Alvotech
9, rue de Bitbourg
L-1273 Luxembourg
Grand Duchy of Luxembourg
RCS Luxembourg B 258.884
Alvotech
Annual report and Report of the
Réviseur d’Entreprises Agréé as of
31 December 2022 and 2021 and
for the years ended 31 December
2022 and 2021
Table of Contents
Endorsement by the Board of Directors 2-4
Report of the Réviseur d’Entreprises Agréé 5-11
Consolidated Statements of Profit or Loss and Other Comprehensive Income or Loss 12
Consolidated Statements of Financial Position 13-14
Consolidated Statements of Cash Flows 15-16
Consolidated Statements of Changes in Equity 17
Notes to the Consolidated Financial Statements 18-75
Corporate Governance Report 76
Non-financial disclosure 84
Alvotech
Annual report and Report of the
Réviseur d’Entreprises Agréé as of
31 December 2022 and 2021 and
for the years ended 31 December
2022 and 2021
Endorsement by the Board of Directors
2
Endorsement by the Board of Directors
USD in million
2022 2021
(513.6) (101.5)
(38.1) (47.7)
185.9 65.8
20.4 18.2
- 2.1
2.8 4.0
11.0 18.0
2.6 2.4
(10.6) (2.7)
83.4 -
27.3 (151.8)
23.7 12.5
(205.2) (180.7)
We suggest the following allocation of the result:
USD (million)
(1,140.5)
(513.6)
-
(1,654.1)
Result brought forward from the previous year..................................................................................................
Result for the year.....................................................................................................................................................
Distribution of dividends.........................................................................................................................................
Result to be carried forward to the following financial year.............................................................................
Transaction costs ......................................................................................................................................................
Adjusted EBITDA....................................................................................................................................................
Loss for the year........................................................................................................................................................
Income tax benefit....................................................................................................................................................
Total net finance costs..............................................................................................................................................
Depreciation and amortization...............................................................................................................................
Impairment of property, plant and equipment ...................................................................................................
Impairment of intangible assets .............................................................................................................................
Incentive plan expense ............................................................................................................................................
Share of net loss of joint venture ..........................................................................................................................
Exchange rate differences .......................................................................................................................................
Share listing expense ................................................................................................................................................
Loss (Gain) on extinguishment of financial liabilities .......................................................................................
3
Endorsement by the Board of Directors
Done in Luxembourg on 1 March 2023,
For the Board of Directors:
Robert Wessman
Title: CEO & Chairman
4
D
eloitte Audit
Société à responsabilité limitée
20 Boulevard de Kockelscheuer
L-1821 Luxembourg
B.P. 1173
L-1011 Luxembourg
Tel: +352 451 451
www.deloitte.lu
Société à re
sponsabilité limitée au capital de 360.000 €
RCS Luxembourg B67.895
Autorisation d’établissement 10022179
© Deloitte Audit, SARL
5
To the Shareholders of
Alvotech S.A.
9, rue de Bitbourg,
L-1273 Luxembourg
RE
PORT OF THE REVISEUR D’ENTREPRISES AGREE
Rep
ort on the Audit of the Consolidated Financial Statements
Opinion
W
e have audited the consolidated financial statements of Alvotech S.A. and its subsidiaries (the “Group”),
which comprise the consolidated statement of financial position as at 31 December 2022, and the consolidated
statement of profit or loss and other comprehensive income or loss, consolidated statement of changes in
equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated
financial statements, including a summary of significant accounting policies.
I
n our opinion, the accompanying consolidated financial statements give a true and fair view of the
consolidated financial position of the Group as at 31 December 2022, and of its consolidated financial
performance and its consolidated cash flows for the year then ended in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union.
Ba
sis for Opinion
We conducted our audit in accordance with the EU Regulation N° 537/2014, the Law of 23 July 2016 on the
audit profession (Law of 23 July 2016) and with International Standards on Auditing (ISAs) as adopted for
Luxembourg by the “Commission de Surveillance du Secteur Financier” (CSSF). Our responsibilities under the EU
Regulation No 537/2014, the Law of 23 July 2016 and ISAs as adopted for Luxembourg by the CSSF are further
described in the “Responsibilities of the “réviseur d’entreprises agréé” for the Audit of the consolidated
financial statements” section of our report. We are also independent of the Group in accordance with the
International Code of Ethics for Professional Accountants, including International Independence Standards,
issued by the International Ethics Standards Board for Accountants (IESBA Code) as adopted for Luxembourg by
the CSSF together with the ethical requirements that are relevant to our audit of the consolidated financial
statements, and have fulfilled our other ethical responsibilities under those ethical requirements. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
6
Material Uncertainty Related to Going Concern
W
e draw your attention to Note 1.5 to the consolidated financial statements, which indicates that, the Group
incurred recurring losses since its inception, including net losses of $513.6 million and $101.5 million for the
years ended 31 December 2022 and 2021, respectively, and had an accumulated deficit of $1,654.1 million as
of 31 December 2022. The Group has not generated positive operational cash flow, largely due to the
continued focus on biosimilar product development and expansion efforts. As set in note 1.5, these conditions
together with the events set forth, indicate that a material uncertainty exists that may cast significant doubt on
the Group’s ability to continue as a going concern. Management is nevertheless confident that financing of the
Group during the development of its biosimilar products will continue to come from several sources including
new and existing out-license contracts with customers. Based on the cash in hand, funding received, and
projected future cash flows, Management concluded that the Group has the ability to continue as a going
concern for at least one year after the date that the consolidated financial statements are issued, however
there is no assurance that the Group will be successful in obtaining sufficient funding on terms acceptable to
the Group to fund continuing operations. Our opinion is not modified in respect of this matter.
Key Audit Matters
K
ey audit matters are those matters that, in our professional judgment, were of most significance in our audit
of the consolidated financial statements of the current period. These matters were addressed in the context of
the audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters.
Key Audit Matter
How the Key Audit Matter was addressed in our audit
Capital Reorganization — Refer to Notes 1.1 to the
consolidated
financial statements
As disclosed in Note 1.1, on 15 June 2022, the
Company consummated the capital reorganization
(the “Business Combination”) contemplated between
Oaktree Acquisition Corp. II (“OACB”), Alvotech
Holdings S.A., the Company, and Alvotech Holdings
S.A. (the “Pre
decessor”). As a result, both OACB and
the Predecessor merged with and into the Company.
The Company accounted for the transaction as a
reverse acquisition where Alvotech Holding S.A. was
the accounting acquirer and accounting predecessor.
Accordingly, t
he capital reorganization was treated as
the equivalent of the Company issuing shares at the
closing of the Business Combination for the net assets
of OACB as of the Closing Date, accompanied by a
recapitalization within the scope of IFRS 2.
Our audit procedures included amongst others:
•
We obtained the relevant Business Combination
Agreements and a detailed understanding of the
accounting treatment and transaction.
•
We evaluated the appropriateness of
management’s accounting treatment of the
transaction and equity instruments.
•
We evaluated whether the business
combination transaction should be treated
within the scope of IFRS 3 or IFRS 2, since OACB,
as special purpose acquisition company, is a non
-
operational entity and does not possess inputs
or perform processes necessary to create an
economic output; therefore, OACB does not
constitute a business.
•
We involved specialists to evaluate the fair value
of the shares i
ssued by comparing these to OACB
share price at Closing Date and assessing the
application of a discount for the lack of
7
As part of the Business Combination, the Predecessor
and OACB’s shareholders were granted a total of
38,330,000 (“Predecessor Earn Out Shares”) and
1,250,000 (“OACB Earn Out Shares”) Ordinary Shares
respectively subject to certain vesting conditions.
Additionally, as p
art of the Business Combination the
Company assumed the 10,916,647 outstanding
warrants (“OACB Warrants”), on substantially the
same contractual terms and conditions as were in
effect immediately prior to the Business Combination.
The Predecessor Earn Out
Shares, OACB Earn Out
Shares and OACB warrants are accounted for as
derivative financial instruments in accordance with
IAS 32.
We identified the Company’s accounting for the
Business Combination and the Predecessor Earn Out
Shares, OACB Earn Out Shares and OACB Warrants as
Key audit matter because of its importance for the
users’ understanding of the transaction, the complexity
of the agreements and the significant judgment used
by the Management relating to the valuation and
classification in the Company’s consolidated financial
statements.
marketability for those shares that are subject to
lock-up terms.
•
With regard to the accounting of the OACB
warrants, we involved speci
alists to assist us in
evaluating the appropriateness of:
•
Management’s classification of the instruments
as derivative financial liabilities according to IAS
32;
•
Management’s valuation approach for public
and private warrants. We evaluated the fair
value
of both types of warrants by comparing
these to the publicly listed price of the public
warrants.
•
We evaluated the sufficiency of the related
disclosures in Note 1.1
Classification and valuation of new financing
arrangements
— Refer to Notes 20 to the
consolidated
financial statements
As disclosed in Note 20 to the consolidated financial
statements, the Group initiated several financing
arrangements, including among others the following:
On 16 November 2022, the Group amended and
upsized the original outstanding bonds, which in
accordance with IFRS 9 was accounted for as an
extinguishment of the existing liability given a
substantial modification was made to the terms of the
outstanding bonds due to the upsize amount and
change
in interest rates;
Through a series of transaction, the Group entered in
2022 into settlement agreements with related parties
and a new subordinated loan agreement on 16
November 2022, under which amongst other things
the Group agreed to rollover the prior outstanding loan
into new subordinated loan agreement and
contingently issuable penny warrants to the
bondholders. The Group determined that these
transactions were a substantial modification to its
related party loans and accounted for the transaction
as an extinguishment.
On 16 November, the Group issued a new convertible
bond for the Share Purchase Agreement and the
acquisition of the Alvotech Facility. Bondholders have
Our audit procedures included amongst others:
•
We obtained an understanding of the Group’s
recognition, derecognition and measurement
policies for derivative financial instruments;
•
We evaluated the design effectiveness and
implementation of relevant controls;
• We involved internal accounting
specialists in
the evaluation of:
o
The appropriateness of the Group’s
substantial modification assessment
and the subsequent extinguishment of
the Senior Bonds and Alvogen Facility
loan;
o
The appropriateness of the Group’s
classification of the derivative fi
nancial
instruments;
•
We involved internal fair value specialists in the
evaluation of:
o
Input data used in the Group’s
valuation models by comparing it to
contract terms and independent
sources of available external market
data;
o The appropriateness of metho
d
adopted by the Group to develop the
8
the right to convert their outstanding bond into
ordinary shares of Alvotech at
specific date.
On 20 December 2022, the Group issued two tranches
of Convertible bonds. Tranche A is ISK denominated
while tranche B is USD denominated. Holders of the
bonds of both Tranche A and Tranche B, may elect to
convert all or part of the principal amount and accrued
coupon into Alvotech ordinary shares at a fixed
conversion rate.
We considered the change in the terms of the financing
arrangements and the measurement of fair value for
derivatives and other financial instruments as key audit
matters, as the application of the accounting standards
and the development of the assumptions referred to
above involve a high level of complexity and require
significant judgment and estimates from Management.
value of the derivative financial
instrument;
o
Key assumptions such as the group’s
applied volatility, risky yield and
scenario analysis;
o
Whether the terms and conditions of
the underlying agreements were made
at arm’ length basis;
•
We evaluated the compliance of the disclosure
in Note 20 to the consolidated financial
statements with disclosure requirements of the
applicable accounting standard.
Ot
her information
Th
e Board of Directors is responsible for the other information. The other information comprises the
information stated in the consolidated annual report including the consolidated management report and the
Corporate Governance Statement but does not include the consolidated financial statements and our report of
the "réviseur d’entreprises agréé" thereon.
O
ur opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
I
n connection with our audit of the consolidated financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the
consolidated financial statements, or our knowledge obtained in the audit or otherwise appears to be
materially misstated. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report this fact. We have nothing to report in this
regard.
Res
ponsibilities of the Board of Directors and Those Charged with Governance for the Consolidated Financial
Statements
Th
e Board of Directors is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with IFRSs as adopted by the European Union, and for such internal control as the
Board of Directors determines is necessary to enable the preparation of consolidated financial statements that
are free from material misstatement, whether due to fraud or error.
9
In preparing the consolidated financial statements the Board of Directors is responsible for assessing the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Group
or to cease operations, or has no realistic alternative but to do so.
T
he Board of Directors is responsible for presenting and marking up the consolidated financial statements in
compliance with the requirements set out in the Delegated Regulation 2019/815 on European Single Electronic
Format as amended (“the ESEF Regulation”).
T
hose charged with governance are responsible for overseeing the Group’s financial reporting process.
Res
ponsibilities of the “réviseur d’entreprises agréé” for the Audit of the Consolidated Financial Statements
T
he objectives of our audit are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and to issue a
report of the “réviseur d’entreprises agréé” that includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in accordance with the EU Regulation N° 537/2014,
the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of these consolidated financial statements.
As
part of an audit in accordance with the EU Regulation N° 537/2014, the Law of 23 July 2016 and with ISAs as
adopted for Luxembourg by the CSSF, we exercise professional judgment and maintain professional skepticism
throughout the audit. We also:
• Identify and assess the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting
a
m
aterial misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accountin
g
e
stimates and related disclosures made by the Board of Directors.
• Conclude on the appropriateness of Board of Directors use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our report of the
“réviseur d’entreprises agréé” to the related disclosures in the consolidated financial statements or, i
f
su
ch disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our report of the “réviseur d’entreprises agréé”. However, futur
e
e
vents or conditions may cause the Group to cease to continue as a going concern.
10
• Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities an
d
b
usiness activities within the Group to express an opinion on the consolidated financial statements We
are responsible for the direction, supervision and performance of the Group audit. We remain solely
r
esponsible for our audit opinion.
O
ur responsibility is also to assess whether the consolidated financial statements have been prepared in all
material respects with the requirements laid down in the ESEF Regulation.
We
communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that
we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, “actions taken to eliminate
threats or safeguards applied”.
From the matters communicated with those charged with governance, we determine those matters that were
of most significance in the audit of the consolidated financial statements of the current period and are
therefore the key audit matters. We describe these matters in our report unless law or regulation precludes
public disclosure about the matter.
Report on Other Legal and Regulatory Requirements
We
have been appointed as “réviseur d’entreprises agréé” by the General Meeting of the Shareholder on
7 June 2022 and the duration of our uninterrupted engagement, including previous renewals and
reappointments, is one year.
The co
nsolidated management report is consistent with the consolidated financial statements and has been
prepared in accordance with applicable legal requirements.
T
he accompanying Corporate Governance Statement is presented on pages 72 to 77. The information required
by Article 68ter paragraph (1) letters c) and d) of the law of 19 December 2002 on the commercial and
companies register and on the accounting records and annual accounts of, as amended, is consistent with the
consolidated financial statements and has been prepared in accordance with applicable legal requirements.
11
We have checked the compliance of the consolidated financial statements of the Group as at
31 December 2022 with the relevant statutory requirements set out in the ESEF Regulation that are applicable
to consolidated financial statements
For the Group, it relates to:
- Financial statements prepared in a valid xHTML format;
- The XBRL markup of the consolidated financial statements using the core taxonomy and the
common rules on markups specified in the ESEF.
I
n our opinion, the consolidated financial statements of the Group as at 31 December 2022, have been
prepared, in all material respects, in compliance with the requirements laid down in the ESEF Regulation.
W
e confirm that the audit opinion is consistent with the additional report to the audit committee.
We
confirm that the prohibited non-audit services referred to in the EU Regulation N° 537/2014 were not
provided and that we remained independent of the Group in conducting the audit.
F
or Deloitte Audit, Cabinet de révision agréé
N
ick Tabone, Réviseur d’entreprises agréé
Partner
1
March 2023
USD in thousands, except for per share amounts
Notes
5 24,836 -
5 58,193 36,772
1,988 2,912
(64,095) -
(180,622) (191,006)
(186,742) (84,134)
Operating loss (346,442) (235,456)
26 (2,590) (2,418)
7 2,549 51,568
7 (188,419) (117,361)
10,566 2,681
20 (27,311) 151,788
Non-operating (loss) / profit (205,205) 86,258
Loss before taxes (551,647) (149,198)
10 38,067 47,694
Loss for the year (513,580) (101,504)
Other comprehensive income / (loss)
Item that will be reclassified to profit or loss in subsequent periods:
(6,111) (305)
Total comprehensive loss (519,691) (101,809)
Loss per share
11 (2.60) (0.92)
2022
2021
Consolidated Statements of Profit or Loss and Other Comprehensive Income or
Loss for the years ended 31 December 2022 and 2021
License and other revenue ......................................................................................................................................
Other income .............................................................................................................................................................
Cost of product revenue ..........................................................................................................................................
Product revenue ........................................................................................................................................................
General and administrative expenses ....................................................................................................................
Share of net loss of joint venture ...........................................................................................................................
Finance income .........................................................................................................................................................
Finance costs ..............................................................................................................................................................
Research and development expenses ....................................................................................................................
Exchange rate difference .........................................................................................................................................
(Loss) / gain on extinguishment of financial liabilities ......................................................................................
Income tax benefit ....................................................................................................................................................
Exchange rate differences on translation of foreign operations ......................................................................
Basic and diluted loss for the year per share .......................................................................................................
The accompanying notes are an integral part of these Consolidated Financial Statements
Alvotech - Consolidated Financial Statements 31.12.2022 12 All amounts are in USD
USD in thousands
Notes
Non-current assets
12 220,594 78,530
13 47,501 126,801
14 11,643 12,367
15 25,652 21,509
5 3,286 1,479
26 48,568 55,307
5,780 1,663
16 25,187 10,087
10 209,496 170,418
597,707 478,161
Current assets
17 71,470 39,058
5 32,972 29,396
5 25,370 17,959
18 32,949 14,736
24 1,548 1,111
16 66,427 17,556
230,736 119,816
828,443 597,977
Receivables from related parties ............................................................................................
31 December
2022
Trade receivables ......................................................................................................................
Other current assets .................................................................................................................
Contract assets ..........................................................................................................................
Property, plant and equipment ..............................................................................................
Total current assets
Other intangible assets ............................................................................................................
31 December
2021
Total non-current assets
Cash and cash equivalents ......................................................................................................
Other long-term assets ............................................................................................................
Contract assets ..........................................................................................................................
Restricted cash ..........................................................................................................................
Consolidated Statements of Financial Position as of 31 December 2022 and 2021
Right-of-use assets ...................................................................................................................
Goodwill ....................................................................................................................................
Investments in joint venture ..................................................................................................
Total assets
The accompanying notes are an integral part of these Consolidated Financial Statements
Deferred tax assets ...................................................................................................................
Inventories .................................................................................................................................
Alvotech - Consolidated Financial Statements 31.12.2022 13 All amounts are in USD
USD in thousands
Notes
Equity
19 2,126 135
19 1,058,432 1,000,118
20, 22 30,582 -
(1,442) 4,669
(1,654,114) (1,140,534)
Total equity (564,416) (135,612)
Non-current liabilities
20 744,654 398,140
27 380,232 -
2 7,440 7,440
13 35,369 114,845
21 544 56,334
5 57,017 44,844
10 309 150
Total non-current liabilities 1,225,565 621,753
Current liabilities
49,188 28,587
13 5,163 7,295
20 19,916 2,771
24 1,131 638
5 36,915 29,692
934 841
25 54,047 42,012
Total current liabilities 167,294 111,836
Total liabilities 1,392,859 733,589
Total equity and liabilities 828,443 597,977
The accompanying notes are an integral part of these Consolidated Financial Statements
Taxes payable ............................................................................................................................
Contract liabilities .....................................................................................................................
Liabilities to related parties .....................................................................................................
Other long-term liability to related party .............................................................................
Lease liabilities ..........................................................................................................................
Lease liabilities ..........................................................................................................................
Other current liabilities ............................................................................................................
Borrowings ................................................................................................................................
Long-term incentive plan ........................................................................................................
31 December
2021
31 December
2022
Consolidated Statements of Financial Position as of 31 December 2022 and 2021
Current maturities of borrowings ..........................................................................................
Derivative financial liabilities .................................................................................................
Share capital ...............................................................................................................................
Other reserves ...........................................................................................................................
Contract liabilities .....................................................................................................................
Trade and other payables ........................................................................................................
Accumulated deficit .................................................................................................................
Deferred tax liability .................................................................................................................
Share premium ..........................................................................................................................
Translation reserve ...................................................................................................................
Alvotech - Consolidated Financial Statements 31.12.2022 14 All amounts are in USD
USD in thousands
Notes
Cash flows from operating activities
(513,580) (101,504)
Adjustments for non-cash items:
21 (4,803) -
1.1 83,411 -
21 5,492 17,955
8 20,409 18,196
12 - 2,092
15 2,755 3,993
26 2,590 2,418
7 (2,549) (51,568)
7 188,419 117,361
20 27,311 (151,788)
22 10,317 -
(10,566) (2,681)
10 (38,067) (47,694)
Operating cash flow before movement in working capital (228,861) (193,220)
(32,412) (29,412)
(3,576) (28,813)
56 (453)
(9,218) 15,286
(17,194) (4,363)
16,442 14,318
19,396 21,470
(21,384) 5,160
Cash used in operations (276,751) (200,027)
568 16
(35,372) (28,004)
(834) (155)
Net cash used in operating activities (312,389) (228,170)
Cash flows from investing activities
12 (37,880) (20,462)
12 379 -
15 (11,122) (20,171)
20 (14,914) -
Net cash used in investing activities (63,537) (40,633)
Cash flows from financing activities
20 (34,714) (37,496)
13 (11,147) (7,350)
20 193,678 113,821
19 - 185,856
20 (12,102) -
1.1 174,930 -
1.1 (5,562) -
1.1 9,827 -
20 160,000 -
20 (50,000) -
Net cash generated from financing activities 424,910 254,831
2021
Consolidated Statements of Cash Flows for the years ended 31 December 2022 and 2021
Exchange rate difference .........................................................................................................................................
Increase / (decrease) in liabilities with related parties ........................................................................................
(Increase) / decrease in contract assets ................................................................................................................
Share listing expense .................................................................................................................................................
Long-term incentive plan expense .........................................................................................................................
Finance costs ..............................................................................................................................................................
Loss/(Gain) on extinguishment of financial liabilities ......................................................................................
Share based payments ..............................................................................................................................................
Depreciation and amortization ...............................................................................................................................
Income tax benefit ....................................................................................................................................................
Increase in inventories .............................................................................................................................................
(Increase) / decrease in trade receivables .............................................................................................................
2022
Loss for the year ........................................................................................................................................................
Gain on extinguishment of SARs liability ............................................................................................................
Impairment of property, plant and equipment ...................................................................................................
Impairment of other intangible assets ..................................................................................................................
Share of net loss of joint venture ...........................................................................................................................
Finance income .........................................................................................................................................................
Increase in other assets ............................................................................................................................................
Increase in trade and other payables .....................................................................................................................
Increase in contract liabilities ..................................................................................................................................
(Decrease) / increase in other liabilities ................................................................................................................
Interest received ........................................................................................................................................................
Interest paid ...............................................................................................................................................................
Income tax paid .........................................................................................................................................................
Acquisition of property, plant and equipment ....................................................................................................
Disposal of property, plant and equipment .........................................................................................................
Acquisition of intangible assets ..............................................................................................................................
Repayment of loans from related parties .............................................................................................................
Proceeds on issue of equity shares ........................................................................................................................
Restricted cash in connection with the amended bond agreement .................................................................
Repayments of borrowings .....................................................................................................................................
Repayments of principal portion of lease liabilities ............................................................................................
Proceeds from new borrowings .............................................................................................................................
Transaction costs for amended borrowing agreements ....................................................................................
Gross proceeds from the PIPE Financing ..........................................................................................................
Gross PIPE Financing fees paid ............................................................................................................................
Proceeds from the Capital Reorganization ..........................................................................................................
Proceeds from loans from related parties ............................................................................................................
Alvotech - Consolidated Financial Statements 31.12.2022 15 All amounts are in USD
48,984 (13,972)
16 17,556 31,689
(113) (161)
16 66,427 17,556
Supplemental cash flow disclosures (Note 28)
The accompanying notes are an integral part of these Consolidated Financial Statements
Increase / (decrease) in cash and cash equivalents .............................................................................................
Cash and cash equivalents at the beginning of the year ....................................................................................
Effect of movements in exchange rates on cash held .......................................................................................
Cash and cash equivalents at the end of the year ........................................................................
Alvotech - Consolidated Financial Statements 31.12.2022 16 All amounts are in USD
Share Other Accumulated Total
USD in thousands Share capital premium reserves deficit equity
73 166,740 - 4,974 (1,039,030) (867,243)
- - - - (101,504) (101,504)
- - - (305) - (305)
- - - (305) (101,504) (101,809)
62 833,378 - - - 833,440
135 1,000,118 - 4,669 (1,140,534) (135,612)
- - - - (513,580) (513,580)
- - - (6,111) - (6,111)
- - - (6,111) (513,580) (519,691)
175 169,193 - - - 169,368
35 30,267 - - - 30,302
1,731 (173,296) - - - (171,565)
50 32,150 - - - 32,200
- - 14,548 - - 14,548
- - 16,034 - - 16,034
2,126 1,058,432 30,582 (1,442) (1,654,114) (564,416)
The accompanying notes are an integral part of these Consolidated Financial Statements
Consolidated Statements of Changes in Equity for the years ended 31 December 2022 and 2021
Translation
reserve
Settlement of SARs with shares....................................................................................
Settlement of related party loans with Ordinary Shares...........................................
Loss for the year..............................................................................................................
Foreign currency translation differences.....................................................................
Total comprehensive loss..............................................................................................
Increase in share capital..................................................................................................
At 31 December 2021................................................................................
At 31 December 2022................................................................................
Capital Reorganization....................................................................................................
Recognition of equity component of convertible bonds.........................................
Recognition of share-based payments.........................................................................
Loss for the year..............................................................................................................
Foreign currency translation differences.....................................................................
Total comprehensive loss..............................................................................................
PIPE Financing................................................................................................................
At 1 January 2021......................................................................................
Alvotech - Consolidated Financial Statements 31.12.2022 17 All amounts are in USD
Notes to the Consolidated Financial Statements
1. General information
1.1 Capital Reorganization
As part of the Business Combination, Predecessor shareholders were granted a total of 38,330,000 Ordinary Shares subject to
certain vesting conditions (“Predecessor Earn Out Shares”). Former OACB shareholders were granted a total of 1,250,000
Ordinary Shares subject to certain vesting conditions (“OACB Earn Out Shares”). Additionally, as part of the Business
Combination the Company assumed the 10,916,647 outstanding warrants (“OACB Warrants”), on substantially the same
contractual terms and conditions as were in effect immediately prior to the Business Combination. See Note 27 for further details.
The Business Combination was accounted for as a capital reorganization. Under this method of accounting, OACB was treated as
the “acquired” company for financial reporting purposes, with Alvotech Holdings S.A. being the accounting acquirer and
accounting predecessor. Accordingly, the capital reorganization was treated as the equivalent of Alvotech issuing shares at the
closing of the Business Combination for the net assets of OACB as of the Closing Date, accompanied by a recapitalization. The
capital reorganization, which was not within the scope of IFRS 3 since OACB did not meet the definition of a business in
accordance with that guidance, was accounted for within the scope of IFRS 2. In accordance with IFRS 2, Alvotech recorded a one-
time non-cash share listing expense of $83.4 million, recognized as a general and administrative expense, based on the excess of the
fair value of Alvotech shares issued, at the Closing Date, over the fair value of OACB's identifiable net assets acquired. The fair
value of shares issued was estimated based on a market price of $9.38 per share as of 15 June 2022.
Concurrently with the execution of the Business Combination Agreement, OACB and Alvotech entered into subscription
agreements (“Subscription Agreements”) with certain investors (the “PIPE Financing”). On 15 June 2022, immediately prior to the
closing of the Business Combination, the PIPE Financing was closed, pursuant to the Subscription Agreements, in which
subscribers collectively subscribed for 17,493,000 Ordinary Shares at $10.00 per share for an aggregate subscription price equal to
$174.9 million.
On 15 June 2022 (the “Closing Date”), the Company consummated the capital reorganization with Alvotech Holdings S.A. and
OACB (the “Business Combination” or “Capital Reorganization”) pursuant to the business combination agreement, dated as of 7
December 2021, as amended by an amendment agreement dated 18 April 2022 and 7 June 2022 (the “Business Combination
Agreement”), by and among the Company, Oaktree Acquisition Corp. II (“OACB”) and the Predecessor. The closing of the
Business Combination resulted in the following transactions:
● OACB merged with and into the Company, whereby (i) all of the outstanding ordinary shares of OACB (“OACB Ordinary
Shares”) were exchanged for ordinary shares of Alvotech (“Ordinary Shares”) on a one-for-one basis, pursuant to a share capital
increase of Alvotech and (ii) all of the outstanding warrants of OACB ceased to represent a right to acquire OACB Ordinary
Shares and now represent a right to be issued one Ordinary Share, with Alvotech as the surviving company in the merger. Prior to
the merger OACB shares were redeemed, resulting in $9.8 million of cash proceeds from the OACB trust account;
● Alvotech redeemed and canceled the initial shares held by the initial sole shareholder of Alvotech pursuant to a share capital
reduction of Alvotech;
● The legal form of Alvotech changed from a simplified joint stock company (société par actions simplifiée) to a public limited
liability company (société anonyme) under Luxembourg law; and
● The Predecessor merged with and into the Parent, whereby all outstanding ordinary shares of the Predecessor (“Predecessor
Ordinary Shares”) were exchanged for Ordinary Shares, pursuant to a share capital increase of Alvotech, with Alvotech as the
surviving company in the merger.
Alvotech (the “Parent” or the “Company” or “Alvotech”), previously known as Alvotech Lux Holdings S.A.S., the surviving
company after the Business Combination (as defined below) with, among other parties, Alvotech Holdings S.A. (the
“Predecessor”), is a Luxembourg public limited company (société anonyme) incorporated and existing under the laws of the Grand
Duchy of Luxembourg, having its registered office at 9, rue de Bitbourg, L-1273 Luxembourg, Grand Duchy of Luxembourg and
is registered with the Luxembourg Trade and Companies’ Register under number B 258884. The Company was incorporated on 23
August 2021. These consolidated financial statements were approved by the Group’s Board of Directors, and authorized for issue,
on 1 March 2023.
The Company and its subsidiaries (collectively referred to as the “Group”) are a global biotech company specialized in the
development and manufacture of biosimilar medicines for patients worldwide. The Group has commercialized a certain biosimilar
product and has multiple biosimilar molecules.
Alvotech - Consolidated Financial Statements 31.12.2022 18 All amounts are in USD
Notes to the Consolidated Financial Statements
Shares (in 000s)
OACB Shareholders
976,505
5,000,000
1,250,000
7,226,505
56,060$
9,100
65,160
(18,251)
83,411
1.2 Information about subsidiaries and joint ventures
Place of
Entity name establishment
31.12.2022 31.12.2021
Alvotech hf...................................................... Biopharm. 3,885,102 Iceland 100.00% 100.00%
Alvotech Germany GmbH........................... Biopharm. 31,182 Germany 100.00% 100.00%
Alvotech Swiss AG........................................ Biopharm. 153,930 Switzerland 100.00% 100.00%
Alvotech Hannover GmbH......................... Biopharm. 29,983 Germany 100.00% 100.00%
Alvotech Malta Ltd........................................ Group Serv. 80,450 Malta 100.00% 100.00%
Alvotech USA Inc.......................................... Biopharm. 10 USA 100.00% 100.00%
Alvotech UK Ltd............................................ Group Serv. 135 UK 100.00% 100.00%
Alvotech Manco ehf...................................... Group Serv. 203,046 Iceland 100.00% -
Alvotech Biosciences India Pvt Ltd............ Biopharm. 96,113 India 100.00% -
Fasteignafélagið Sæmundur hf..................... Real Estate 12,965,337 Iceland 100.00% -
Alvotech & CCHN Bioph.. Co. Ltd*......... Biopharm. 110,000,021 China 50.00% 50.00%
1.3 Information about shareholders
Significant shareholders of the Company are Aztiq Pharma Partners S.à r.l. (Aztiq) and Alvogen Lux Holdings S.à r.l. (Alvogen),
with 40.7% and 35.8% ownership interest as of 31 December 2022, respectively. The remaining 23.5% ownership interest is held
by various entities, with no single shareholder holding more than 2.4% ownership interest as of 31 December 2022.
Issued and paid
capital
(presented in
whole shares)
Fair value of Shares issued to OACB as of 15 June 2022..................................................................
Adjusted net liabilities of OACB as of 15 June 2022..........................................................................
Difference - being the share listing expense..............................................................................................
In connection with the Business Combination and PIPE Financing, the Company incurred $28.5 million of transaction costs,
which represent legal, financial advisory, and other professional fees in connection with the Business Combination and PIPE
Financing, during the year ended 31 December 2022. Of this amount, $5.6 million represented equity issuance costs related to
PIPE Financing that were capitalized in share premium. The remaining $22.9 million was recognized as general and administrative
expense.
* Alvotech & CCHN Biopharmaceutical Co. Ltd. is an unconsolidated joint venture (see Note 26).
Class B Shareholders..................................................................................................................................
Estimated fair market value......................................................................................................................
Total Alvotech Shares issued to OACB shareholders.........................................................................
Fair value of OACB Earn Out Shares issued to OACB as of 15 June 2022..................................
Class A Shareholders..................................................................................................................................
Aztiq and Alvogen held 45.1% and 39.5% ownership interest as of 31 December 2021, respectively. The remaining 15.4%
ownership interest was held by various entities, with no single shareholder holding more than 2.4% ownership interest as of 31
December 2021.
OACB Earn Out Shares............................................................................................................................
Proportion of ownership and
voting power held by Alvotech
Principal
activity
Alvotech - Consolidated Financial Statements 31.12.2022 19 All amounts are in USD
Notes to the Consolidated Financial Statements
1.4 Impact of COVID-19, the Russia and Ukraine Conflict, and Economic Conditions
1.5 Going concern
The Company believes that inflation will have a general impact on the business in line with overall price increases, increases in the
cost of borrowing, and operating in an inflationary economy. We cannot predict the timing, strength, or duration of any
inflationary period or economic slowdown or its ultimate impact on the Company. If the conditions in the general economy
significantly deviate from present levels and continue to deteriorate it could have a material adverse effect on the Group’s business,
financial condition, results of operations and growth prospects.
On 25 January 2023, the Company issued an additional $10.0 million in Tranche B Convertible Bonds. Holders of the Tranche B
Convertible Bonds may elect, at their sole discretion, to convert all or part of the principal amount and accrued interest into
Alvotech Ordinary Shares at a conversion price of $10.00 per share on December 31, 2023, or June 30, 2024. See Note 29 for
further details.
In February 2022, Russia began a military invasion of Ukraine. The global response to this invasion could have an adverse impact
on the Group’s business, including the effects of relocating clinical trials and the Group’s ability to market and sell products in
Europe, by creating disruptions in global supply chain, and potentially having an adverse impact on the global economy, European
economy, financial markets, energy markets, currency rates, and otherwise. Currently, the conflict has not had a material impact on
the Group’s financial condition, results of operations, the timelines for biosimilar product development, expansion efforts or the
Group’s operations as a whole.
With the ongoing COVID-19 pandemic, the Group created a COVID-19 task force which implemented a business continuity plan
to address and mitigate the impact of the pandemic on the Group’s business and operations across sites. As a result, in the short-
term, the pandemic has not had a material impact on the Group’s financial condition, results of operations, the timelines for
biosimilar product development, expansion efforts or the Group’s operations as a whole. However, the extent to which the
pandemic will impact the Group’s business, biosimilar product development and expansion efforts, corporate development
objectives and the value of and market for the Ordinary Shares will depend on future developments that are highly uncertain and
cannot be predicted with confidence at this time, such as the ultimate direction of the pandemic, emergence and spread of new
variants of the disease, travel restrictions, quarantines, social distancing, business closure requirements and the effectiveness of
other actions taken globally to contain and treat the disease. The global economic slowdown, the overall disruption of global supply
chains and distribution systems, the effects of this on the work of appropriate regulatory authorities in different regions and the
other risks and uncertainties associated with the pandemic could have a material adverse effect on the Group’s business, financial
condition, results of operations and growth prospects.
The Group has primarily funded its operations with proceeds from the issuance of ordinary shares and the issuance of loans and
borrowings to both related parties and third parties. The Group has also incurred recurring losses since its inception, including net
losses of $513.6 million and $101.5 million for the years ended 31 December 2022 and 2021, respectively, and had an accumulated
deficit of $1,654.1 million as of 31 December 2022. The Group has not generated positive operational cash flow, largely due to the
continued focus on biosimilar product development and expansion efforts.
As of 31 December 2022, the Group had cash and cash equivalents, excluding restricted cash, of $66.4 million and current assets
less current liabilities of $63.4 million. In February and March 2022, Alvotech received $25.0 million from each of Alvogen and
Aztiq pursuant to interest free loan advances provided by both significant shareholders, who agreed to settle these outstanding
amounts in Ordinary Shares rather than cash in July 2022. The closing of the Business Combination and the PIPE Financing
provided the Group with net proceeds of $131.9 million that is expected to be used to finance the continuing development and
commercialization of its biosimilar products. Additionally, during the year ended 31 December 2022 the Company received $110.0
million in loans from Alvogen, successfully amended and upsized the outstanding Senior Bonds resulting in $57.9 million of net
cash proceeds, along with net cash proceeds of $73.4 million from the issuance of the Tranche A and Tranche B Convertible
Bonds and Facility Loans, of which $50.0 million was used to repay amounts drawn under the Alvogen Facility.
Alvotech - Consolidated Financial Statements 31.12.2022 20 All amounts are in USD
Notes to the Consolidated Financial Statements
2. Summary of significant accounting policies
2.1 Basis of preparation
2.2 Basis of consolidation
Additionally, the Group expects to continue to source its financing during the development of its biosimilar products from new
and existing out-license contracts with customers. In light of these conditions and events, along with those noted in Note 1.4,
management evaluated whether there is substantial doubt about the Group’s ability to continue as a going concern for at least one
year after the date that the consolidated financial statements are issued. Based on the cash on hand, funding received, and projected
future cash flows, management concluded that the Company has the ability to continue as a going concern for at least one year
after the date that the consolidated financial statements are issued.
On 10 February 2023, Alvotech completed a private placement, at the then-prevailing exchange rates, of its Ordinary Shares at a
purchase price of $11.57 per Ordinary Share, resulting in proceeds of $137.0 million and transaction costs of $4.8 million. See Note
29 for further details.
The consolidated financial statements have been prepared on a historical cost basis, except for certain financial assets and financial
liabilities which have been measured at fair value. Historical cost is generally based on the fair value of the consideration given in
exchange for goods and services. The consolidated financial statements are presented in U.S. Dollar (USD) and all values are
rounded to the nearest thousand unless otherwise indicated.
• has power over the investee;
• is exposed, or has rights, to variable returns from its involvement with the investee; and
• has the ability to use its power to affect its returns.
As such, the consolidated financial statements have been prepared on a going concern basis. However, although management
continues to pursue these plans, there is no assurance that the Group will be successful in obtaining sufficient funding on terms
acceptable to the Group to fund continuing operations, if at all. If financing is obtained, the terms of such financing may adversely
affect the holdings or the rights of the Group’s shareholders. The ability to obtain funding, therefore, is outside of management’s
control and is a material uncertainty that may cast significant doubt upon the Group’s ability to continue as a going concern.
When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting
rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers
all relevant facts and circumstances in assessing whether or not the Company's voting rights in an investee are sufficient to give it
power, including:
• the size of the Company's holding of voting rights relative to the size and dispersion of holdings of the other vote holders;
• potential voting rights held by the Company, other vote holders or other parties;
• rights arising from other contractual arrangements; and
• any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the
relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders' meetings.
The consolidated financial statements of the Group have been prepared in accordance and in compliance with International
Financial Reporting Standards (IFRS) as adopted by the European Union, as issued by the International Accounting Standards
Board (IASB), which comprise all standards and interpretations approved by the IASB.
All amendments to IFRSs issued by the IASB that are effective for annual periods that begin on or after 1 January 2022 have been
adopted as further described within the footnotes to the consolidated financial statements. The Group has not adopted any
standards or amendments to standards in issue that are available for early adoption.
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the
Company and its subsidiaries. Control is achieved when the Company:
Alvotech - Consolidated Financial Statements 31.12.2022 21 All amounts are in USD
Notes to the Consolidated Financial Statements
All intra-group transactions, balances, income and expenses are eliminated in full in consolidation.
2.3 Investments in joint ventures
2.4 Critical accounting judgments and key sources of estimation uncertainty
The carrying amount of equity-accounted investments is assessed for impairment as a single asset. Impairment losses are incurred
only if there is objective evidence of impairment as a result of loss events that have an impact on estimated future cash flows and
that can be reliably estimated. Losses expected as a result of future events are not recognized. The Group did not recognize any
impairment losses related to its investment in the joint venture for the years ended 31 December 2022 and 2021.
• the size of the Company's holding of voting rights relative to the size and dispersion of holdings of the other vote holders;
• potential voting rights held by the Company, other vote holders or other parties;
• rights arising from other contractual arrangements; and
• any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the
relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders' meetings.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses
control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in
the consolidated statements of profit or loss and other comprehensive income or loss from the date the Company gains control
until the date when the Company ceases to control the subsidiary. The Company 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.
To the extent the Group concludes that it does not control, and thus consolidate, a joint venture, the Group accounts for its
interest in joint ventures using the equity method of accounting. As such, investments in a joint venture are initially recognized at
cost and the carrying amount is subsequently adjusted for the Group’s share of the profit or loss of the joint venture, as well as any
distributions received from the joint venture. The Group carries its ownership interest in a joint venture as “Investment in joint
venture” on the consolidated statements of financial position. The Group’s profit or loss includes its share of the profit or loss of
the joint venture and, to the extent applicable, other comprehensive income or loss for the Group includes its share of other
comprehensive income or loss of the joint venture. The Group’s share of a joint venture’s profit or loss in a particular year is
presented as “Share of net loss of joint venture” in the consolidated statements of profit or loss and other comprehensive income
or loss.
Refer to Note 26 for additional information regarding the Group’s joint venture as of 31 December 2022 and 2021 and for the
years ended 31 December 2022 and 2021.
The preparation of the consolidated financial statements in conformity with IFRS requires Group management to make
judgments, estimates and assumptions about the reported amounts of assets, liabilities, income and expenses that are not readily
apparent from other sources.
Existing circumstances and assumptions may change due to events arising that are beyond the Group’s control. Therefore, actual
results may differ from these estimates.
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 the revision and future periods
if the revision affects both current and future periods.
The estimates and associated assumptions are based on information available when the consolidated financial statements are
prepared, historical experience and other factors that are considered to be relevant. Judgments and assumptions involving key
estimates are primarily made in relation to the measurement and recognition of revenue (as described in Note 2.6 and Note 5), the
measurement and recognition of extinguishment of financial liabilities (as described in Note 2.18 and Note 20), the valuation of
derivative financial liabilities (as described in Note 2.18 and Note 25), the valuation of management share appreciation rights
(SARs) (as described in Note 2.18 and Note 21), and the valuation of deferred tax assets (as described in Note 2.14 and Note 10).
Apart from those involving estimations, critical accounting judgments include the Group’s evaluation as to whether it controls its
joint venture in China (as described in Note 2.3 and 26) and material uncertainties with respect to the Group’s going concern
assessment (as described in Note 1.5).
Alvotech - Consolidated Financial Statements 31.12.2022 22 All amounts are in USD
Notes to the Consolidated Financial Statements
2.5 Segment reporting
2.6 Revenue recognition
Product revenue
Out-licensing revenue
The Group operates and manages its business as one operating segment based on the manner in which the Chief Executive
Officer, the Group’s chief operating decision maker, assesses performance and allocates resources across the Group.
The majority of the Group’s revenue is generated from long-term out-license contracts which provide the customer with an
exclusive right to market and sell products in a particular territory once such products are approved for commercialization. These
contracts typically include the Group’s promises to continue development of the underlying compound and to provide supply of
the product to the customer upon commercialization. The Group concludes that the license, development services and commercial
supply are separate performance obligations. This is because customers generally have the capabilities to perform the necessary
development, manufacturing and commercialization activities on their own or with readily available resources and have the
requisite expertise in the industry and the territory for which the license has been granted. Further, the intellectual property is
generally in a later phase of development at the time the license is granted such that any subsequent development activities
performed by the Group are not expected to significantly modify or transform the intellectual property. The fact that the Group is
contractually obligated to perform development activities for and provide commercial supply to the customer does not impact this
conclusion. The Group’s promise to provide commercial supply to its customers is contingent upon the achievement of regulatory
approval in the particular territory for which the license has been granted.
The consideration to which the Group is entitled pursuant to these contracts generally includes upfront payments and payments
based upon the achievement of development and regulatory milestones. All contracts include a potential refund obligation whereby
the Group must refund the consideration paid by the customer in the event of a technical failure or the occurrence of certain other
matters that result in partial or full cancellation of the contract. As such, the entire transaction price is comprised of variable
consideration, which is estimated using the most likely amount method due to the binary nature of the outcomes under these
contracts. Such variable consideration is included in the transaction price only when it is highly probable that doing so will not
result in a significant reversal of cumulative revenue recognized when the underlying uncertainty associated with the variable
consideration is subsequently resolved. The Group does not account for a significant financing component since a substantial
amount of consideration promised by the customer is variable and the amount or timing of that consideration varies on the basis
of a future event that is not substantially within the control of either party. Certain contracts also include commercialization
milestones upon the first commercial sale of a product in a particular territory, as well as royalties. Commercialization milestones
and royalties are accounted for as sales-based royalties; therefore, such amounts are not included in the transaction price and
recognized as revenue until the underlying sale that triggers the milestone or royalty occurs.
The Company recognizes revenue from the sale of its biosimilar product to commercial partners, identified as the customer, when
control is transferred, and the performance obligations have been satisfied. This is when the title passes to the customer, which is
upon shipment of the product. At that point, the commercial partner has full discretion over the channel and price to sell the
products. Revenue is recognized based on the net selling price from the commercial partners, which is considered to be the
transaction price and includes estimated rebates, returns and chargebacks, and other forms of variable consideration recognized by
the Customer. Variable consideration is accounted for by the Company only to the extent that it is highly probable that a
significant reversal in the revenue recognized will not occur. Variable consideration, which includes any adjustments to the net
selling price, is estimated based on the most likely amount method on a contract-by-contract basis.
Alvotech - Consolidated Financial Statements 31.12.2022 23 All amounts are in USD
Notes to the Consolidated Financial Statements
Other revenue
Upfront payments, when applicable, are received in advance of transferring control of all goods and services. Therefore, a portion
of upfront payments is recorded as a contract liability upon receipt. Due to the existence of refund provisions, upfront payments
and certain development milestone payments are generally included in the transaction price upon submission of the first clinical
trial application to the respective regulatory agency, since it is at this point in time that a significant reversal of cumulative revenue
recognized related to such payments is no longer highly probable. Other development and regulatory milestones may not be
included in the transaction price until such milestones are achieved due to the degree of uncertainty associated with achieving these
milestones. Contract liabilities are presented on the consolidated statements of financial position as either current or non-current
based upon forecasted performance. In certain contracts, the Group may transfer control of goods and services, and thus
recognize revenue, prior to having the right to invoice the customer. In these circumstances, the Group recognizes contract assets
for revenue recognized, and subsequently reclasses the contract asset to trade receivables upon issuing an invoice and the right to
consideration is only conditional on the passage of time. Contract assets are presented on the consolidated statements of financial
position as either current or non-current based upon the expected timing of settlement.
The standalone selling prices of the development services and the license to intellectual property are not directly observable and,
therefore, are estimated. The standalone selling price of the development services is estimated based on the expected costs to be
incurred during the development period, using various data points such as the underlying development budget, contractual
milestones and performance completed at the time of entering into the contract with a customer. The standalone selling price of
the license is estimated using the residual approach on the basis that the Group licenses intellectual property for a broad range of
amounts and has not previously licensed intellectual property on a standalone basis. Therefore, the Group first allocates the
transaction price to the development services and subsequently allocates the remainder of the transaction price to the license. If
product is still in early phase development and the constraint on variable consideration has not been resolved, all the transaction
price is allocated to the development service.
The standalone selling price of the commercial supply is directly observable and the stated prices in the Group’s supply contracts
reflect the standalone selling price of such goods.
The licenses to intellectual property are right of use licenses on the basis that the ongoing development work performed by the
Group does not significantly affect the intellectual property to which the customer has rights. Therefore, control of the license
transfers to the customer at the point in time when the right to use the license is granted to the customer. The license is generally
granted to the customer at the time the contract is executed with the customer.
The Group satisfies its performance obligation related to the development services over time as the Group’s performance
enhances the value of the licensed intellectual property controlled by the customer throughout the performance period. The Group
recognizes revenue using a cost-based input measure since this measure best reflects the progress of the development services and,
therefore, the pattern of transfer of control of the services to the customer. In certain instances, the Group may subcontract
services to other parties for which the Group is ultimately responsible. Costs incurred for such subcontracted services are included
in the Group’s measure of progress for satisfying its performance obligation. Changes in the total estimated costs to be incurred in
measuring the Group’s progress toward satisfying its performance obligation may result in adjustments to cumulative revenue
recognized at the time the change in estimate occurs.
Upon the achievement of regulatory approval and the commencement of commercial sale of its products, the Group will satisfy its
performance obligation related to commercial supply at the point in time when control of the manufactured product is transferred
to the customer. Transfer of control for such goods will occur in accordance with the stated shipping terms.
The Group does not incur incremental costs of obtaining a contract with a customer that would require capitalization. Costs to
fulfill performance obligations are not incurred in advance of performance and, as such, are expensed when incurred.
Other revenue primarily consists of clinical trial support services rendered by the Group for its customers, which is recognized as
the service is provided. Revenue for such services is presented in the consolidated statements of profit or loss and other
comprehensive income or loss net of any discounts.
Alvotech - Consolidated Financial Statements 31.12.2022 24 All amounts are in USD
Notes to the Consolidated Financial Statements
2.7 Cost of product revenue
2.8 Research and development expenses
2.9 General and administrative expenses
2.10 Finance income and finance cost
Research and development expenses primarily consist of personnel costs, material and other lab supply costs, facility costs and
internal and external costs related to the execution of studies and other development program advancement initiatives. Such
expenses also include costs incurred in preparation for commercial launch, such as designing and developing commercial-scale
manufacturing capabilities and processes, quality control processes, production asset validation and other related activities. The
costs also include amortization, depreciation and impairment losses related to software, property, plant and equipment, and right-of-
use assets used in research and development activities and pre-commercial manufacturing and quality control activities.
An internally generated intangible asset arising from the Group’s development is recognized only if the Group can demonstrate:
the technical feasibility of completing the intangible asset so that it will be available for use or sale; the intent to complete the
intangible asset and use or sell it; how the intangible asset will generate probable future economic benefits; the availability of
adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and the ability
to measure reliably the expenditure attributable to the intangible asset during its development.
The amount initially recognized for internally-generated intangible assets is the sum of the expenditures incurred from the date
when the intangible asset first meets the aforementioned recognition criteria. If an internally-generated intangible asset cannot be
recognized, the related development expenditure is charged to profit or loss in the period in which it is incurred.
General and administration expenses primarily consist of personnel-related costs, including salaries and other related compensation
expense, for corporate and other administrative and operational functions including finance, human resources, information
technology and legal, as well as facility-related costs. These costs relate to the operation of the business and are not related to
research and development initiatives.
Cost of product revenue includes the cost of inventory sold, labor costs, manufacturing overhead expenses and reserves for
expected scrap, as well as shipping and freight costs and royalty costs related to in-license agreements.
Expenditures related to general and administration activities are recognized as an expense in the period in which they are incurred.
Finance income consists of changes in the fair value of derivative financial liabilities and interest income. Interest income from a
financial asset is recognized when it is probable that the economic benefits will flow to the Group and the amount of income can
be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective
interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the
financial asset to that asset's net carrying amount on initial recognition.
Expenditures related to research and development activities are generally recognized as an expense in the period in which they are
incurred. Due to significant regulatory uncertainties and other uncertainties inherent in the development of pharmaceutical
products, the Group did not capitalize any research and development expenses as internally-developed intangible assets during the
years ended 31 December 2022 and 2021.
Finance cost consists of changes in the fair value of derivative financial liabilities, interest expense related to lease liabilities and
borrowings, accretion of borrowings and amortization of deferred debt issue costs.
Alvotech - Consolidated Financial Statements 31.12.2022 25 All amounts are in USD
Notes to the Consolidated Financial Statements
2.11 Foreign currency translation
2.12 Fair value measurements
2.13 Goodwill and other intangible assets
The consolidated financial statements are presented in U.S. Dollars, which is the Group’s presentation currency. The Group
maintains the financial statements of each entity within the Group in its respective functional currency. The majority of the
Group’s expenses are incurred in U.S. Dollar and Icelandic Krona, and the majority of the Company’s cash and cash equivalents
are held in a combination of U.S. Dollars and Euros. Transactions in currencies other than the Group’s presentation currency
(foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting
period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items
carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value
was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences on monetary items are recognized in profit or loss in the period in which they arise.
Exchange differences arising on translation of a foreign controlled subsidiary are recognized in other comprehensive income or
loss and accumulated in a translation reserve within equity. The cumulative translation amount is reclassified to profit or loss if and
when the net investment in the foreign controlled subsidiary is disposed.
The Group measures certain financial liabilities at fair value through profit or loss (FVTPL) each reporting period. Fair value is the
price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to
measure the fair values of such financial liabilities, maximizing the use of relevant observable inputs and minimizing the use of
unobservable inputs.
Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques, as
follows:
• Level 1: quoted prices in active markets for identical assets and liabilities;
• Level 2: inputs other than quoted prices that are observable for the asset or liability, either directly (e.g., prices) or indirectly (e.g.,
derived from prices); and
• Level 3: inputs for the asset or liability that are unobservable.
The carrying amounts of cash and cash equivalents, restricted cash, trade receivables, other current assets, contract assets, trade and
other payables and accrued and other liabilities in the Group’s consolidated statements of financial position approximate their fair
value because of the short maturities and nature of these instruments.
For liabilities that are measured at fair value on a recurring basis, the Group determines whether transfers have occurred between
levels in the fair value hierarchy by reassessing the inputs used in determining fair value at the end of each reporting period.
Goodwill
Acquisitions are first reviewed to determine whether a set of assets acquired constitute a business and should be accounted for as a
business combination. If the assets acquired do not meet the definition of a business, the Group will account for the transaction as
an asset acquisition. If the definition of a business combination is met, the Group will account for the transaction using the
acquisition method of accounting. The consideration transferred in a business combination is measured at fair value, which is
calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to
the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-
related costs are recognized in the consolidated statements of profit or loss and other comprehensive income or loss as incurred.
Alvotech - Consolidated Financial Statements 31.12.2022 26 All amounts are in USD
Notes to the Consolidated Financial Statements
Software 3-5 years
Customer relationships 7 years
The Group did not complete any business combinations during the year ended 31 December 2021. Refer to Note 1.1 for the
Business Combination completed during the year ended 31 December 2022.
Goodwill represents the excess of the purchase price of the business combination over the Group's interest in the net fair value of
the identifiable assets, liabilities, contingent liabilities, the amount of any noncontrolling interests in the acquiree and the fair value
of the acquirer's previously held equity interest in the acquiree. Goodwill is reviewed for impairment at least annually, and
whenever there is an indication that the asset may be impaired. An impairment loss is recognized for the amount by which the
asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of
disposal and value in use. The value in use calculation is performed using discounted expected future cash flows. The discount rate
applied to these cash flows is based on the weighted average cost of capital and reflects current market assessments of the time
value of money.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the business
combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those
provisional amounts are adjusted during the measurement period, or as additional assets or liabilities are recognized, to reflect new
information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the
amounts recognized at that date.
Other intangible assets
Other intangible assets consist of software, customer relationships, and intellectual property rights licensed from Biosana (see Note
2.18). Intangible assets acquired in a business combination are identified and recognized separately from goodwill if they satisfy the
definition of an intangible asset and their fair values can be reliably measured. The cost of intangible assets is their fair value at the
acquisition date.
Intangible assets with finite useful lives are reported at cost less accumulated amortization and accumulated impairment losses.
Amortization is recognized on a straight-line basis over an asset’s estimated useful life. The estimated useful life and amortization
method are reviewed at each balance sheet date, with the effect of any changes in estimate being accounted for on a prospective
basis. Intangible assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. The following useful lives are used in the calculation of amortization:
Intangible assets with indefinite useful lives are reviewed for impairment at least annually, and whenever there is an indication that
the asset may be impaired. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. The value
in use calculation is performed using discounted expected future cash flows. The discount rate applied to these cash flows is based
on the weighted average cost of capital and reflects current market assessments of the time value of money.
Alvotech - Consolidated Financial Statements 31.12.2022 27 All amounts are in USD
Notes to the Consolidated Financial Statements
2.14 Income tax
Income tax includes the current tax and deferred tax charge recorded in the consolidated statements of profit or loss and other
comprehensive income or loss.
Current tax
The current tax expense is based on taxable profit for the year. Taxable profit differs from ‘profit before tax’ as reported in the
consolidated statement of profit or loss and other comprehensive income or loss because it excludes items of income or expense
that are taxable or deductible in other years and items that are never taxable or deductible. The Group's current tax expense is
calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Accruals for tax contingencies are made when it is not probable that a tax authority will accept the tax position, based upon
management’s interpretation of applicable laws and regulations and the expectation of how the tax authority will resolve the matter.
Accruals for tax contingencies are measured using either the most likely amount or the expected value amount depending on which
method the entity expects to better predict the resolution of the uncertainty.
Deferred tax
Deferred tax is provided in full for all temporary differences between the carrying amounts of assets and liabilities in the
consolidated financial statements and the corresponding tax bases used in the computation of taxable profit, except to the extent
the temporary difference arises from:
• The initial recognition of an asset or a liability in a transaction that is not a business combination and that affects neither the
taxable profit nor accounting profit;
• The initial recognition of residual goodwill (for deferred tax liabilities only); or
• Investments in subsidiaries, branches, associates and joint ventures, where the Group is able to control the timing of the reversal
of the temporary difference and it is not probable that it will reverse in the foreseeable future.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is
settled or the asset realized, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the
reporting period. The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would
follow from the manner in which the Group expects, at the balance sheet date, to recover or settle the carrying amount of the
assets and liabilities.
Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized
for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those
deductible temporary differences can be utilized. The carrying amount of deferred tax assets is reviewed at the end of each
reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or
part of the asset to be recovered.
Deferred tax is charged or credited to the consolidated statement of profit or loss and other comprehensive income or loss, except
when the tax arises from a business combination or it relates to items charged or credited directly to equity, in which case the
deferred tax is also taken directly to equity.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group
intends to settle its current tax assets and liabilities on a net basis in that taxation authority.
Alvotech - Consolidated Financial Statements 31.12.2022 28 All amounts are in USD
Notes to the Consolidated Financial Statements
2.15 Property, plant and equipment
Facility
Facility equipment
Computer equipment
Leasehold improvements
Furniture and fixtures
2.16 Inventories
Property, plant and equipment is recognized as an asset when it is probable that future economic benefits associated with the asset
will flow to the Group and the cost of the asset can be measured in a reliable manner. Property, plant and equipment which
qualifies for recognition as an asset are initially measured at cost.
The cost of property, plant and equipment includes an asset’s purchase price and any directly attributable costs of bringing the
asset to working condition for its intended use.
5-20 years
3 years
40 years
Depreciation is calculated and recognized as an expense on a straight-line basis over an asset’s estimated useful life. The estimated
useful lives, residual values and depreciation method are reviewed at each balance sheet date, with the effect of any changes in
estimate accounted for on a prospective basis. The following useful lives are used in the calculation of depreciation:
3-15 years
5 years
At the end of each reporting period, or sooner if events triggering an interim impairment assessment occur, the Group reviews the
carrying amounts of its property, plant and equipment to determine whether there is any indication that the value of such assets are
impaired. Triggering events that warrant an interim impairment assessment include, but are not limited to, the technical
obsolescence of equipment or failure of such equipment to meet regulatory requirements. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine the extent of the impairment loss and the carrying amount of
the asset is reduced to its recoverable amount, which is the higher of fair value less costs of disposal and value in use.
Inventories, which consist of raw materials and supplies, work in progress and finished goods are stated at the lower of cost or net
realizable value. Net realizable value is the expected sales price less completion costs and costs to be incurred in marketing, selling
and distributing the inventory. Cost is calculated using the weighted average cost method or the first-in, first-out method,
depending on the nature of the inventory.
Certain of the Group’s property, plant and equipment assets have been pledged to secure borrowings as further described in Note
20. Significant disposals of pledged assets are subject to lender approval. Upon disposal or retirement of an asset, the difference
between the sales proceeds, if applicable, and the carrying amount of the asset is recognized in the consolidated statements of
profit or loss and other comprehensive income or loss at the time of disposal or retirement.
Inventories include direct costs for raw materials and supplies and, as applicable, direct and indirect labor and overhead expenses
that have been incurred to bring inventories to their present location and condition. See Note 17 for further details.
If the net realizable value is lower than the carrying amount, a write-down of inventory is recognized for the amount by which the
carrying amount exceeds net realizable value. During the years ended 31 December 2022 and 2021, write-down of inventories
amounted to $2.1 million and $1.2 million, respectively, due to product expiration. There were no reversals of inventory write-
downs during the years ended 31 December 2022 and 2021. See Note 17 for further details.
The Group does not pledge inventories as collateral to secure its liabilities.
Alvotech - Consolidated Financial Statements 31.12.2022 29 All amounts are in USD
Notes to the Consolidated Financial Statements
2.17 Financial assets
Recognition of financial assets
Financial assets are recognized when the Group becomes a party to the contractual provisions of the instrument. Financial assets
are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets, other
than financial assets measured at FVTPL, are added to or deducted from the fair value of the financial assets, as appropriate, on
initial recognition. Transaction costs directly attributable to the acquisition of financial assets at FVTPL are recognized immediately
in profit or loss. There were no transaction costs related to the acquisition of financials assets in 2022 or 2021. All of the Group’s
financial assets are measured at amortized cost as of 31 December 2022 and 2021.
Financial assets measured at amortized cost
Financial assets measured at amortized cost are debt instruments that give rise to contractual cash flows that are solely payments of
principal and interest on the principal amount outstanding. The Group's financial assets measured at amortized cost are trade
receivables, certain other current assets, receivables from related parties, restricted cash and cash and cash equivalents.
Interest income is recognized by applying the effective interest rate, except for short-term receivables when the effect of
discounting is immaterial.
Impairment of financial assets
The Group recognizes a loss allowance for expected credit losses (ECL) on its trade receivables and other debt instruments that
are measured at amortized cost. In addition, although contract assets are not financial assets, a loss allowance for ECL are also
recognized for such assets. ECL is based on the difference between the contractual cash flows due in accordance with the contract
and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The
amount of ECL is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial
instrument.
The Group always recognizes lifetime ECL for trade receivables and contract assets. The expected credit losses on these financial
assets are estimated using a provision matrix based on the Group’s historical credit loss experience, adjusted for factors that are
specific to the debtors, general economic conditions and an assessment of both the current as well as the forecasted direction of
conditions at the reporting date, including time value of money where appropriate.
The Group writes off a financial asset when there is no reasonable expectation of recovery, such as information indicating that the
debtor is in severe financial difficulty and there is no realistic prospect of recovery. A trade receivable or contract asset that is
considered uncollectible is written off against the allowance account. Subsequent recoveries of amounts previously written off are
credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss.
The Group did not write off any trade receivables or contract assets during the years ended 31 December 2022 and 2021.
The Group estimates impairment for related party receivables on an individual basis. No impairment is recognized for restricted
cash or cash and cash equivalents as management has estimated that the effects of any calculated ECL would be immaterial.
Derecognition of financial assets
The Group derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers
the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Group neither
transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group
recognizes its retained interest in the asset as well as an associated liability. If the Group retains substantially all the risks and
rewards of ownership of a transferred financial asset, the Group continues to recognize the financial asset and also recognizes a
collateralized borrowing for the proceeds received.
On derecognition of a financial asset, the difference between the asset's carrying amount and the sum of the consideration received
and receivable and the cumulative gain or loss that had been recognized in other comprehensive income or loss and accumulated in
equity is recognized in profit or loss.
Alvotech - Consolidated Financial Statements 31.12.2022 30 All amounts are in USD
Notes to the Consolidated Financial Statements
2.18 Financial liabilities
The Group’s financial liabilities consist of trade and other payables, certain other current liabilities loans and borrowings, lease
liabilities, derivative financial instruments, long-term incentive plans, share appreciation right plans and other long-term liability to a
related party. All financial liabilities are initially measured at fair value. Loans and borrowings are recorded net of directly
attributable transaction costs and less the value attributable to any embedded derivative financial instruments, if applicable.
The Group derecognizes financial liabilities when, and only when, the Group’s obligations are discharged, cancelled, substantially
modified or have expired. Additionally, management elected, as part of its accounting policy, to recognize the difference between
the carrying amount of the financial liabilities and the fair value of the consideration paid for the extinguishment in the
consolidated statement of profit or loss and other comprehensive income or loss.
Financial liabilities subsequently measured at amortized cost
After initial recognition, financial liabilities other than derivative financial instruments, and awards issued pursuant to long-term
incentive plans are subsequently measured at amortized cost using the effective interest method. The effective interest method is a
method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The
effective interest rate is the rate that discounts all estimated future cash payments through the expected life of the financial liability,
or a shorter period if appropriate, to the amortized cost of a financial liability. The effective interest rate includes the effects of any
discount or premium on acquisition of the financial liability, as well as any fees or costs incurred upon acquisition.
Financial liabilities subsequently measured at FVTPL
Derivative financial instruments
Financial liabilities
The Group recognized derivative liabilities related to the Predecessor Earn Out Shares, OACB Earn Out Shares and assumed
OACB warrants. Additionally, the Group recognized an embedded derivative for the conversion feature associated with the
Tranche A Convertible Bonds, as further described in Note 20. These features are liability-classified, rather than equity-classified,
because the Group is obligated to issue a variable number of ordinary shares to the holder upon conversion or exercise of the
feature. Therefore, these derivative liabilities were initially recorded at fair value and remeasured to fair value at each reporting
period with gains and losses arising from changes in the fair value recognized in finance income or finance costs, as appropriate.
Certain rights and features pursuant to borrowing arrangements and other contracts may provide the counterparty with one or
more financial instruments that need to be evaluated and potentially accounted for separately by the Group. These financial
instruments are either embedded in a host instrument or are treated as a separate financial instrument if they are contractually
transferable independent from the host instrument. Such rights and features pursuant to the Group’s contracts with both third
parties and related parties include earn out rights, conversion rights and warrant rights.
Equity conversion features within host debt instruments that meet the definition of a derivative and have economic and risk
characteristics that are not closely related to the host instrument are embedded derivatives that are separated from the host
instrument and accounted for separately. As part of the accounting for embedded derivatives or separate financial instruments,
management considers the appropriate accounting classification under IAS 32. Embedded derivatives and separate financial
instruments that meet the fixed-for-fixed criteria are classified as equity and initially measured at fair value.
Warrant rights that provide the holder with an option to purchase ordinary shares at a specified price or pursuant to a specified
formula are generally separate derivative financial instruments that are accounted for as derivative liabilities. Earn Out Shares grant
the holder with a variable number of Ordinary Shares based on certain vesting conditions tied to the stock price and are accounted
for as derivative liabilities. In the event that the fair value of any derivative liabilities, determined using unobservable inputs,
exceeds the transaction price of a borrowing arrangement, the Group records a deferred loss at the inception of the borrowing
arrangement for the difference between the fair value of the derivative liabilities and the transaction price of the borrowing
arrangement. Such deferred losses are recognized over the term of the related borrowing arrangement using the straight-line
method of amortization. The deferred loss is netted against derivative financial liabilities on the consolidated statements of financial
position. Amortization of the deferred loss is recognized as a component of “Finance costs” in the consolidated statements of
profit or loss and other comprehensive income or loss.
Alvotech - Consolidated Financial Statements 31.12.2022 31 All amounts are in USD
Notes to the Consolidated Financial Statements
The fair values of the derivative liabilities were determined using a valuation approach that incorporated a range of inputs that are
both observable and unobservable in nature. The inputs used in the initial and subsequent fair value measurements predominantly
relate to (i) the price of the Group’s Ordinary Shares (ii) the volatility of the Group’s Ordinary Shares, (ii) a risky discount rate
corresponding to the credit risk associated with the repayment of the host debt instruments, and (iii) the probabilities of each
derivative being exercised by the holder and the timing of such exercises. The probabilities are determined based on all relevant
internal and external information available and are reviewed and reassessed at each reporting date.
The Group will derecognize any derivative liabilities if and when the rights are exercised by the holders or the time period during
which the rights can be exercised expires.
Other long-term liability to related party
The Group’s other long-term liability to a related party arose from its acquisition of rights for the commercialization of the
Group’s biosimilar Adalimumab product in certain territories in Asia from Lotus Pharmaceutical Co. Ltd., a related party, during
the year ended 31 December 2020. Pursuant to the terms of the asset acquisition, the Group made an upfront payment of $1.9
million and is required to pay $7.4 million upon the commercial launch of Adalimumab in China. The Group concluded that the
event triggering future payment is probable and, as such, recorded the full amount of the liability as a non-current liability in the
consolidated statements of financial position as of 31 December 2022 and 2021. The upfront payment and contingent payment
amounts were charged to “Research and development expense” in the consolidated statements of profit or loss and other
comprehensive income or loss.
Long-term incentive plans
Share appreciation rights
Other current liabilities
In December 2021, Alvotech entered into an exclusive global licensing agreement with BiosanaPharma (Biosana) for the co-
development of AVT23. Under the terms of the agreement, Biosana granted Alvotech an exclusive global right for AVT23, which
will be produced using Biosana’s proprietary process technology. In exchange, Alvotech made an upfront payment of $7.5 million
upon the signing of the agreement (the “upfront payment”), with an additional $7.5 million due at the earlier of the closing of the
Business Combination (see Note 27) or 30 April 2022 (the “deferred upfront payment”). In addition, Alvotech may be obligated to
pay Biosana up to an aggregate of $13.5 million, payable upon the achievement of various development and regulatory milestones,
as well as certain tiered royalty payments based on commercial sales of AVT23. The agreement terminates 15 years after the launch
of AVT23 and is subject to certain customary termination rights.
The Group concluded that the deferred upfront payment is probable and, as such, recorded the full amount of the liability in
“Other current liabilities” on the consolidated statement of financial position as of 31 December 2021. The upfront payment and
the deferred upfront payment amounts were capitalized as other intangible assets in the consolidated statement of financial
position and will be amortized over the useful life of 15 years. The Group will accrue the additional contingent payments if and
when the related milestones and other contingencies are deemed probable of being achieved.
The Group issued to certain current and former employees share appreciation rights (SARs) that require settlement in connection
with the occurrence of specified, future triggering events. Grants occurred from 2015 through 2020. The awards include a
combination of vesting conditions, such as service and performance conditions, as well as non-vesting conditions depending on the
particular award. The individuals retain their vested awards upon termination of employment with the Group. Settlement amounts
are determined by the change in the Group’s market value from the grant date of the SAR until the triggering events occur. The
SARs do not expire at a specific date.
Alvotech - Consolidated Financial Statements 31.12.2022 32 All amounts are in USD
Notes to the Consolidated Financial Statements
2.19 Litigation and other contingencies
Pursuant to the terms of the SAR agreements, management determined that the Group cannot avoid paying cash to settle the
awards and, therefore, SARs are liability-classified in the consolidated statements of financial position. Accordingly, SARs were
recorded at fair value and were subsequently remeasured each reporting period with the change in fair value reflected as a gain or
loss in the consolidated statements of profit or loss and other comprehensive income or loss, as appropriate. The fair value of the
SARs was determined using the Black-Scholes-Merton pricing model. In connection with the closing of the Business Combination,
the Company reached a settlement agreement for share appreciation rights previously awarded to certain current and former
employees. The remaining share appreciation rights were settled through the issuance of fully vested RSUs under the Management
Incentive Plan on 1 December 2022. See Note 21 for further details.
Employee incentive plan
The Group also sponsors an employee incentive plan for certain qualifying employees. Under the plans, such employees are
entitled to cash payments upon achievement of key milestones, such as a research and development milestone or the occurrence of
an exit event. The awards include a combination of vesting conditions, such as service and performance conditions, as well as non-
vesting conditions depending on the particular award. Since the Group cannot avoid paying cash to settle the awards, the employee
incentive plan is liability-classified in the consolidated statements of financial position. Accordingly, awards issued pursuant to the
employee incentive plan are recorded at fair value and are subsequently remeasured each reporting period with the change in fair
value reflected as a gain or loss in the consolidated statements of profit or loss and other comprehensive income or loss, as
appropriate. Employee incentive plan liabilities are presented as either current or non-current on the consolidated statements of
financial position based on the anticipated timing of settlement.
The fair value of the employee incentive plan awards is determined by estimating the probability of success in reaching the
specified milestones and other levers, such as the anticipated timing of potential milestone achievement. See Note 21 for further
details.
The Group may, from time to time, become involved in legal proceedings arising out of the normal course of its operations. For
instance, as a developer and manufacturer of biosimilars, the Group may be subject to lawsuits alleging patent infringement or
other similar claims filed by the reference product sponsor. Similarly, the Group may utilize patent challenge procedures to
challenge the validity, enforceability or infringement of the reference product sponsor’s patents. Other parties may also file patent
infringement claims against the Group alleging that the Group’s products or manufacturing process techniques infringe their
patents.
The Group establishes reserves for specific legal matters when it determines that the likelihood of an unfavorable outcome is
probable and the loss is reasonably estimable. When such conditions are not met for a specific legal matter, no reserve is
established. Although management currently believes that resolving claims against the Group, including claims where an
unfavorable outcome is reasonably possible, will not have a material impact on the liquidity, results of operations, or financial
condition of the Group, these matters are subject to inherent uncertainties and management’s view of these matters may change in
the future. It is possible that an unfavorable outcome of a lawsuit or other contingency could have a material impact on the
liquidity, results of operations, or financial condition of the Group.
Management incentive plan
The Group can issue share options, restricted share units (“RSUs”), and other share-based awards under the Company’s new
incentive plan (the “Management Incentive Plan”) which was approved by the Board in June 2022. Awards issued under the
Management Incentive Plan are accounted for in accordance with IFRS 2. Share-based payments are classified as equity-settled
share-based payments as the Company intends to settle the awards with equity and has the commercial substance to do so. Share-
based payments are measured at the grant date fair value of the instruments issued and recognized over the expected vesting
periods. The number of shares expected to vest are reviewed and adjusted at the end of each reporting period such that the
amount of expense recognized shall be based on the number of equity instruments that will eventually vest. See Note 22 for
further details.
Alvotech - Consolidated Financial Statements 31.12.2022 33 All amounts are in USD
Notes to the Consolidated Financial Statements
2.20 Leases
Significant judgment is required in both the determination of probability of loss and the determination as to whether the amount
of loss can be reasonably estimated. Accruals are based only on information available at the time of the assessment, due to the
uncertain nature of such matters. As additional information becomes available, management reassesses potential liabilities related to
pending claims and litigation and may revise its previous estimates, which could materially affect the Group’s results of operations
in a given period.
The Group maintains liability insurance coverages for various claims and exposures. The Group’s insurance coverage limits its
maximum exposure on claims; however, the Group is responsible for any uninsured portion of losses. Management believes that
present insurance coverage is sufficient to cover potential exposures.
The Group assesses whether a contract is or contains a lease at inception of the contract. The Group recognizes a right-of-use asset
and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for those with a lease term
of twelve months or less and leases of low value assets. For these leases, the Group recognizes the lease payments as an operating
expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern
in which economic benefits from the leased assets are consumed. The Group’s leased assets consist of various real estate, fleet and
equipment leases.
Right-of-use assets reflect the initial measurement of the lease liability, lease payments made at or before the lease commencement
date and any initial direct costs less lease incentives that may have been received by the Group. These assets are subsequently
measured at cost less accumulated depreciation, impairment losses and remeasurements of the underlying lease liability. Right-of-
use assets are depreciated over the shorter of the lease term and the useful life of the underlying asset. If a lease transfers
ownership of the underlying asset to the Group or the lease includes a purchase option that the Group is reasonably certain to
exercise, the related right-of-use asset is depreciated over the useful life of the underlying asset. Depreciation starts at the
commencement date of the lease.
Lease liabilities are initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental
borrowing rate, which is the rate of interest that the Group would need to pay to borrow, on a collateralized basis, an amount equal
to the lease payments over a similar term in a similar economic environment based on information available at the commencement
date of the lease. The lease payments included in the measurement of the lease liability comprise fixed payments (including in-
substance fixed payments) less any incentives, variable lease payments that depend on an index or rate, expected residual guarantees
and the exercise price of purchase options reasonably certain to be exercised by the Group.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability, using the
effective interest method, and by reducing the carrying amount to reflect payments made during the lease term. The Group
remeasures the lease liability if the lease term has changed, when lease payments based on an index or rate change or when a lease
contract is modified and the modification is not accounted for as a separate lease.
Variable payments that do not depend on an index or rate are not included in the measurement of the lease liability and the right-of-
use asset. The related payments are recognized as an expense in the period in which the event or condition that triggers those
payments occurs.
As a practical expedient, lessees are not required to separate non-lease components from lease components, and instead account
for any lease and associated non-lease components as a single lease component. The Group has used this practical expedient.
Alvotech - Consolidated Financial Statements 31.12.2022 34 All amounts are in USD
Notes to the Consolidated Financial Statements
2.21 Loss per share
3. New accounting standards
IAS 16 (Amendments) – Property, Plant and Equipment – Proceeds before Intended Use
IAS 37 (Amendment) - Onerous Contracts – Cost of Fulfilling a Contract
Annual Improvements to IFRS Standards 2018-2020 Cycle
Holders of the Predecessor Earn Out Shares and OACB Earn Out Shares have equal dividend and participation rights to the
ordinary shareholders. However, these participating securities are classified as liabilities and as such, the shares held are not
included in the weighted average number of ordinary shares outstanding in the basic loss per share calculation.
The calculation of basic loss per share is based on the loss for the year attributable to ordinary shareholders of the Group and the
weighted average number of ordinary shares outstanding during the period.
Diluted loss per share is computed by dividing the loss for the year attributable to ordinary shareholders of the Group by the
weighted average number of ordinary shares outstanding in the basic loss per share calculation, both of which are adjusted for the
effects of all dilutive potential ordinary shares. Antidilutive effects of potential ordinary shares, which result in an increase in
earnings per share or a reduction in loss per share, are not recognized in the computation of diluted loss per share.
New standards and interpretations adopted and effective during the periods
The following new IFRS standards have been adopted by the Group effective 1 January 2022:
The IASB issued amendments to IAS 16, which prohibit deducting from the cost of an item of property, plant and equipment any
proceeds from selling items produced before that asset is available for use; that is, proceeds from items being sold while bringing
the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
Consequently, an entity recognizes such sales proceeds and related costs in profit or loss. The entity measures the cost of those
items in accordance with IAS 2 Inventories. The amendments also clarified the meaning of ‘testing whether an asset is functioning
properly’. IAS 16 now specifies this as assessing whether the technical and physical performance of the asset is such that it is
capable of being used in the production or supply of goods or services, for rental to others, or for administrative purposes. The
adoption of the amendments did not have a material impact on the consolidated financial statements of the Group.
The IASB issued amendments to IAS 37 to specify that the ‘cost of fulfilling’ a contract comprises the ‘costs that relate directly to
the contract’. Costs that relate directly to a contract consist of both the incremental costs of fulfilling that contract (examples would
be direct labor or materials) and an allocation of other costs that relate directly to fulfilling contracts (an example would be the
allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling the contract). The amendments
apply to contracts for which the entity has not yet fulfilled all its obligations at the beginning of the annual reporting period in
which the entity first applies the amendments. Comparatives are not restated. Instead, the entity shall recognize the cumulative
effect of initially applying the amendments as an adjustment to the opening balance of retained earnings or other component of
equity, as appropriate, at the date of initial application. The adoption of the amendments did not have a material impact on the
consolidated financial statements of the Group.
IFRS 9 Financial Instruments
The IASB issues amendments on IFRS 9, which clarifies that in applying the ‘10 percent’ test to assess whether to derecognize a
financial liability, an entity includes only fees paid or received between the entity (the borrower) and the lender, including fees paid
or received by either the entity or the lender on the other’s behalf. The amendment is applied prospectively to modifications and
exchanges that occur on or after the date the entity first applies the amendment. The adoption of the amendments did not have a
material impact on the consolidated financial statements of the Group.
Alvotech - Consolidated Financial Statements 31.12.2022 35 All amounts are in USD
Notes to the Consolidated Financial Statements
New and revised IFRS standards in issue but not yet effective
IFRS 10 and IAS 28 (Amendments) – Sale or Contribution of Assets between Investor and its Associate or Joint Venture:
IAS 1 (Amendments) – Classification of Liabilities as Current or Non-Current
IFRS 16 Leases
The IASB issues amendments on IFRS 16, which removes the illustration of the reimbursement of leasehold improvements. As
the amendment to IFRS 16 only regards an illustrative example, no effective date is stated.
The Group anticipates that the application of these amendments will not have a material impact on the consolidated financial
statements.
The aim to improve accounting policy disclosures and to help users of the financial statements to distinguish between changes in
accounting estimates and changes in accounting policies. The amendment is effective for annual periods beginning on or after 1
January 2023.
IAS 12 Income Taxes
IAS 1 Presentation of Financial Statements, Practice statement 2 and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
These require companies to recognize deferred tax on transactions that, on initial recognition give rise to equal amounts of taxable
and deductible temporary differences. The amendment is effective for annual periods beginning on or after 1 January 2023.
The following new standards are not yet adopted by or effective for the Group and have not been applied in preparing these
Consolidated Financial Statements.
The IASB issues amendments to IFRS 10 and IAS 28, which relate to situations where there is a sale or contribution of assets
between an investor and its associate or joint venture. The amendments state that gains or losses resulting from the loss of control
of a subsidiary that does not contain a business in a transaction with an associate or a joint venture that is accounted for using the
equity method, are recognized in the parent’s profit or loss only to the extent of the unrelated investors’ interests in that associate
or joint venture. Similarly, gains and losses resulting from the remeasurement of investments retained in any former subsidiary (that
has become an associate or a joint venture that is accounted for using the equity method) to fair value are recognized in the former
parent’s profit or loss only to the extent of the unrelated investors’ interests in the new associate or joint venture. The effective date
of the amendments has yet to be set by the Board; however, earlier application of the amendments is permitted. The Group
anticipates that the application of these amendments may have an impact on the consolidated financial statements in future periods
should such transactions arise.
The IASB issues amendments to IAS 1, which affect the presentation of liabilities as current or non-current in the statement of
financial position. The amendment does not impact the amount or timing of recognition of any asset, liability, income or expenses,
or the information disclosed about those items. The amendments clarify that the classification of liabilities as current or non-
current is based on rights that are in existence at the end of the reporting period, specify that classification is unaffected by
expectations about whether an entity will exercise its right to defer settlement of a liability, explain that rights are in existence if
covenants are complied with at the end of the reporting period, and introduce a definition of ‘settlement’ to make clear that
settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services. The amendments are
applied retrospectively for annual periods beginning on or after 1 January 2023, with early application permitted. The Group
anticipates that the application of these amendments may have an impact on the consolidated financial statements in future
periods.
Annual Improvements to IFRS Standards 2018-2020 Cycle
The Annual Improvements include amendments to the following Standards that are relevant to the Group:
Alvotech - Consolidated Financial Statements 31.12.2022 36 All amounts are in USD
Notes to the Consolidated Financial Statements
4. Segment reporting
As disclosed in Note 2, the Group operates and manages its business as one operating segment.
30,780 11,660
39,433 20,509
6,798 1,323
6,018 3,280
83,029 36,772
2022 2021
240 439
334,837 249,803
3,715 2,194
338,792 252,436
Revenue % Total
17,940 21.6%
38,376 46.2%
Revenue % Total
10,070 27.4%
18,369 50.0%
Customer B.......................................................................................................................................................
The majority of the Group’s revenue is generated from long-term out-license contracts which provide the customer with exclusive
rights to a particular territory, which generally span multiple countries or a particular continent, as well as the Group’s promises to
continue development of the underlying compound and to provide supply of the product to the customer upon commercialization.
Therefore, based on the nature of the customer agreements, revenue information is not currently available on a country-by-country
basis.
Revenue from customers based on the geographic market in which the revenue is earned, which predominantly aligns with the
rights conveyed to the Group’s customers pursuant to its out-license contracts, is as follows (in thousands):
2021
2022
Non-current assets, excluding financial instruments and deferred tax assets, based on the location of the asset is as follows (in
thousands):
North America.................................................................................................................................................
Europe...............................................................................................................................................................
North America.................................................................................................................................................
Europe...............................................................................................................................................................
Asia.....................................................................................................................................................................
Other..................................................................................................................................................................
Asia and other..................................................................................................................................................
Revenue from transactions with individual customers that exceed ten percent or more of the Group’s total revenue is as follows (in
thousands, except for percentages):
2022
2021
Customer A......................................................................................................................................................
Customer B.......................................................................................................................................................
Customer A......................................................................................................................................................
Alvotech - Consolidated Financial Statements 31.12.2022 37 All amounts are in USD
Notes to the Consolidated Financial Statements
5. Revenue and other income
Revenue from contracts with Customers
Disaggregated revenue
2022 2021
24,836 -
424 1,453
57,769 35,319
83,029 36,772
* Over time revenue recognition
Reassessment of variable consideration
Contract assets and liabilities
34,724 53,066
21,525 -
(36,811) -
- 34,577
- (13,107)
19,438 74,536
29,823 -
(19,690) -
- 46,127
- (26,782)
(915) 51
28,656 93,932
Contract assets
Product revenue (point in time revenue recognition)..............................................................................
License revenue (point in time revenue recognition)...............................................................................
Research and development and other service revenue*..........................................................................
Contract
liabilities
Customer prepayments .................................................................................................................................
31 December 2021 .........................................................................................................................................
Amounts transferred to trade receivables .................................................................................................
Customer prepayments .................................................................................................................................
Revenue recognized .......................................................................................................................................
31 December 2022 .........................................................................................................................................
Foreign currency adjustment .......................................................................................................................
The net increase in contract assets as of 31 December 2022 is primarily due revenue recognized when the performance obligation
has been met which is offset by the transfer of such amounts to trade receivables on the basis that the Group’s right to that
consideration is no longer contingent on its performance. The net increase in contract liabilities as of 31 December 2022 is due to
customer prepayments in advance of the Group’s performance. As of 31 December 2022, $3.3 million and $25.4 million are
recorded as non-current contract assets and current contract assets, respectively. Non-current contract assets will materialize over
the next 2 to 3 years. As of 31 December 2022, $57.0 million and $36.9 million are recorded as non-current contract liabilities and
current contract liabilities, respectively. Non-current contract liabilities will be recognized as revenue over the next 2 to 5 years as
either services are rendered or contractual milestones are achieved, depending on the performance obligation to which the payment
relates.
Subsequent changes to the estimate of the transaction price are generally recorded as adjustments to revenue in the period of
change. The Group updates variable consideration estimates on a quarterly basis. The quarterly changes in estimates did not result
in material adjustments to the Group’s previously reported revenue or trade receivables during the years ended 31 December 2022
and 2021.
A reconciliation of the beginning and ending balances of contract assets and contract liabilities is shown in the table below (in
thousands):
Amounts transferred to trade receivables .................................................................................................
Revenue recognized .......................................................................................................................................
31 December 2020 .........................................................................................................................................
Contract asset additions ................................................................................................................................
Contract asset additions ................................................................................................................................
The following table summarizes the Groups’ revenue from contracts with customers, disaggregated by the type of good or service
and timing of transfer of control of such goods and services to customers (in thousands):
Alvotech - Consolidated Financial Statements 31.12.2022 38 All amounts are in USD
Notes to the Consolidated Financial Statements
Remaining performance obligations
Out-license agreements
Teva Pharmaceutical Industries Ltd. (Teva)
STADA Arzneimittel AG (STADA)
In connection with the agreement, Teva made an upfront payment of $40.0 million. The Group also received $35.0 million in
development milestones and is entitled to receive up to an additional $50.0 million in development milestones, $175.0 million in
regulatory milestones and milestones due upon the first commercial sale of the biosimilar product candidates and $200.0 million in
contingent payments based upon the achievement of cumulative net sales amounts. Subject to some limitations, as consideration
for supplies, the Group will receive 40% of the value of Teva’s net sales of the products.
In November 2019, the Group entered into an exclusive strategic agreement with STADA for the commercialization of seven
biosimilars in all key European markets and selected markets outside Europe. The initial pipeline contains biosimilar candidates
aimed at treating autoimmunity, oncology, ophthalmology and inflammatory conditions. Under this agreement, the Group will be
responsible for the development, registration and supply of the biosimilars, while STADA will be exclusively commercializing the
products in the relevant territories pursuant to an intellectual property license granted by the Group to STADA.
Due to the long-term nature of the Group’s out-license contracts, the Group’s obligations pursuant to such contracts represent
partially unsatisfied performance obligations at year-end. The revenues under existing out-license contracts with original expected
durations of more than one year are estimated to be $283.0 million. The Group expects to recognize the majority of this revenue
over the next 3 years.
In connection with the agreement, STADA made an upfront payment of $5.9 million. The Group has received $78.6 million in
development milestones through the year ended 31 December 2022. The Group is also entitled to receive up to an aggregate of
$130.9 million in additional development milestones, $60.1 million in regulatory milestones and milestones due upon the first
commercial sale of the biosimilar product candidates and $11.8 million in contingent payments based upon the achievement of
cumulative net sales amounts. The Group is also expected to receive a royalty of approximately 40% of the estimated net selling
price from STADA’s and its affiliates’ commercialization of the contracted biosimilars.
In August 2020, the Group entered into an exclusive strategic agreement with Teva for the commercialization in the United States
of five of the Group’s biosimilar product candidates. The initial pipeline contains biosimilar candidates addressing multiple
therapeutic areas. Under this agreement, the Group will be responsible for the development, registration and supply of the
biosimilars, while Teva will be exclusively commercializing the products in the United States pursuant to an intellectual property
license granted by the Group to Teva.
On 27 February 2023, the Group and Teva signed an amendment to the licence & development agreement. As part of that
amendment, the Group agreed to provide future financial consideration to Teva to assist with the cost of launching and marketing
the licensed biosimilar products.
Alvotech - Consolidated Financial Statements 31.12.2022 39 All amounts are in USD
Notes to the Consolidated Financial Statements
6. Salaries and other employee expenses
92,082 67,433
10,052 7,694
5,481 17,955
10,317 -
11,670 10,274
5,838 6,164
135,440 109,520
2022 2021
42,501 -
52,962 71,588
39,977 37,932
135,440 109,520
7. Finance income and finance cost
Finance income earned during the years ended 31 December 2022 and 2021 is as follows (in thousands):
1,637 51,549
556 18
356 1
2,549 51,568
Finance cost incurred during the years ended 31 December 2022 and 2021 is as follows (in thousands):
96,981 2,804
71,452 106,548
7,430 -
6,511 -
6,022 6,423
23 1,586
188,419 117,361
Changes in the fair value of derivatives (see Note 27).............................................................................
2022
Salary expense..................................................................................................................................................
Defined contribution plan expense (1) ......................................................................................................
The average number of individuals employed by the Group during the years ended 31 December 2022 and 2021 was 858 and 645
respectively. The aggregate salary and other employee expenses incurred by the Group for these employees were as follows (in
thousands):
2021
Interest income from cash and cash equivalents.......................................................................................
Other interest income.....................................................................................................................................
Interest on debt and borrowings..................................................................................................................
Consenting fee (see Note 20)........................................................................................................................
Loss on remeasurement of bonds (see Note 20)......................................................................................
Long-term incentive plan expense...............................................................................................................
Amortization of deferred debt issue costs.................................................................................................
Interest on lease liabilities (see Note 13).....................................................................................................
2021
2021
2022
(1)
Defined contribution plan expense consists of costs incurred by the Group for employees of certain subsidiaries that are
required by local laws to participate in pension schemes. These pension schemes are not sponsored or administered by the Group.
Pursuant to the requirements of the schemes, the Group is required to contribute a certain percentage of its payroll costs to the
pension schemes. Such contributions are charged to the consolidated statements of profit or loss and other comprehensive income
or loss as they become payable in accordance with the rules of the pension schemes.
Salaries and other employee expense is included within the consolidated statements of profit or loss and other comprehensive
income or loss as follows (in thousands):
Share-based payments (see Note 22) ..........................................................................................................
Other employee expense................................................................................................................................
Temporary labor..............................................................................................................................................
Cost of product revenue................................................................................................................................
Research and development expenses .........................................................................................................
2022
General and administrative expenses .........................................................................................................
Total salary and other employee expenses..................................................................................................
Changes in the fair value of derivatives (see Note 27).............................................................................
Alvotech - Consolidated Financial Statements 31.12.2022 40 All amounts are in USD
Notes to the Consolidated Financial Statements
8. Depreciation, amortization and impairment
9,807 10,666
9,869 8,699
3,488 4,916
23,164 24,281
10,053 -
9,757 21,764
3,354 2,517
23,164 24,281
9. Audit fees
2,615 5,502
676 136
3,291 5,638
10. Income tax
Current tax
1,015 706
(115) 491
900 1,197
Deferred tax
(54,236) (48,414)
15,269 (477)
(38,967) (48,891)
(38,067) (47,694)
Total current tax..............................................................................................................................................
Current..............................................................................................................................................................
Total depreciation, amortization and impairment expense.....................................................................
Financial Statement audit fees.......................................................................................................................
Other fees, including tax services.................................................................................................................
Total fees...........................................................................................................................................................
Direct taxes - current......................................................................................................................................
Direct taxes - prior year..................................................................................................................................
Deprec. and impairm. of property, plant and equipm. (see Note 12)...................................................
Cost of product revenue................................................................................................................................
Research and development expenses .........................................................................................................
General and administrative expenses .........................................................................................................
2021
2022
Depreciation, amortization and impairment expenses incurred during the years ended 31 December 2022 and 2021 are as follows
(in thousands):
2021
Depreciation, amortization and impairment expense is included within the consolidated statements of profit or loss and other
comprehensive income or loss as follows (in thousands):
2021
Amortization and impairment of intangible assets (see Note 15)..........................................................
Depreciation of right of use assets (see Note 13).....................................................................................
2022
Taxation recognized in the consolidated statements of profit or loss and other comprehensive income or loss during the years
ended 31 December 2022 and 2021 is as follows (in thousands):
2022
Audit fees for 2021 include fees for the audit of the PCAOB uplift of the consolidated financial statements for 2019 and 2020.
Other fees for 2022 include review services for the F-4 and other SEC filings.
2022
2021
The prior year deferred tax impact of $15.3 million mainly relates to foreign currency impact on losses denominated in Icelandic
krona.
The factors affecting the tax benefit during the years ended 31 December 2022 and 2021 relate to the recognition of a deferred tax
asset on accumulated tax losses, as management assessed that it was probable that the accumulated tax losses would be fully
utilized in the coming years, as further described below.
Prior year...........................................................................................................................................................
Total deferred tax............................................................................................................................................
Total income tax benefit................................................................................................................................
Alvotech - Consolidated Financial Statements 31.12.2022 41 All amounts are in USD
Notes to the Consolidated Financial Statements
2022 2021
24.9% 24.9%
(2.4%) (8.2%)
- -
(8.9%) 30.4%
(3.8%) (15.0%)
(2.9%) (0.1%)
6.9% 32.0%
2022 2021
170,268 121,647
38,919 48,621
209,187 170,268
209,496 170,418
(309) (150)
2022 2021
205,290 158,330
6,832 12,088
(2,935) (150)
209,187 170,268
35,751
210,224
836,536
1,082,511
Balance at 31 December................................................................................................................................
Permanent differences ...................................................................................................................................
Other items ......................................................................................................................................................
Effective tax rate ............................................................................................................................................
A deferred tax liability of $2.9 million and $0.2 million has been recognized in relation to the difference in measurement basis of
customer relationships and other ordinary timing differences as of 31 December 2022 and 2021, respectively.
Non-recognition of tax losses ......................................................................................................................
Deferred tax assets..........................................................................................................................................
Deferred tax liabilities.....................................................................................................................................
Tax rate .............................................................................................................................................................
There were no accruals for tax contingencies during the years ended 31 December 2022 and 2021.
The effective tax rate for the year of 6.9% (2021: 32.0%) is lower than the applicable Luxembourgish statutory rate of corporation
tax. The reconciling items between the statutory rate and the effective tax rate are as follows:
Effect of tax rate in foreign jurisdictions ...................................................................................................
Recognition of tax losses ..............................................................................................................................
Deferred tax credited to profit or loss........................................................................................................
The movement in net deferred taxes during the years ended 31 December 2022 and 2021 is as follows (in thousands):
Balance at 1 January........................................................................................................................................
Where there is a right of offset of deferred tax balances within the same tax jurisdiction, IAS 12 requires these to be presented after
such offset in the consolidated statements of financial position. The closing deferred tax balances included above are after offset;
however, the disclosure of deferred tax assets by category below are presented before such offset.
The amount of deferred tax recognized in the consolidated statements of financial position as of 31 December 2022 and 2021 is as
follows (in thousands):
Deferred tax assets attributable to temporary differences in respect of tax losses.............................
A deferred tax asset has been recognized in relation to ordinary timing differences arising from various provisions, reserves,
employee benefits and tax losses carried forward in the group. The recognition of the deferred tax asset on the Icelandic tax losses,
since 2020, is backed by the Group’s latest ten-year forecast whereby profit associated with product and milestone revenue is
significant and provides considerable headroom over and above the level needed to support full recognition of such losses. A
deferred tax asset of $209.5 million and $170.4 million is recognized as of 31 December 2022 and 2021, respectively.
Deferred tax liabilities attributable to other temporary differences......................................................
Net deferred tax assets...................................................................................................................................
Deferred tax asset attributable to other temporary differences.............................................................
These tax losses expire as follows (in thousands):
2023-2025 .........................................................................................................................................................................................
2026-2028 .........................................................................................................................................................................................
Later ..................................................................................................................................................................................................
Alvotech - Consolidated Financial Statements 31.12.2022 42 All amounts are in USD
Notes to the Consolidated Financial Statements
11. Loss per share
2022 2021
Earnings
(513,580) (101,504)
Number of shares
197,721,710 110,673,309
(2.60) (0.92)
Loss for the year .........................................................................................................................................
Weighted average number of ordinary shares outstanding ................................................................
Basic and diluted loss per share ...................................................................................................................
Basic loss per share is computed by dividing loss for the year by the weighted average number of ordinary shares outstanding
during the period.
The calculation of basic and diluted loss per share for the years ended 31 December 2022 and 2021 is as follows (in thousands,
except for share and per share amounts):
Diluted loss per share is computed by adjusting the calculation of basic loss per share for the effects of dilutive potential ordinary
shares from financial instruments that may be converted or exercised into ordinary shares of the Group. For the year ended 31
December 2022 148,857,998 potential ordinary shares pursuant to the RSUs, Senior Bond Warrants, Aztiq Convertible Bond,
December Convertible Bonds, OACB warrants, Predecessor Earn Out Shares, and OACB Earn Out Shares were excluded in the
calculation of diluted loss per share, since the effect of doing so would result in a reduction of loss per share and thus be
antidilutive. For the year ended 31 December 2021, there were no potential ordinary shares pursuant to such agreements as all
conversion, warrant and funding rights associated with these agreements had been exercised or otherwise expired (refer to Note 21
for further details). Therefore, the calculation of diluted loss per share did not differ from the calculation of basic loss per share.
Alvotech - Consolidated Financial Statements 31.12.2022 43 All amounts are in USD
Notes to the Consolidated Financial Statements
12. Property, plant and equipment
Furniture, fixt.
Facility and leasehold Computer
equipment improvements equipment Total
Cost
Balance at 1 January 2022 ............................ - 88,510 32,395 1,551 122,456
Reclassifications of assets ............................... - 25,486 (25,486) - -
Additions ......................................................... 115,000 35,156 2,706 357 153,219
Disposals ......................................................... - (2,959) - - (2,959)
Translation difference ................................... - (1,043) (17) 51 (1,009)
Balance at 31 December 2022 .................... 115,000 145,150 9,598 1,959 271,707
Depreciation
Balance at 1 January 2022 ............................ - 33,853 8,614 1,459 43,926
Reclassifications of assets ............................ - 5,985 (5,985) - -
Depreciation ................................................... 359 8,752 621 75 9,807
Disposals ......................................................... - (2,597) - - (2,597)
Translation difference ................................... - 9 (17) (15) (23)
Balance at 31 December 2022 .................... 359 46,002 3,233 1,519 51,113
Net carrying amount
Balance at 31 December 2022 .................... 114,641 99,148 6,365 440 220,594
Furniture, fixt.
Facility and leasehold Computer
equipment improvements equipment Total
Cost
Balance at 1 January 2021 ............................................................ 70,308 27,600 1,513 99,421
19,345 4,845 69 24,259
Translation difference.................................................................... (1,143) (50) (31) (1,224)
Balance at 31 December 2021 .....................................................
88,510 32,395 1,551 122,456
Depreciation
Balance at 1 January 2021 ............................................................ 25,540 7,016 1,419 33,975
6,870 1,637 67 8,574
2,092 - - 2,092
Translation difference.................................................................... (649) (39) (27) (715)
Balance at 31 December 2021 .....................................................
33,853 8,614 1,459 43,926
Net carrying amount
Balance at 31 December 2021 .....................................................
54,657 23,781 92 78,530
Property, plant and equipment consists of facility and computer equipment, furniture, fixtures and leasehold improvements.
Movements within property, plant and equipment during the years ended 31 December 2022 and 2021 are as follows (in
thousands):
Additions .........................................................................................
Impairment .....................................................................................
Facility
Depreciation ...................................................................................
On 16 November 2022 the Group entered into a share purchase agreement (the “Share Purchase Agreement”) relating to shares in
Fasteignafélagið Sæmundur hf. (“Saemundur”) with ATP Holdings ehf., an affiliate of Aztiq. Pursuant to the Share Purchase
Agreement, Alvotech is purchased 99.99% of the shares in Saemundur through the issuance the Aztiq Convertible Bond, as
defined and discussed in Note 20, and the assumption of debt. At the time of closing, Saemundur’s only asset was the property
where Alvotech’s Reykjavik manufacturing and research facility (the “Facility”) are located. See Note 20 for further details.
Alvotech - Consolidated Financial Statements 31.12.2022 44 All amounts are in USD
Notes to the Consolidated Financial Statements
The Group pledged $122.4 million and $6.8 million of property, plant and equipment as collateral to secure bank loans with third
parties as of 31 December 2022 and 2021, respectively.
At 31 December 2021, the Group performed a review of its property, plant and equipment and determined certain laboratory
equipment was no longer in use. In assessing recoverable amount, the Group determined the market for resale was non-existent
due to the unique nature of the equipment. Management therefore determined to fully impair the assets, resulting in an impairment
of $2.1 million during each of the year ended 31 December 2021. See Note 8 for where impairment charges have been recognized
as an expense within in the consolidated statements of profit or loss and other comprehensive income or loss.
The Share Purchase Agreement was accounted for as an asset acquisition under IFRS 3 as all of the fair value of the gross assets
acquired from Saemundur were concentrated in the Alvotech Facility. As a result, the purchase price was determined to be $115.0
million, which consists of $80.0 million related to the fair value of the Aztiq Convertible Bond, $30.0 million in loans assumed by
the Company, and $5.0 million associated with the settlement of the pre-existing relationship with Saemundur. The entire purchase
price was allocated to the Facility as it was the only asset acquired. Additionally, the Company recognized a $3.9 million loss on the
extinguishment of the lease liability related to the Facility. See Note 20 for further details.
Alvotech - Consolidated Financial Statements 31.12.2022 45 All amounts are in USD
Notes to the Consolidated Financial Statements
13. Leases
2022 2021
Right-of-use assets
126,801 111,519
10,201 5,358
9,583 18,871
(88,941) -
(9,869) (8,699)
(274) (248)
47,501 126,801
The Group’s right-of-use assets as of 31 December 2022 and 2021 are comprised of the following (in thousands):
2022 2021
Right-of-use assets
41,702 122,927
339 159
5,460 3,715
47,501 126,801
Lease liabilities 2022 2021
122,140 108,947
10,247 5,358
7,458 18,116
(7,655) (6,595)
(80,075) -
(11,682) (3,744)
99 58
40,532 122,140
(5,163) (7,295)
35,369 114,845
Balance at 31 December ...............................................................................................................................
New or renewed leases ..................................................................................................................................
Depreciation ....................................................................................................................................................
Translation difference ....................................................................................................................................
Equipment .......................................................................................................................................................
Fleet ..................................................................................................................................................................
Balance at 1 January .......................................................................................................................................
New or renewed leases ..................................................................................................................................
Derecognition due to acquisition of Alvotech Facility (see Note 12) .................................................
Installment payments .....................................................................................................................................
Translation difference ....................................................................................................................................
The Group’s leased assets consist of facilities, fleet and equipment pursuant to both arrangements with third parties and related
parties. The carrying amounts of the Group’s right-of-use assets and the movements during the years ended 31 December 2022
and 2021 are as follows (in thousands):
Adjustments for indexed leases ...................................................................................................................
Adjustments for indexed leases ...................................................................................................................
Derecognition due to acquisition of Alvotech Facility (see Note 12) .................................................
Balance at 31 December ...............................................................................................................................
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 Group’s lease liabilities and the movements during the years ended 31 December 2022 and 2021
are as follows (in thousands):
Balance at 1 January .......................................................................................................................................
Non-current liabilities ....................................................................................................................................
Current liabilities ............................................................................................................................................
Facilities ............................................................................................................................................................
Foreign currency adjustment .......................................................................................................................
Alvotech - Consolidated Financial Statements 31.12.2022 46 All amounts are in USD
Notes to the Consolidated Financial Statements
2022 2021
Depreciation expense from right-of-use assets
(9,423) (8,228)
(119) (38)
(327) (433)
(9,869) (8,699)
(6,022) (6,423)
11,682 3,744
(3,859) -
(8,068) (11,378)
2022 2021
6,000 13,164
20,160 49,379
22,274 117,511
48,434 180,054
14. Goodwill
2022 2021
Balance at 1 January.......................................................................................................................................... 12,367 13,427
Translation difference....................................................................................................................................... (724) (1,060)
Balance as of 31 December............................................................................................................................. 11,643 12,367
Facilities .........................................................................................................................................................
Fleet ................................................................................................................................................................
Equipment .....................................................................................................................................................
Foreign currency difference on lease liability ............................................................................................
Loss from extinguishment of lease agreement (see Note 12) ...............................................................
Total amount recognized in profit and loss ..............................................................................................
Interest expense on lease liabilities .............................................................................................................
Less than one year ..........................................................................................................................................
Total depreciation expense from right-of-use assets ...............................................................................
The Group’s goodwill balances as of 31 December 2022 and 2021 are as follows (in thousands):
Goodwill is recognized at the Group level, which is determined to be the smallest cash-generating unit. The recoverable amount of
the cash-generating unit is determined based on a value in use calculation which uses cash flow projections based on the financial
forecast for the period 2023-2030 that has been approved by management and the Board of Directors. The Group’s operations are
currently in a development phase, and the ten-year forecast includes the initial revenue generating phase when products currently in
development will be available for market. The Group determined that the terminal growth rate and the discount rate are the key
assumptions used in determining the current estimate of value in use.
Cash flows beyond 2030 have been extrapolated using a negative 5.0% terminal rate in both the 2022 and 2021 value in use
calculations respectively. A discount rate of 27.6% (2021: 21.5%) per annum was used in determining the current estimate of value
in use. Since the recoverable amount of the cash-generating unit was substantially in excess of its carrying amount as of 31
December 2022 and 2021, management believes that any reasonably possible change in the key assumptions on which the
recoverable amount of the cash-generating unit is based would not cause the carrying amount of the cash-generating unit to exceed
its recoverable amount.
The amounts recognized in the consolidated statements of profit or loss and other comprehensive income or loss during the years
ended 31 December 2022 and 2021 in relation to the Group’s lease arrangements are as follows (in thousands):
Thereafter ........................................................................................................................................................
The Group’s lease liabilities as of 31 December 2022 and 2021 do not include $0.1 million of costs for short‐term leases and low
value leases.
One to five years ............................................................................................................................................
The maturity analysis of undiscounted lease payments as of 31 December 2022 and 2021 is as follows (in thousands):
There were no goodwill impairment charges recognized in the consolidated statements of profit or loss and other comprehensive
income or loss in any prior periods.
Alvotech - Consolidated Financial Statements 31.12.2022 47 All amounts are in USD
Notes to the Consolidated Financial Statements
15. Intangible assets
Software Total
Cost
8,777 2,329 15,000 26,106
7,682 - - 7,682
(2,755) - - (2,755)
(20) (148) - (168)
13,684 2,181 15,000 30,865
Amortization
2,933 1,664 - 4,597
423 310 - 733
(13) (104) - (117)
3,343 1,870 - 5,213
Net carrying amount
10,341 311 15,000 25,652
Customer
Software relationships Total
Cost
7,603 2,528 - 10,131
Additions............................................................................................ 5,186 - 15,000 20,186
(3,993) - - (3,993)
Translation difference...................................................................... (19) (199) - (218)
8,777 2,329 15,000 26,106
Amortization
2,351 1,445 - 3,796
Amortization .....................................................................................
591 332 - 923
Translation difference...................................................................... (9) (113) - (122)
2,933 1,664 - 4,597
Net carrying amount
5,844 665 15,000 21,509
Intellectual
property rights
Balance at 1 January 2022..............................................................
Additions..........................................................................................
Impairment......................................................................................
Translation difference....................................................................
Balance at 31 December 2022......................................................
Amortization ..................................................................................
Translation difference....................................................................
Additions during the year ended 31 December 2021 were primarily comprised of licensed intellectual property rights from Biosana.
Refer to Note 2.18 for further details.
Expense for amortization of the Group’s intangible assets is included within the consolidated statements of profit or loss and other
comprehensive income or loss as follows (in thousands ):
Balance at 31 December 2021......................................................
Balance at 1 January 2021..............................................................
Balance at 1 January 2021..............................................................
Balance at 31 December 2021......................................................
Customer
relationships
Intellectual
property rights
Balance at 1 January 2022..............................................................
Intangible assets consist of software, customer relationships and licensed intellectual property rights. Movements in intangible
assets during the years ended 31 December 2022 and 2021 are as follows (in thousands):
Balance at 31 December 2022......................................................
Balance at 31 December 2022......................................................
Balance at 31 December 2021......................................................
Impairment......................................................................................
Alvotech - Consolidated Financial Statements 31.12.2022 48 All amounts are in USD
Notes to the Consolidated Financial Statements
2022 2021
471 -
- 324
262 599
733 923
16. Cash and cash equivalents
Cash and cash equivalents
2022 2021
10,377 15,798
56,050 1,758
66,427 17,556
Restricted cash
2022 2021
10,087 10,087
14,914 -
186 -
25,187 10,087
Cost of product revenue................................................................................................................................
Research and development expenses .........................................................................................................
General and administrative expenses .........................................................................................................
Balance at 1 January .......................................................................................................................................
Additions during the year .............................................................................................................................
Interest income ...............................................................................................................................................
The Group’s restricted cash is available for use after one year or later.
Cash and cash equivalents denominated in US dollars ...........................................................................
Cash and cash equivalents denominated in other currencies ................................................................
Restricted cash as shown on the consolidated statements of financial position relates to cash that may only be used pursuant to
certain of the Group’s borrowing arrangements. Therefore, these deposits are not available for general use by the Group.
Movements in restricted cash balances during the years ended 31 December 2022 and 2021 are as follows (in thousands):
Balance at 31 December ...............................................................................................................................
At 31 December, 2022 and 2021, the Group performed a review of its intangible assets and determined certain software
development had been abandoned. In assessing recoverable amount, the Group determined the market for resale was non-existent.
Management therefore determined to fully impair the assets, resulting in an impairment charge of $2.8 million and $4.0 million
during the year ended 31 December 2022 and 2021, respectively. The impairment charge was recognized as an expense as follows:
$2.1 million in “Cost of product revenue” and $0.7 million in “General and administrative expenses.” For the year ended 31
December 2021 the impairment was recognized as an expense within “Research and development expenses” in the consolidated
statements of profit or loss and other comprehensive income or loss.
Cash and cash equivalents include both cash in banks and on hand. Cash and cash equivalents as shown in the consolidated
statements of cash flows as of 31 December 2022 and 2021 is as follows (in thousands):
At 31 December 2022 the Group performed an impairment analysis on the intellectual property rights indefinite lived intangible
asset. No impairment loss was recognized as the asset’s recoverable amount exceeded the carrying amount.
Alvotech - Consolidated Financial Statements 31.12.2022 49 All amounts are in USD
Notes to the Consolidated Financial Statements
17.
Inventories
The Group’s inventory balances as of 31 December 2022 and 2021 are as follows (in thousands):
2022 2021
Raw materials and supplies............................................................................................................................
41,961 26,590
Work in progress............................................................................................................................................. 29,450 13,730
Finished goods.................................................................................................................................................
2,121 -
Inventory reserves...........................................................................................................................................
(2,062) (1,262)
71,470 39,058
The Company recognized $8.5 million of inventories in cost of product revenue during the year ended 31 December 2022.
18.
Other current assets
The composition of other current assets as of 31 December 2022 and 2021 is as follows (in thousands):
2022 2021
Value-added tax............................................................................................................................................... 6,468 4,725
Prepaid expenses............................................................................................................................................. 20,601 9,320
Proceeds receivable from Convertible Bonds (see Note 20)..................................................................
3,520 -
Derivative asset................................................................................................................................................
851 -
Other short-term receivables........................................................................................................................ 1,509 691
32,949 14,736
19. Share capital
The Capital Reorganization resulted in the following share capital activity:
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all liabilities. Equity
instruments issued by a Group entity are recognized in the amount of the proceeds received, net of direct issue costs.
• 976,505 of Class A OACB Ordinary Shares were exchanged for Ordinary Shares;
No dividends were paid or declared during the years ended 31 December 2022 and 2021.
Prior to the Capital Reorganization the Group’s equity consisted of Class A and Class B ordinary shares (together the “Predecessor
Ordinary Shares”). The Group’s authorized share capital was $99.7 million, consisting of the equivalent of 99,961,829 Class A or
Class B ordinary shares with a par value of $0.01 per share. All share capital issued as of 31 December 2021 and 2020 was fully
paid.
Earn Out Shares; and
• 6,250,000 of Class B OACB Ordinary Shares were exchanged for 5,000,000 Ordinary Shares and 1,250,000 OACB
Balance at 31 December ...............................................................................................................................
• All of the outstanding Predecessor Ordinary Shares were exchanged for 180,600,000 Ordinary Shares and 38,330,000
•17,493,000 Ordinary Shares were issued in the PIPE Financing.
Predecessor Earn Out Shares;
The increase in inventory from 31 December 2021 to 31 December 2022 is due to the commercial launch of certain of the Group’s
biosimilar product candidates.
Alvotech - Consolidated Financial Statements 31.12.2022 50 All amounts are in USD
Notes to the Consolidated Financial Statements
Shares
Share capital
and share
premium
Shares
Share capital
and share
premium
- - 13,386,098 997,824
- - 95,701 2,429
252,160,087 1,060,558 - -
252,160,087 1,060,558 13,481,799 1,000,253
Balance at 1 January 2021............................. - 7,259,139 73 166,740 166,813
Share issue........................................................ - 6,222,660 62 833,378 833,440
Balance at 31 December 2021...................... - 13,481,799 135 1,000,118 1,000,253
Elimination of Predecessor Ordinary
Shares (Note 1.1)............................................
- (13,481,799) (135) 135 -
Issuance of Ordinary Shares (Note 1.1)..... 186,576,505 - 1,866 63,169 65,035
PIPE Financing (Note 1.1)........................... 17,493,000 - 175 174,755 174,930
Transaction costs on share issue.................. - - - (5,562) (5,562)
Predec. Earn Out Sh. (Note 22).................. 38,330,000 - - (227,500) (227,500)
OACB Earn Out Sh. (Note 22)................... 1,250,000 - - (9,100) (9,100)
SARs settlement (Note 21)........................... 3,510,582 - 35 30,267 30,302
Settlement of related party loans with
Ordinary Shares.............................................. 5,000,000 - 50 32,150 32,200
Balance at 31 December 2022...................... 252,160,087 - 2,126 1,058,432 1,060,558
Class A ordinary shares..................................................................
2022
Class B ordinary shares..................................................................
Share capital and share premium of the Group’s Ordinary Shares issued as of 31 December 2022 and 2021 is as follows (in
thousands, except for share amounts):
2021
Movements in the Group’s Class A and Class B ordinary shares, share capital and share premium during the years ended 31
December 2022 and 2021 are as follows (in thousands, except for share amounts):
Share capital
Share premium
Total
Ordinary
Shares
Predecessor
Ordinary
Shares
Alvotech Manco ehf., a subsidiary of Alvotech hf., owns 27,072,167 Ordinary Shares in Alvotech. Such shares are intended for the
future issuance of Ordinary Shares under the Management Incentive Plan and other equity offerings.
Ordinary shares...............................................................................
Total share capital and share premium.......................................
Alvotech - Consolidated Financial Statements 31.12.2022 51 All amounts are in USD
Notes to the Consolidated Financial Statements
20. Borrowings
2022 2021
530,506 -
- 394,129
65,793 -
64,588 -
32,441 -
71,242 6,782
764,570 400,911
(19,916) (2,771)
744,654 398,140
Convertible shareholder loans
Convertible bonds, Bonds and Senior Bonds
Convertible bonds
Bonds.................................................................................................................................................................
Aztiq Convertible Bond.................................................................................................................................
Other borrowings............................................................................................................................................
The Group’s debt consists of interest-bearing borrowings from financial institutions, related parties and third parties. Outstanding
borrowings, net of transaction costs, presented on the consolidated statements of financial position as current and non-current as
of 31 December 2022 and 2021 is as follows (in thousands):
Senior Bonds....................................................................................................................................................
Convertible Bonds..........................................................................................................................................
Alvogen Facility...............................................................................................................................................
Total outstanding borrowings, net of debt issue costs............................................................................
Less: current portion of borrowings............................................................................................................
Total non-current borrowings......................................................................................................................
• 1,522,103 shares from the exercise of warrant and funding rights in exchange for $101.3 million of cash;
• 1,137,248 shares from the exercise of warrant rights in exchange for the settlement of $73.7 million of accrued payment-in-kind
• 2,306,555 shares resulting from the conversion of $166.8 million of outstanding principal and accrued payment-in-kind interest.
On 14 December 2018, the Group issued $300.0 million of convertible bonds to multiple third parties. The offering included
$125.0 million of Tranche A bonds that included a guarantee from Alvogen and a 10% bonus if the bondholders converted at the
time of an IPO. In addition, $175.0 million of Tranche B bonds were issued that do not have a guarantee but include a 25% bonus
if the bondholders elect to convert at the time of an IPO. The bonds offered a 15% payment-in-kind interest rate and a put option
to sell the bond back to the Group if an IPO had not occurred within three years from the original date of issuance.
The Group recorded $5.4 million, recorded as a component of finance income in the consolidated statements of profit or loss and
other comprehensive income or loss for the year ended 31 December 2020. Fair value measurements of the derivative financial
liabilities are set out in Note 27.
In connection with these exercises, for the year ended 31 December 2021, the Group recognized finance income of $48.7 million
resulting from the remeasurement of the derivative liabilities at the date of extinguishment and a $149.2 million gain on
extinguishment of financial liabilities, which primarily reflects the difference between the carrying amount of the pre-transaction
convertible shareholder loans and the related derivative financial liabilities and the fair value of the ordinary shares issued. In
addition, the gain on extinguishment of financial liabilities includes transaction costs incurred as part of the extinguishment, the
acceleration of previously deferred debt issue costs incurred in connection with the issuance of the convertible shareholder loans
and the acceleration of previously unamortized accretion of the convertible shareholder loans.
In connection with the Business Combination Agreement (see Note 1.1), on 7 December 2021, the Group’s shareholders entered
into the BCA Framework Agreement resulting in the exercise of the conversion, warrant, and funding rights associated with the
convertible shareholder loans. As a result, the following issuances of Class A ordinary shares occurred:
Alvotech - Consolidated Financial Statements 31.12.2022 52 All amounts are in USD
Notes to the Consolidated Financial Statements
Bonds
The Group determined that the 24 June 2021 transaction was a substantial modification to its convertible bonds and the associated
derivative financial liability and accounted for the transaction as an extinguishment. As a result, the Group recognized a gain on
extinguishment of financial liabilities of $2.6 million during the year ended 31 December 2021, primarily driven by the difference
between the fair value of the post-transaction bonds and the carrying amount of the pre-transaction bonds. The gain on
extinguishment of financial liabilities also includes the following:
As a result of the closing of the Business Combination, there was a change in future cash flows on the bonds related to the increase
in interest rate from 7.5% to 10.0%. The Company remeasured the carrying value in accordance with IFRS 9 to the present value
of the revised cash flows and recognized a $6.5 million loss on the remeasurement of the bonds.
Prior to the extinguishment of the convertible bonds and as noted above, the bondholders had the option to convert the bonds
into Class A ordinary shares up to fourteen days prior to maturity. This conversion right was separately accounted for as a
derivative financial liability. During the period from 1 January 2021 to 24 June 2021, there was no change in fair value of the
derivative financial liability.
• Transaction costs and fees incurred as part of the extinguishment;
In January and June of 2022, the Group amended the terms of the outstanding bonds. The amendments resulted in the following:
As of 31 December 2021, the carrying amount of the bonds was $363.1 million. Accrued interest on the bonds as of 31 December
2021 is $31.0 million. The Group has the option, at any time, to prepay all or any part of the outstanding bonds. If the Group
elects to prepay the bonds within the first three years of the bond agreement, the bondholders are entitled to be paid an additional
premium of at least 2.0% of the outstanding principal at the time of such prepayment.
• The acceleration of previously deferred debt issue costs incurred in connection with the issuance of the pre-transaction bonds;
• The acceleration of previously unamortized accretion of the pre-transaction bonds.
On 24 June 2021, holders of the Group’s convertible bonds converted $100.7 million of principal and accrued interest and $4.8
million of additional premium offered by the Group to the bondholders into 455,687 Class A ordinary shares. Following the
conversion, certain bondholders elected to redeem their remaining bonds for cash, resulting in the payment of $55.3 million in
outstanding principal and accrued interest plus an additional $6.1 million of premium that the bondholders elected to be paid in
cash.
The remaining unconverted and unredeemed bonds were replaced with new bonds with an extended maturity of June 2025 and
the elimination of conversion rights, among other amendments to the terms and conditions. The Group offered the holders of the
replaced bonds an extension premium of $8.1 million for their agreement to extend the maturity of the replaced bonds to June
2025, as well as an additional premium of $2.6 million, both of which were granted to the bondholders in the form of additional
bonds. The Group also issued an additional $113.8 million of bonds to one previous bondholder and one new bondholder. On the
date of issuance, the fair value and the nominal value of the bonds was $358.8 million and $397.4 million, respectively. The
difference between the nominal value and fair value was recognized as a discount that will be amortized over the term of the
bonds.
• Following the close of the Business Combination, the interest rate will range from 7.5% to 10.0% depending on the amount of
aggregate net proceeds, as defined by the terms of the amended bond agreement;
• A $7.4 million consent fee, recognized as finance costs, paid to the bondholders who did not vote against the Business
Combination Agreement;
• The requirement for Alvotech to maintain a minimum of $25.0 million of restricted cash in a separate liquidity account; and
• A decrease in the interest rate to 7.5%, following the closing of the Business Combination, if the Company issues additional
shares within six months of the Closing Date, resulting in the Company exceeding the amount of aggregate net proceeds, as defined
in the bond agreement.
Alvotech - Consolidated Financial Statements 31.12.2022 53 All amounts are in USD
Notes to the Consolidated Financial Statements
Senior Bonds
Aztiq Convertible Bond
• $64.0 million related to the debt host;
• $16.0 million related to the Aztiq Conversion Feature;
As of 31 December 2022, the carrying amount of the Aztiq Convertible Bond is $65.8 million. Accrued interest on the Aztiq
Convertible Bond as of 31 December 2022 is $0.5 million.
The conversion feature (the “Aztiq Conversion Feature”) was determined to be an embedded derivative as the economic
characteristics and risks are not closely related to the debt host. The Group classified the Aztiq Conversion Feature as equity due to
the conversion price having preservation and passage of time adjustments that meet fixed-for-fixed criteria. As a result, the Group
recognized the following related to the Aztiq Convertible Bond:
• $30.0 million related to the loans (the “Facility Loans”) on the building, which were assumed by the Group as part of the asset
On 16 November 2022, the Group amended and upsized the outstanding bonds by $70.0 million. The amended bond agreement
(the “Senior Bonds”) resulted in the following:
• Recognition of a $4.6 million derivative asset for the Senior Bond Interest Rate Feature;
• An increase in the interest rate, resulting in a range from 10.75% to 12.0% depending on the occurrence of certain events, as
defined by the terms of the agreement. The Group accounted for this interest rate feature (the “Senior Bond Interest Rate
Feature”) as an embedded derivative, classified as an other current asset in the consolidated statement of financial position as of 31
December 2022;
• Recognition of $528.2 million and $15.4 million representing the fair value of the new Senior Bonds and Senior Bond Warrants
• An increase in principal from $455.7 million at the time of the amendment, to $525.7 million;
• Contingently issuable penny warrants (exercise price of $0.01) to the bondholders (the “Senior Bond Warrants”) if certain
events occur, issuable in two tranches representing 1.5% and 1.0% of the fully diluted ordinary share capital, as defined in the
Senior Bonds agreement (see Note 27).
The Group has pledged it´s intellectual property as collateral for the Senior Bonds.
• Extinguishment of bonds with a carrying value of $440.1 million, including $4.8 million of accrued interest;
• Amended the terms of the related party loans from Alvogen, setting forth subordination conditions;
• Net cash proceeds of $57.9 million, including transaction costs paid of $12.1 million;
On 16 November 2022 the Group issued a convertible bond (the “Aztiq Convertible Bond”) to ATP Holdings ehf. for the Share
Purchase Agreement and the acquisition of the Alvotech Facility (See Note 12). The Aztiq Convertible Bond has a principal
amount of $80.0 million and carries an interest rate of 12.50% per annum. Interest is payable in six-month intervals and is
capitalized and added to the outstanding principal amount of the bonds. The maturity date of the convertible bond is the later of
the (i) 16 November 2025 or (ii) 91 days after the earlier of the full redemption or the final maturity date of the Senior Bonds.
Bondholders have the right to convert their outstanding bonds into ordinary shares of Alvotech on December 31, 2023, June 30,
2024, or when the bond has been called or put up for redemption, including on the maturity date, for a conversion price is $10.00
per share.
The Group determined that the 16 November 2022 transaction was a substantial modification to its bonds and accounted for the
transaction as an extinguishment. As a result, the Group recognized a loss on extinguishment of financial liabilities of $40.9 million,
including $12.1 million of transaction costs, during the year ended 31 December 2022, primarily driven by the difference between
the fair value of the post-transaction Senior Bonds and the Senior Bond Warrants and the carrying amount of the pre-transaction
bonds. The loss on extinguishment of financial liabilities includes the following:
As of 31 December 2022, the carrying amount of the Senior Bonds is $530.5 million. Accrued interest on the Senior Bonds as of
31 December 2022 is $2.6 million. The Group has the option, at any time, to prepay all or any part of the outstanding bonds.
Alvotech - Consolidated Financial Statements 31.12.2022 54 All amounts are in USD
Notes to the Consolidated Financial Statements
Facility Loans
• Contingently issuable penny warrants to the bondholders (the "Alvogen Facility Warrants") if certain events occur, representing
4.0% of the fully diluted ordinary share capital, as defined in the Alvogen Facility agreement.
On 12 July 22, the Company entered into settlement agreements with both Aztiq and Alvogen for the $25.0 million in related party
loans provided by each party. As a result of the settlement agreements, Aztiq and Alvogen each received 2,500,000 Ordinary
Shares. The settlement was accounted for as an extinguishment of financial liabilities. In accordance with IFRS 9, the difference
between the fair value of the consideration paid for the settlement, which was determined to be $32.2 million, and the extinguished
financial liabilities of $50.0 million was recognized as a gain on the extinguishment of financial liabilities in the consolidated
statement of profit or loss and other comprehensive income or loss.
As of 31 December 2022, the carrying amount of the Facility Loans is $48.8 million. Accrued interest on the Facility Loans as of 31
December 2022 is $0.3 million.
• The interest rate was increased from 10% per annum to 17.5% per annum on the outstanding amounts under the loan facility;
• Rollover the $63.3 million outstanding, which includes $3.3 million of accrued interest, under the Alvogen loans, into the new
subordinated loan agreement, and withdraw an additional $50.0 million in loans;
• A repayment date of 91 days after the full redemption or the final maturity date of the Senior Bonds;
In connection with an undertaking by Alvotech shareholders to ensure that Alvotech was sufficiently funded through the closing
of the Business Combination by providing at least $50.0 million for the operations of the Group, Alvogen and Aztiq provided
interest free loan advances to Alvotech. On 22 February 2022, Alvotech borrowed $15.0 million under the facility from Alvogen,
as lender. On 29 March 2022, Alvotech withdrew an additional amount of $10.0 million under the facility, for aggregate
indebtedness of $25.0 million. On 11 March 2022, Alvotech borrowed $15.0 million under the facility from Aztiq, as lender. On 31
March 2022, Alvotech withdrew an additional amount of $10.0 million under the facility, for aggregate indebtedness of $25.0
million.
As noted above, the Group assumed the Facility Loans as part of the asset acquisition for the Facility. On 9 December 2022, the
Group extinguished the assumed loans from Arion banki hf., with an outstanding balance of $30.9 million, with new loans from
Landsbankinn hf. for $48.8 million, and carries variable interest rate, currently 8.3% and 9.3% per annum. The refinancing resulted
in net cash proceeds of $17.2 million after transaction costs paid.
On 11 April 2022, Alvotech entered into a loan agreement with Alvogen, as lender, for a loan of up to $40.0 million bearing an
interest rate of 10% per annum. The loan was drawable in two separate installments of $20.0 million each. On 12 April 2022,
Alvotech withdrew the first installment of $20.0 million. Alvotech withdrew a second installment of $20.0 million on 9 May 2022
for aggregate indebtedness of $40.0 million.
The Group determined that the 16 November 2022 transaction was a substantial modification to its related party loans and
accounted for the transaction as an extinguishment. As a result, the Group recognized the following:
In connection with the 16 November 2022 bond amendment, Alvotech entered into a subordinated loan agreement with Alvogen
(the “Alvogen Facility”). As part of the subordinated loan agreement, the Group agreed to the following:
Related party loans and Alvogen Facility
On 1 June 2022, Alvotech also entered into a loan agreement with Alvogen, as lender, for a loan of $20.0 million bearing an
interest rate of 10% per annum. Alvotech withdrew the entire loan amount of $20.0 million on 1 June 2022.
Alvotech - Consolidated Financial Statements 31.12.2022 55 All amounts are in USD
Notes to the Consolidated Financial Statements
• Net cash proceeds of $50.0 million;
Convertible Bonds
Other borrowings
• Recognition of $113.2 million and $1.3 million representing the fair value of the new Alvogen Facility and Alvogen Facility
Warrants, respectively.
On 20 December 2022, the Company repaid $50.0 million under the Alvogen Facility, with proceeds from the Convertible Bonds.
As a result, Alvotech extinguished the liability to issue the Alvogen Facility Warrants.
In 2015 and 2016, the Group entered into several term loan agreements with a financial institution for a total principal amount of
$25.9 million. The loan agreements set forth terms and conditions between the Group and the financial institution, inclusive of
certain representations and non-financial covenants. Per the terms of the loan agreements, the loans mature throughout late 2023
and into the second half of 2024, depending on the issuance date of each loan. Interest on the loans is variable interest rate of USD
SOFR plus a margin of 4.95%, payable on a monthly basis. Interest accrued and unpaid at the end of each interest period increases
the principal obligations owed by the Group to the financial institution. As of 31 December 2022 and 2021, the outstanding
balance on the loans, including accrued interest, is $3.2 million and $5.7 million, respectively. The Group is in compliance with all
representations and non-financial covenants required by these agreements. In addition, the Group has pledged property, plant and
equipment as collateral to secure these borrowings, as further described in Note 12.
On 20 December 2022 the Group issued two tranches of convertible bonds (the “Convertible Bonds”). Tranche A is ISK
denominated with a principal balance of $59.1 million, of which $3.5 million in cash proceeds were received subsequent to 31
December 2022 (see Note 18), and carries an annual payment-in-kind interest rate of 15% per year, while Tranche B is USD
denominated with a principal balance of $0.6 million and carries an annual payment-in-kind interest rate of 12.5% per year. The
maturity date of the Convertible Bonds is the later of the (i) 20 December 2025 or (ii) 91 days after the earlier of the full
redemption or the final maturity date of the Senior Bonds. Holders of both the Tranche A and Tranche B Convertible Bonds, may
elect, at their sole discretion, to convert all or part of the principal amount and accrued interest into Alvotech Ordinary Shares at a
conversion price of $10.00 per share on December 31, 2023, or June 30, 2024.
On 22 February 2022, the Group entered into a credit facility agreement with Landsbankinn hf. with the ability to draw down an
amount up to $18.3 million. The credit facility is in place to help finance equipment purchases in the future. Per the terms of the
credit facility, any borrowings are required to be paid by 1 August 2023 and have a variable interest rate of USD SOFR plus a
margin of 4.95%. As of 31 December 2022, the outstanding balance on the credit facility was $14.0 million, including accrued
interest.
As of 31 December 2022, the carrying amount of the Tranche A and Tranche B Convertible Bond is $31.9 million and $0.5
million, respectively.
• Extinguishment of bonds with a carrying value of $63.2 million, including $3.2 million of accrued interest;
As of 31 December 2022, the carrying amount of the loans is $64.6 million.
The conversion features (the “Tranche A Conversion Feature” and “Tranche B Conversion Feature”) for both the Tranche A and
Tranche B Convertible Bonds were determined to be embedded derivatives as the economic characteristics and risks are not
closely related to the debt host. The Group classified the Tranche A Conversion Feature as a liability due to the variability created
by conversion rates resulting from the tranche being denominated in ISK and was determined to have a fair value of $24.9 million
at issuance date (see Note 27 for further details). The Group classified the Tranche B Conversion Feature as equity due to the
conversion price having preservation and passage of time adjustments that meet the fixed-for-fixed criteria.
In 2021, the Group entered into two loan agreements with two separate lenders, Origo hf. and Arion banki hf. The outstanding
balance on the borrowings held with Origo hf. and Arion banki hf., including accrued interest, was $0.2 million and $0.3 million as
of 31 December 2022 and 31 December 2021, respectively. The loans mature in late 2023 and 2024.
Alvotech - Consolidated Financial Statements 31.12.2022 56 All amounts are in USD
Notes to the Consolidated Financial Statements
2022 2021
400,911 567,899
- (105,501)
- (34,899)
- (19,200)
- 15,472
- 32,114
(2,889) -
35,065 5,506
(43,241) (34,302)
467,196 114,282
(50,000) (240,542)
(83,951) (2,597)
40,424 89,958
23 12,754
1,032 (33)
764,570 400,911
2022 2021
19,916 2,771
3,804 2,920
696,646 622
3,374 394,222
40,830 376
764,570 400,911
Thereafter..........................................................................................................................................................
On 22 February 2022, the Group entered into a loan agreement with Landsbankinn hf. for a principal amount of $3.2 million. The
loan is in place to help finance equipment purchases. Per the terms of the loan agreement, annuity payments are due monthly with
a final maturity in February 2029. The loan has a variable interest rate of USD SOFR plus a margin of 4.25%. As of 31 December
2022, the outstanding balance on the loan was $2.9 million, including accrued interest.
Accrued interest...............................................................................................................................................
Repayments of borrowings............................................................................................................................
Amortization of deferred debt issue costs.................................................................................................
Borrowings, net at 31 December.................................................................................................................
Within four years.............................................................................................................................................
Recognition of deferred debt issue costs....................................................................................................
Borrowings converted to equity...................................................................................................................
Paid payment-in-kind interest.......................................................................................................................
Within one year................................................................................................................................................
Loans from related party converted to equity...........................................................................................
Within three years............................................................................................................................................
Contractual maturities of principal amounts on the Group’s outstanding borrowings as of 31 December 2022 and 2021 are as
follows (in thousands):
The weighted-average interest rates of outstanding borrowings for the years ended 31 December 2022 and 2021 are 12.41% and
14.83%, respectively.
Redemption of borrowings...........................................................................................................................
Change in fair value upon extinguishment of convertible shareholder loans......................................
On 8 August 2022, the Group entered into a loan agreement with Landsbankinn hf. for a principal amount of $1.8 million. The
loan is in place to help finance equipment purchases. Per the terms of the loan agreement, annuity payments are due monthly with
a final maturity in August 2029. The loan has a variable interest rate of USD SOFR plus a margin of 4.25%. As of 31 December
2022, the outstanding balance on the loan was $1.8 million, including accrued interest.
Proceeds from new borrowings...................................................................................................................
Recognition of new borrowings discount..................................................................................................
Accretion/derecognition of borrowings discount....................................................................................
Foreign currency exchange difference.........................................................................................................
Movements in the Group’s outstanding borrowings during the years ended 31 December 2022 and 2021 are as follows (in
thousands):
Within two years..............................................................................................................................................
Premium on redeemed and unredeemed bonds.......................................................................................
Borrowings, net at 1 January.........................................................................................................................
Alvotech - Consolidated Financial Statements 31.12.2022 57 All amounts are in USD
Notes to the Consolidated Financial Statements
21. Long-term incentive plans
Share appreciation rights
Settlement of SARs
15 June 2022
$9.38
1 year
35.0%
0.0%
$0.75
8.0%
Historical SARs Accounting
• one current employee can elect to receive a cash payment of $1.5 million or 150,000 Ordinary Shares to be issued one year after
the Closing Date. The Company recognized the cash settlement option as a liability with a fair value of $0.8 million and the share
settlement option as equity with a fair value of $0.7 million.
Dividend yield..................................................................................................................................................................................
Asset price.........................................................................................................................................................................................
Volatility rate.....................................................................................................................................................................................
In connection with the closing of the Business Combination, the Company reached a settlement agreement for share appreciation
rights previously awarded to certain current and former employees. The rights were settled as follows:
• one former employee will receive a $1.5 million cash payment in July 2022; and
The settlement agreements resulted in a net $36.8 million decrease in the SARs liability, a $31.0 million increase in equity equal to
the fair value of the Ordinary Shares issued to the two former employees and potentially issued to one current employee, a $1.5
million increase in other current liabilities and income of $4.3 million in general and administrative expense recognized for the
difference between the extinguished liabilities and the fair value of consideration paid to the current and former employees. As of
31 December 2022, the Company recognized $0.7 million as an other current liability related to the remaining SARs liability.
Prior to 2019, the Group granted SARs to three former employees. During the year ended 31 December 2020 and 2019, the
Group granted SARs to one and two current employees, respectively. There were no new granted SARS in the years ended 31
December 2022 and 2021.
The Group’s SAR liability as of 31 December 2021 totaled $41.4 million. Expense recognized for the Group’s SAR liability for the
year ended 31 December 2021 totaled $11.3 million. The vested portion of the Group’s SAR liability as of 31 December 2021 is
$36.6 million.
Term (years)......................................................................................................................................................................................
Significant assumptions used in the Finnerty model to determine the fair value of the Ordinary Shares to be issued for the
settlement as of 15 June 2022 are as follows:
• two former employees will each receive 1,755,291 Ordinary Shares to be issued one year after the Closing Date. In accordance
with IFRS 2, the settlements were accounted for as a modification of a share-based payment transaction that changes the awards
classification from cash-settled to equity-settled;
Indicated put option value.............................................................................................................................................................
Discount for lack of marketability................................................................................................................................................
The asset price is based on the public trading price of Ordinary Shares at the time of the settlement. The term is based on when the
holder’s will no longer be restricted from trading the Ordinary Shares. The volatility rate is based on historical data from a peer
group of public companies with an enterprise value between $500 million and $5 billion. The dividend yield is based on the
expected dividends to be paid out by the Company. The discount for lack of marketability reflects the timing of when the shares
will be issued and can be traded by the holders.
On 1 December 2022, the Company issued Ordinary Shares to settle the remaining outstanding SARs. The vested portion of the
Group’s SARs liability as of the settlement date was $3.8 million. The Ordinary Shares granted for the settlement will be delivered
in June 2023. As a result, management recognized a gain of $0.3 million on the extinguishment of the SARs liability resulting from
the difference in the carrying value of the liability and fair value of the Ordinary Shares issued.
Alvotech - Consolidated Financial Statements 31.12.2022 58 All amounts are in USD
Notes to the Consolidated Financial Statements
2021
0.1%
42.0%
0.0%
0.4 - 1.0 years
$1,806
$925-$1,695
Employee incentive plan
2022 2021
14,935 10,501
5,075 6,648
(7,693) (2,214)
12,317 14,935
(11,773) -
544 14,935
22. Share-based payments
RSUs
7,659,049 $6.68
(679,563) $6.30
6,979,486 $6.72
The Group recognized $10.3 million of share-based payment expense during the year ended 31 December 2022 (in thousands):
2022
1,522
2,994
5,801
10,317
Reclassified to other current liabilities.........................................................................................................
On 1 December 2022, the Renumeration Committee authorized and the Group granted restricted stock units (“RSUs”) to
employees, executives, and directors granting rights to Ordinary Shares once vesting conditions are met. Compensation expense
for RSUs is determined based upon the market price of the Ordinary Shares underlying the awards on the date of grant and
expensed over the vesting period, which is generally a one to four-year period, with a 1-year cliff vesting period and subsequent
monthly vesting, resulting from participates completing a service condition. Movements in RSUs during the year ended 31
December 2022 are as follows:
Risk-free interest rate......................................................................................................................................................................
Significant assumptions used in the Black-Scholes-Merton pricing model as of 31 December 2021 is as follows:
The risk-free interest rate is the continuously compounded risk-free rate for a one-year US government zero-yield bond. Expected
volatility is based on historical data from a peer group of public companies. The expected life is based on when the Group expects
each holder’s award will be fully vested and settled by the Group, which is dependent on management’s expectation of when
specified triggering events requiring settlement will occur. The share price at valuation is based on the Group’s equity valuation at
the time of various equity-related transactions that occurred during 2021 and 2020. The strike price represents actual and
anticipated increases in equity between the SAR agreement date and the anticipated dates of settlement triggering events. The strike
price is used to determine the difference between the equity value at the time of the settlement triggering event and the original
equity value of the Group.
Balance at 31 December prior to reclassification......................................................................................
Research and development expenses...........................................................................................................................................
Additions...........................................................................................................................................................
Balance at 31 December................................................................................................................................
Weighted
Average Fair
value
Granted.............................................................................................................................................................
General and administrative expenses...........................................................................................................................................
Movements in the Group’s employee incentive plan liabilities during the years ended 31 December 2022 and 2021 are as follows
Cost of product revenue................................................................................................................................................................
Outstanding at 31 December........................................................................................................................
Vested................................................................................................................................................................
Payments...........................................................................................................................................................
Balance at 1 January........................................................................................................................................
Volatility rate.....................................................................................................................................................................................
Expected dividend yield.................................................................................................................................................................
Expected life.....................................................................................................................................................................................
Share price at valuation...................................................................................................................................................................
Strike price........................................................................................................................................................................................
Alvotech - Consolidated Financial Statements 31.12.2022 59 All amounts are in USD
Notes to the Consolidated Financial Statements
23. Litigation
On 17 December 2021, AbbVie Inc., AbbVie Biotechnology Ltd, and AbbVie Operations Singapore Pte. Ltd. filed a complaint
with the U.S. International Trade Commission against Alvotech hf., Alvotech Germany GmbH, Alvotech Swiss AG, Alvotech
USA Inc., Teva Pharmaceutical Industries Ltd., Teva Pharmaceuticals USA Inc., and Ivers-Lee AG (Certain Adalimumab,
Processes for Manufacturing or Relating to Same, and Products Containing Same, Investigation No. 337-TA-1296). The complaint
raised trade secret misappropriation allegations similar to those raised in the trade secret litigation that AbbVie previously filed in
the Northern District of Illinois.
The Group incurred approximately $8.7 million and $13.5 million in legal expenses during the years ended 31 December 2022 and
2021, respectively, in preparation for, and/or in relation to, these litigations. Aside from these matters, the Group is not currently a
party to any material litigations or similar matters.
On 27 April 2021, AbbVie filed an action against Alvotech hf. in the United States District Court for the Northern District of
Illinois alleging infringement of four patents, under the patent laws of the United States. On 28 May 2021, AbbVie filed another
action against Alvotech hf. in the United States District Court for the Northern District of Illinois alleging infringement of 58
patents, under the patent laws of the United States, the BPCIA, and the Declaratory Judgment Act, and later added two more
patents.
In 2022, prior to the issuance date of these consolidated financial statements, the Group was involved in four litigations (all now
dismissed) in the United States adverse to AbbVie arising out of the development of Alvotech’s AVT02 product, and the filing of a
biologics license application with the U.S. Food and Drug Administration seeking regulatory approval (the “AbbVie Litigations”).
On 19 March 2021, AbbVie Inc. and AbbVie Biotechnology Ltd. (collectively, “AbbVie”) filed an action against Alvotech hf. in
the United States District Court for the Northern District of Illinois alleging trade secret misappropriation under the Defend Trade
Secrets Act and under the Illinois Trade Secrets Act. The complaint pleaded, among other things, that Alvotech hired a certain
former AbbVie employee in order to acquire and access trade secrets belonging to AbbVie. In October 2021, the Court granted
Alvotech’s motion to dismiss the action, and AbbVie later appealed that ruling to U.S. Court of Appeals for the Seventh Circuit.
As of 31 December 2022, the AbbVie Litigations were dismissed. On 8 March 2022, Alvotech entered into the AbbVie U.S.
Agreement with AbbVie Inc. and AbbVie Biotechnology Ltd with respect to AVT02 for the U.S. market. Pursuant to the
settlement component of the AbbVie U.S. Agreement, the parties agreed to stipulate to the dismissal of all claims, counterclaims
and potential claims in the four U.S. litigations, with each party to bear its own fees and costs. The parties further agreed to release
each other from certain claims and demands. Under the licensing component of the AbbVie U.S. Agreement, AbbVie granted
Alvotech a license effective 1 July 2023 to make, import, use, distribute, sell and offer for sale AVT02 in the U.S. and a license to
manufacture, import and store a reasonable amount of AVT02 in anticipation of the commercial launch of AVT02 in the U.S.
Under the agreement, Alvotech may sublicense certain rights to Teva, as a commercialization partner, and may also sublicense to
other parties subject to certain conditions. In return, Alvotech is obligated to pay a royalty to AbbVie in the single-digits of the net
sales of AVT02 in the U.S. The agreement does not provide for upfront or milestone payments. The obligation of Alvotech to pay
royalties shall terminate on the earlier of (i) 11 February 2025; or (ii) a determination that licensed patents are invalid or
unenforceable, at which time the license granted will be deemed fully paid up and irrevocable. Each party has the right to terminate
the agreement upon breach of certain terms of the agreement that remains uncured for a certain period of time. Additionally,
AbbVie may terminate the agreement if Alvotech takes certain actions concerning the patentability, validity or enforceability of
AbbVie’s patents in the U.S. with respect to AVT02.
Alvotech - Consolidated Financial Statements 31.12.2022 60 All amounts are in USD
Notes to the Consolidated Financial Statements
24. Related parties
Transactions with related parties
The Group entered into two lease agreements with Fasteignafélagið Sæmundur hf. in January 2019 and October 2020 for facilities
in Iceland, both with remaining lease terms of approximately 17 years as of 31 December 2021. The Group also entered into ten
separate lease agreements with HRJAF ehf. throughout 2019 and 2020 for a group of apartment buildings in Iceland used for
temporary housing of employees and third party contractors. Two of the leases were terminated during the year ended 31
December 2020. The group extinguished the lease agreements with Sæmundur hf. as a result of the Share Purchase Agreement (see
Note 12). The remaining lease terms for the other eight leases approximate 8 years, on average, as of 31 December 2022.
Purchased service includes rental fees and service expenses, as described above. Rental fees and service expenses with related
parties are presented as “General and administrative expenses” or “Research and development expenses” in the consolidated
statements of profit or loss and other comprehensive income or loss, depending on the nature of the service performed and
expense incurred by the Group. Rental liabilities from lease arrangements with related parties are presented as a component of
“Lease liabilities” on the consolidated statements of financial position. Service payables are presented as “Liabilities to related
parties” on the consolidated statements of financial position.
A related party transaction is a transfer of resources, services or obligations between the Group and a related party, regardless of
whether a price is charged. The Group engages with related parties for both purchased and sold services, loans and other
borrowings and other activities.
Related parties are those parties which have considerable influence over the Group, directly or indirectly, including a parent
company, owners or their families, large investors, key management personnel and their families and parties that are controlled by
or dependent on the Group, such as affiliates and joint ventures. Key management personnel include the Group’s executive
officers and directors, since these individuals have the authority and responsibility for planning, directing and controlling the
activities of the Group. Interests in subsidiaries are set out in Note 1.
The Group provides and receives certain support services through arrangements with Aztiq, Alvogen and Alvogen Malta
(Outlicensing) Ltd. (Adalvo). Services provided to Alvogen consist of finance, administrative, legal and human resource services.
Services received from Alvogen primarily consist of marketing, salary processing and information technology support services.
Services received from Adalvo primarily consist of legal, regulatory, supply chain management and portfolio and market
intelligence services.
Interest includes interest expense on borrowings. Interest expenses on loans from related parties are presented as “Finance costs”
in the consolidated statements of profit or loss and other comprehensive income or loss. Borrowings are presented as
“Borrowings” and “Current maturities of borrowings” on the consolidated statements of financial position. See Note 20 for
further details on the Borrowing arrangements with related parties.
Alvotech - Consolidated Financial Statements 31.12.2022 61 All amounts are in USD
Notes to the Consolidated Financial Statements
Related party transactions as of and for the year ended 31 December 2022 are as follows (in thousands):
Purchased Sold Receivables Payables /
service / interest Service Loans
5,415 - - 64,588
216 - - 20
442 - - 25
1,254 - 765 81,254
7,189 - - -
- 196 - -
465 174 - 484
- 68 1 -
- 3 2 7,440
- 4 3 -
98 - - -
- 1 - -
585 266 12 222
- - 758 -
1,218 106 - 349
603 - 7 -
117 - - -
301 - - 31
1,159 - - -
1,516 - - 8,876
26 - - -
537 - - -
21,141 818 1,548 163,289
Alvogen ehf. - Sister company ..................................................
Aztiq Fjárfestingar ehf. (a) ...........................................................
Alvogen Korea co. Ltd - Sister company ..................................
Sold service includes services provided to related parties, as described above. Income from related parties for such services are
presented as “Other income” in the consolidated statements of profit or loss and other comprehensive income or loss. Amounts
receivable for such activities are presented as “Receivables from related parties” on the consolidated statements of financial
position. The Group has not recorded bad debt provisions for its receivables from related parties.
Alvogen Pharma Pvt Ltd - Sister Company .............................
Lotus Pharmaceuticals Co. Ltd. - Sister company (b) ............
Alvogen Lux Holdings S.à r.l. – Sister company (a) ...............
Adalvo Limited - Sister company ...............................................
L41 ehf. ............................................................................................
Alvogen Emerging Markets - Sister company .........................
Lotus International Pte. Ltd. - Sister company ........................
Fasteignafélagið Sæmundur hf. - Sister company (e) ..............
Flóki Fasteignir ehf. (HRJÁF ehf.) - Sister company ............
Alvogen Spain SL - Sister Company ..........................................
ATP Holdings ehf. ........................................................................
Aztiq Consulting ehf. ....................................................................
Alvogen Iceland ehf. - Sister company ...................................
Fasteignafélagið Eyjólfur hf. - Sister company .......................
Alvogen Inc. - Sister company ...................................................
Alvotech and CCHN Biopharmaceutical Co., Ltd. (c) .........
Alvogen Malta Sh. Services - Sister company ..........................
Lambhagavegur 7 ehf. (d) ............................................................
(a) The full amount of purchased service relates to interest expenses from long-term liabilities and the full amount of payables /
loans are interest-bearing long-term liabilities (see Note 20).
(b) Payables to Lotus Pharmaceuticals Co. Ltd. consists of the long-term liability as further described in Note 2. This long-term
liability is presented as “Other long-term liability to related party” on the consolidated statements of financial position.
(c) The amount receivable from Alvotech and CCHN Biopharmaceutical Co., Ltd. relates to amounts due for reference drugs used
in research and development studies and certain consulting fees incurred by the Group.
Norwich Clinical Services Ltd - Sister Company ....................
(e) Fasteignafélagið Sæmundur hf. was acquired as part of the Share Purchase Agreement, with ATP Holdings ehf., on 16
November 2022. The related party transactions reflect activity until the acquisition date. See Note 12 and Note 20 for further
details.
(d) Lambhagavegur is no longer a related party as it was sold during the year ended 31 December 2022.
Alvotech - Consolidated Financial Statements 31.12.2022 62 All amounts are in USD
Notes to the Consolidated Financial Statements
Related party transactions as of and for the year ended 31 December 2021 are as follows (in thousands):
Purchased Sold Receivables Payables /
service / interest Service Loans
9,383 - - -
16,048 - - -
297 - - 43
120 - - -
- - 2 -
7,762 - - 83,770
454 2,308 109 14
6 2 2 -
299 - 17 -
- 312 295 7,440
238 - - 16
- 9 - -
89 654 301 -
- - 320 -
1,216 151 - 283
1,045 279 65 229
294 - - 23
41 - - 17
491 - - 13
1,415 - - 9,794
29 - - -
713 - - 12,661
39,940 3,715 1,111 114,303
Commitments and guarantees
Key management personnel
Aztiq Pharma Partners S.à r.l. – Sister company (a) ...............
Alvogen Lux Holdings S.à r.l. – Sister company (a) ...............
Alvogen Malta (Outlicensing) Ltd - Sister company ..............
Alvogen Emerging Markets - Sister company .........................
Alvogen Pharma Pvt Ltd - Sister Company .............................
Aztiq Investment Advisory AB (a) ............................................
Alvogen Aztiq AB – Sister company (a) ...................................
Alvogen UK - Sister company ...................................................
Alvogen Spain SL - Sister Company ..........................................
(a) The full amount of purchased service relates to interest expenses from long-term liabilities and the full amount of payables /
loans are interest-bearing long-term liabilities (see Note 20).
(b) Payables to Lotus Pharmaceuticals Co. Ltd. consists of the long-term liability as further described in Note 2. This long-term
liability is presented as “Other long-term liability to related party” on the consolidated statements of financial position.
(c) The amount receivable from Alvotech and CCHN Biopharmaceutical Co., Ltd. relates to amounts due for reference drugs used
in research and development studies and certain consulting fees incurred by the Group.
Aztiq Fjárfestingar ehf. (a) ...........................................................
Alvogen Iceland ehf. - Sister company ...................................
Alvogen Korea co. Ltd - Sister company ..................................
Alvogen Malta Sh. Services - Sister company ..........................
Lambhagavegur 7 ehf. ..................................................................
HRJÁF ehf - Sister company .....................................................
Norwich Clinical Services Ltd - Sister Company ....................
L41 ehf. ............................................................................................
The Group does not have any contractual commitments with its related parties other than the receivables, loans and payables
previously disclosed.
Alvogen ehf. - Sister company ..................................................
Alvogen Inc. - Sister company ...................................................
Fasteignafélagið Sæmundur hf. - Sister company ..................
Lotus Pharmaceuticals Co. Ltd. - Sister company (b) ............
Alvotech and CCHN Biopharmaceutical Co., Ltd. (c) .........
At 31 December 2022 and 2021 there are no loans to the members of the Board of Directors and the CEO. In addition, there
were no transactions carried out (except those in Note 24) between the Group and members of the Board of Directors nor the
CEO in the year ended 31 December 2022 and 2021. The Board of Directors' remuneration is shown in the table below.
Alvotech - Consolidated Financial Statements 31.12.2022 63 All amounts are in USD
Notes to the Consolidated Financial Statements
740 - -
68 - 1,133,131
43 - -
- - -
- - -
38 - -
38 - -
- - -
- - -
927 - 1,133,131
*Waived their board compensation (both cash and equity).
**Direct share ownership
Key employees
Salaries and
benefits
Pension
contribution
Termination
benefits
Other long-
term benefits
892 162 1,157 -
5,400 446 820 5,015
6,292 608 1,977 5,015
- - -
- - 893,060
- - -
- - -
- - -
- - -
- - 893,060
**Direct share ownership
Key employees
Salaries and
benefits
Pension
contribution
Termination
benefits
Other long-
term benefits
877 159 - -
4,531 333 - 985
5,408 492 - 985
Hirofumi Imai, Board member....................................................................................
Other Executive Team Members (9)..........................................
Board of Directors' fee for the year and shares at year end (board fees in
thousands and shares in whole amounts).
Árni Harðarson, Board Member (from 16.6.2022)*................................................
Lisa Graver, Board Member (from 16.6.2022)..........................................................
Linda McGoldrick, Board Member (from 16.6.2022).............................................
Robert Wessman, Chairman of the board..................................................................
Tomas Ekman, Board Member*..................................................................................
2021
Pension
contribution
Other Executive Team Members (9)..........................................
Mark Levick CEO..........................................................................
Richard Davies, Vice-Chairman...................................................................................
2021
Tanya Zharov (from 23.8.2021)*.................................................................................
Robert Wessman, Chairman of the board..................................................................
Richard Davies, Vice-Chairman...................................................................................
Ann Merchant, Board Member (from 16.6.2022)....................................................
Tomas Ekman, Board Member*..................................................................................
Pension
contribution
Hirofumi Imai, Board member (until 16.6.2022)......................................................
2022
Shares at year-
end**
Board fees
Mark Levick CEO..........................................................................
Faysal Kalmoua, Board Member*................................................................................
*Waived their board compensation (both cash and equity).
Faysal Kalmoua, Board Member*................................................................................
Board fees
2022
Board of Directors' fee for the year and shares at year end (board fees in
thousands and shares in whole amounts).
Shares at year-
end**
Alvotech - Consolidated Financial Statements 31.12.2022 64 All amounts are in USD
Notes to the Consolidated Financial Statements
25. Other current liabilities
The composition of other current liabilities as of 31 December 2022 and 2021 is as follows (in thousands):
2022 2021
15,620 10,235
2,249 7,547
- 7,500
5,025 4,626
12,433 -
18,720 12,104
54,047 42,012
26. Interests in joint ventures
2022 2021
2022
2021
China 50% 50% 48,568 55,307
2022 2021
55,307 56,679
(2,590) (2,418)
(4,149) 1,046
48,568 55,307
Translation difference.....................................................................................................................................
Alvotech & CCHN Biopharmaceutical
Co., Ltd
Name of entity
Accrued interest...............................................................................................................................................
Accrued expenses............................................................................................................................................
The proportion of ownership interest is the same as the proportion of voting rights held by the Group. Management evaluated
whether the Group’s voting rights are sufficient for providing a practical ability to direct the relevant activities and strategic
objectives of JVCO unilaterally. As the Group does not hold a majority of the voting rights, the Group does not control JVCO. As
a result, the Group’s investment in JVCO is accounted for using the equity method.
Unpaid salary and salary related expenses..................................................................................................
Accrued vacation leave...................................................................................................................................
In September 2018, Alvotech hf., a subsidiary of the Group, entered into a joint venture agreement with Changchun High & New
Technology Industries (Group) Inc. (the “joint venture partner”) to form a newly created joint venture entity, Alvotech & CCHN
Biopharmaceutical Co., Ltd. (the “joint venture” or “JVCO”). The purpose of the JVCO is to develop, manufacture and sell
biosimilar products in the Chinese market. The JVCO’s place of business is also the country of incorporation.
The following table provides the change in the Group’s investment in a joint venture during the years ended 31 December 2022
and 2021 (in thousands):
Carrying amount
Ownership interest
Balance at 1 January........................................................................................................................................
Place of
business
Share in losses..................................................................................................................................................
Balance at 31 December................................................................................................................................
Employee incentive plan................................................................................................................................
Accrued payable to Biosana..........................................................................................................................
The tables below provide summarized financial information for the JVCO. The information disclosed reflects the amounts
presented in the financial statements of the JVCO and not the Group’s share of those amounts. They have been amended to
reflect adjustments made by the Group when using the equity method, including fair value adjustments and modifications for
differences in accounting policy.
Alvotech - Consolidated Financial Statements 31.12.2022 65 All amounts are in USD
Notes to the Consolidated Financial Statements
2022 2021
Current assets
17,203 29,659
- 15
250 18
1,539 1,372
18,992 31,064
Total non-current assets
107,487 94,525
Current liabilities
145 -
14,129 12,156
14,274 12,156
Total non-current liabilities
15,069 2,820
Net assets
97,136 110,613
2022 2021
110,613 113,061
(5,180) (4,836)
- -
- -
- -
- -
(8,297) 2,388
97,136 110,613
50% 50%
48,568 55,307
48,568 55,307
2022 2021
- -
433 1,295
829 210
151 -
- -
4,633 5,920
- 1
(5,180) (4,836)
- -
(5,180) (4,836)
- -
Income tax expense........................................................................................................................................
Other expenses................................................................................................................................................
Dividends received from joint venture entity............................................................................................
Loss for the year................................................................................................................
Exchange rate differences..............................................................................................................................
Trade receivables..........................................................................................................................................
Other current assets ...................................................................................................................................
Inventories....................................................................................................................................................
Total current assets ........................................................................................................................................
Receivable from owners.................................................................................................................................
Group’s share in USD....................................................................................................................................
Depreciation and Amortization....................................................................................................................
Summarized Statement of Profit or Loss & Other Comprehensive Income (in thousands)
Revenue.............................................................................................................................................................
Interest income................................................................................................................................................
Other comprehensive income.......................................................................................................................
Total comprehensive loss..............................................................................................................................
Other current liabilities...............................................................................................................................
Cash contributions of owners.......................................................................................................................
Reconciliation to carrying amounts (in thousands):
Loss for the year..............................................................................................................................................
Other comprehensive income.......................................................................................................................
Cash and bank balances..............................................................................................................................
Other, net..........................................................................................................................................................
Group’s share in %.........................................................................................................................................
Opening net assets at 1 January....................................................................................................................
Closing net assets at 31 December..............................................................................................................
Carrying amount..............................................................................................................................................
Dividend paid...................................................................................................................................................
Total current liabilities ...................................................................................................................................
Summarized Statement of Financial Position (in thousands)
Interest expense...............................................................................................................................................
Financial liabilities .......................................................................................................................................
Alvotech - Consolidated Financial Statements 31.12.2022 66 All amounts are in USD
Notes to the Consolidated Financial Statements
27. Financial instruments
Accounting classification and carrying amounts
2022 2021
66,427 17,556
25,187 10,087
32,972 29,396
5,880 14,518
1,548 1,111
4,484 -
136,498 72,668
Financial liabilities as of 31 December 2022 and 2021 are as follows (in thousands):
2022 2021
764,570 400,911
380,232 -
7,440 7,440
544 56,334
49,188 28,587
40,532 122,140
1,131 638
53,664 42,012
1,297,301 658,062
Other long-term assets...................................................................................................................................
Derivative financial liabilities (measured at FVTPL)................................................................................
It is management’s estimate that the carrying amounts of financial assets and financial liabilities carried at amortized cost
approximate their fair value, with the exception of the Senior Bonds , since any applicable interest receivable or payable is either
close to current market rates or the instruments are short-term in nature. Material differences between the fair values and carrying
amounts of these borrowings are identified as follows (in thousands):
The Group did not receive any dividends from JVCO during the years ended 31 December 2022 and 2021. The Group had a $5.0
million commitment to provide a cash contribution to JVCO as of 31 December 2019, which was paid during the year ended 31
December 2020. Similarly, the joint venture partner had a $50.0 million commitment to provide a cash contribution to JVCO as of
31 December 2019, which was also paid during the year ended 31 December 2020. The Group does not have any remaining
commitments to JVCO as of 31 December 2022 and 2021. Furthermore, the Group does not have any contingent liabilities
relating to its interests in JVCO as of 31 December 2022 or 2021. While there are no significant restrictions resulting from
contractual arrangements with JVCO, entities in China are subject to local exchange control regulations. These regulations provide
for restrictions on exporting capital from those countries, other than dividends.
Receivables from related parties...................................................................................................................
Other long-term liability to related party (measured at amortized cost)..............................................
Long-term incentive plan (measured at FVTPL)......................................................................................
Trade receivables.............................................................................................................................................
Trade and other payables (measured at amortized cost).........................................................................
Lease liabilities (measured at amortized cost)............................................................................................
Restricted cash.................................................................................................................................................
Other current assets........................................................................................................................................
Other current liabilities...................................................................................................................................
Financial assets as of 31 December 2022 and 2021, all of which are measured at amortized cost, are as follows (in thousands):
Borrowings (measured at amortized cost)..................................................................................................
Cash and cash equivalents.............................................................................................................................
Liabilities to related parties (measured at amortized cost)......................................................................
Alvotech - Consolidated Financial Statements 31.12.2022 67 All amounts are in USD
Notes to the Consolidated Financial Statements
530,506 535,167
363,100 368,476
Fair value measurements
Level 1 Level 2 Level 3 Total
- - 45,325 45,325
- - 38,055 38,055
- - 851 851
- 276,200 - 276,200
- 10,500 - 10,500
10,152 - - 10,152
10,152 286,700 84,231 381,083
Tranche A Conversion Feature
Carrying
amount
Fair value
As noted in Note 20, in connection with the Convertible Bonds the Group classified the Tranche A Conversion Feature as an
embedded derivative liability due to the variability created by conversion rates resulting from the tranche being denominated in
ISK. The conversion feature had a fair value of $24.9 million and $38.1 million as of 20 December 2022 and 31 December 2022,
respectively. The change in fair resulted in $13.2 million of finance costs for the year ended 31 December 2022.
The Group did not recognize any transfers of assets or liabilities between levels of the fair value hierarchy during the years ended
31 December 2022 and 2021.
Fair value
2022
The following tables illustrate the fair value measurement hierarchy of the Group’s financial instruments measured to fair value on
a recurring basis as of 31 December 2022 (in thousands):
Bonds.................................................................................................................................................................
At 31 December 2021
At 31 December 2022
Carrying
amount
Tranche A Conversion Feature....................................................
Predecessor Earn Out Shares.......................................................
Senior Bond Warrants....................................................................
OACB Earn Out Shares................................................................
OACB Warrants..............................................................................
Sr. Bond Interest Rate Feat. (incl. in oth. current assets).......
The fair value of the Tranche A Conversion Feature was determined using a lattice model that incorporated inputs and
assumptions as further described below. The inputs and assumptions associated with the valuation of the instruments are
determined based on all relevant internal and external information available and are reviewed and reassessed at each reporting date.
The following table presents the assumptions and inputs that were used for the model in valuing the Tranche A Conversion
Feature:
The Group recognized derivative financial liabilities related to the equity conversion rights in the convertible bonds as well as the
equity conversion rights, warrant rights and funding rights in the convertible shareholder loans as of 31 December 2020. These
derivative financial liabilities were extinguished during the year ended 31 December 2021. Refer to Note 20 for additional details
on the extinguishment.
Senior Bonds....................................................................................................................................................
Alvotech - Consolidated Financial Statements 31.12.2022 68 All amounts are in USD
Notes to the Consolidated Financial Statements
$10.00 $8.00
$10.00 $10.00
45.0% 45.0%
4.2% 4.0%
0.0% 0.0%
19.3% 18.6%
Senior Bond Warrants
Stock price...........................................................................................................................................................
Risk yield.............................................................................................................................................................
Dividend yield....................................................................................................................................................
• One tranche representing 1.5% of the fully diluted ordinary share capital if the aggregate amount of the net proceeds of all new
equity issuances received by the Company on or before 15 December 2022 is less than $75.0 million, as defined in the Senior
Bonds agreement.
• One tranche representing 1.0% of the fully diluted ordinary share capital if the aggregate amount of the net Proceeds of all new
equity issuances received by the Company on or before 31 March 2023 is less than $150.0 million, as defined in the Senior Bonds
agreement.
As part of the Senior Bonds agreement (see Note 20), the Group agreed to issue penny warrants to the Bondholders that are
issuable if certain events occur. The contingently issuable Senior Bond Warrants include two tranches:
Volatility rate.......................................................................................................................................................
Risk-free interest rate........................................................................................................................................
Conversion price................................................................................................................................................
20 December
2022
31 December
2022
The Senior Bond Warrants are accounted for as derivative financial liabilities in accordance with IFRS 9 and IAS 32 and will be
subject to ongoing mark-to-market adjustments through the consolidated statement of profit or loss and other comprehensive
income or loss. The Senior Bond Warrants had a fair value of $15.4 million on 16 November 2022. The fair value was determined
using the Finnerty model along with the publicly quoted trading price of Ordinary Shares and probability of the contingent events
occurring at the valuation date. Probabilities associated with the instruments are determined based on all relevant internal and
external information available and are reviewed and reassessed at each reporting date.
On 31 December 2022, the Company issued 4,198,807 warrants, with an exercise price of $0.01, representing the first tranche of
Senior Bond Warrants. The issued warrants, along with the remaining tranche of contingently issuable warrants had a fair value of
$45.3 million as of 31 December 2022. The Group recognized $29.9 million in finance costs resulting from the change in fair value
of the Senior Bond Warrants.
Predecessor Earn Out Shares
As part of the Business Combination, Predecessor shareholders were granted a total of 38,330,000 Ordinary Shares subject to
certain vesting conditions (“Predecessor Earn Out Shares”). One half of the Predecessor Earn Out Shares will vest if, at any time
during the five years following the closing of the Business Combination, the Alvotech ordinary share price is at or above a volume
weighted average price (“VWAP”) of $15.00 per share for any ten trading days within any twenty-trading day period, with the other
half vesting at a VWAP of $20.00 per share for any ten trading days within any twenty-trading day period. The Predecessor Earn
Out Shares are accounted for as derivative financial liabilities in accordance with IAS 32 and will be subject to ongoing mark-to-
market adjustments through the consolidated statement of profit or loss and other comprehensive income or loss. The Predecessor
Earn Out Shares had a fair value of $227.5 million at the Closing Date and $276.2 million as of 31 December 2022, resulting in
$48.7 million of finance costs during the year ended 31 December 2022.
The fair value of the Predecessor Earn Out Shares was determined using Monte Carlo analysis that incorporated inputs and
assumptions as further described below. The inputs and assumptions associated with the valuation of the instruments are
determined based on all relevant internal and external information available and are reviewed and reassessed at each reporting date.
The following table presents the assumptions and inputs that were used for the model in valuing the Predecessor Earn Out Shares:
Alvotech - Consolidated Financial Statements 31.12.2022 69 All amounts are in USD
Notes to the Consolidated Financial Statements
$10.00 $9.38
45.0% 37.5%
4.05% 3.4%
OACB Earn Out Shares
$10.00 $9.38
45.0% 37.5%
4.05% 3.4%
OACB Warrants
15 June 2022
The fair value of the OACB Earn Out Shares was determined using a Monte Carlo analysis that incorporated inputs and
assumptions as further described below. Assumptions and inputs associated with the valuation of the instruments are determined
based on all relevant internal and external information available and are reviewed and reassessed at each reporting date. The
following table presents the assumptions and inputs that were used for the model in valuing the OACB Earn Out Shares:
Share price...........................................................................................................................................................
Risk-free interest rate........................................................................................................................................
31 December
2022
Former OACB shareholders were granted a total of 1,250,000 Ordinary Shares subject to certain vesting conditions (“OACB Earn
Out Shares”). One half of the OACB Earn Out Shares will vest if, at any time during the five years following the closing of the
Business Combination, the Alvotech ordinary share price is at or above a VWAP of $12.50 per share for any ten trading days
within any twenty-trading day period, with the other half vesting at a VWAP of $15.00 per share. The OACB Earn Out Shares are
accounted for as derivative financial liabilities in accordance with IAS 32 and will be subject to ongoing mark-to-market
adjustments through the statement of profit or loss and other comprehensive income or loss. The OACB Earn Out Shares had a
fair value of $9.1 million at the Closing Date and $10.5 million as of 31 December 2022, resulting in $1.4 million of finance costs
during the year ended 31 December 2022.
Additionally, as part of the Business Combination the Company assumed the 10,916,647 outstanding OACB warrants, on
substantially the same contractual terms and conditions as were in effect immediately prior to the Business Combination, including
an exercise price of $11.50. Each warrant entitles the holder to purchase one Alvotech ordinary share. The OACB warrants are
accounted for as derivative financial liabilities in accordance with IAS 32 and will be subject to ongoing mark-to-market
adjustments through the consolidated statement of profit or loss and other comprehensive income or loss. The OACB warrants
had a fair value of $11.8 million at the Closing Date and $10.2 million as of 31 December 2022. The fair value of the warrants was
derived from the publicly quoted trading price at the valuation date. The change in fair value of the OACB Warrants resulted in
$1.6 million of finance income for the year ended 31 December 2022.
Volatility rate.......................................................................................................................................................
Risk-free interest rate........................................................................................................................................
31 December
2022
Volatility rate.......................................................................................................................................................
15 June 2022
Share price...........................................................................................................................................................
Alvotech - Consolidated Financial Statements 31.12.2022 70 All amounts are in USD
Notes to the Consolidated Financial Statements
Convertible shareholder loans
Capital management
Financial risk management
Interest rate risk
The following table provides an interest rate sensitivity analysis for the effect on loss before tax (in thousands):
2022 2021
(186) (65)
186 65
The fair value of the derivatives associated with the convertible shareholder loans on 7 December 2021 was determined based on
the number of shares to be issued at the closing of the Business Combination Agreement multiplied by OACB stock price ($9.86).
The fair value of the derivatives associated with the convertible shareholder loans was $485.9 million and $534.7 million at 7
December 2021, the date of extinguishment (refer to Note 20 for additional details) and 31 December 2020. Changes in the fair
value of the financial instruments during the period are recognized in the consolidated statements of profit or loss and other
comprehensive income or loss.
Variable-rate financial liabilities -100...........................................................................................................
The capital structure of the Group consists of equity, debt and cash. For the foreseeable future, the Board of Directors will
maintain a capital structure that supports the Group’s strategic objectives through managing the budgeting process, maintaining
strong investor relations and managing the financial risks of the Group, as further described below. No changes were made in the
objectives, policies or processes for managing capital during the years ended 31 December 2022 and 2021.
The Group’s corporate treasury function provides services across the organization, coordinates access to domestic and
international financial markets, monitors and manages the financial risks relating to the Group’s operations through internal risk
reports which analyze exposures by degree and magnitude of risks. These risks include market risk (including currency risk and
interest rate risk), credit risk and liquidity risk.
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
market interest rates. The Group’s exposure to the risk of fluctuations in market interest rates primarily relates to the cash in bank
that is subject to floating interest rates.
Variable-rate financial liabilities +100.........................................................................................................
The Group did not recognize any transfers of assets or liabilities between levels of the fair value hierarchy during the years ended
31 December 2022 and 2021.
In aggregate, the fair value of the derivative liabilities associated with the convertible shareholder loans and convertible bonds at 31
December 2019 was $479.3 million. In 2020, the fair value of the derivative liabilities increased by $55.4 million, resulting in
derivative liabilities of $534.7 million at 31 December 2020. In 2021, the fair value of the financial instruments decreased by $48.8
million, resulting in derivative liabilities of $485.9 million at 7 December 2021, the date of extinguishment. Included in the changes
in fair value of the derivative liabilities is the amortization of a deferred loss associated with the recognition of funding rights at the
inception of the convertible shareholder loan with Aztiq. Specifically, at inception, the fair value of the funding rights, determined
using unobservable inputs, exceeded the transaction price by $15.0 million. The deferred loss was recognized over the 5-year term
of the convertible shareholder loan using the straight-line method of amortization. The unamortized deferred loss, which is netted
against derivative financial liabilities on the consolidated statements of financial position, was $3.1 million as of 7 December 2021,
the date of extinguishment.
Alvotech - Consolidated Financial Statements 31.12.2022 71 All amounts are in USD
Notes to the Consolidated Financial Statements
Foreign currency risk
Below are the foreign currencies that have the most significant impact on the Group's operations.
Change
2022 2021 2022 2021
EUR ....................................................................
1.061 1.133 1.052 1.183 (6.4%)
GBP ....................................................................
1.204 1.350 1.233 1.376 (10.8%)
ISK ......................................................................
0.007 0.008 0.007 0.008 (8.3%)
CHF ....................................................................
1.071 1.094 1.047 1.094 (2.1%)
INR .....................................................................
0.012 0.013 0.013 0.014 (10.1%)
Assets Liabilities Net
EUR ..................................................................................................................................
36,420 26,514 9,906
GBP ..................................................................................................................................
111 1,538 (1,427)
ISK ....................................................................................................................................
49,484 109,507 (60,023)
CHF ..................................................................................................................................
69 7,305 (7,236)
INR ...................................................................................................................................
11 517 (506)
Assets Liabilities Net
EUR ..................................................................................................................................
31,718 15,720 15,998
GBP ..................................................................................................................................
180 673 (493)
ISK ....................................................................................................................................
5,421 148,747 (143,326)
CHF ..................................................................................................................................
715 7,305 (6,590)
Year ended 31 December 2022 EUR GBP ISK CHF INR
-10% weakening ............................................. (991) (143) (6,002) (724) (51)
+10% strengthening ..................................... 991 143 6,002 724 51
Year ended 31 December 2021 EUR GBP ISK CHF INR
-10% weakening ............................................. (1,600) (49) (14,333) (659) N/A
+10% strengthening ..................................... 1,600 49 14,333 659 N/A
The Group’s assets and liabilities that are denominated in foreign currencies as of 31 December 2022 are as follows (in thousands):
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
foreign exchange rates. The Group’s exposure to currency risk arises from financial assets and financial liabilities denominated in
other currencies than the presentation currency of the Group.
Closing rate
Average rate
The Group’s assets and liabilities that are denominated in foreign currencies as of 31 December 2021 are as follows (in thousands):
A reasonable possible strengthening or weakening of the Group’s significant foreign currencies against the USD would affect the
measurement of financial instruments denominated in a foreign currency and affect equity by the amount shown in the sensitivity
analysis table below. The analysis assumes that all other variables, such as interest rates, remain constant.
Alvotech - Consolidated Financial Statements 31.12.2022 72 All amounts are in USD
Notes to the Consolidated Financial Statements
Credit risk
2022 2021
66,427 17,556
25,187 10,087
44,884 66,344
136,498 93,987
Liquidity risk
Within one One to two
Financial assets year years Thereafter Total
40,400 - - 40,400
66,427 - 29,671 96,098
106,827 - 29,671 136,498
Financial liabilities
104,366 - 7,984 112,350
45,757 66,308 896,921 1,008,986
- - 380,232 380,232
25,259 8,036 59,109 92,404
175,382 74,344 1,344,246 1,593,972
Other assets .....................................................................................................................................................
Credit risk it the risk that a counterparty will not fulfill its contractual obligations under a financial instrument contract, leading to a
financial loss for the Group. The maximum credit risk exposure for the Group’s financial assets as of 31 December 2022 and 2021
is as follows (in thousands):
Other assets primarily consist of other current assets, as described in Note 18, and trade receivables and contract assets recognized
in connection with the Group’s performance pursuant to its contracts with customers, all of which are large multinational
pharmaceutical companies. There are no significant amounts past due as of 31 December 2022 and 2021 and the Group concludes
that any expected credit losses with respect to these assets is immaterial.
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities
that are settled by delivering cash or another financial asset.
The Group’s cash and cash equivalents and restricted cash are deposited with high-quality financial institutions. Management
believes these financial institutions are financially sound and, accordingly, that minimal credit risk exists. The Group has not
experienced any losses on its deposits of cash and cash equivalents and restricted cash yet monitors the credit rating of these
financial institutions on a periodic basis.
Contractual maturities of financial assets and liabilities as of 31 December 2022 are as follows (in thousands):
Derivative liabilities .......................................................................
Non-interest bearing .....................................................................
Cash and cash equivalents ............................................................................................................................
Variable-interest bearing - Borrowings ......................................
Restricted cash ................................................................................................................................................
Fixed-interest bearing - Borrowings ..........................................
Non-interest bearing .....................................................................
Total financial liabilities ................................................................
Variable-interest bearing ...............................................................
Total financial assets .....................................................................
Alvotech - Consolidated Financial Statements 31.12.2022 73 All amounts are in USD
Notes to the Consolidated Financial Statements
Within one One to two
year years Thereafter Total
Financial assets
29,396 - - 29,396
17,556 - 10,087 27,643
46,952 - 10,087 57,039
Financial liabilities
71,237 - 63,774 135,011
16,663 33,235 500,675 550,573
3,041 3,035 1,117 7,193
90,941 36,270 565,566 692,777
28. Supplemental cash flow information
Non-cash investing and financing activities 2022 2021
4,131 3,812
4,075 -
9,583 18,871
115,005 -
80,000 -
32,200 346,043
- 461
29. Subsequent events
Acquisition of other intangible assets through financing agreements..................................................
Acquisition of property, plant and equipment in trade payables...........................................................
Acquisition of intangibles in trade payables and other current liabilities.............................................
Right-of-use assets obtained through new operating leases....................................................................
Addition of the Facility through Aztiq Convertible Bond......................................................................
Non-cash issuance of Aztiq Convertible Bond.........................................................................................
Equity issued through conversion of borrowings.....................................................................................
On 10 February 2023, the Company completed a private placement equity offering of $137.0 million, at current ISK exchange
rates, of its Ordinary Shares, par value $0.01 per share, at a purchase price of $11.57 per share. The Shares are expected be
delivered from previously issued ordinary shares held by Alvotech’s subsidiary, Alvotech Manco ehf. As a result of proceeds raised
from the private placement offering, the Company extinguished the liability related to the Senior Bond Warrants resulting in the
potential issuance of penny warrants representing 1.0% of the fully diluted ordinary share capital (see Note 20). This will be
accounted for as an extinguishment of a financial liability in the consolidated statement of profit or loss and other comprehensive
income or loss.
The Group evaluated subsequent events through 1 March 2023, the date the consolidated financial statements were available to be
issued.
Total financial liabilities ................................................................
Supplement cash flow information for the year ended 31 December 2022 and 2021 is included below (in thousands).
On 25 January 2023, the Company issued an additional $10.0 million in Tranche B Convertible Bonds. Holders of the Tranche B
Convertible Bonds may elect, at their sole discretion, to convert all or part of the principal amount and accrued interest into
Alvotech Ordinary Shares at a conversion price of $10.00 per share on December 31, 2023, or June 30, 2024. The conversion
feature will be accounted for as an embedded derivative and classified as equity.
Fixed-interest bearing - Borrowings ..........................................
Non-interest bearing .....................................................................
Variable-interest bearing ...............................................................
Total financial assets .....................................................................
Refer to Note 13 for the maturity analysis of the Group’s undiscounted lease payments.
Variable-interest bearing - Borrowings ......................................
Non-interest bearing .....................................................................
Contractual maturities of financial assets and liabilities as of 31 December 2021 are as follows (in thousands):
Alvotech - Consolidated Financial Statements 31.12.2022 74 All amounts are in USD
Notes to the Consolidated Financial Statements
On 17 February 2023, the first tranche of OACB Earn Out Shares vested resulting in the issuance of 625,000 Ordinary Shares. The
issuance of Ordinary Shares for the first tranche will be accounted for as an extinguishment of a financial liability in the
consolidated statement of profit or loss and other comprehensive income or loss.
Subsequent to 31 December 2022, holders of the OACB Warrants exercised their warrant rights for an exercise price of $11.50 for
the rights to one Ordinary Share per warrant. The exercises result in the issuance of 271,150 Ordinary Shares and cash proceeds of
$3.1 million. The Company will recognize the transaction as an extinguishment of the derivative financial liabilities. The difference
between the equity issued and carrying value of the derivative financial liabilities will be recognized in the consolidated statement of
profit or loss and other comprehensive income or loss.
Subsequent to 31 December 2022, Senior Bond Warrant holders elected to exercise their warrants. As a result, 3,014,189 Ordinary
Shares were issued in exchange for the exercising of the penny warrants. The Company received an immaterial amount of cash and
will recognize the transaction as an extinguishment of the derivative financial liabilities. The difference between the equity issued
and carrying value of the derivative financial liabilities will be recognized in the consolidated statement of profit or loss and other
comprehensive income or loss.
On 27 February 2023, the Group and Teva signed an amendment to the licence & development agreement. As part of that
amendment, the Group agreed to provide future financial consideration to Teva to assist with the cost of launching and marketing
the licensed biosimilar products.
Alvotech - Consolidated Financial Statements 31.12.2022 75 All amounts are in USD
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Corporate Governance Report for 2022
This corporate governance report (the “Report”) covers the period from 16 June 2022 (date immediately
following the date on which Alvotech consummated the business combination with Oaktree Acquisition Corp.
II and Alvotech Holdings S.A.) through 31 December 2022 of Alvotech, a société anonyme, incorporated and
existing under the laws of the Grand Duchy of Luxembourg, registered with the Luxembourg Trade and
Companies' Register under number B258884, having its registered office at 9, rue de Bitbourg, L-1273
Luxembourg, Grand Duchy of Luxembourg (“Alvotech” or the “Company”). Alvotech was incorporated on
August 23, 2021 for the sole purpose of completing a business combination between Alvotech Holdings S.A.,
Oaktree Acquisition Corp. II and Alvotech. The business combination closed on 15 June 2022 and,
concurrently with the closing, the current Directors of Alvotech were appointed.
The ordinary shares and warrants of Alvotech are listed on The Nasdaq Stock Market LLC (“Nasdaq US”)
under the symbol “ALVO” and “ALVOW”, respectively, since 16 June 2022. Alvotech’s ordinary shares are
also listed on the Nasdaq Iceland Main Market under the ticker symbol “ALVO” since 8 December 2022 and,
prior to that, on the Nasdaq First North Growth Market since 23 June 2022 until their admission to trading to
the Nasdaq Iceland Main Market. This Report will be a part of the financial statements for the year ended 31
December 2022, and has been approved by the Board of Directors of the Company (the “Board of Directors”
or “Board”) and reviewed by its Audit Committee.
As regards general meetings of shareholders, at an ordinary general meeting, there is no quorum requirement
and resolutions are adopted by a simple majority of validly cast votes. Abstentions are not considered “votes.”
Resolutions at an extraordinary general meeting are required for any of the following matters, among others: (i)
an increase or decrease of the authorized or issued capital, (ii) a limitation or exclusion of preferential
subscription rights, (iii) approval of a statutory merger or de-merger (scission), (iv) Alvotech’s dissolution and
liquidation, (v) any and all amendments to Alvotech’s articles of association and (vi) change of nationality.
Pursuant to Alvotech’s articles of association, for any resolutions to be considered at an extraordinary general
meeting of shareholders, the quorum shall be at least one half of Alvotech’s issued share capital unless otherwise
mandatorily required by law. If the said quorum is not present, a second meeting may be convened, for which
Luxembourg Company Law does not prescribe a quorum. Any extraordinary resolution shall be adopted at a
quorate general meeting, except otherwise provided by law, by at least a two-thirds majority of the votes validly
cast on such resolution by shareholders. Abstentions are not considered “votes.”
An annual general meeting of shareholders (“AGM”) shall be held in the Grand Duchy of Luxembourg within
6 months of the end of the preceding financial year.
Each Ordinary Share entitles the holder thereof to one vote. Neither Luxembourg law nor Alvotech’s articles
of association contain any restrictions as to the voting of Ordinary Shares by non-Luxembourg residents. The
Luxembourg Company Law distinguishes ordinary general meetings of shareholders and extraordinary general
meetings of shareholders with respect to the required quorums and majorities.
Alvotech is committed to recognizing general principles aimed to ensure good corporate governance. Our
approach to corporate governance is further described in this Report.
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Alvotech’s corporate governance consists of a framework of principles and rules, including its Articles of
Association, the 6
th
edition from February 2021 of the Guidelines on Corporate Governance issued by the
Iceland Chamber of Commerce, Nasdaq Iceland Main Market and the Confederation of Icelandic Employers.
The Board of Directors also adopted a Code of Business Conduct and Ethics (the “Code”) applicable to the
directors, officers, employees and other team members that complies with the rules and regulations of Nasdaq
US, Nasdaq Iceland Main Market, and the SEC. The Code is available on Alvotech’s website.
Alvotech’s regulatory framework for corporate governance practices consists of the law applicable listed
companies as well as other applicable law and regulations, including those imposed by Nasdaq Iceland Main
Market and Nasdaq US available at their respective websites.
The Board of Directors is committed to excellence in corporate governance by complying with the applicable
regulatory standards and international best practices in the field of corporate governance.
All directors of the Company must act honestly, with due skill and care in the best interests of the Company
and the group. All directors must adhere to the highest standards of honest and ethical conduct, including
taking proper and due actions to avoid any conflicts of interest in his or her dealings with the Alvotech or the
group, or dealings with other parties that may relate to or affect the group of Alvotech, its interest and assets.
Internal Control
The Audit and Risk Committee is responsible, among other things, for establishing procedures for the
confidential anonymous submission of complaints (a whistle blowing mechanism).
Risk Management
Alvotech has a strong track record of growth. The Board of Directors is responsible for overseeing Alvotech’s
risk management process. The Board of Directors focuses on Alvotech’s general risk management strategy, the
most significant risks, and oversees the implementation of risk mitigation strategies by management. The audit
and risk committee is also responsible for discussing Alvotech’s policies with respect to risk assessment and
risk management. The Board of Directors believes its administration of its risk oversight function has not
negatively affected the Board’s leadership structure. As part of the steady expansion of Alvotech´s risk
management processes, the Company has launched a number of initiatives. Each initiative is contributing to
achieving the company´s objectives with regard to efficacy and efficiency of operations, reliability of financial
reporting and compliance with applicable laws and regulations. The Company has identified certain key risks
that are given special attention and monitored.
Audit, accounting and risk
The Board of Directors adopted the Audit and Risk Committee Charter. The Chief Executive Officer of the
Company ensures that the directors are provided with accurate information on Alvotech´s finances,
development, operations and risk assessments on a regular basis and the Audit and Risk Committee assists the
Board in fulfilling its oversight responsibilities concerning the financial reporting process and the system of
internal controls. The Board of Directors ensures that internal procedures for risk management are revised at
least annually.
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The consolidated financial statements are published on an annual, semi-annual and quarterly basis, as applicable,
subject to and in accordance with applicable publication requirements under Icelandic and/or Luxembourg
and/or and U.S. laws.
The AGM appoints the independent auditor (réviseur d’entreprises agréé) and shall determine their office, in
accordance with Alvotech´s Articles of Association. The Board´s proposal to the AGM is based on the Audit
and Risk Committee´s recommendation on the selection of an audit firm. Deloitte hf. has carried out the
external audit of Alvotech in recent years. In addition, Deloitte Audit (20, Boulevard de Kockelscheuer L-1821,
Luxembourg, Grand Duchy of Luxembourg) is appointed as the independent auditor (réviseur d’entreprises agréé)
of Alvotech and in recent years conducted external audits in accordance with the Luxembourg law of 23 July
2016 on the audit profession (the “Audit Law”). In accordance with Article 51 of the law of the Audit Law
and by way of derogation from Article 17(1) of Regulation (EU) No 537/2014, the maximum duration of a
statutory audit of a public-interest entity may be of 20 years, where a public tendering process for the statutory
audit is conducted in accordance with paragraphs 2 to 5 of Article 16 of the above-mentioned regulation.
Compliance
Alvotech has a Compliance function. The General Counsel of the company is the Compliance Officer and is
responsible for the Code, the training of employees and business ethics. Under Icelandic Act 60/2021, a
Securities Compliance Officer has been appointed to oversee the compliance with the Company´s Insider
Trading policy. The Securities Compliance Officer is responsible for assessing and monitoring if Alvotech, its
directors, officers and employees are in compliance with the laws and regulations that apply to a company listed
on the Nasdaq Iceland Main Market. The Compliance Officer monitors if the company is in compliance with
other applicable law and the Company´s Business Code of Conduct.
Code of Business Conduct and Ethics
The Board of Directors adopted a Code of Business Conduct and Ethics for Alvotech´s directors, officers and
employees. The Code sets out Alvotech´s code of business conduct and ethics, consisting of the principal
business, ethical, moral and legal standards which Alvotech´s directors, officers and employees are required to
observe. The aim of the Code is a further testament to Alvotech´s commitment to sustainability, having
oversight and managing relevant environment, social and government risks and opportunities in Alvotech´s
operations and value chain.
Sustainability
Alvotech has adopted a Sustainability Policy that is focused on making its operations exemplary in the
pharmaceutical environment based on established international environmental, social and governance (“ESG”)
criteria. In this respect, the company has a created a separate Non-Financial Disclosures 2023 report for 2022
that will be attached to the 2022 financials.
Board Committees
Alvotech has five standing committees of the Board of Directors (an audit and risk committee, a compensation
committee, a nominating and corporate governance committee, a strategy committee and a Corporate
Sustainability Committee). All the committees are constituted of members of the Board based on their expertise,
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skills and experience relevant to that Committee and in accordance with the rules set for each committee by
the Board of Directors.
Audit and Risk Committee
The members of Alvotech’s audit and risk committee are LindaMcGoldrick (Chair), Ann Merchant and Richard
Davies. Each member of Alvotech’s audit and risk committee qualifies as independent directors according to
the rules and regulations of the SEC and Nasdaq with respect to audit and risk committee membership. In
addition, all audit and risk committee members meet the requirements for financial literacy under applicable
SEC and Nasdaq rules and at least one of the audit and risk committee members qualifies as an “audit and risk
committee financial expert,” as such term is defined in Item 407(d) of Regulation S-K under the United States
Securities Act of 1933, as amended. The audit and risk committee is responsible for, among other things:
• appointing, compensating, retaining, evaluating, terminating and overseeing our independent
registered public accounting firm;
• discussing with our independent registered public accounting firm their independence from
management;
• reviewing, with our independent registered public accounting firm, the scope and results of their
audit;
• approving all audit and permissible non-audit services to be performed by our independent registered
public accounting firm;
• overseeing the financial reporting process and discussing with management and our independent
registered public accounting firm the annual financial statements that we file with the SEC;
• overseeing our financial and accounting controls and compliance with legal and regulatory
requirements;
• reviewing our policies on risk assessment and risk management;
• reviewing related party transactions; and
• establishing procedures for the confidential anonymous submission of concerns regarding
questionable accounting, internal controls or auditing matters.
Compensation Committee
Richard Davies (Chair), Árni Harðarson and Tomas Ekman. Mr. Davies qualifies as an independent director
according to the rules and regulations of the SEC and Nasdaq with respect to compensation committee
membership, including the heightened independence standards for members of a compensation committee.
The compensation committee is responsible for, among other things:
• reviewing and approving the corporate goals and objectives, evaluating the performance of and
reviewing and approving, (either alone or, if directed by the board of directors, in conjunction with a
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majority of the independent members of the board of directors) the compensation of our chief
executive officer;
• overseeing an evaluation of the performance of and reviewing and setting or making
recommendations to our board of directors regarding the compensation of our other executive
officers;
• reviewing and approving or making recommendations to our board of directors regarding our
incentive compensation and equity-based plans, policies and programs;
• reviewing and approving all employment agreement and severance arrangements for our executive
officers;
• making recommendations to our shareholders regarding the compensation of our directors; and
• retaining and overseeing compensation consultants.]
Corporate Sustainability Committee:
The members of Alvotech’s ESG committee are Ann Merchant (Chair), Árni Harðarson and Róbert Wessman.
The ESG committee is responsible for, among other things:
• reviewing, monitoring and setting strategy in the area of corporate responsibility;
• overseeing Alvotech’s activities in the area of corporate responsibility that may have an impact on
the Company’s reputation and operations;
• periodically assess the Alvotech’s compliance obligations;
• monitor and review matters of health and safety and report findings to the broader board; and
• review and evaluate environmental, social and political issues and trends and their relevance to
Alvotech’s business and make recommendations to the board regarding those trends and issues.
Nomination and Corporate Governance Committee
The members of Alvotech’s nominating and corporate governance committee are Richard Davies (Chair), Lisa
Graver and Tomas Ekman. The nominating committee is responsible for, among other things:
• identifying individuals qualified to become members of our board of directors, consistent with
criteria approved by our board of directors;
• overseeing succession planning for our Chief Executive Officer and other executive officers;
• periodically reviewing our board of directors’ leadership structure and recommending any proposed
changes to our board of directors;
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• overseeing an annual evaluation of the effectiveness of our board of directors and its committees;
and
• developing and recommending to our board of directors a set of corporate governance guidelines.
Strategy Committee
The Strategy committee is responsible for, among other things, reviewing, monitoring and setting strategy for
the business of Alvotech. The members of Alvotech’s Strategy committee are F aysal Kalmoua (Chair), Lisa
Graver and Róbert Wessman.
The structure and composition of the Board of Directors
Alvotech’s Board of Directors is currently composed of eight members. In accordance with Alvotech’s articles
of association, the Board is not divided into classes of directors. Each director was appointed at the closing of
the business combination on June 15, 2022, to serve as director until the end of the general meeting of
shareholders called to approve the Alvotech’s annual accounts for the 2024 financial year. There are no
limitations on the duration of the board membership. The composition of the board shall at any time be diverse,
with regard to educational and professional background, gender and age.
The board undertakes Alvotech´s affairs in between shareholders´ meetings unless otherwise provided by law
or Alvotech ´s Articles of Association. The board is responsible for setting Alvotech´s general strategy. The
board has a supervisory role in overseeing that Alvotech´s organization and activities are at all times in
accordance with the relevant law, regulation and good business practices. The board met 9 times last year since
the Company went public.
Members of the Board of Directors
Robert Wessman, Chairman and CEO, is the founder of Alvotech and has served as Executive Chairman and
member of the board of directors of Alvotech since January 2019. Since November 2018, he has also served as
Director at Fuji Pharma and chairman of the board of directors of Lotus Pharmaceuticals and since May 2009,
he has served as a member of the board of directors of Aztiq and as a member of the board of directors of
Aztiq GP, the general partner of Aztiq Fund I SCSp, a Luxembourg alternative investment fund, and the parent
company of Aztiq. Mr. Wessman is also the founder and main partner of the Aztiq group. Mr. Wessman
founded Alvogen in July 2009, and served as its Executive Chairman and Chief Executive Officer until June
2022. He continues to serve as Alvogen’s chairman since July 2022. Between 1999 and 2008, Mr. Wessman
served as the Chief Executive Officer of Actavis. He has a Bachelor of Science degree in Business
Administration from the University of Iceland. We believe Mr. Wessman is qualified to serve on Alvotech’s
board of directors due to the perspective he brings as Alvotech’s founder and his experience in top executive
positions in the pharmaceutical industry.
Richard Davies, Director and Deputy Chairman, has served as Deputy Chairman of Alvotech’s board from June
2022. He was previously on one of Alvotech’s directors since January 2019 and served as Chairman. Since
November 2018, he has served as Chief Executive Officer of Auregen Bio Therapeutics SA. Prior to joining
Auregen Bio Therapeutics, Mr. Davies served as Chief Executive Officer of Bonesupport AB between 2016
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and 2018, as Senior Vice President and Chief Commercial Officer of Hospira Inc. between 2012 and 2015, and
in various leadership roles at Amgen Inc between 2003 and 2012. Mr. Davies holds an MBA from the University
of Warwick and Bachelor of Science in applied chemistry from the University of Portsmouth.
Tomas Ekman, Director, has served as one of Alvotech’s directors since January 2019. Since November 2014 he
has served as a partner at CVC Capital Partners where he is a member of the CVC Nordics team and is based
in Stockholm. Prior to joining CVC in 2014, Mr. Ekman was a partner and Managing Director at 3i, responsible
for its Nordic business. Mr. Ekman holds MSc degrees from the University of Strathclyde and Chalmers
University of Technology, and an MBA from IMD, Switzerland.
Faysal Kalmoua, Director, has served as one of Alvotech’s directors since June 2020. Mr. Kalmoua has also served
as a partner of the Aztiq group since June 2022. Between April 2020 and June 2022, Mr. Kalmoua served as
Executive Vice President of Portfolio, Business Development and Research and Development for Alvogen.
Between November 2015 and March 2020, Mr. Kalmoua served as Executive Vice President of Portfolio for
Alvogen, Inc. Prior to joining Alvogen, Mr. Kalmoua served in various management positions for Synthon for
nearly 16 years. Mr. Kalmoua holds a Master’s degree in Chemistry from the Radboud University Nijmegen
and an executive MBA from Insead.
Ann Merchant, Director, has served as one of Alvotech’s directors since June 2022. Since 2018, she has served as
Vice President for MorphoSys, and as Head of Global Supply Chain since January 2019. Prior to joining
MorphoSys, from September 2011 to August 2018, Ms. Merchant served as the President for Schreiner
Medipharm. Between 1994 and 2011, Ms. Merchant held various roles at Amgen, including Vice President,
Head of International Supply Chain and Site Head between 2007 and 2011. Ms. Merchant holds an MBA from
the Henley Business School and a Bachelor of Science in Languages from Georgetown University. We believe
Ms. Merchant is qualified to serve on Alvotech’s board of directors because of her experience in executive
positions with several pharmaceutical companies and expertise in financial planning, new product launches and
creating and executing international strategies to increase market share.
Arni Hardarson, Director, has served as one of Alvotech’s directors since June 2022. Mr. Hardarson is a co-
founder and partner of the Aztiq group. Between 2009 and June 2022, he served as Deputy to the Chief
Executive Officer and General Counsel of Alvogen. Prior to joining Alvogen, Mr. Hardarson was Vice
President of Tax and Structure at Actavis, and as partner, member of the executive management committee,
and served as a head of tax and legal at Deloitte. Mr. Hardarson holds a Master’s degree in law from the
University of Iceland. We believe Mr. Hardarson is qualified to serve on Alvotech’s board of directors because
of his extensive expertise in financial and legal matters and his past experience in top executive positions.
Lisa Graver, Director, has served as one of Alvotech’s directors since June 2022. Ms. Graver has served in various
leadership positions for Alvogen since June 2010, including as President of Alvogen Inc, a subsidiary of
Alvogen, since August 2015, as Executive Vice President and Deputy to the Chief Executive Officer of Alvogen
Inc. since February 2013, and as Vice president Intellectual Property of Alvogen since June 2010. Prior to
joining Alvogen, Ms. Graver was Vice President Intellectual Property and Senior Director Intellectual Property
at Actavis Inc. between 2006 and 2008. Ms. Graver holds a BSc in Biology from Lakehead University and a law
degree from the Case Western Reserve University School of Law. We believe Ms. Graver is qualified to serve
on Alvotech’s board of directors because of her extensive expertise in intellectual property and the
pharmaceutical industry.
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Linda McGoldrick, Director, has served as one of Alvotech’s directors since June 2022 and as the Chairman of the
Audit Commitee. In 1985, Ms. McGoldrick founded, and currently serves as Chairman and Chief Executive
Officer of, Financial Health Associates International, a strategic consulting company specializing in healthcare
and life sciences. Since January 2020, she has served as the Chief Executive Officer for 2Enable Health LLC.
Prior to joining 2Enable Health LLC, Ms. McGoldrick served as interim CEO at Zillion between June 2019
and December 2019. Over her professional career, Ms. McGoldrick has served in a number of leadership roles,
including Senior Vice President and National Development Director for the Healthcare and Life Sciences
Industry Practices at Marsh-MMC Companies, International Operations and Marketing Director of Veos plc,
and Managing Director Europe for Kaiser Permanente International. In 2018, Ms. McGoldrick was appointed
by the Governor of Massachusetts to serve on the state’s Health Information Technology Commission. Ms.
McGoldrick has served as a director of numerous publicly traded and private held companies and non-profit
organizations in the U.S., UK and Europe, including as director for Compass Pathways since September 2020.
In 2012, Ms. McGoldrick was named as one of the Top 100 Corporate Directors of Fortune 100 Companies
by the Financial Times. Ms. McGoldrick holds a Master’s Degree in Healthcare from the University of
Pennsylvania and an MBA from Wharton. We believe Ms. McGoldrick is qualified to serve on Alvotech’s board
of directors because of her extensive expertise in financial matters and the healthcare and life sciences industry.
Business ethics and Code of Conduct
Alvotech sets high standards for all employees and directors. We also adhere to ethical commitments in every
aspect of our business, with respect to our employees as well as outside stakeholders, including contractors,
suppliers, commercial partners, government authorities and the general public. These commitments are
spelled out in our Code of Corporate Conduct and Ethics, which applies to all our employees, including our
senior executive, officers and directors. We apply our Code of Conduct both in internal and external relations
and give preference in our business dealings to those who adhere to comparable ethical standards.
It is the duty of the Board of Directors to serve as fiduciary for shareholders and to oversee the management
of the company. To fulfill its responsibilities and to discharge its duties prudently, the Board of Directors
follows the procedures and standards that are set forth in guidelines and charters. These documents are
subject to modification from time to time as the Board of Directors deems appropriate in the best interests of
Alvotech or as required by applicable laws and regulations.
The Code of Conduct and charters for the Board of Directors are accessible on Alvotech’s website at
https://investors.alvotech.com/corporate-governance/documents-charters
Approved by the board on: 1 March 2023
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Non-financial disclosure
Business model
Alvotech was founded in 2013 to develop and manufacture biosimilars which have the potential to improve the
life and health of millions of patients globally. The goal is to become the leading global biosimilar company in the
production and sales of cost-effective medicines while increasing availability for all patients.
Alvotech’s headquarters are located at the University of Iceland’s Science Park in Reykjavik, Iceland and the
company also operates out of several buildings in the Reykjavik metro area. Alvotech has affiliates in the U.S.,
Germany, India and Switzerland.
Due diligence process regarding non-financial disclosures
Rules governing Alvotech’s quality assurance and certification processes
Alvotech operates according to the standard of Good Manufacturing Practice (GMP) as other companies which
manufacture medicines for patients. To be able to demonstrate that these practices are being followed, Alvotech
has implemented a quality assurance system for all manufacturing, monitoring, and distribution processes. The
quality assurance system is based on thousands of documents of varying types. Many are standard operating
procedures for the product manufacturing process or for quality control processes, equipment and instrument
validation, environmental systems and buildings, proper document control and so on. All documents which are
part of the quality control system form the basis of the quality of the medicines being produced. Furthermore, all
pharma companies which adopt GMP must be able to accept regular audits by the local Health Authority which
regulate the pharmaceutical industry and international Health Authority regulators from the countries where these
medicines will be commercially distributed.
Alvotech’s quality control system has been certified, first in 2018 when a permission was granted to produce
medicines for clinical trials (clinical manufacturing) and in September 2020 when Alvotech received permission to
produce marketed products (commercial manufacturing). Alvotech has also been audited by other pharmaceutical
companies and partners in relations to Alvotech’s global marketing biosimilars agreements and is inspected on a
regular basis by medical authorities of the regions and countries where Alvotech’s biosimilars are either already
marketed or where applications for marketing authorization have been submitted.
Alvotech’s largest divisions operate according to an ISO 9001 certified quality control system which also applies
to several non-financial issues, such as environmental controls. The British Standards Institution (BSI) validates
annually that these protocols are being followed.
The company’s compliance officer ensures that the business Code of Conduct is being followed and implements
annual training for employees in these matters. The Environmental, Health and Safety committee ensures Alvotech
is following Icelandic statute nr. 46/1980. The executive management team and board of directors are responsible
for ensuring that the company’s operations follow all respective rules and regulations. Additionally, this team
ensures that internal procedures and Code of Conduct are followed.
Alvotech has conducted a survey of its performance in implementing these policies, including environmental, social
and governance factors, with reference to the provisions of paragraph 66.d. of the Icelandic Financial Statement
Act No. 3/2006. This survey highlighted information on how the company performs according to various
applicable international standards and guidelines. The report provides a wholistic overview of Alvotech’s
operations from this viewpoint, which management can then use to guide further work on implementing
improvements to reduce risk exposure or prevent adverse impact on the environment.
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Operations
Biosimilars are manufactured using living cells. Alvotech develops its medicines in mammalian cells which have
been specialized to produce a specific protein. The protein becomes the active ingredient in a biosimilar that is
designed to match the effectiveness and safety of a particular reference biologic. Biologic medicines have proven
especially effective in many therapeutic areas, such as oncology or immunology. Alvotech’s portfolio consists of
seven biosimilar candidates and one approved biosimilar.
Biosimilars must pass rigorous clinical trials to demonstrate that they are equally effective as the reference biologic.
Alvotech works with experienced collaborators to implement these clinical studies.
On average in 2022, Alvotech hf. employed 858 people, the majority with a master’s degree or doctorate.
Environment
We are committed to understanding and mitigating our impact on the natural environment. From our home-base
and manufacturing hub in Reykjavik, Iceland, we can leverage the country’s abundant renewable natural resources,
including clean water and renewable hydro- and geothermal energy that power a dedicated grid and supplies local
industry and homes. This allows us to balance the growth of our operations and prosperity of our stakeholders,
with the overarching objective of sustainability.
As a global company, we believe that our impact on the environment correlates strongly with our long-term success
and value as an enterprise. We are committed to minimizing the impact we have on natural resources and climate
change and recognize that this commitment starts with understanding our contribution through our energy use
and CO2 emissions and continues with our dedication to mitigate the energy intensity and emissions intensity of
our operations.
We focus on protecting the environment from any adverse impact from our operations. We reach these goals by
reducing waste, using energy more efficiently, increasing reuse, recycling as much waste as possible and reducing
the use of all raw materials and consumables. We also handle genetically modified cells, biological and chemical
waste safely, to reduce the risk of contamination or environmental damage.
It has been demonstrated that monoclonal antibody production in single-use technology reduces overall
environmental impact when compared to more traditional durable process technology. However, single-use
technology does create a material waste stream from single-use plastics, which is not present in traditional stainless-
steel processes. We recognize that the industry must play an active role in moving from a linear plastic system into
a circular economy for plastics. To accomplish this, Alvotech must not only improve internal processes, but
cooperate with and demand more from our vendors in the future. A key part of maturing our sustainability program
will be focused on understanding and mitigating the impact of single-use plastics on the natural environment.
Alvotech has appointed an environment committee with volunteers from its staff. The committee works closely
with the company’s safety committee. Each committee focuses on improving processes that have an impact on
the environment or employee safety. From an environmental perspective, particular emphasis is on sorting waste
and reducing the use of raw materials while increasing awareness of how our operation and processes impact these
metrics.
Staff is also encouraged to commute to work by bike, walking or on public transport. To further incentivize this
behavior, Alvotech offers transportation grants and facilities for those that walk or bike to work.
Scope 1, 2 and 3 emissions
We can measure Scope 1 and Scope 2 emissions for our facilities in Iceland, including the main manufacturing
facility, based on invoices or direct metering. For facilities outside of Iceland we rely on indirect measures, based
on headcount, facility size and regional emission factors, to estimate this. We have also begun to track some Scope
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3 emissions related to activity under our own control, such as business travel, but are not able at this point to
quantify all the emissions that fall under Scope 3, and this remains a work in progress.
Key environmental performance indicators
GHG Emissions and Emissions Intensity
Unit
2020
2021
2022
Scope 1 & 2 emissions
tCO2eq.
218
219
235
Scope 1, 2 & 3 emissions
tCO2eq.
479
513
957
Scope 1 emissions
tCO2eq.
16
12
19
Scope 1 emissions from fuel use
tCO2eq.
2
12
12
Scope 1 emissions from refrigerants
tCO2eq.
14
0
6
Scope 2 emissions
tCO2eq.
202
206
217
Scope 2 emissions from electricity use
tCO2eq.
177
181
192
Scope 2 emissions from thermal energy use
tCO2eq.
25
25
25
Scope 3 emissions
tCO2eq.
261
294
721
Scope 3 emissions from flights
tCO2eq.
192
207
573
Scope 3 emissions from waste
tCO2eq.
69
85
145
Scope 3 emissions from fuel and energy use
tCO2eq.
0.5
3.2
3.2
Scope 1 & 2 emissions intensity per employee
tCO2eq./emp.
0.4
0.3
0.3
Scope 1, 2 & 3 emissions intensity per employee
tCO2eq./emp.
0.9
0.8
1.1
Nasdaq: E1,E2| GRI: 305-1,305-2,305-3,305-4
Energy Usage, Energy Intensity and Energy Mix
Unit
2020
2021
2022
Total use of energy
MWh
8,438
8,190
11,326
Total use of electricity
MWh
4,663
4,776
5,758
Total use of thermal energy (heat)
MWh
3,768
3,369
5,386
Total use of fuel
MWh
7
45
46
Total use of energy per employee
MWh
16
13
13
Percentage of total energy from renewables
%
94%
93%
94%
Nasdaq: E3,E4,E5| GRI: 302-1,302-2,302-3
Water Usage
Unit
2020
2021
2022
Total water usage
m3
48,294
40,119
60,630
Nasdaq: E6| GRI: 303-5
Environmental Operations
Unit
2020
2021
2022
87
Environmental policy in place
Yes/No
Yes
Yes
Yes
Total amount of non-hazardous waste
tons
97
116
190
Total amount of hazardous waste
tons
42
52
92
Nasdaq: E7| GRI: 103-2
Social environment
One of the most valuable assets for any company is undoubtedly the experience and knowledge obtained by its
employees. Alvotech therefore focuses on employee satisfaction and a strong sense of company culture. Alvotech
is committed to ensuring the health, safety and well-being of its staff and guests of the company.
Health and wellbeing
A strong emphasis on training is part of Alvotech’s focus on the staff’s health and well-being. We collect and
disseminate monthly key indicators about our performance in this area. These include statistics on incidents,
accidents, near-accidents, potentially dangerous situations, and risk assessments. We also monitor our impact on
the environment and potentially our behaviors by collecting statistics about waste, effluents, water, and energy
consumption.
By implementing a reporting system for accidents, near accidents and potentially dangerous events, Alvotech
implements risk prevention measures and creates a safety culture among employees. Employees also receive
information about the origin of these reports, by department. This creates a sense of duty by employees to show
that their department is contributing to the safety culture.
We have performed a detailed risk assessment for each role at Alvotech, which includes a definition of the main
sources of risks in regular tasks and preventive measures.
Because of the large number of foreign employees that have migrated to Iceland to work at Alvotech, the company
also offers special assistance to ex-pats. This includes offering housing in apartments leased by the company, to
help employees better adapt to the new environment and integrate into society.
Other initiatives to improve the workplace environment include support for training and continuing education, a
system for shift workers which enhances work-life balance, paid visits to psychiatrist and an online service, which
offers counseling for work- and family related matters free of charge. Alvotech regularly offers instructional
seminars about health and well-being, which have been very popular with employees. Staff is also offered semi-
annual subsidies for sports activities, including health-club memberships or grants to cover the cost of sports-
equipment.
Equality
Alvotech’s gender equality policy was approved and presented to employees in January 2021, with an associated
action plan. The goal of this policy is to guarantee that all employees face the same opportunities regardless of
gender, age, religion, nationality, race, disability, sexual orientation, or political views and to avoid any
discrimination or harassment based on these or other issues unrelated to the quality of work. The policy is
implemented to ensure that all employees are evaluated based on their own merit and that they can reach their
potential based on skill and ability. The policy should also eliminate ingrained gender bias from the workplace.
Furthermore, the policy should lead to more equal ratios of the genders for employees holding each type of position
or within departments. Alvotech’s equality policy also states that an equality report should be issued each year and
made available no later than April based on data for the previous year.
88
Equal pay certification
In 2020 Alvotech started preparing for an equal pay certification audit which was conducted in January 2021, by
ICert (a domestic accredited certification body which carries out audits and certification of management systems).
In February 2021 Alvotech was awarded an equal pay certification and subsequently given permission to use the
equal pay insignia by the Icelandic Equal Rights Administration and the Ministry of Welfare. In addition to
employees in Iceland, we also implement the same policy globally in all our affiliates.
Job satisfaction and well-being
In November 2021 Alvotech started performing periodic comprehensive surveys of employees with respect to job
satisfaction and how employees view the company, measuring for example indicators of stress, undue work
pressures or employee harassment. The results of employee surveys have been used to identify areas for
improvement and implement policies to address issues highlighted by the survey results.
Anti-harassment policy
Alvotech enforces a strict policy with respect to bullying and harassment in the workplace. The policy states that
any type of bullying, harassment or improper behavior is not condoned and defines a clear policy for dealing with
such incidents. Employees responsible for responding to such incidents have been assigned and trained to accept
complaints or conduct interviews with the parties involved. All managers are also trained in responding to such
incidents.
Alvotech offers free consulting services from the occupational health service Vinnuvernd, where employees can
meet with a specialist, discuss their experience, and get confidential advice on next steps. The purpose of this policy
is to ensure that all reports about bullying, or harassment incidents are dealt with properly and promptly.
Human rights and child labor policies
We are working on implementing human rights and child labor which will apply to Alvotech and our vendors.
Key social performance indicators
Social
Unit
2020
2021
2022
Ratio of pay of men to women
%
120%
117%
Women in management (ratio to total headcount)
%
27%
31%
31%
Women in the company excluding management (ratio to total headcount)
%
53%
49%
58%
Ratio of temporary workers to total headcount
%
7%
5%
4%
Existence of a sexual harassment and/or non-discrimination policy?
Y/N
Yes
Yes
Yes
Frequency of injury events relative to total workforce (TIR)
TIR
0.63
0.24
0.87
Existence of an occupational health and/or global health & safety policy?
Y/N
Yes
Yes
Yes
Does your company follow a child and/or forced labor policy?
Y/N
No
No
No
If yes, does the policy cover suppliers and vendors?
Y/N
Does your company follow a human rights policy?
Y/N
No
No
No
If yes, does the policy cover suppliers and vendors?
Y/N
Survey of employees regarding job satisfaction
0-10
7.0
7.2
7.0
89
Survey of employees regarding job commitment
0-10
8.7
8.6
8.6
Participation rate in job satisfaction and commitment survey
%
50%
78%
89%
Number of new hires
171
306
345
New hires as percentage of total workforce of the company
%
29%
42%
35%
Number of data privacy breaches
0
0
0
Nasdaq: S2,S3,S4,S5,S6,S7,S8,S9, S10|GRI: 405-1, 406,102-8,103-2,401-1,401-1b,403-9,405-1,405-2,418-1
Governance
Human rights and business ethics
Alvotech conducts its business in a responsible and ethical fashion. Any type of corruption, bribery or violation of
human rights is not condoned. To prevent such conduct from taking place the company has implemented a Code
of Conduct which applies to the company’s entire business, including relationships with suppliers, partners, and
contractors. The core principle is that Alvotech and its employees always act ethically and honestly in any given
circumstance. The Code of Conduct addresses the companies Ethics and Anti-Corruption Policy as well as
Whistleblower Policy. The Code of Conduct and a formal certification by the employee of compliance to the code
is a part of on-boarding and training.
Data protection policy
Alvotech has implemented a data protection policy based on the EU General Data Protection Regulation which
has also been transposed into Icelandic law, which applies to all employees, associates, contractors, participants in
clinical studies and users of the company’s products. Alvotech follows all standards and laws regarding personal
privacy and data protection, including specific rules and regulations applying to clinical studies as well as any other
applicable rules which apply to our business.
Key governance performance indicators
Corporate Governance
Unit
2020
2021
2022
Percentage of total headcount covered by collective bargaining agreement
%
77%
76%
75%
Does your company follow an Ethics and/or Anti-Corruption policy?
Y/N
Yes
Yes
Yes
If yes, what percentage of your workforce has certified its compliance?
%
84%
86%
Does your company follow a Data Privacy policy?
Y/N
Yes
Yes
Yes
Has your company taken steps to comply with GDPR rules?
Y/N
Yes
Yes
Yes
Are your sustainability disclosures assured or validated by a third party?
Y/N
No
No
No
Does your company have a Whistleblower Policy in place?
Y/N
Yes
Yes
Yes
If yes, what percentage of your workforce has certified its compliance?
%
84%
86%
Nasdaq: G4,G6,G7,G8|GRI: 102-16,102-41,102-56,103-2,418
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