting). Our examination included amongst others:
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•
Obtaining an understanding of the company’s financial reporting process, including the
preparation of the reporting package
•
Identifying and assessing the risks that the annual report does not comply in all material
respects with the RTS on ESEF and designing and performing further assurance
procedures responsive to those risks to provide a basis for our opinion, including:
–
Obtaining the reporting package and performing validations to determine whether
the reporting package containing the Inline XBRL instance document and the XBRL
extension taxonomy files, has been prepared in accordance with the technical
specifications as included in the RTS on ESEF
–
Examining the information related to the consolidated financial statements in the
reporting package to determine whether all required mark-ups have been applied
and whether these are in accordance with the RTS on ESEF.
Description of responsibilities regarding the financial statements
Responsibilities of the board of directors for the financial statements
The board of directors is responsible for the preparation and fair presentation of the
financial statements in accordance with EU-IFRSs and Part 9 of Book 2 of the Dutch Civil
Code. Furthermore, the board of directors is responsible for such internal control as the
board determines is necessary to enable the preparation of the financial statements that
are free from material misstatement, whether due to fraud or error.
As part of the preparation of the financial statements, the board of directors is responsible
for assessing the company’s ability to continue as a going concern. Based on the financial
reporting framework mentioned, the board of directors should prepare the financial
statements using the going concern basis of accounting unless the board of directors
either intends to liquidate the company or to cease operations, or has no realistic
alternative but to do so. The board of directors should disclose events and circumstances
that may cast significant doubt on the company’s ability to continue as a going concern in
the financial statements.
The non-executive board members of the board of directors are responsible for overseeing
the company’s financial reporting process.
Our responsibilities for the audit of the financial statements
Our objective is to plan and perform the audit engagement in a manner that allows us to
obtain sufficient and appropriate audit evidence for our opinion.
Our audit has been performed with a high, but not absolute, level of assurance, which
means we may not detect all material errors and fraud during our audit.
Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of these financial statements. The materiality affects the
nature, timing and extent of our audit procedures and the evaluation of the effect of
identified misstatements on our opinion.
We have exercised professional judgment and have maintained professional skepticism
throughout the audit, in accordance with Dutch Standards on Auditing, ethical
requirements and independence requirements. The Information in support of our opinion
section above includes an informative summary of our responsibilities and the work
performed as the basis for our opinion.
Our audit further included among others:
•
Performing audit procedures responsive to the risks identified, and obtaining audit
evidence that is sufficient and appropriate to provide a basis for our opinion
•
Obtaining 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 internal control
•
Evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the board of directors
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•
Evaluating the overall presentation, structure and content of the financial statements,
including the disclosures
•
Evaluating whether the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation
Communication
We communicate with the audit committee of the board of directors regarding, among
other matters, the planned scope and timing of the audit and significant audit findings,
including any significant findings in internal control that we identify during our audit.
In this respect we also submit an additional report to the audit committee of the board
of directors in accordance with Article 11 of the EU Regulation on specific requirements
regarding statutory audit of public-interest entities. The information included in this
additional report is consistent with our audit opinion in this auditor’s report.
We provide the audit committee of the board of directors 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 audit committee of the board of directors, we
determine the key audit matters: those matters that were of most significance in the
audit of the financial statements. 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, not communicating the matter is in the public interest.
Eindhoven, 24
April
202
4
Ernst & Young Accountants LLP
Signed by J.C.F. Lemmens
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Profit Appropriation
Pursuant to the Articles of Association, the profits shown in the Company’s annual
accounts in respect of a financial year shall be appropriated as follows, and in the following
order of priority:
•
to the extent that any Preferred Shares have been cancelled without full repayment
as described in the Articles of Association and without any such deficit subsequently
having been paid in full, an amount equal to any such (remaining) deficit shall
be distributed to those who held those Preferred Shares at the moment of such
cancellation becoming effective;
•
to the extent that any Preferred Distribution (or part thereof) in relation to previous
financial years has not yet been paid in full as described in the Articles of Association, an
amount equal to any such (remaining) deficit shall be distributed on the Preferred Shares;
•
the Preferred Distribution shall be distributed on the preferred shares in respect of the
financial year to which the annual accounts pertain;
•
the Board shall determine which part of the remaining profits shall be added to the
Company’s reserves; and
•
subject to a proposal by the Board of Directors to that effect, the remaining profits shall
be at the disposal of the General Meeting for distribution on the Ordinary Shares.
Special Statutory Voting Rights
There are no special statutory voting rights.
Shares Carrying Limited Economic Entitlement
The Preferred Shares in the Company’s capital carry a limited entitlement to the
Company’s profit and reserves. As at 31 December 2023, no Preferred Shares in the
Company’s capital were issued.
Branches
The Company has no branches. The statutory list of all subsidiaries and affiliated
companies, prepared in accordance with the relevant legal requirements (Netherlands
Civil Code, Part 9 of Book 2, Sections 379 and 414), forms part of the notes to the
consolidated financial statements.
Non-IFRS Financial Measure
This Annual Report contains a financial measure that is not a measure of liquidity under
IFRS. This is commonly referred to as non-IFRS financial measure.
Although the non-IFRS financial measure presented is not a measure of liquidity under
IFRS, the Company uses this measure to monitor the underlying performance of its
business and operations. This measure has not been audited or reviewed by the Company’s
external auditor. Furthermore, the measures may not be indicative of the Company’s
historical operating results, nor is this measure meant to be predictive of the company’s
future results. This measure is presented in this Annual Report because the company
considers it an important supplemental measure for evaluating the company’s liquidity.
Net Cash
The Company discloses the following as net cash for the measurement and explanation
of liquidity:
2023
2022
Cash at bank
Short-term deposits
3,568
26,200
21,760
20,000
Cash and cash equivalents
29,768
41,760
Fixed term deposits
–
20,000
–
20,000
Net cash
29,768
61,760
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Definitions and Abbreviations
The following definitions are used in this report:
510(k)
Clearance under Section 510(k) of the
FDCA (US)
BDD
Breakthrough Device Designation -
Designation given by the FDA to allow a
timely access to devices providing a more
effective treatment or diagnosis of life-
threatening diseases by speeding-up their
development, assessment, and review
Brain – Computer Interface (BCI)
Electrical signal produced by the brain is
recorded by a device and is then translated
into a signal allowing the stimulation of
the spinal cord, enabling thought-driven
restoration of movement
Caltech
California Institute for Technology
Cardiovascular
Relating to the heart and blood vessels
CARF
Commission of Accredited Rehabilitation
Facilities
CE
Conformité Européene
Cervical
Relating to the neck or located around the
neck area
DCGC
The Dutch corporate governance code
issued on 8 December 2016
Chairperson
The Chairperson of the Board
CHUV
Centre Hospitalier Universitaire Vaudois
CRO
Contract research organizations
CSO
Chief Scientific Officer
DARPA
The US Department of Defense Advanced
Research Projects Agency
EBITDA
Earnings before interest, tax, depreciation
and amortization
EEA
European Economic Area
EPFL
École Polytechnique Fédérale de Lausanne
Epidural
Placed or administered outside the
dura mater
FDA
U.S. Food and Drug Administration
FDCA
U.S. Federal Food, Drug, and Cosmetic Act
FTE
Full time equivalent personnel
GCP
Good Clinical Practice
HDE
Humanitarian Device Exemption
HIPAA
Health Insurance Portability and
Accountability Act
Hypertension
Higher blood pressure than normal range
Hypotension
Lower blood pressure than normal range
IPG
Implantable pulse generator
Lesion
A damaged region in the body
LTIP
Long-Term Incentive Plan
Lumbar
Relating to the lumbar region of the back
MDR
Medical Device Regulation
Medical Devices Regulation
Regulation (EU) 2017/745
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MHRA
Medicines and Healthcare products
Regulatory Agency (UK)
Neurodegenerative
Characterized by the degeneration of the
nervous system
Neuromodulation
Field of bioengineering implicating
technologies impacting neural interfaces
Neuroprosthetic
Device used to restore function in the body
via the interface of electrodes and the
nervous system
Neurostimulation
Application of an electrical stimulation
inducing modulation or activation of the
nervous system for a therapeutic effect
Neurorehabilitation
Supervised program of training to restore
function to patients who suffered from a
neurological disorder
NHS
National Health Service – in the United
Kingdom: refers to the publicly funded
healthcare systems
Orthostatic hypotension
Hypotension caused by transition to an
upright position
Paraplegic
Someone affected by paralysis (partial or
complete) of the lower half of the body due
to an injury or disease of the spinal cord
Perfusion
Passage of a fluid (blood, water) through
blood vessels, tissue or organ
PMA
Pre-market approval
QSR
Quality System Regulations
Reeve Foundation
Christopher and Dana Reeve Foundation
RVO
Rijksdienst voor Ondernemend Nederland
Scaffold (cellular)
Scaffolds engineered to induce cellular
interactions contributing to the formation
of new functional tissues
SCI
Spinal Cord Injury – damage to the nerves
in the spine that circulate signals from
the brain to and from the body. It can
be caused by a trauma or a disease.
This damage can lead to temporary or
permanent dysfunctions
Spasticity
Abnormal increase in muscle tone usually
caused by nerve damage and can be
associated with pain
STIMO
STImulation Movement Overground (title of
clinical study)
Tetraplegic (Quadraplegic)
Someone affected by paralysis (partial or
complete) of upper and lower limbs due to
injury or disease of the spinal cord
Thoracic
Related to the thoracic region of the back
Transcutaneous
Penetrating through the skin. For example:
transcutaneous stimulation is stimulation
delivered through the skin via electrodes
placed on the skin
UCLA
University of California, Los Angeles
Up-LIFT
Pivotal study to evaluate the Company’s
ARC
EX
Therapy
Vascular
Relating to blood vessels
17
18
19
20
20
Other Information
Forward to
2024