Annual Report
2021
Contents
Management review
Introduction
UNION at a glance 4
Joint letter from the Chair and CEO 5
2021 achievements 7
Consolidated key figures 8
Financial statements
Consolidated financial statements 35
Parent financial statements 64
Statement of the Board of Directors
and Executive Board 85
Independent Auditors Report 86
Forward looking statements 88
Other information
Sources 90
Company information 90
Our business
Strategy 10
Pipeline 11
Orismilast 12
Psoriasis 13
Atopic dermatitis 15
Hidradenitis suppurativa 16
Niclosamide 18
COVID-19 and
immunocompromised patients 19
Joint letter from
the Chair and CEO
Orismilast and
Niclosamide
Living with HS
Page 5
Corporate matters
Executive Management 22
Board of Directors 23
Corporate responsibility 25
Our people 26
Environment and climate 28
Corporate governance 30
Key risks 31
Financial review 33
Page 17
UNION therapeutics 2Annual Report 2021 Contents
contents
Introduction
UNION at a glance 4
Joint letter from the Chair and CEO 5
2021 achievements 7
Consolidated key figures 8
UNION develops innovative drug
candidates to improve the quality of
life for people with immunological
and infectious diseases.
UNION therapeutics 3Annual Report 2021 Introduction
introduction
UNION at a glance
Pharmaceutical development company with a
diversified pipeline addressing major unmet medical
needs in immunology and infectious disease.
Orismilast
Next-generation PDE4-inhibitor with first-in-class
and best-in-class potential as an oral treatment
across a range of immunological diseases,
initially in development for psoriasis, atopic
dermatitis and hidradenitis suppurativa, tapping
into a fast-growing USD +30bn market.
Immunology
Immunology is the largest
therapy area in the US, the
second largest globally
after oncology, and the
fastest growing therapy area
globally.
Infectious disease
Infectious disease is an
area of growing importance
and was already before
COVID-19 the fourth largest
therapy area globally.
Niclosamide
Anti-infective drug with broad antiviral and
antibacterial properties, and first-in-class
potential for prevention and treatment of differ-
ent respiratory infections, currently being tested
as prevention of COVID-19 in immunocompro-
mised patients.
Intellectual property
Pipeline in immunology and infectious disease
supported by strong patent estate consisting of
more than 100 issued patents.
+100 issued
patents
Business model and strategy
Focused on clinical development of well-
characterized molecules with broad
mechanisms of action, maximizing the potential
of the molecules through a combination of
pharmaceutical innovation and strong clinical
development expertise.
Employees
36 employees (+20 vs. 2020) in total led by
an experienced management team of biotech
entrepreneurs and seasoned pharma executives
with a track record of 15 global drug launches
(FDA/EMA).
36 employees
R&D investments
DKK 155m invested in research and
development in 2021, +139% vs. 2020, driven
by initiation of Phase 2/3 study in COVID-19
prophylaxis and Phase 2 studies in psoriasis
and hidradenitis suppurativa.
DKK 155m
UNION therapeutics 4Annual Report 2021 UNION at a glance
union at a glance
Joint letter from the Chair and CEO
Building a
lasting Danish
pharmaceutical
company
2021 has been a year of great progress for UNION
with important advancement of our clinical pipeline,
expansion of our international collaborations,
external recognition, and significant strengthening
of the organization across all levels.
Developing orismilast as a potential first-
in-class and best-in-class oral treatment
Throughout the year, we have successfully
advanced our two lead molecules, orismilast
and niclosamide, with the overall aim to devel-
op best-in-class and first-in-class treatments.
UNION’s key focus is to address unmet medical
needs for the benefit of patients, physicians, and
payers. We are currently developing orismilast, a
next-generation PDE4-inhibitor, for the treat-
ment of three immunological diseases: psoriasis,
atopic dermatitis (AD), and hidradenitis suppura-
tiva (HS). Despite many important advancements
and novel medicines, substantial unmet medical
needs remain, but also in immunology more
broadly; a therapy area that is the second largest
and fastest growing globally.
AD is the most prevalent immunological skin
disease with no safe oral treatment available
today. The Fast Track Designation granted from
the FDA in November for oral orismilast in AD
is a big testimony to both the significant unmet
medical need, as well as oral orismilast’s poten-
tial in this disease.
During 2021, we have initiated Phase 2a and 2b
studies with oral orismilast for the treatment
of HS and psoriasis, respectively. We are very
encouraged by the rapid progression of the
development of orismilast by the UNION team.
In September 2021, we entered a strategic part-
nership and license agreement with Innovent
Biologics for the development and commercial-
ization of orismilast in Greater China (includ-
ing Mainland China, Hong Kong, Macau and
Taiwan). This agreement has both an immedi-
ate and potential long-term positive financial
impact. UNION received USD 20m upfront and
is entitled to additional milestone payments of
up to USD 247m as well as tiered royalties on
future orismilast sales in Greater China. The
agreement is a further validation of the first-in-
class and best-in-class potential of orismilast
and expands our global footprint in an under-
served market where deep market understand-
ing and special competencies are important.
Developing niclosamide to help
immunocompromised patients
The year 2021 will also be remembered for COVID-
19 and the continued impact the pandemic has
had on our lives for the second consecutive year.
However, the pharmaceutical industry has risen
to the challenge in record-time with vaccines
approved and antiviral treatments developed to
further reduce the risk of severe disease pro-
gression and hospitalization.
UNION therapeutics 5Annual Report 2021 Joint letter from the Chair and CEO
letter from ceo
“ Throughout the year, we
have successfully advanced
our two lead molecules,
orismilast and niclosamide.”
After almost two years with lockdowns, most
countries are now lifting restrictions. Yet,
some patients with weakened immune systems
do remain at significant risk of severe illness
from COVID-19. Immunocompromised pa-
tients, for example organ transplant patients,
chronic kidney disease patients on dialysis and
hematologic cancer patients, do not mount a full
antibody response upon vaccination and thus
need additional protection.
In 2021, our proprietary niclosamide nasal
spray was selected for the Phase 2/3 PROTECT-V
platform study sponsored by Cambridge Uni-
versity Hospitals NHS Foundation Trust and the
University of Cambridge as a COVID-19 proph-
ylaxis for kidney disease patients. The study
was subsequently granted Level 1 Urgent Public
Health prioritization by the National Institute
for Health Research in the UK. PROTECT-V is
one of the first prophylactic COVID-19 studies in
Stig Løkke Pedersen Kim Domela Kjøller
Chair of the Board of Directors Chief Executive Officer
immunocompromised patients, and we are very
pleased to contribute and hopefully help protect
this vulnerable patient group.
Strengthening of the organization
The UNION organization has been significantly
strengthened in 2021 with several key hires to
the Management, the Board of Directors, and
the broader UNION team. Today, UNION is a
diversified and agile international organization
with a good mix of seasoned pharma executives,
biotech entrepreneurs and new talent.
All of us at UNION are passionate about contrib-
uting to the development of new drug candi-
dates that hold the potential to improve the
quality of life for people with immunological
and infectious diseases.
The Executive Management and the Board are
very encouraged with the progress achieved in
2021 and we are excited about the opportunities
and challenges ahead of us in 2022.
A sincere thank you to all who have supported
the remarkable achievements during 2021 –
colleagues, partners, contractors, investigators,
investors, collaborators, other stakeholders and
not least the patients participating in clinical
trials with orismilast and niclosamide.
UNION therapeutics 6Annual Report 2021 Joint letter from the Chair and CEO
2021 achievements
Advanced the clinical pipeline
Phase 2a investigator-led, proof-of-concept study OSIRIS initiated
with oral orismilast for the treatment of hidradenitis suppurativa.
UNION initiated the Phase 2b study IASOS with oral orismilast for
the treatment of moderate to severe psoriasis.
Niclosamide selected for the Phase 2/3 platform trial
PROTECT-V by University of Cambridge, investigating
niclosamide nasal spray as a COVID-19 pre-exposure prophylac-
tic agent in kidney patients.
Strengthened
the organization
UNION has more than doubled its employee base in 2021 from
16 employees at the end of 2020 to 36 employees at the end of
2021.
Special competencies have been added across all levels of the
organization.
Further validated the potential
for orismilast through
partnership with Innovent
Biologics
UNION entered a strategic partnership and licensing agree-
ment for orismilast in Greater China (including Mainland
China, Hong Kong, Macau and Taiwan), receiving USD 20m
upfront and being entitled to additional milestone payments of
up to USD 247m as well as tiered royalties on future orismilast
sales in Greater China.
Received Fast Track
Designation from FDA
in atopic dermatitis
UNION received Fast Track Designation from the
U.S. Food and Drug Administration (FDA) for oral
orismilast for the treatment of moderate to severe
atopic dermatitis.
Atopic dermatitis is the most prevalent immunolog-
ical skin disease and the lack of safe oral treatments
is a major unmet need.
Raised funds to
accelerate clinical
programs
UNION continued to see strong support from
current and new investors, and raised more
than DKK 200m in private placements.
UNION therapeutics 7Annual Report 2021 2021 achievements
2021 achievements
DKK’000 2021 2020 2019 2018* 2017*
Statement of comprehensive income
Revenue 118,912 0 11,649 0 2,080
Research and development costs -155,305 -65,107 -19,402 -48,459 -41,625
Administrative costs -21,724 -8,270 -5,053 -5,491 -3,302
Other operating income 6,178 9,049 344 3,683 2,464
Operating result -51,939 -64,328 -12,462 -50,267 -40,382
Financial income/(expense) -9,562 -22,078 -4,543 -5,375 -868
Result before tax -61,501 -86,406 -17,005 -55,642 -41,250
Tax benefit/(expense) 5,475 5,510 4,143 5,497 5,658
Result for the year -56,026 -80,896 -12,862 -50,145 -35,592
Statement of financial position
Non-current assets 17,978 16,856 576 169 155
Current assets excl. Cash and cash equivalents 13,545 15,603 5,251 6,678 9,014
Cash and cash equivalents 253,402 36,425 46,466 21,775 13,834
Total assets 284,925 68,884 52,293 28,622 23,003
Equity 49,380 -58,397 -38,308 -35,419 12,023
Non-current liabilities 170,675 94,963 81,220 52,362 2,488
Current liabilities 64,870 32,318 9,381 11,679 8,492
DKK’000 2021 2020 2019 2018* 2017*
Cash flow statement
Cash flow from operating activities -2,974 -51,546 -8,379 -43,973 -32,795
Cash flow from investing activities -140 -1,668 0 -35 -160
- Investment in property plant and equipment -140 0 0 -35 -63
Cash flow from financing activities 216,496 43,524 32,783 52,023 47,258
Employees
Average full-time equivalents 26 9 9 8 5
* The comparatives figures for 2017-2018 have not been restated following the adoption of IFRS 16 Leases on January 1, 2019 by use of
the modified retrospective approach.
Consolidated key figures
UNION therapeutics 8Annual Report 2021 Consolidated key figures
consolidated key figures
Our business
Strategy 10
Pipeline 11
Orismilast 12
Psoriasis 13
Atopic dermatitis 15
Hidradenitis suppurativa 16
Niclosamide 18
COVID-19 and immunocompromised
patients 19
UNION’s core area of expertise is centred
around pharmaceutical innovation and
clinical development, working with
molecules in therapeutic areas with
significant unmet medical need.
UNION therapeutics 9Annual Report 2021 Our business
our business
Identify Develop Commercialize
Strategy
UNION works with development of
molecules that have broadly applicable
and well-understood modes-of-action
as well as demonstrated safety.
Commercialization
To maximize the potential of the
compounds and development
programs, and the number of patients
reached, collaboration with large
pharma companies with existing
commercialization capabilities is an
integral part of UNION’s strategy. The
nature and form of the collaboration,
including the role of UNION, will vary
depending on the size and characteristics
of the indication, the stage of
development as well as the geography.
Matching
Molecule
Delivery
Disease
People
Molecule and disease matching
We combine molecules and disease
understanding to identify and prioritize
diseases and patient populations where the
mode of action (MoA) is most relevant and
the unmet medical need is significant.
Pharmaceutical innovation
We optimize drug delivery to
target specific tissues and to
enhance efficacy, safety and
ease-of-use of the drug to
support patient adherence to
treatment.
Medical needs identification
We identify unmet needs for
patients, physicians and payers,
and develop solutions to meet
the needs for all stakeholders.
Clinical development
We utilize our expertise to develop and establish clinical development
programs which are designed to rapidly demonstrate competitive and unique
product characteristics for patients, physicians and payers. This includes
early de-risking through innovative and efficient proof-of-concept
studies with robust and predictive clinical endpoints.
Development of de-risked
molecules with broad potential
Realize potential
for patients
2 3
5
4
1
UNION therapeutics 10Annual Report 2021 Strategy
strategy
Pipeline
Program Pre-clinical Phase 1 Phase 2a Phase 2b Phase 3
Immunology
Psoriasis
Oral orismilast*
Atopic dermatitis
Oral orismilast*
Hidradenitis suppurativa
Oral orismilast*, Investigator sponsored study
Atopic dermatitis
Topical orismilast*
Infectious
disease
COVID-19 prophylaxis
Niclosamide nasal spray
PROTECT-V platform study. Primarily funded externally**
Other
Canine pyoderma
Topical oxyclozanide***
* Innovent Biologics has exclusive rights to oral orismilast and an option on topical orismilast for Greater China (Mainland China, Hong Kong, Taiwan and Macau); UNION retains worldwide rights outside of Greater China.
** Platform study sponsored by Cambridge University Hospitals NHS Foundation Trust and the University of Cambridge, and funded by LifeArc, Addenbrookes Charitable Trust, Kidney Research UK and UNION.
*** Topical oxyclozanide is fully outlicensed to Ceva Santé Animale.
A diversified late-stage clinical pipeline with drug development
candidates in large disease areas, including multiple Phase
2 programs with orismilast in psoriasis, atopic dermatitis
and hidradenitis suppurativa, as well as one Phase 2/3
program with niclosamide in COVID-19 prophylaxis.
Immunology
The purpose of the immune system
is to defend the body against outside
invaders, such as bacteria, viruses, and
toxins. However, the immune system
sometimes malfunctions, which can lead
to inflammation, eczema, allergies or
autoimmune reactions where the immune
system attacks the body’s own cells.
Infectious disease
Infectious diseases are disorders caused by
disease-causing agents, such as bacteria or
viruses. An infection can occur anywhere in
the body. COVID-19 and flu are examples of
respiratory infections, which are infections of
parts of the body involved in breathing, such
as the throat, airways or lungs.
UNION therapeutics 11Annual Report 2021 Pipeline
pipeline
Hidradenitis suppurativa
Need for more and better treatment options
Orismilast holds first-in-class potential as a novel oral treatment with broad
anti-inflammatory MoA vs. biologics.
Atopic dermatitis
Need for safe oral treatments with good efficacy
Orismilast holds first-in-class potential as a safe oral alternative to injectable
biologics.
Psoriasis
Need for orals with improved efficacy
Orismilast holds best-in-class potential as a safe oral treatment with better
efficacy than the oral treatment options available today.
Page 13
Page 15
Page 16
Orismilast
First-in-class and best-in-class potential for
treatment of immunological diseases.
Orismilast is a next-generation PDE4-inhibitor
(phosphodiesterase-4 inhibitor) with poten-
tial for improved efficacy and safety profile
compared to today’s PDE4-inhibitors on the
market. Because of the broad mode of action
(MoA) associated with PDE4-inhibitors, orismi-
last holds potential in several diseases within
immunology.
Addressing unmet needs
UNION is currently developing orismilast in
a modified release tablet for the treatment of
three diseases within immunology – psoriasis,
atopic dermatitis (AD), and hidradenitis suppu-
rativa (HS).
In psoriasis there are limited safe oral treat-
ment options available today that do not require
extensive screening and monitoring. There is a
need for oral treatments with improved efficacy,
representing a significant unmet medical need.
In AD there are no safe oral treatment options
available today that do not require extensive
screening and monitoring. Thus, a substantial
unmet medical need exists.
In HS there is only one approved treatment
available today. No oral options are available.
Proof-of-concept established
in psoriasis and AD
Proof-of-concept has been demonstrated with
oral orismilast in psoriasis and with a topical
version of orismilast in AD. In proof-of-concept
studies, orismilast demonstrated superior effi-
cacy to placebo in both psoriasis and AD.
Orismilast currently in Phase 2 development
The formulation of orismilast in a modified
release tablet is now being tested in a Phase 2b
dose-finding study in psoriasis and in a Phase
2a investigator-initiated proof-of-concept study
in HS. A Phase 2b dose-finding study with oral
orismilast in AD is expected to be initiated in
2022.
UNION is initially developing orismilast for three
immunological indications with significant unmet needs.
UNION therapeutics 12Annual Report 2021 Orismilast
orismilast
Most people living with psoriasis have plaque
psoriasis, which is characterized by “plaques”,
or raised, red areas of skin covered with a silver
or white layer of dead skin cells referred to as
“scale”. Psoriatic plaques can appear on any
area of the body, but most often appear on the
scalp, knees, elbows, torso, and limbs, and the
plaques are often itchy and sometimes painful.
Substantial psychosocial impact
of living with psoriasis
60% of psoriasis patients report their disease
to be a “large problem” for their everyday
life
3
. Psoriasis patients in general experience
negative impact on their quality of life due to
higher rates of many comorbidities, including
cardiovascular disease, heart attack, stroke and
metabolic syndrome.
Development of
oral orismilast
in psoriasis
In November 2020,
the FDA approved
an Investigational
New Drug Program
(IND) for advancing oral orismilast into a
Phase 2b trial in patients with moderate
to severe psoriasis.
In December 2021, UNION initiated
IASOS, a Phase 2b study with oral
orismilast for the treatment of moderate
to severe psoriasis.
Psoriasis is a chronic, autoimmune disease
that primarily involves the skin.
Psoriasis
7.7m
US
5.4m
EU5
0.3m
Japan
* EU5: UK, Germany, France, Italy and Spain.
1 GlobalData, DRG (2021).
2 GlobalData, DRG (2021) and Publication: Armstrong et al. (2021).
3 Stern et al. (2004).
13.4 million
2
patients diagnosed with
psoriasis across
the US, EU5* and
Japan.
In addition to the direct clinical challenges of
psoriasis, many patients with plaque psoriasis
suffer substantial psychosocial impacts from
their disease, including depression, social stigma,
feelings of rejection and shame, guilt, impaired
sexual intimacy, discrimination in the workplace,
difficulty finding employment or working outside
the home, financial hardships, increased work
absenteeism and reduced productivity.
The economic burden of psoriasis is substantial
because the disease results in these considera-
ble negative physical, psychological and social
consequences.
Unmet need – need for better
oral treatments
Psoriasis can be managed by topical, oral, and
biological treatments as well as phototherapy.
Depending on the progression and severity of
the disease, patients and physicians choose
between these treatment options. However,
many physicians and patients express a need for
better oral treatments.
Market size and market growth
~USD 25bn
and annual market growth of
4% towards 2027
1
.
Prof. Richard Warren, MD, Ph.D.,
Senior Investigator of the Phase 2b study:
“Psoriasis is one of the most common
chronic inflammatory skin diseases in the
world. Even though there are many biologics
approved for the treatment of psoriasis,
there are still limited oral treatments that
are efficacious, can be used long-term and
do not require screening before initiation
and during use. Oral orismilast has the
potential to become an efficacious and
patient-friendly treatment option for patients
with psoriasis.”
UNION therapeutics 13Annual Report 2021 Psoriasis
psoriasis
Living with psoriasis
Meet Frederik who has severe psoriasis and learn about
his experience with different treatment options.
“ Psoriasis can negatively influence my mood especially when I think
about getting one of the comorbidities associated with psoriasis
such as cardiovascular diseases or diabetes.”
Patient story
Frederik was 24 when he was diagnosed with
psoriasis by a dermatologist who gave Frederik
a brief brochure about the disease, a cream,
which is the typical first line treatment, and told
him how to apply it.
“When I came home from the doctors, I Googled
psoriasis and it made me worried and a bit
scared - suddenly, I was a patient, having to live
with psoriasis for the rest of my life.”
The first couple of years after being diagnosed,
Frederik had difficulties accepting his diagno-
sis and was not that fond of applying the cream
to his skin. This led to a worsening of his psori-
asis, and it greatly influenced his state of mind.
In the years to come, Frederik step-by-step tried
the different treatments offered: UVB-light-
ening, orals, and biologics. The UVB-light did
have a positive effect on Frederik’s psoriasis,
but it was a struggle for him to fit this with his
everyday life, as the treatment regimen was two
to three times a week during regular working
hours and many kilometres away from both his
home and work.
The third treatment option, oral treatment, also
had a positive effect on his psoriasis, but the
side effects meant that Frederik often had to
work from home. Many psoriasis patients prefer
the ease-of-use attributes of an oral treatment.
This goes for both moderate and severe psori-
asis patients. The challenge, however, is that
there are limited treatment options available,
and the few commonly prescribed oral treat-
ments can have negative side effects.
Frederik is now on a biological treatment where
he has to inject himself once every second
week. The treatment works well both for his pso-
riasis and his lifestyle. However, it is uncertain
how long he can stay on biologics, as the long-
term side effects of this relatively new treatment
option are unknown. Another challenge is that
biologics are generally very expensive com-
pared to topical and oral treatments.
UNION therapeutics 14Annual Report 2021 Psoriasis
14.3m
US
10.2m
EU5
1.9m
Japan
26.4 million
2
patients diagnosed
with psoriasis across
US, EU5* and Japan.
Atopic dermatitis is the most common type of eczema,
characterized by overreaction to allergens and irritants,
leading to an immune reaction and inflammation.
Atopic dermatitis (AD) produces a red, itchy
rash, most frequently occurring on the face,
arms and legs, and the rash can cover signifi-
cant areas of the body, in some cases half of the
body or more. The prevalence of AD worldwide
is ~3% in the adult population and ~15% among
children
1
. AD is one of the most common skin
diseases among children, and 90% of AD pa-
tients are diagnosed by the age of five
2
.
Substantial psychosocial impacts
of living with AD
Children with AD can suffer from sleep distur-
bances, behavioral problems, irritability, crying,
interference with normal childhood activities
and social functioning.
Adults with AD also frequently suffer from sleep
disturbances, emotional impacts, and impaired
Development of oral
orismilast in AD
UNION is developing
oral orismilast for
the treatment of
moderate to severe
AD. The FDA has
granted Fast Track Designation to oral
orismilast for the treatment of moderate
to severe AD and UNION expects to
initiate a Phase 2b dose-finding study in
2022.
Atopic dermatitis
Market size and market growth
> USD 6bn
and annual market growth of 22%
towards 2027
2
.
social functioning. They also appear to be at
a significantly increased risk of anxiety and
depression.
Unmet need – no safe oral treatments
The vast majority of AD patients are being treat-
ed with topical therapies, particularly topical
corticosteroids and topical calcineurin inhibi-
tors. In addition to this, systemic therapies like
biologics are used in those patients who fail on
topical therapy. However, biological therapies
in AD are currently limited. Some physicians
and patients have expressed dissatisfaction
with current treatments due to the overall
suboptimal symptomatic improvement, poor
safety, limited ability to control itch, and limited
impact on quality of life.
There are currently no oral therapies for the
treatment of AD that are safe for long-term
use and exempt from extensive screening and
monitoring. The first oral therapies have only
recently been approved but all carry a boxed
warning in the US label for serious heart-related
events, cancer, blood clots, and death.
* EU5: UK, Germany, France, Italy and Spain.
1 Silverberg (2017).
2 GlobalData, DRG (2020).
Jonathan Silverberg, MD, Ph.D., MPH:
“Despite the recent advancements in the
treatment of atopic dermatitis, there is still
a high unmet need in terms of safe and
efficacious oral treatments that can be
used before biologics. It is encouraging to
see that the FDA recognizes the potential
of orismilast in atopic dermatitis and has
granted it Fast Track Designation, which
would bring orismilast one step closer to
patients.”
UNION therapeutics 15Annual Report 2021 Atopic dermatitis
atopic dermatitis
785,000
1
patients diagnosed with HS across US,
EU5* and Japan.
Development of
oral orismilast for
the treatment of HS
Oral orismilast
is currently in
development for
the treatment of HS
in an investigator-sponsored Phase 2a
study, OSIRIS.
The study was initiated in October 2022.
Hidradenitis suppurativa is a chronic debilitating systemic
skin disease which results in painful inflammation of the hair
follicles, most notably in the armpit, groin and genital regions.
The clinical hallmarks of hidradenitis suppu-
rativa (HS) include very painful inflammatory
nodules, boils or abscesses that typically open
and release odorous inflammatory fluids. In
the more chronic form of the disease, patients
experience draining fistulas, also referred to as
sinus tracts, which ultimately lead to scarring
and related functional disability in certain
areas. HS patients suffer primarily from pain
and significant discomfort resulting from the
constant formation of puss, often requiring the
use of bandages and diapers, resulting in social
isolation. HS severely and adversely affects
patients’ quality of life.
Substantial psychosocial impact
of living with HS
HS has a severe, negative impact on quality of
life with 60% of patients with HS experiencing a
“large” or “extremely large” negative impact on
quality of life
2
.
Patients with HS also have lower quality of life as
measured by the Dermatology Life Quality Index
Hidradenitis suppurativa
Market size and market growth
~USD 1bn
and annual market growth of
8% towards 2027
1
.
* EU5: UK, Germany, France, Italy and Spain.
1 GlobalData (2019).
2 von der Werth and Jemec (2001).
compared to patients with other chronic skin
diseases, including psoriasis and AD.
Unmet need – only one approved drug today
Currently, there is only one drug approved
for treatment of moderate-severe HS, which is
an injectable drug. For mild HS there are no
treatments approved. The general standard of
care for HS patients, although off-label, includes
topical, oral or intravenous antibiotic treatment
which often provides only temporary sympto-
matic relief. Antibiotics do not target the under-
lying inflammation and they are associated with
resistance development.
The relevance of PDE4 inhibition in HS
The only approved drug today targets primarily
TNF-
α. However, several cytokines are relevant
in the pathogenesis of HS. PDE4 inhibition has
been demonstrated to inhibit a wide array of
HS-related cytokines and also demonstrated
effect in prior clinical studies.
Professor Gregor B. Jemec, Lead
Investigator of the Phase 2a study,
Founding Chairman of the Department
of Dermatology, Zealand University
Hospital Roskilde, Denmark:
“ There is a significant and urgent unmet
need for an effective therapy. We are
therefore very pleased to be able to enroll
the first of 24 patients in the study and
hope that orismilast as an innovative oral
approach will demonstrate benefit in the
management of this devastating illness.”
UNION therapeutics 16Annual Report 2021 Hidradenitis suppurativa
hidradenitis suppurativa
See video on UNION’s website.
Living with Hidradenitis
Suppurativa
Meet Janne who has lived with hidradenitis
suppurativa since she was 13 years old.
“ My hope for HS patients in the future is that researchers
will find a treatment that helps control HS, if nothing else,
something that can help reduce symptoms so people can
have an acceptable life with HS.”
For most of her life, Janne has suffered from hi-
dradenitis suppurativa (HS), but it was not until
she turned 47 that she got her diagnosis.
For many years she lived with an undiagnosed
disease due to lack of awareness. It has resulted
in many years of suffering, not just due to the
lack of diagnosis itself but also due to improper
treatment.
As part of living with HS, Janne has had more
than 100 surgeries and has been admitted to the
hospital more than 150 times for operations under
general anesthesia because of the boils.
HS greatly influences her everyday life. Janne
has retired because of her disease as her physi-
cal condition is impacted by HS.
She cannot ride a bike because of large scars in
her groin area, and she has difficulties straight-
ening her arms over her head because the skin
has become tight from the surgeries and skin
transplants.
“I have had seven major skin transplants be-
cause my skin became so damaged that it could
not grow back together after the boils.”
Both of Janne’s children have been diagnosed
with HS. Her daughter was diagnosed when she
was 23 and seven years later her son was also
diagnosed with HS.
Patient story
UNION therapeutics 17Annual Report 2021 Hidradenitis suppurativa
living with hidradenitis
Niclosamide
First-in-class candidate for the prevention of COVID-19
and potential in other respiratory infections.
Niclosamide is an anti-infective drug intro-
duced into clinics in the early 1960s as an oral
treatment for tapeworm infections and is cur-
rently marketed as a tablet in certain countries.
UNION has developed a concentrated liquid for-
mulation of niclosamide that allows for delivery
as a nasal spray to the upper respiratory tract,
as a nebulizer solution for delivery to the lower
respiratory tract (lungs), or as a combination of
both the nasal spray and the nebulizer covering
infections of the upper and lower respirato-
ry tracts. For respiratory infections such as
COVID-19, this allows for a local delivery of
niclosamide directly to the site of infection,
either as a potential treatment or, prior to infec-
tion, as a prophylactic agent.
Broad antiviral properties
Niclosamide’s mechanism of action is host-tar-
geting, making it broadly antiviral. Therefore,
niclosamide has been able to inhibit replica-
Repurposing of niclosamide
In early 2020, in response to the
emerging COVID-19 pandemic,
Institut Pasteur in South Korea
conducted a major in-vitro (cell
studies) screening effort of approved
molecules and found niclosamide to
be the most potent inhibitor of SARS-
CoV-2 among approved compounds.
Intranasal delivery of niclosamide
has also demonstrated significant
efficacy in improving outcomes and
reducing mortality from SARS-CoV-2
infection compared to saline solution
in an in vivo study (mouse model).
Niclosamide funding from
Innovation Fund Denmark and
European Investment Bank
In addition to co-funding of the
niclosamide development through
platform study participation, UNION
has received grants and support
from institutional backers targeted
towards niclosamide. This includes
grants from Innovation Fund
Denmark and a venture debt facility
from the European Investment Bank.
tion of all SARS-CoV-2 variants that it has been
tested against, including Alpha, Beta, Delta and
Omicron
1
. Several neutralizing monoclonal anti-
bodies, which received emergency use authori-
zation
from FDA for treatment of COVID-19,
have not retained broad efficacy against SARS-
CoV-2 variants due to their virus-targeting
mechanism of action.
Looking ahead, niclosamide holds the potential
to prevent or treat a broad range of respiratory
infections due to its broad antiviral properties.
Niclosamide currently in Phase 2/3
development
Niclosamide was selected for the Phase 2/3 plat-
form trial PROTECT-V sponsored by Cambridge
University Hospital NHS Foundation Trust and
the University of Cambridge, funded by Kidney
Research UK, LifeArc and others, and granted
level 1 Urgent Public Health (UPH) prioritiza-
tion in the UK. The trial is currently ongoing.
1 Weiss et al. (2021) and TFF (2022).
UNION therapeutics 18Annual Report 2021 Niclosamide
niclosamide
COVID-19 and immuno-
compromised patients
Immunocompromised patients continue to be at high risk of
contracting COVID-19 and experience significantly higher
mortality rates.
COVID-19 is a disease caused by infection with
SARS-CoV-2, a strain of coronavirus. Respira-
tory illness is the most common symptom asso-
ciated with COVID-19 with a severity ranging
from mild disease to life-threatening acute
respiratory distress syndrome.
Unmet need – Weak protection of
immunocompromised patients
Vaccines have become the most important
weapon to fight COVID-19. However, there are
some patient groups who continue to be at high
risk of contracting COVID-19 because they have
a poor immune system due to medication or un-
derlying disease, for example organ transplant
patients, cancer patients receiving chemother-
apy, or patients with chronic kidney disease
on dialysis. Immunocompromised patients are
estimated to constitute ~3% of the population
1
.
Due to the immunocompromised state of these
patients, they do not respond properly to vac-
cines and they are also at higher risk of severe
outcomes of infection and experience higher
hospitalization and mortality rates.
Higher mortality rates among
immunocompromised patients
Data from the UK Kidney Association & UK
Renal Registry shows that kidney patients have
significantly higher case fatality rates than the
general population. After the roll-out of vac-
cines, in the period November 2021-February
2022, case fatality rates have been ~30 times
higher for UK kidney patients compared to the
general UK population.
In general, immunocompromised patients are
at greater risk of severe illness if contracting an
infection than the general population, whether
Development of
niclosamide
in COVID-19
UNION is
developing
niclosamide
nasal spray as a
potential first-in-
class prophylactic
agent for immunocompromised
patients to prevent COVID-19 infection.
Niclosamide was selected by Cambridge
University Hospital for the Phase 2/3
platform study PROTECT-V, which started
in February 2021.
it is COVID-19 or another infection like influen-
za or RSV. This also means that prophylaxis is
well-established among immunocompromised
patients.
Continued prevalence of COVID-19
There is a high likelihood for continued spread
of COVID-19 cases in the general population
due to viral mutations, waning vaccine immuni-
ty and vaccine scepticism. As countries around
the globe start loosening social restrictions, the
immunocompromised patient group is increas-
ingly at risk of contracting COVID-19, a risk that
is unlikely to change in the near term. Addi-
tional layers of protection and treatments are
needed to keep this patient population safe.
1 MacMillan (2022).
COVID-19 and immunocompromised patients
Dr. Rona Smith, Lead Investigator,
a senior research associate at
the University of Cambridge and
honorary consultant nephrologist
at Addenbrooke’s Hospital:
“The vaccine is a huge step forward, but
we know that the patients enrolled in the
PROTECT-V study may make less robust
vaccine responses due to their underlying
condition or treatment. Niclosamide
may provide further protection against
COVID-19 that does not rely on the
immune system mounting a response.”
UNION therapeutics 19Annual Report 2021 COVID-19 and immunocompromised patients
covid 19 and immunocompromised patients
The long-term consequences
of COVID-19
Meet Robert who lives with a new kidney and is significantly
affected after having contracted COVID-19.
“I would very much like to start working again, if my head and
my ability to talk will ever feel better after having had COVID-19.”
Robert was 50 when he had a kidney transplant,
as both of his kidneys were damaged. When
the COVID-19 pandemic spread all over the
world, Robert became very afraid of contracting
COVID-19 due to his poor immune function
and the uncertain impact of COVID-19. Due to
this fear, Robert and his family dramatically
changed their everyday lives and mainly stayed
at home.
In the Spring of 2021, shortly before Robert’s
planned second vaccination, he was hospi-
talized due to heart problems. Unfortunately,
during this hospitalization, he was infected
with COVID-19. After a few days with COVID-19,
Robert’s condition worsened to plus 40 degrees
of fever for 10 days. He was given antibiotics
and pain medication to reduce the fever but the
antibiotics did not work. Finally, his oxygen
level dropped to 75%. The doctors feared for his
life and planned to move him to the intensive
care unit but there were no empty beds. Instead,
he was placed on oxygen flow for the remainder
of his hospitalization.
After being hospitalized for a month, Robert
was finally able to come home. He continued to
suffer from low oxygen levels, he had lost his
ability to speak properly, and he could not work.
For the first 3-4 months at home, he was merely
surviving. He forgot words and had difficulties
speaking. For the last 11 months, he has not
been himself. He has also gained more than 15
kilos, as he has difficulties when walking due to
low oxygen levels.
Robert finds it important to stay positive about
the future. He hopes that within the next couple
of months, he and his family will get back to
their normal lives again.
“Many people do not understand how big a
problem it is for an immunocompromised
patient like me to get COVID-19 – it makes me
very angry.”
Patient story
UNION therapeutics 20Annual Report 2021 COVID-19 and immunocompromised patients
Corporate matters
Executive Management 22
Board of Directors 23
Corporate responsibility 25
Our people 26
Environment and climate 28
Corporate governance 30
Key risks 31
Financial review 33
UNION is determined to develop
drugs offering significant benefits to
patients, physicians and payers - in
a sustainable way with care for key
stakeholders, including employees,
the environment and collaborators.
UNION therapeutics 21Annual Report 2021 Corporate matters
corporate matters
Executive Management
Kim Domela Kjøller
Chief Executive Officer
Born 1967, Danish
Dr. Kim D. Kjøller has been CEO of UNION since January
2021. He brings more than 20 years of experience from
various senior executive positions in the pharmaceutical
industry. He has worked for more than 10 years at LEO
Pharma where he for five years was EVP of Global R&D.
Kim is an MD from University of Copenhagen and Chair of
the Board at the Danish Life Science Cluster.
Morten H. Boesen
Chief Financial Officer
Born 1982, Danish
Morten H. Boesen joined UNION in 2018 as Chief Financial
Officer. He brings more than 10 years of experience from
corporate finance, management consulting and private
equity.
Morten holds a Master of Science in Finance and Account-
ing from Copenhagen Business School.
Dr. Rasmus Toft-Kehler
Co-founder, Chief Operating Officer and Board member
Born 1980, Danish
Rasmus Toft-Kehler is co-founder, board member and
Chief Operating Officer at UNION. Rasmus has extensive
leadership and strategic development experience from
founding and building companies in the life science
industry. He is co-founder and board member of multiple
biotech and life science companies.
Rasmus holds a Ph.D. in Entrepreneurship from Copen-
hagen Business School and executive education from
Harvard Business School.
Dr. Morten Sommer
Co-founder, Chief Scientific Officer and Board member
Born 1981, Danish
Morten Sommer is the co-founder of several biotech-
nology companies specialized within the fields of drug
development, industrial biotech and microbiome research.
Morten is also a Professor and Scientific Director at the
Technical University of Denmark with a lab of more than
20 Ph.D.s and Post-Doctorial researchers, working pri-
marily at the intersection of antibiotic resistance and the
human microbiome.
Morten holds an M.Sc. in Physics from University of
Copenhagen and a Ph.D. in Biophysics from Harvard Uni-
versity from the laboratory of Professor George Church.
UNION therapeutics 22Annual Report 2021 Executive Management
executive management
Board of Directors
Stig Løkke Pedersen
Chair of the Board
Arthur Higgins
Deputy Chair of the Board
Gitte P. Aabo
Member of the Board
Andrew J. Oakley
Member of the Board
Born 1961, Danish Born 1956, British and American Born 1967, Danish
Born 1962, Australian
Elected to the Board in 2017 and Chair of the Board
since 2020. Stig is regarded as an independent board
member.
Elected to the Board in 2021 and Deputy Chair since
2021. Arthur is regarded as an independent board
member.
Elected to the Board in 2021 and is regarded as an
independent board member.
Elected to the Board in 2019 and is regarded as an
independent board member.
Special competencies Stig has more than 35 years of strategic, commer-
cial and leadership expertise from the life science
industry, holding senior positions at H. Lundbeck and
Ciba-Geigy.
Arthur is a global executive with extensive business
development, marketing, and leadership expertise
from large healthcare companies in both the US and
Europe, holding CEO positions at Bayer HealthCare
AG and Assertio Therapeutics, Inc, and senior
executive roles at Abbott Laboratories.
Gitte brings extensive global leadership experience
from the life science industry and a deep understand-
ing of dermatology, marketing, and capital markets.
Gitte has previously been President & Chief Executive
Officer of LEO Pharma for more than 10 years.
Andrew is a global executive with more than 20 years
of financial and capital markets experience, holding
positions as Chief Financial Officer of Actelion Ltd,
Sosei Group Corporation and Vectura Group Plc.
Current positions Chair of the Board of Directors at StemMedical, SSI
Diagnostica and Moksha8.
Member of the Board of Directors of TAP, Skybrands,
BroenLab, Hasle Refractories, NLS Pharmaceutics
and Quiapeg. In addition, Stig is Operating Partner in
the private equity fund Catacap.
Senior Operating Advisor to Abu Dhabi Investment
Authority, Director at Ecolab and ZimmerBiomet.
Gitte Aabo is the Chief Executive Officer at GN
Hearing.
Gitte is a member of the Committee of Directors of
Danmarks Nationalbank (the Danish Central Bank),
board member of ALK-Abelló, and member for the
board and the Executive Committee at Danish Cham-
ber of Commerce (Dansk Erhverv).
Andrew currently serves as Senior Vice President
and Chief Financial Officer of Autolus Therapeutics.
Andrew has been a member of the Australian Institute
of Chartered Accountants since 1987 and is also a
board member at Novaremed.
Education Stig holds a Master of Science in Economics from
Aalborg University, Denmark.
Arthur Higgins holds a B.Sc. in Biochemistry from
Strathclyde University, Scotland.
Gitte Aabo holds a Master of Science in Business
Administration from Copenhagen Business School,
Denmark.
Andrew holds a Bachelor of Economics degree from
Macquarie University and an MBA from London
Business School, United Kingdom.
UNION therapeutics 23Annual Report 2021 Board of Directors
board of directors
Dr. Jutta Heim
Member of the Board
Dr. Rasmus Toft-Kehler
Co-founder, Chief Operating Officer and Board member
Dr. Morten Sommer
Co-founder, Chief Scientific Officer and Board member
Born 1951, German and Swiss
Born 1980, Danish
Born 1981, Danish
Elected to the Board in 2017 and regarded as an
independent board member.
Member of the Board, and not considered independent
due to being COO as well as co-founder and major
shareholder of UNION.
Member of the Board, and not considered independent
due to being CSO as well as co-founder and major
shareholder of UNION.
Special competencies More than 20 years of research experience within
infectious disease, coagulation disorders and
oncology. Jutta has worked for more than 30 years at
Ciba-Geigy/Novartis in both Switzerland and the US,
as well as in Basilea Pharmaceutica and Evolva.
Extensive leadership and strategic development
experience from founding and building companies in
the life science industry. Before going into biotech,
Rasmus worked in investment banking and in man-
agement consulting.
Extensive research and development experience work-
ing within the fields of drug development, industrial
biotechnology and microbiome research. Morten has
published more than 100 scientific publications and is
an inventor of several issued patents.
Current positions Chair of the Board of Directors of Synendos Therapeu-
tics and advisor to discoveric bio group and to Aukera
Therapeutics, all companies located in Switzerland.
Member of the scientific advisory board of the HZI,
the infectious diseases institute of the Helmholtz
association.
Rasmus is the Chief Operating Officer of UNION and
co-founder of several biotech companies. He is also
board member at Clinical-Microbiomics and UTILITY
Therapeutics.
Morten is the Chief Scientific Officer of UNION and
holds the position as Professor and Scientific Director
at the Technical University of Denmark. He is also
Chair of the Board at Clinical-Microbiomics and board
member in SNIPR Holdings and SNIPR biome, Biosyntia
and UTILITY Therapeutics.
Education Jutta holds a Ph.D. in Microbiology from the University
of Tübingen and a Professorship in Biotechnology at
the Biocenter of the University of Basel, Switzerland.
Rasmus holds a Ph.D. in Entrepreneurship from
Copenhagen Business School and executive
education from Harvard Business School.
Morten holds an M.Sc. in Physics from University of
Copenhagen and a Ph.D. in Biophysics from Harvard
University from the laboratory of Professor George
Church.
Board of Directors
UNION therapeutics 24Annual Report 2021 Board of Directors
Corporate responsibility
UNION therapeutics 25Annual Report 2021 Corporate responsibility
corporate responsibility
Our people
People are the most important asset at
UNION. We aim to attract and retain
employees who have passion for
their work and can challenge status
quo in the pursuit of excellence.
As a small to medium-sized pharmaceutical
development company, teamwork within and
across functions is essential. We believe in
sharing knowledge and supporting each other’s
development through feedback and mentoring.
We want to continue building an exciting and
engaging culture where successes are cele-
brated and failures form part of the learning
process.
UNION is committed to being an employer with
proper terms of employment, appropriate health
and safety standards, and a motivating and
inspiring work environment. We support the
principles set forth in the core labor conven-
tions of the International Labor Organization
(ILO) and the UN Sustainable Development Goal
on Good Health and Well-being. The time in-
vested in creating a good and healthy working
environment has significant benefits in terms of
improving employee satisfaction, productivity
and promoting employee welfare in general. At
Team with broad industry experience
Mads Jellingsø, M.Sc.
Chief Commercial Officer
15 years of experience from man-
agement consulting (McKinsey &
Co.) and commercial roles in the
pharmaceutical industry (Novo Nor-
disk), specializing in market access
including real world evidence and
innovative contracting.
Dr. Lutz Wevelsiep
VP of Regulatory Affairs
25 years of experience in interna-
tional regulatory affairs across
Europe (EMA and EU national
agencies) and US (FDA) from
Phase I through Marketing with
multiple successful marketing au-
thorizations at Basilea Pharmaceu-
tica where he was Head of Global
Regulatory Affairs.
Eckhard Niemeier, M.Sc.
Chief Business Officer
20 years of experience from strategy
and dealmaking in life science.
Previously employed at McKinsey &
Co., MorphoSys AG and latest Pieris
Pharmaceuticals where he was Head
of Business Development, respon-
sible for all business and corporate
development activities.
Gina Fisher, M.Sc.
Project Director of orismilast
20 years of experience with pro-
ject, alliance and portfolio man-
agement in the pharmaceutical
industry, including multiple global
approvals when leading several
joint developments at Nycomed
and LEO Pharma.
Dr. Per Cantor, MD, DMSci
Chief Medical Officer
30 years of experience from phar-
maceutical companies in Europe,
US and China, including 14 years
as SVP of Clinical and Non-clinical
R&D at Ferring and 15 years at Eli
Lilly, leading major clinical develop-
ment programs.
Dr. Günter Ditzinger
Chief Technology Officer
30 years of experience from
pharmaceutical innovation across
the value chain with successful de-
velopment and commercialization
of multiple marketed products at
Sanofi, Novartis and latest Basilea
Pharmaceutica where he served as
Chief Technology Officer.
Tanya Arp Regnersgaard, M.Sc.
Project Director of niclosamide
15 years of experience with project
and portfolio management across
R&D and commercial functions in
the pharmaceutical and medical
devices industry, including 10 years
at LEO Pharma.
Read more at UNION’s website
UNION therapeutics 26Annual Report 2021 Our people
our people
UNION, we are determined to create and main-
tain a safe working environment that meets the
regulatory requirements regarding the way the
workplace is designed. UNION offers health
insurance to all its employees.
COVID-19 and flexible working conditions
As a response to the increase in COVID-19 in-
fection rates in Denmark in the fall of 2021, UN-
ION started to offer free COVID-19 rapid antigen
tests to all employees on a daily basis. UNION
continuously monitors the pandemic and its
potential impact on the health and well-being of
employees and their families. UNION has also
offered flexible working conditions in general
to allow employees to adapt to their individual
needs and preferences.
Organizational development
The organizational development in UNION
has been significant during the year 2021. The
employee base has increased from 16 employ-
ees as of year-end 2020 to 36 employees as of
year-end 2021. Among the 36 employees, 26
employees work in Research and Development
and related functions, thus representing 72%
of the workforce, whereas 10 employees work
in general and administrative functions, e.g.
Finance, Legal, HR and IT. As of 31 December
2021, 19 employees are male and 17 employees
are female, representing an approximate 50-50
split. The employee base is international with a
multitude of nationalities working across time
zones.
As an important part of working with ESG,
in particular ESG integration, UNION has
throughout the organization conducted work-
shops and started discussing the concepts
of culture, values, and meaningfulness with
respect to purpose, leadership, belonging and
personal growth. Company culture, values and
meaningfulness will continue as important
employee-related topics in 2022.
53%
Male
28%
Administrative
47%
Female
72%
R&D
GenderFunctional areas
2019 2020 2021
Development in
employees (year-end)
10
16
36
UNION therapeutics 27Annual Report 2021 Our people
0.3 %
99.7 %
0.0%
22 %
11.6 %
20.4%
16.9% 20.9 %
8.2 %
22 %
11.6 %
20.4%
16.9% 20.9 %
8.2 %
Pharmaceutical products and
pharmaceutical preparations
50.3% 24.8% 12.1% 3.7% 2.3%
Scientific research and
development
Office administrative and
other business support
Air transport
Professional, scientific and
technical activities
Human health and social
work activities
Scope 1
Scope 2
Scope 3
Total emissions
4.1 M
kg CO
2
-equivalent
Overview of Greenhouse Gas Emissions
Scope breakdown (1, 2, 3) % of total emissions
Emissions per activity type in scope 3 (kg CO
2
-equivalent)
UNION’s 2021 carbon footprint
UNION therapeutics 28Annual Report 2021 Environment and climate
environment and climate
UNION therapeutics 29Annual Report 2021 Environment and climate
Corporate governance
UNION therapeutics 30Annual Report 2021 Corporate governance
corporate governance
Key risks
Description Potential impact Mitigating actions
Clinical
development
risks
UNION’s product candidates will go through lengthy and
costly clinical trials to document efficacy and safety before
filing for approval with the relevant regulatory authorities.
Clinical trials are generally associated with high risk of
failure. UNION could experience delays in completing clinical
trials, incur additional costs in clinical trials, and ultimately
fail to progress orismilast and niclosamide towards the
market.
• Patients will not benefit from new treatments
• Potentially negative impact on sales, profit and market
position.
• UNION’s clinical project teams work closely with Contract
Research Organizations to design and conduct the clinical
trials and engage with regulatory authorities to get guid-
ance on the development path
• UNION’s management team has quaterly program
review meetings where Project Directors and the relevant
functional leads in the orismilast and niclosamide project
teams discuss the clinical development progress and as-
sociated risks. Risk management and prioritizations within
and across programs are structured around a stage-gate
model with defined milestones.
Product
supply, quality
and safety
risks
Shortage of the investigational medicinal product (IMP) or
quality issues could mean that UNION is unable to continue
the development of its product candidates.
• Product shortage and quality issues could result in delays
and ultimately discontinuation of UNION’s product candi-
dates.
• Potentially negative impact on sales, profit and market
position.
• UNION’s CMC and supply chain team works closely with
Contract Development and Manufacturing Organizations
on early identification of root causes when issues material-
ize.
People risks
UNION’s ability to compete in the highly competitive pharma-
ceutical industry depends on its ability to attract and retain
highly qualified managerial, scientific, medical, commercial
and other personnel.
• UNION could be unable to continue the development of
its product candidates, out-license or commercialize its
product candidates or otherwise implement the business
plan if key employees leave the organization and it is not
possible to find suitable replacements on a timely basis.
• Potentially negative impact on sales, profit and market
position.
• UNION professionalized considerably in terms of employ-
ees and processes during 2021. In addition to building
a healthy and rewarding work environment, UNION will
continue to strengthen processes in order to mitigate the
potentially negative impact from significant unwanted
employee turnover.
UNION faces risks that need to be identified and mitigated. Failure to mitigate significant risks can potentially impact
future sales, profits, and market position negatively. The risks are diverse and range from not being able to attract and
retain qualified employees to violation of intellectual property, all with different likelihood and impact profiles.
UNION therapeutics 31Annual Report 2021 Key risks
key risks
Description Potential impact Mitigating actions
Environmental
risks
UNION’s business operations are not considered very
sensitive to environmental risks, such as air pollution, toxic
waste or unwanted environmental accidents. However, the
business activities of UNION and our contractors do have a
carbon emission footprint.
• The indirect carbon emissions of UNION, representing
the majority of the company’s emissions, could have a
negative impact on the environment.
• UNION has started measuring the company’s aggregated
carbon emission footprint in 2021, hence creating more
transparency and opportunities to identify initiatives that
can help optimize and minimize emissions going forward.
Business
ethics risks
Partnerships and collaborations can bring significant
benefits but also involve risks. The key business ethics risk
includes violation by employees and business partners or
contractors of our anti-corruption commitment.
• Potentially legal and financial consequences from busi-
ness ethics violation.
• Potentially negative impact on sales, profit and market
position.
• All UNION employees are encouraged to speak up if poten-
tial illegal or unethical business behaviors are detected or
suspected.
• Development of programs to train employees in the
general business code of conduct, as well as a program to
ensure stronger data privacy and protection.
Intellectual
property risks
UNION could be unable to maintain or enforce intellectual
property rights that cover the current product candidates.
UNION could also face infringement claims or challenges by
third parties.
• UNION could lose its competitive advantage if the com-
pany is unable to protect its intellectual property, whereas
patent infringement claims could prevent development of
the product candidates.
• Potentially negative impact on sales, profit and market
position.
• UNION owns a patent portfolio consisting of key patent
families that include issued patents and pending patent ap-
plications worldwide, providing comprehensive protection
of the company’s product candidates.
• UNION works closely with external patent counsels to mini-
mize the risk of patent infringement against UNION and
to prepare for any potential patent infringement claims as
well as defense.
Financial risks
Financial risks relate to uncertainty associated with budget
forecasts, treasury management, i.e. exchange rate fluctua-
tions, interest rate risk, and financing opportunities.
• Potentially negative impact on sales, profit and market
position as well as cash position.
• Sensitivity analyses for budget forecasts and ongoing
dialogue with project teams to monitor actual spend vs.
budget forecast.
• Natural hedging of outflow of resources in selected curren-
cies when commitments are entered.
• Exploring different financing opportunities (venture debt,
equity).
IT risks
IT systems are key to UNION’s business operations. IT risks,
such as cyber-attacks and infrastructure failure, could result
in business disruption.
• IT risks could compromise patients’, employees’ and other
individuals’ privacy.
• IT risks could limit UNION’s ability to continue its business
operations.
• Potentially negative impact on sales, profit and market
position.
• UNION has appropriate protection from viruses and
malware, and sensitive data is encrypted and subject to
restricted use.
• UNION works with external IT specialists on IT security. In
2021, UNION did an “IT Infrastructure and Security Update”
to improve the IT environment and security framework.
UNION therapeutics 32Annual Report 2021 Key risks
Advancement in lead molecules, orismilast and niclosamide,
as well as conscious effort to strengthen the organization led
to a high activity level in 2021. The strategic partnership with
Innovent Biologics validates the potential of orismilast.
The financial review is based on the consolidat-
ed financial statements for the year ended De-
cember 31, 2021, with comparative 2020 figures
in brackets. There is no significant difference
in the development of the Group and the Parent
Company.
Income statement
Revenue
Revenue in 2021 was DKK 118.9m (DKK 0m) as
UNION on September 28, 2021, entered into a
strategic collaboration and license agreement
for orismilast with Innovent Biologics (the
Innovent Agreement). As part of the Innovent
Agreement, UNION is entitled to receive a
non-refundable, non-creditable and not subject
to off-set up-front payment of USD 20m and is
eligible to receive future milestones payments
of up to USD 247m, contingent on the achieve-
ment of certain development and regulato-
ry milestones across multiple therapeutic
indications and on the achievement of certain
sales-based milestones. Lastly, the company
is entitled to receive a sales-based royalty
fee ranging from a high single digit to a low
twenties percentage of all net sales of orismilast
in Greater China (including Mainland China,
Hong Kong, Macau and Taiwan) by or on behalf
of Innovent Biologics.
Research and development costs
Research and development costs increased
to DKK 155.3m in 2021 (DKK 65.1m). Higher
activity level in 2021 compared to 2020 caused
the increase in cost in 2021. Additionally, em-
ployee costs have increased as an effect of the
strengthening of the research and development
organization.
Administrative costs
Administrative costs increased to DKK 21.7m
in 2021 (DKK 8.3m) To support the increased
activity level in research and development,
the administrative functions have also been
strengthened, resulting in higher employee
costs. Supported by external service providers,
systems, processes and compliance efforts
have been revised and optimized together with
preparations for future growth. This has led to
an increase in external costs, most of which are
one-off costs.
Other operating income
Other operating income decreased to DKK 6.2m
in 2021 (DKK 9.0m). In 2021, Other operating
income consists of government grant (Innova-
tion Fund Denmark).
Financial income/(expenses)
Financial income/(expenses) decreased to DKK
-9.6m in 2021 (DKK -22.1m). The development
compared to 2020 is mainly due to increased
income from currency adjustments of USD
bank accounts and lower fair value adjustments
of warrant and put option. This is only partly
off-set by increased cost related to fair value
adjustment of convertible loan.
Tax benefit/(expense)
Tax benefit of DKK 5.5m in 2021 (DKK 5.5m)
comprises receivable tax credit for research and
development expenditures at the applicable tax
rate under the Danish Tax Assessment Act.
Result for the year
The result for the year of DKK -56.0m (DKK
-80.9m) is reflecting high research and develop-
ment costs off-set by revenue from the Innovent
agreement.
Cash flow
Cash flow from operating activities
Cash flow from operating activities totaled DKK
-3.0m (DKK -51.5m), which includes positive
contribution of DKK 128.2m related to the up-
front payment from the Innovent agreement.
Cash flow from financing activities
Cash flow from financing activities totaled DKK
216.5m (DKK 43.5m) due to proceeds from a
capital increase and proceeds from issuance of
convertible loan.
Liquidity and capital resources
As of December 31, 2021, UNION had cash and
cash equivalents of DKK 253.4m (DKK 36.4
m). The increase is primarily due to upfront
payment from the Innovent agreement, capital
increase and issuance of convertible loan.
Equity
Equity as of December 31, 2021, totaled DKK
49.4m (DKK -58.4m) The increase was driv-
en primarily by net income and the capital
increase. The equity corresponds to an equity
ratio of 17.3% (-84.8%).
Financial review
UNION therapeutics 33Annual Report 2021 Financial review
financial review
Consolidated financial statements
Statement of comprehensive income 36
Cash flow statement 36
Statement of financial position 37
Statement of changes in equity 38
Notes
1. Accounting policies 39
2. Critical accounting estimates and judgements 46
3. Revenue 47
4. Research and development costs
and Administrative costs 48
5. Staff costs 49
6. Share-based payment 50
7. Other operating income 52
8. Financial income and expenses 53
9. Income taxes 53
10. Result per share 54
11. Intangible assets 55
12. Property, plant and equipment 56
13. Other receivables and prepayments 57
14. Capital management and share capital 57
15. Other payables 58
16. Financial risks 58
17. European Investment Bank Loan 59
18. Convertible loans 60
19. Related party disclosures 61
20. Changes in liabilities arising from
financing activities 62
21. Cash flow statement - adjustment for
non-cash items 63
22. Cash flow statement - changes in
net working capital 63
23. Contingent assets and liabilities,
contractual liabilities, and pledges 63
24. Events after the balance sheet date 63
UNION therapeutics 35Annual Report 2021 Consolidated financial statements
consolidated financial statements
DKK’000 Notes 2021 2020
Revenue 3 118,912 0
Research and development costs 4 -155,305 -65,107
Administrative costs 4 -21,724 -8,270
Operating result before other income -58,117 -73,377
Other operating income 7 6,178 9,049
Operating result -51,939 -64,328
Financial income 8 4,286 6
Financial expenses 8 -13,848 -22,084
Result before tax -61,501 -86,406
Tax benefit/(expense) 9 5,475 5,510
Result for the year -56,026 -80,896
Other comprehensive income or loss
Items that may be reclassified to profit or loss in subsequent periods, net of tax
Exchange differences on translation of foreign operations 13 -40
Other comprehensive result for the period, net of tax 13 -40
Total comprehensive result for the year -56,013 -80,936
Basic net result per share 10 -8 -15
Diluted net result per share 10 -8 -15
Result for the year and total comprehensive result is attributable to the shareholders of UNION therapeutics A/S.
Statement of comprehensive income
DKK’000 Notes 2021 2020
Result for the year -56,026 -80,896
Adjustment for non-cash items 21 14,129 23,459
Changes in net working capital 22 34,762 1,945
Changes in non-current financial assets -130 -10
Interest received 0 7
Interest paid -1,184 -221
Income taxes received/(paid) 5,475 4,170
Cash flow from operating activities -2,974 -51,546
Investment in intangible assets 11 0 -1,668
Investment in property, plant and equipment 12 -140 0
Cash flow from investing activities -140 -1,668
Proceeds from capital increase 154,786 43,749
Costs associated with capital increase -15 -70
Proceeds from issuance of convertible loans 18 62,037 0
Lease instalments 20 -312 -155
Cash flow from financing activities 216,496 43,524
Net cash flow for the year 213,382 -9,690
Cash at the beginning of the year 36,425 46,466
Exchange rate adjustments of cash 3,595 -351
Cash and cash equivalents at end of the year 253,402 36,425
Cash and cash equivalents as per statement of financial position 253,402 36,425
Non-cash investing activities
Non-cash capital increases included in equity 0 14,898
Cash flow statement
UNION therapeutics 36Annual Report 2021 Consolidated financial statements
con comprehensive cash flow
Dec. 31 Dec. 31
DKK’000 Notes 2021 2020
Assets
Non-current assets
Intangible assets 11 16,566 16,566
Property, plant and equipment 12 1,160 168
Other receivables 252 122
Total non-current assets 17,978 16,856
Current assets
Tax receivables 9 5,500 5,500
Other receivables and prepayments 13 8,045 10,103
Cash and cash equivalents 253,402 36,425
Total current assets 266,947 52,028
Total assets 284,925 68,884
Dec. 31 Dec. 31
DKK’000 Notes 2021 2020
Equity and liabilities
Equity
Share capital 14 660 563
Other reserves 48,720 -58,960
Total equity 49,380 -58,397
Non-current liabilities
Long-term debt 16 99,286 88,894
Cash-settled warrant obligation 6 6,074 6,069
Deferred revenue 3 876 0
Lease liabilities 16 661 0
Convertible loans 18 63,778 0
Total non-current liabilities 170,675 94,963
Current liabilities
Lease liabilities 16 429 167
Trade payables 16 11,424 7,350
Warrant and put option 16 18,480 18,018
Deferred revenue 3 7,344 0
Other payables 15 27,193 6,783
Total current liabilities 64,870 32,318
Total liabilities 235,545 127,282
Total equity and liabilities 284,925 68,884
Statement of financial position
UNION therapeutics 37Annual Report 2021 Consolidated financial statements
con financial position
Other reserves
(Accu-
Foreign mulated
currency deficit)/
Share translation Retained
DKK’000 Notes capital reserve earnings Total
Equity at January 1, 2020 515 15 -38,838 -38,308
Result for the year 0 0 -80,896 -80,896
Other comprehensive income or loss 0 -40 0 -40
Total comprehensive result for the year 0 -40 -80,896 -80,936
Transactions with owners:
Capital increases 14 48 0 58,600 58,648
Transaction costs 0 0 -70 -70
Share-based compensation 6 0 0 2,269 2,269
Equity at December 31, 2020 563 -25 -58,935 -58,397
Other reserves
(Accu-
Foreign mulated
currency deficit)/
Share translation Retained
DKK’000 Notes capital reserve earnings Total
Equity at January 1, 2021 563 -25 -58,935 -58,397
Result for the year 0 0 -56,026 -56,026
Other comprehensive income or loss 0 13 0 13
Total comprehensive result for the year 0 13 -56,026 -56,013
Transactions with owners:
Capital increases 14 97 0 154,689 154,786
Transaction costs 0 0 -15 -15
Share-based compensation 6 0 0 9,019 9,019
Equity at December 31, 2021 660 -12 48,732 49,380
Statement of changes in equity
UNION therapeutics 38Annual Report 2021 Consolidated financial statements
con equity
Notes
1. Accounting policies
Basis for preparation
The consolidated financial statements of UNION therapeu-
tics A /S (refered to as “UNION” or “the company” through-
out the Annual Report) have been prepared in accordance
with International Financial Reporting Standards (IFRS)
as adopted by the EU and additional requirements of the
Danish Financial Statements Act (class B and selected
disclosure requirements for class C and D).
The consolidated financial statements have been prepared
under the historical cost basis, except for certain financial
assets and liabilities that are measured at fair value.
Going concern
Management considers the company’s capital resources
at December 31, 2021 sufficient to cover the company’s
obligations for the ongoing activities as they mature at
least through December 31, 2022. On this basis, manage-
ment has prepared the financial statements on a going
concern assumption.
Applied materiality
UNION’s consolidated financial statement is based on
the concept of materiality focusing on information that is
considered material and relevant.
The consolidated financial statements are a result of pro-
cessing large numbers of transactions and aggregating
those into classes according to their nature or function.
The aggregated transactions are presented in classes of
similar items in the consolidated financial statements.
Line items not individually material are aggregated with
other items of similar nature in the financial statements or
in the notes.
The disclosure requirements are substantial in IFRS and
the Danish Financial Statement Act. Management pro-
vides specific disclosures required unless the information
is considered immaterial to the financial decision-making
of the users of these consolidated financial statements
and otherwise not warranted or not applicable.
Information on COVID-19
UNION’s business, operations and clinical studies were
impacted by the effects of COVID-19. Although the clinical
studies continued without interruption during 2021,
delays and increased costs resulting from implications
of COVID-19 were experienced. However, UNION has not
recognized any writeoffs, impairments of assets, or losses
due to onerous contracts. The COVID-19 pandemic may,
in the long-term, affect the productivity of UNION’s staff;
the ability to attract, integrate, manage and retain qualified
personnel or key employees; the global supply chains and
relationships with vendors and other parties; significant
disruption of global financial markets; and reduced ability
to secure additional funding. UNION continuously moni-
tors the COVID-19 pandemic and its potential impact on
the business and financials.
Information on the war in Ukraine
UNION does not have any activities in neither Ukraine nor
Russia and is not directly impacted by the war in Ukraine.
Changes in the accounting policies and disclosures
Implementation of new and revised
standards and interpretations
UNION applied for the first time, certain standards and
amendments, which are effective for annual periods be-
ginning on or after January 1, 2021. UNION has not early
adopted any other standard, interpretation or amendment
that has been issued but is not yet effective.
Interest Rate Benchmark Reform –
Phase 2: Amendments to IFRS 9, IAS
39, IFRS 7, IFRS 4 and IFRS 16.
The amendments provide temporary reliefs which address
the financial reporting effects when an interbank offered
rate (IBOR) is replaced with an alternative nearly risk-free
interest rate (RFR). The amendments include the following
practical expedients:
• To require contractual changes, or changes to cash
flows that are directly required by the reform, to be
treated as changes to a floating interest rate, equivalent
to a movement in a market rate of interest
• To permit changes required by IBOR reform to be made
to hedge designations and hedge documentation with-
out the hedging relationship being discontinued
• To provide temporary relief to entities from having to
meet the separately identifiable requirement when
an RFR instrument is designated as a hedge of a risk
component
These amendments had no impact on the consolidated
financial statements of UNION. UNION intends to use
the practical expedients in future periods if they become
applicable.
COVID-19-Related Rent Concessions beyond
June 30, 2021 Amendments to IFRS 16 On May
28, 2020, the IASB issued COVID-19-Related Rent
Concessions - amendment to IFRS 16 Leases.
The amendments provide relief to lessees from applying
IFRS 16 guidance on lease modification accounting for
rent concessions arising as a direct consequence of the
COVID-19 pandemic. As a practical expedient, a lessee
may elect not to assess whether a COVID-19 related
rent concession from a lessor is a lease modification. A
lessee that makes this election accounts for any change in
lease payments resulting from the COVID-19 related rent
concession the same way it would account for the change
under IFRS 16 if the change were not a lease modification.
The amendment was intended to apply until June 30,
2021, but as the impact of the COVID-19 pandemic is
continuing, on March 31, 2021, the IASB extended the
period of application of the practical expedient to June 30,
2022. The amendment applies to annual reporting periods
beginning on or after April 1, 2021.
UNION has not received COVID-19-related rent conces-
sions.
Standards and interpretations not yet in force
At the date of publication of the consolidated financial
statements, a number of new and amended standards and
interpretations have not yet entered into force or have not
yet been adopted by the EU. Therefore, they are not incor-
porated in the consolidated financial statements.
None of the new or amended standards and interpre-
tations are expected to have a material impact on the
consolidated financial statements.
Consolidated financial statements
The consolidated financial statements comprise the
parent company, UNION therapeutics A/S, and three sub-
sidiaries controlled by UNION therapeutics A/S: UNION
Research ApS, UNION therapeutics Germany GmbH and
UNION therapeutics North America Inc.
The group controls an entity if the group holds more than
50% of the votes or otherwise exercises control. Subsidiar-
ies are fully consolidated from the date on which control is
transferred to the group. They are deconsolidated from the
date that control ceases.
UNION therapeutics 39Annual Report 2021 Consolidated financial statements
con note 1
Notes
The consolidated financial statements are prepared by
combining the parent company’s and the individual sub-
sidiaries’ financial statements and eliminating intercompa-
ny transactions such as intra-group income and expenses,
shareholdings, intra-group balances and dividends, and
realized and unrealized gains on intra-group transactions.
Translation of foreign operations
Items included in the consolidated financial statements
of each of the group’s entities are measured using the
currency of the primary economic environment that best
reflect the economic substance in which the legal entities
operate (functional currency). The functional currency of
the parent company and the Danish subsidiary is DKK. The
functional currency of the U.S. subsidiary is USD and the
functional currency of the German subsidiary is EUR.
Transactions denominated in currencies other than the
functional currency are foreign currency transactions.
On initial recognition, foreign currency transactions are
translated to the functional currency at the exchange rates
at the transaction date. Foreign exchange differences
arising between the rate at the transaction date and the
rate at the date of payment are recognized in profit or loss
as financial income or financial expenses.
Receivables and payables and other monetary items
denominated in foreign currencies are translated to the
functional currency at the exchange rates at the date of
the statement of financial position.
The difference between the exchange rates at the end of
the reporting period and at the date at which the receiva-
ble or payable arose or was recognized in the latest annual
report is recognized in the statement of comprehensive
income as financial income or financial expenses.
Financial statements of foreign subsidiaries are translated
into DKK at the exchange rates prevailing at the reporting
date for assets and liabilities, and at average exchange
rates for income statement items. The following exchange
rate differences, arising from translation using the
exchange rate prevailing at the reporting date, are recog-
nized in Other comprehensive income:
• Translation of foreign subsidiaries’ net assets at the
beginning of the year
• Translation of foreign subsidiaries’ income statements
from average exchange rates
Statement of comprehensive income
Revenue
Revenue is recognized when the customer obtains control
of promised goods or services, in an amount that reflects
the consideration that the entity expects to receive in ex-
change for those goods or services. To determine revenue
recognition for arrangements within the scope of IFRS
15, the following five steps are performed: (i) identify the
contract(s) with a customer; (ii) identify the performance
obligations in the contract; (iii) determine the transaction
price; (iv) allocate the transaction price to the performance
obligations in the contract; and (v) recognize revenue
when (or as) the entity satisfies a performance obligation.
The five-step model to contracts is only applied when it
is probable that the consideration UNION is entitled to
in exchange for the goods or services it transfers to the
customer will be collected. At contract inception, once the
contract is determined to be within the scope of IFRS 15,
UNION assesses the goods or services promised within
each contract and identifies, as a performance obligation,
and assesses whether each promised good or service
is distinct. Revenue is recognized in the amount of the
transaction price that is allocated to the respective perfor-
mance obligation when (or as) the performance obligation
is satisfied.
Royalties: Certain license and collaboration agreements
include sales-based royalties including commercial
milestone payments based on the level of sales. The
license has been deemed to be the predominant item to
which the royalties relate under license and collaboration
agreements. As a result, revenue is recognized when the
related sales occur.
Upfront payments: Certain agreements include pay-
ments to UNION at signing. To the extend the customer
obtains control of goods or services related to the upfront
payments at signing, revenue is recognized at signing.
To the extend the customer obtains control of goods and
services related to the upfront payment at a later point in
time, upfront payments are initially recognized as deferred
revenue and only recognized as revenue when the custom-
er obtains control of goods or services.
Milestone Revenue: At the inception of each arrange-
ment that includes milestone payments, it is evaluated
whether the achievement of milestones are considered
highly probable and UNION estimates the amount to be
included in the transaction price. If it is highly probable
that a significant revenue reversal would not occur, the
associated milestone value is included in the transaction
price. Milestone payments that are not within the control
of UNION or the license and collaboration partner, such
as regulatory approvals, are not considered probable of
being achieved until those approvals are received. The
transaction price is then allocated to each performance
obligation on a relative stand-alone selling price basis, for
which revenue is recognized as or when the performance
obligations under the contract are satisfied. At the end
of each subsequent reporting period, the probability of
achievement of such development milestones and any
related constraint is re-evaluated, and if necessary, esti-
mate of the overall transaction price is adjusted. Any such
adjustments are recorded on a cumulative catch-up basis,
which would affect revenue and earnings in the period of
adjustment.
License Revenue for Intellectual Property: If license to
functional intellectual property is determined to be distinct
from the other performance obligations identified in the
arrangement, revenue is recognized from non-refundable
upfront fees allocated to the license at the point in time the
license is transferred to the licensee and the licensee is
able to use and benefit from the license. For licenses that
are bundled with other promises, UNION utilizes judge-
ment to assess the nature of the combined performance
obligation to determine whether the combined perfor-
mance obligation is satisfied over time or at a point in time
and, if over time, the appropriate method of measuring
progress for purposes of recognizing revenue from non-re-
fundable, upfront fees.
Revenue is measured at the fair value of the agreed con-
sideration exclusive of VAT and taxes charged on behalf of
third parties. Revenue is presented in the country in which
the delivery takes plase, which is the customer’s country
of domicile.
Joint arrangements
When UNION enters into an agreement, the agreement
might include joint development arrangement plans in
respect of activities that support the development of
the UNION Asset. Costs arising under any such joint
development plan will be shared between UNION and the
1. Accounting policies continued
UNION therapeutics 40Annual Report 2021 Consolidated financial statements
Notes
development partner. These collaboration agreements,
are considered joint operations as defined in IFRS 11 “Joint
Arrangements”. As a consequence such agreements are
not considered perfomance obligations.
Research and development costs
Research and development costs are primarily external
and, to a lesser extent, internal costs incurred in the devel-
opment of the company’s product candidates, including
personnel costs and external research and development
costs. Substantial portions of the company’s clinical
studies are performed by third-party laboratories, medical
centres or CROs. The company recognizes accruals for
estimated research and development costs, comprising
payments for work performed by third-party contractors
and others. Payments for these activities are based on
the terms of the individual agreements with the relevant
counterparties, which may differ from the pattern of costs
incurred, in which case, they are reflected in the financial
statements as expense, prepaid expense or accrued
expense. CROs generally invoice monthly or quarterly for
services performed. For clinical studies, the company
accrues expenses based upon estimated percentage of
work completed.
The company’s estimates depend on the timeliness and
accuracy of the data provided by the CROs regarding the
status of each program and total program spending. The
company evaluates the estimates to determine if adjust-
ments are necessary or appropriate based on information
received. CROs invoice the company upon the occurrence
of predetermined contractual or activity-based milestones;
however, the timing of these invoices and the company’s
related payments often do not correspond directly to the
level of performance of contracted activities. To the extent
payments are made by the company in advance of the
related activities performed by the CROs, they are included
in prepayments to clinical research organisations and ex-
pensed when the activities are performed by the CROs. To
the extent the payments are made by the company follow-
ing the performance of the related activities, the expense is
accrued for as a payable to clinical research organisations.
Administrative costs
Administrative costs consist primarily of personnel costs
and costs related to corporate functions and business
development. In addition, administrative costs include
depreciation and other expenses for UNION’s headquar-
ters. UNION recognizes administrative costs in the period
in which such costs occur.
Other operating income
Other operating income comprises items secondary to the
principal activities of the entities, including gains on on-
going disposal and replacement of items of property and
plant and equipment. Gains on disposal are made up as
the sales price less selling costs and the carrying amount
at the time of disposal.
Moreover, other operating income comprises government
and privately funded grants. Grants are recognized at
the time when a final and firm right to the grant has been
obtained and to the extent that the entity has obtained
reasonable assurance to comply with the conditions at-
tached to the grants received. When the grant relates to an
expense item, it is recognized as income on a systematic
basis over the periods that the related costs, for which it is
intended to compensate, are expensed.
Financial income and expenses
Financial income and expenses comprise interest income
and expenses, exchange gains and losses on transactions
denominated in foreign currencies and are recognized
in the income statements at the amounts that concern
the financial year. Furthermore, amortization of financial
assets and liabilities, including lease liabilities, as well
as surcharges and allowances under the on-account tax
scheme and changes in the fair value of non-derivative
financial liabilities that are measured at fair value are
included in financial income and expenses.
Income tax
Tax for the year includes current tax on the year’s expected
taxable income and the year’s deferred tax adjustments.
The portion of the tax for the year that relates to the
profit/loss for the year is recognized in the statement of
comprehensive income, whereas the portion that relates
to transactions taken to equity is recognized in equity.
Net result per share
Basic net result per share is calculated as the result for
the year compared to the weighted average of the issued
shares in the financial year.
The basis for the calculation of diluted net result per share
is the weighted-average number of ordinary shares in the
financial year adjusted for the dilutive effects of warrants.
Current versus Non-current classification
The company presents assets and liabilities in the state-
ment of financial position based on Current/Non-current
classification.
An asset is classified as Current when it is:
• expected to be realized or intended to be sold or con-
sumed in the normal operating cycle
• held primarily for the purpose of trading
• expected to be realized within twelve months after the
reporting period or
• cash or cash equivalent unless restricted from being
exchanged or used to settle a liability for at least twelve
months after the reporting period. All other assets are
classified as Non-current.
A liability is classified as Current when:
• it is expected to be settled in the normal operating cycle
• it is held primarily for the purpose of trading
• it is due to be settled within twelve months after the
reporting period or
• there is no unconditional right to defer the settlement of
the liability for at least twelve months after the reporting
period.
The company classifies all other liabilities as Non-cur-
rent. Deferred tax assets and liabilities are classified as
non-current assets and liabilities.
Intangible assets
Separately acquired intangible assets
Separately acquired intangible assets are measured at
historical costs. Such assets have a finite useful life and
are subsequent to initial measurement carried at costs
less accumulated amortization and impairment.
For acquisition of intangible rights involving equity-set-
tled share-based payment transactions, management
1. Accounting policies continued
UNION therapeutics 41Annual Report 2021 Consolidated financial statements
Notes
measures the fair value of the rights received and the
corresponding increase in equity by reference to the fair
value of the rights received unless that fair value cannot be
estimated reliably. If management cannot estimate reliably
the fair value of the rights received, it measures the fair
value and the corresponding increase in equity by refer-
ence to the fair value of the equity instruments granted.
Variable or contingent consideration for the acquisition of
intangible rights is accounted for under the cost accumu-
lation model, whereby all future considerations are added,
when incurred, to the cost of the asset initially recorded.
Following initial recognition, intangible assets are carried
at cost less any accumulated amortization and accumu-
lated impairment losses. The useful lives of intangible
assets are assessed as either finite or indefinite. Intangible
assets with finite lives are amortized using the straight-line
method over the useful economic life and assessed for
impairment whenever there is an indication that the intan-
gible asset may be impaired. The amortization period and
the amortization method are reviewed at least once a year.
Changes in the expected useful life or the expected pattern
of consumption of future economic benefits embodied in
the asset are considered to modify the amortization period
or method, as appropriate, and are treated as changes in
accounting estimates. The amortization expense on intan-
gible assets with finite lives is recognized in the statement
of comprehensive income in the expense category that is
consistent with the function of the intangible assets.
UNION has no intangible assets with indefinite useful lives.
Internally generated intangible assets from development
Intangible assets arising from development projects are
recognized in the balance sheet when:
• the development project is clearly defined and identifia-
ble and the attributable costs can be measured reliably
during the development period;
• the technological feasibility, adequate resources to
complete and a market for the product or an internal use
of the product can be documented; and
• management has the intent to produce and market the
product or to use it internally.
Such an intangible asset is recognized if it can be doc-
umented that the future income from the development
project will exceed the aggregate cost of production,
development, and sale and administration of the product,
with sufficient certainty.
Research and development costs not recognized in the
balance sheet are recognized in the statement of compre-
hensive income when incurred.
Impairment test of intangible assets
During the year, the carrying amounts of intangible assets
are reviewed in order to determine whether there is any
indication that they have suffered an impairment loss. If
any such indication exists, the recoverable amount of the
asset is estimated in order to determine the extent of the
impairment loss.
Intangible assets not yet available for use are tested for
impairment at least annually, and whenever there is an
indication that the asset may be impaired.
The recoverable amount is the higher of fair value less
costs of disposal and value in use. On assessing value
in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of
money and the risks specific to the asset for which the
estimates of future cash flows have not been adjusted.
Property, plant and equipment
Property, plant and equipment include leasehold improve-
ments and other fixtures and fittings, tools and equipment.
Items of property, plant and equipment are measured at
cost less accumulated depreciation and impairment loss-
es. Cost includes the acquisition price and costs directly
related to the acquisition until the time at which the asset
is ready for use.
Subsequent costs are included in the asset’s carrying
amount or recognized as a separate asset, as appropriate,
only when it is probable that future economic benefits
associated with the item will flow to the group and the cost
of the item can be measured reliably. The carrying amount
of any component accounted for as a separate asset is
derecognized when replaced. Repairs and maintenance
are charged to profit or loss during the reporting period in
which they are incurred.
The assets’ residual values and useful lives are reviewed,
and adjusted if appropriate, at least annually.
Depreciation is recognized on a straight-line basis over the
estimated useful lives of the assets, as follows:
Other fixtures and fittings, tools and equipment: 2-5 years
Leasehold improvements: Extend of lease term, but no
longer than 5 years.
Leases
UNION assesses at contract inception whether a contract
is, or contains, a lease. That is, if the contract conveys the
right to control the use of an identified asset for a period of
time in exchange for consideration.
UNION applies a single recognition and measurement
approach for all leases, except for short-term leases and
leases of low-value assets. The company recognizes lease
liabilities for future remaining lease payments and right-
of-use assets representing the right to use the underlying
assets.
Right-of-use assets
Right-of-use assets are recognized at the lease com-
mencement date (i.e., the date the underlying asset is
available for use). Right-of-use assets are measured at
cost less any accumulated depreciation and impairment
losses and adjusted for certain remeasurements of lease
liabilities. The cost of right-of-use assets includes the
amount of lease liabilities recognized, lease payments
made at or before the commencement date less any
lease incentives received, initial direct costs incurred, and
restoration costs.
Right-of-use assets are depreciated over the shorter of
the lease term and the useful life of the right-of-use asset
using the straight-line method. In addition, right-of-use
assets are reduced by impairment losses, if any, and
adjusted for certain remeasurements.
Right-of-use assets are presented within ‘Property, plant
and equipment’.
1. Accounting policies continued
UNION therapeutics 42Annual Report 2021 Consolidated financial statements
Notes
Lease liabilities
At the commencement date of the lease, UNION recog-
nizes lease liabilities measured at the present value of the
following payments, when applicable:
• fixed payments (including in-substance fixed payments),
less any lease incentives receivable;
• variable lease payments (linked to an index or interest
rate) initially measured using the index or rate as at the
commencement date
• expected payments under residual value guarantees;
• the exercise price of purchase options, where exercise is
reasonably certain;
• lease payments in optional renewal periods, where exer-
cise of extension options is reasonably certain; and
• penalty payments for the termination of a lease if the
lease term reflects the exercise of the respective termi-
nation option.
The lease payments are discounted using the interest rate
implicit in the lease if this rate can be readily determined.
Otherwise, UNION’s incremental borrowing rate is used,
being the rate that the company would have to pay to
borrow the funds necessary to obtain an asset of similar
value to the right-of-use asset in a similar economic
environment with similar terms, security, and conditions.
Generally, UNION uses its incremental borrowing rate as
the discount rate.
Lease liabilities are subsequently measured at amortized
cost using the effective interest method. In addition, the
carrying amount of the lease liabilities are remeasured
if there is a modification, a change in the lease term, or
a change in the lease payments (e.g., changes to future
payments resulting from a change in an index or rate used
to determine such lease payments).
Impairment of non-current assets
Non-current assets are tested for impairment whenever
events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment
loss is recognized for the amount by which the asset’s
carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value
less costs of disposal and value in use. For the purposes
of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash
inflows which are largely independent of the cash inflows
from other assets or groups of assets (cash-generating
units). Non-financial assets that suffered an impairment
are reviewed for possible reversal of the impairment at the
end of each reporting period.
Accounts receivables
Accounts receivables comprise unconditional rights to
consideration, which are designated as financial assets
measured at amortized cost, are initially measured at fair
value or transaction price and subsequently measured
in the balance sheet at amortized cost, which generally
corresponds to nominal value less expected credit loss
provision. UNION utilizes a simplified approach to measur-
ing expected credit losses.
Other receivables
Other receivables, which include VAT and government
grant receivables, are initially measured at fair value, and
subsequently measured at amortized cost, which usually
corresponds to the nominal value. The value is reduced by
impairment losses.
Prepayments
Prepayments recognized under assets comprise prepaid
expenses regarding subsequent financial reporting periods.
Cash and cash equivalents
Cash is comprised of cash on hand and in bank deposit
accounts.
Income tax and deferred tax
Current income tax
Tax assets and liabilities for the current period are meas-
ured at the amount expected to be recovered from or paid
to the taxation authorities within one year from the date
of the statement of financial position. The tax rates and
tax laws used to compute the amount are those that are
enacted or substantively enacted at the reporting date in
the countries where the company operates.
Management periodically evaluates positions taken in the
tax returns with respect to situations in which applicable
tax regulations are subject to interpretation or uncertainty
and establishes provisions where appropriate.
Deferred tax
Deferred tax is provided using the liability method on tem-
porary differences arising between the tax bases of assets
and liabilities and their carrying amounts for financial
reporting purposes at the reporting date.
Deferred tax assets are recognized for all deductible tem-
porary differences, the carry forward of unused tax credits
and any unused tax losses to the extent that it is probable
that taxable profit will be available against which the
deductible temporary differences and the carry forward of
unused tax credits and unused tax losses, can be utilized.
The carrying amount of deferred tax assets is reviewed
at each reporting date and reduced to the extent that it
is no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred tax asset to be
utilized. Unrecognized deferred tax assets are re-assessed
at each reporting date and are recognized to the extent
that it has become probable that future taxable profits will
allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply in the year when the asset
is realized or the liability is settled, based on tax rates (and
tax laws) that have been enacted or substantively enacted
at the reporting date.
Deferred tax relating to items recognized outside the
profit or loss is recognized in correlation to the underlying
transaction either in other comprehensive income or
directly in equity.
Deferred tax assets and deferred tax liabilities of the same
tax jurisdiction are offset if a legally enforceable right
exists to set off.
Equity
Share capital
The share capital comprises the nominal amount of the com-
pany’s ordinary shares, each at a nominal value of 0.1 DKK.
Foreign currency translation reserve
Exchange differences arising on translation of foreign
controlled entities into the presentation currency, DKK, are
recognized in other comprehensive income and accumu-
lated in a separate reserve within equity. The cumulative
amount is reclassified in the statement of comprehensive
income when the net investment is disposed of.
1. Accounting policies continued
UNION therapeutics 43Annual Report 2021 Consolidated financial statements
Notes
Retained earnings/(accumulated deficit)
Accumulated deficit includes the accumulated profit or
loss for the year. Further, accumulated deficit includes the
share premium comprising the amount received, attrib-
utable to shareholders’ equity, in excess of the nominal
amount of the shares issued at the company’s capital
increases, reduced by any expenses directly attributable
to the capital increases. Accumulated deficit also includes
the corresponding increase in equity relating to share-
based payment expense recognized in the profit or loss,
arising from equity-settled share-based compensation
programs.
Share-based payments
Members of the Board of Directors, Executive Manage-
ment and key personnel of the company receive remuner-
ation in the form of share-based payments.
Equity-settled awards
For equity-settled, share-based payment transactions,
UNION measures the goods received at the fair value
of the goods or services received, unless that fair value
cannot be estimated reliably. If UNION cannot estimate
the fair value of the goods or services received reliably, it
measures their fair value by reference to the fair value of
the equity instruments granted.
The cost of equity-settled awards is determined by the fair
value at the date when the grant is made using an appro-
priate valuation model.
The cost is recognized in the statement of comprehensive
income together with a corresponding increase in equity,
over the period in which the service and, where applica-
ble, the performance conditions are fulfilled (the vesting
period).
Service and non-market performance conditions are not
taken into account when determining the grant date fair
value of awards, but the likelihood of the conditions being
met is assessed as part of the group’s best estimate of
the number of equity instruments that will ultimately vest.
Market performance conditions are reflected within the
grant date fair value. Any other conditions attached to an
award, but without an associated service requirement,
are considered to be non-vesting conditions. Non-vesting
conditions are reflected in the fair value of an award and
lead to an immediate expensing of an award unless there
are also service and/or performance conditions.
Cash-settled awards
A liability is recognized for the fair value of cash-settled
awards. The fair value is expensed over the period until the
vesting date with recognition of a corresponding liability.
The fair value is measured initially and at each reporting
date up to and including the settlement date, with changes
in fair value recognized in employee benefits expense.
Financial liabilities measured at amortized cost
Financial liabilities measured at amortized cost includes
all financial liabilities, other than those measured at fair
value through profit or loss. The company includes in this
category loans and other short-term payables.
Loans are initially recognized at fair value, net of transac-
tion costs incurred, if any. Loans are subsequently meas-
ured at amortized cost using the effective interest rate
method. Gains and losses are recognized in the statement
of comprehensive income within financial items when
liabilities are derecognized as well as when the effective
interest rate method is used.
Amortized cost is calculated by taking into account any
discount or premium on acquisition and fees or costs that
are an integral part of the effective interest rate method.
Compound financial instruments
A compound financial instrument which contains both a
liability and an embedded put option component is sepa-
rated at the issue date.
When establishing the accounting treatment of these
non-derivative instruments the company first establishes
whether the instrument is a compound instrument and
classifies such instruments or components separately as
financial liabilities, or warrant put option instruments in ac-
cordance with IAS 32 Financial Instruments: Presentation.
The company separately recognizes the components of a
financial instrument that: (a) creates a financial liability for
the company; and (b) grants a put option to the lender to
purchase all or part of the warrants held by the lender.
Classification of the liability and warrant put option
components is not revised because of a change in the
likelihood that the warrant put option will be exercised,
even when exercise of the option may appear to have
become economically advantageous to the holders. When
allocating the initial carrying amount of a compound
financial instrument to its liability and warrant put option
components, the liability component is assigned the
residual amount after deducting from the entire fair value
of the instrument, the amount separately determined for
the warrant put option component.
Deferred revenue
Deferred revenue represents the aggregated amount of
consideration to which UNION has obtained unconditional
right to but for which performance obligations are not yet
satisfied at the end of the reporting period. Deferred rev-
enue presented as Current relates to performance obliga-
tions UNION expects to satisfy during the coming twelve
months, whereas the Non-current portion represents
performance obligations UNION expects to satisfy after
the coming twelve months. The split between Current and
Non-current deferred revenue is based on UNION’s under-
lying development plans under which the performance
obligations are expected to be satisfied.
Convertible loan
During July, 2021, the company issued a convertible debt
instrument which is determined to be a financial instru-
ment. As required by IAS 32 and IFRS 9, this instrument
was separated into its components: debt, and embedded
derivatives related to the conversion features; conversion
or repayment at maturity, mandatory conversion in the
occurrence of an exit event, or conversion or repayment
in connection with a De-SPAC transaction. The company
elected the fair value option and accounts for both the
debt and the embedded derivatives as a single instrument
that is measured at fair value, whereby the convertible
debenture at initial recognition is designated at fair value
through profit or loss. At each reporting date the entire
agreement is remeasured at fair value, whereby:
• changes in fair value related to changes in UNION’s own
credit risk is presented in other comprehensive income;
and
• all other changes in fair value to be presented in the
income statement.
Amounts recognized in other comprehensive income are
not subsequently to be recycled to the income statement.
1. Accounting policies continued
UNION therapeutics 44Annual Report 2021 Consolidated financial statements
Notes
Other liabilities
Other financial liabilities are on initial recognition meas-
ured at fair value which correspond to proceeds received
less transaction costs paid. On subsequently recognition,
liabilities are measured at amortized cost corresponding
to the nominal unpaid debt.
Fair value
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 fair value measurement is based on the presumption
that the transaction to sell the asset or transfer the liability
takes place either:
• In the principal market for the asset or liability, or
• In the absence of a principal market, in the most advan-
tageous market for the asset or liability.
The fair value of an asset or a liability is measured using
the assumptions that market participants would use when
pricing the asset or liability, assuming that market partici-
pants act in their economic best interest.
The company uses valuation techniques that are appro-
priate in the circumstances and for which sufficient data
are available to measure fair value, maximizing the use
of relevant observable inputs and minimizing the use of
unobservable inputs.
All assets and liabilities for which fair value is measured
or disclosed in the financial statements are categorized
within the fair value hierarchy, described as follows, based
on the lowest level input that is significant to the fair value
measurement as a whole:
• Level 1: Quoted (unadjusted) market prices in active
markets for identical assets or liabilities
• Level 2: Valuation techniques for which the lowest level
input that is significant to the fair value measurement is
directly or indirectly observable
• Level 3: Valuation techniques for which the lowest level
input that is significant to the fair value measurement is
unobservable.
For the purpose of fair value disclosures, the company has
determined classes of assets and liabilities on the basis of
the nature, characteristics and risks of the asset or liability
and the level of the fair value hierarchy.
Valuation models and assumptions
Management assessed that cash, trade receivables, trade
payables, and other current liabilities (except for cash-set-
tled warrants and the European Investment Bank warrant
and put option) approximate their carrying amounts large-
ly due to the short-term maturities of these instruments.
Subsequent events
If UNION obtains information after the balance sheet date,
but prior to the date of the Board of Director’s approval of
the financial statements, about conditions that existed at
the balance sheet date, UNION assesses if the information
affects the amounts that it recognizes in the financial
statements.
UNION adjusts the amounts recognized in its consolidated
financial statements to reflect any adjusting events after
the balance sheet date and update the disclosures that re-
late to those conditions in the light of the new information.
For non-adjusting events after the balance sheet date,
UNION does not change the amounts recognized in its
consolidated financial statements but disclose the nature
of the non-adjusting events and an estimate of its financial
effect, or a statement that such an estimate cannot be
made, if applicable.
Cash flow statement
The cash flow statement shows the company’s net cash
flows, broken down by operating, investing and financing
activities, the year’s changes in cash and cash equivalents
and the company’s cash and cash equivalents at the
beginning and at the end of the year.
Cash flows from operating activities are presented using
the indirect method and are made up as the result for the
year, adjusted for non-cash operating items, changes in
working capital, paid net financials and paid or received
income taxes.
Cash flows from investing activities comprise payments in
connection with purchase and sale of fixed assets, securi-
ties which are part of investment activities and payments
in connection with purchase and sale of businesses and
activities.
Cash flows from financing activities comprise dividends
paid to shareholders, capital increases and reductions,
borrowings and repayments of interest-bearing debt.
Cash is comprised of cash on hand and in bank deposit
accounts.
Segment information
Although UNION have established subsidiaries in Den-
mark, Germany, and USA the company is managed and
operated as one business unit which is reflected in the
internal reporting. No separate lines of business or sep-
arate business entities have been identified with respect
to any product candidate or geographical market and no
segment information is currently disclosed in the compa-
ny’s internal reporting. All material non-current assets are
located in De nm ark .
1. Accounting policies continued
UNION therapeutics 45Annual Report 2021 Consolidated financial statements
Notes
2. Critical accounting estimates
and judgements
In preparing the consolidated financial statements,
management makes various accounting judgements as
well as estimates and define assumptions which form the
basis of recognition, measurement and presentation of the
company’s assets and liabilities.
The estimates and assumptions applied are based on his-
torical experience, the most recent information available
at the reporting date, and other factors that management
considers reasonable under the circumstances.
The basis for judgement and information can by nature be
inaccurate or incomplete, and the company is subject to
uncertainties, which can result in an actual outcome that
deviates from the estimates and defined assumptions.
It may be necessary in the future to change previous
estimates and judgements as a result of supplementary
information, additional knowledge and experience of
subsequent events.
In applying the accounting policies described in note
1, management has exercised the following critical
accounting judgements and estimates which significantly
influence the amounts recognized in the consolidated
financial statements:
Revenue Recognition
Revenue comprises license payments, milestone
payments and royalty income. License payments which
provide the buyer with the right to use the license as it
exists at the date of transfer are recognized upon transfer
of the associated licensing rights at the point at which the
buyer obtains the right to use the license.
The evaluation of the criteria for revenue recognition
requires management to apply significant judgment in the
application of the five step model of IFRS 15. Specifically,
in relation to the Innovent Biologics license and collabo-
ration agreement management has performed signifi-
cant judgements and estimates in its (i) identification of
performance obligations under the contract, including the
determination of whether promised services under the
contract are capable of being distinct, (ii) allocation of the
transaction price to various performance obligations, (iii)
determining whether licenses granted under the contract
provide the costumer with either a right to access the enti-
ty’s intellectual property as it exists throughout the license
period or a right to use the entity’s intellectual property as
it exists at a point in time at which the license is granted,
and (iv) determination of budget costs and cost to com-
plete the research and development projects, which are
applied in measuring progress of performance obligation
satisfied over time. For further detail refer to note 3.
Measuring of share-based payments
Estimating fair value for share-based payment trans-
actions requires determination of the most appropriate
valuation model, which depends on the terms and
conditions of the respective awards. This estimate also
requires determination of the most appropriate inputs to
the valuation model including the share price, expected
life of the share option, market interest rate, and volatility
and making assumptions about them. UNION initially
measures the cost of equity-settled and cash-settled
share-based payment awards using the Black-Scholes
model to determine the fair value of the respective awards.
For cash-settled share-based payment transactions, the
liability needs to be remeasured at the end of each report-
ing period up to the date of settlement, with any changes
in fair value recognized in comprehensive income. This
requires a reassessment of the estimates used at the end
of each reporting period. The assumptions and models
used for estimating fair value for share-based payment
transactions are disclosed in note 6.
Measurement of European Invesment
Bank warrant and put option
Estimating fair value of the European Investment Bank
warrant and put option requires determination of the most
appropriate mesuring model and the determination of the
most appropriate inputs to the measuring model. UNION
measures the fair value by the end of each reporting peri-
od by use of the Black-Scholes model. For the European
Investment Bank warrant and put option, estimated share-
price is the most significant input. UNION determines the
value of the share price with reference to the share price
applied in most recent capital increase transactions, and
adjusted for any value infliction points. The assumptions
and method used for estimating fair value for the warrant
and put option are further disclosed in note 17.
Measurement of convertible debt instruments
The company has elected the fair value option for includ-
ing embedded derivatives with their debt hosts and the
combined instruments are measured at fair value. In order
to value these various instruments, the company makes
assumptions and estimates concerning variables such as
discount rates, probability of exit events taking place, and
the timing of such exit events. The assumptions of future
outcomes, and other sources of estimating uncertainty
concerning the determination of key inputs to the valua-
tion models, are based on management’s best assess-
ment using the knowledge available, management’s
historical experiences as well as other factors that are
considered to be relevant. The estimates and assumptions
are reviewed on an ongoing basis. Refer to note 18 for
further details.
UNION therapeutics 46Annual Report 2021 Consolidated financial statements
con note 2
Notes
3. Revenue
Innovent Agreement
On September 28, 2021, UNION entered into a strategic collaboration and license agreement for orismilast with
Innovent Biologics, Inc (the Innovent Agreement). As part of the Innovent Agreement, UNION is entitled to receive a
non-refundable, non-creditable and not subject to off-set up-front payment of USD 20m (DKK 127m) and is eligible
to receive future milestones and option payments of up to USD 250m, of which up to USD 247m is contingent on the
achievement of certain development and regulatory milestones across multiple therapeutic indications and on the
achievement of certain sales-based milestones. Lastly, UNION is entitled to receive a sales-based royalty fee ranging
from a high single digit to a low twenties percentage of all net sales of orismilast in Greater China (including Mainland
China, Hong Kong, Macau and Taiwan) by or on behalf of Innovent.
Within the Innovent Agreement, UNION identified three performance obligations: (1) delivery of license for orismilast
(at a point in time), (2) delivery of Phase 2 study data for orismilast (over time) (3) Option to enter into agreement
regarding topical formulation (over time).
Out of the total contract value of DKK 1,715m (USD 270m) excluding royalties, the upfront payment of DKK 127m has
been recognized as the transaction price, as the future potential milestone and option amounts were not deemed to
be highly probable as they are contingent upon success in future clinical trials and regulatory approvals which are
not within UNION’s control and were uncertain at the inception of the agreement. Milestones will be recognized when
their achievement are deemed to be highly probable, and a significant revenue reversal would not occur. Upon com-
mercialization of products, if any, under this agreement, royalties and net sales-based milestones will be recognized
when the related sales occur.
The transaction price of DKK 127m was at the inception of the contract allocated to the performance obligations
based on the best estimate of relative stand-alone selling prices. As such, DKK 117m was allocated to the perfo-
mance obligation related to to the delivery of license of orismilast, DKK 10m was allocated to the performance
obligation related to the delivery of Phase 2 study data for orismilast. The transaction price of DKK 127m comprises
UNION’s unconditional rights to considerations under the Innovent agreement.
The performance obligations related to the delivery of licenses were completed at a point in time (September 2021)
and UNION recognized DKK 117m as revenue in September 2021. The performance obligation regarding Phase 2
study data will be completed as the study progress. Revenue will be recognized over time based on incurred cost as a
percentage of total expected cost.
Other out-license agreements
In January 2019, UNION entered into an out-licensing agreement with an external party. Under the terms of the agree-
ment, UNION is eligible for upfront and milestone payments upon successful achievement of certain research and
development and regulatory approval milestones, as well as royalties on sales.
100% of UNION’s revenue in 2021 arise from the Innovent agreement. Payment terms are between 30 and 60 days.
Revenue
DKK’000 2021 2020
License revenue from upfront payment recognized over time 1,886 0
License revenue from upfront payment recognized at a point in time 117,026 0
118,912 0
Geographical split of revenue:
Greater China 118,912 0
118,912 0
Deferred revenue
Deferred revenue at December 31, 2021 of DKK 8.2m represents the aggregated amount of the transaction price
allocated to the performance obligations that are unsatisfied at the end of the reporting period. Deferred revenue of
DKK 7.3m presented as Current relates to performance obligations that UNION expects to satisfy during the coming
twelve months, whereas the Non-current portion of DKK 0.9m represents performance obligations that UNION
expects to satisfy after the coming twelve months.
UNION therapeutics 47Annual Report 2021 Consolidated financial statements
con note 3
Notes
3. Revenue continued
Deferred revenue
DKK’000 2021 2020
At January 1 0 0
Portion of upfront payment recognized over time 10,106 0
Recognized as revenue -1,886 0
At December 31 8,220 0
Of which is presented as:
Non-current 876 0
Current 7,344 0
Joint arrangements
For the Innovent agreement UNION and Innovent Biologics have agreed on an initial joint development plan in respect
of activities that support the development of orismilast. Costs under any such joint development plan will be shared
between Innovent Biologics and UNION, with UNION covering 90% and Innovent Biologics covering 10 % of such
costs. In the accounting for the Innovent Biologics collaboration agreement, this joint development is considered a
joint operation as defined in IFRS 11 “Joint Arrangements”. Accordingly, UNION is accounting for the assets, liabilities,
revenues, and expenses related to its interest in the joint operation in accordance with the IFRSs applicable to the
particular assets, liabilities, revenues and expenses.
4. Research and development costs and Administrative costs
Research and development costs are primarily external and, to a lesser extent, internal costs incurred in the devel-
opment of UNION’s product candidates. Substantial portions of the company’s clinical studies are performed by
third-party laboratories, medical centres or clinical research organizations.
DKK’000 Notes 2021 2020
Research and development costs
Employee benefit costs 5 21,289 7,453
Share-based compensation 6 6,750 5,542
External costs 127,266 52,112
155,305 65,107
Higher activity level in 2021 compared to 2020 caused the increase in research and development costs. Additionally,
employee costs have increased as an effect of the strengthening of the research and development organization.
Administrative costs consist primarily of personnel costs and costs related to corporate functions and business
development. In addition, administrative costs include depreciation and other expenses for UNION’s headquarters.
DKK’000 Notes 2021 2020
Administrative costs
Employee benefit costs 5 7,451 4,026
Share-based compensation 6 2,274 1,354
External costs 11,648 2,735
Depreciation 12 351 155
21,724 8,270
To support the increased activity level in research and development the administrative functions have also been
strengthened resulting in higher employee costs. Supported by external service providers systems, processes and
compliance efforts have been revised and optimized together with other preparations for future growth. This has led
to an increase in external costs, most of which are one-off costs.
UNION therapeutics 48Annual Report 2021 Consolidated financial statements
con note 4
Notes
5. Staff costs
DKK’000 Notes 2021 2020
Wages and salaries 25,711 9,518
Defined contribution plans 1,005 300
Other social security costs 1,452 410
Share-based compensation 6 9,024 6,896
Other staff costs 572 1,250
37,764 18,374
Research and development costs 28,039 12,995
Administrative costs 9,725 5,379
37,764 18,374
Average number of full-time equivalents 26 9
Remuneration to Executive Board and Board of Directors
2021
Executive Board of
DKK’000 Board Directors Total
Wages and salaries 6,938 888 7,826
Share-based compensation expenses 3,545 1,819 5,364
Social security 10 0 10
10,493 2,707 13,200
2020
Executive Board of
DKK’000 Board Directors Total
Wages and salaries 4,693 140 4,833
Share-based compensation expenses 644 391 1,035
Social security 7 0 7
5,344 531 5,875
Executive board members are the key management personnel of UNION.
UNION therapeutics 49Annual Report 2021 Consolidated financial statements
con note 5
Notes
6. Share-based payment
Warrant programs
UNION has established share-based incentive programs (equity-settled and cash-settled) for members of the Board
of Directors, members of the Executive Board and key personnel in the form of warrants. Warrants are granted by
the Board of Directors in accordance with authorizations given to it by the general meeting of shareholders and as
incorporated into the company’s articles of associations.
On December 29, 2021, a 10-for-1 stock split of issued and outstanding ordinary shares was approved at an extraordi-
nary general meeting. The share split directly affects granted warrants, as warrants effectively split 10-for-1, while
the exercise price of each warrant is reduced to 1/10 of the pre-split value. The total value of granted warrants is
unchanged. Refer to note 14.
Warrants granted in February 2017 (Cash-settled)
In April 2017, the general meeting of shareholders granted warrants with rights to subscribe for up to 44,650 shares
of nominally DKK 0.1 with an exercise price of DKK 23,98 per warrant (pre-split: 4,465 shares of nominally DKK 1
with an exercise price of DKK 239.80 per warrant). At December 31, 2021, the Board of Directors have granted in total
44,650 (December 31, 2020: 44,650 (pre-split: 4,465)). These warrants vest and become exercisable upon an “exit
event”, defined as an event of IPO, merger, demerger, or solvent liquidation, which triggers an immediate expense rec-
ognition upon grant. These warrants may be settled in equity instruments of the company or in cash at the discretion
of the warrant holder. Accordingly, these warrants are classified as cash-settled warrants. The life of the warrants
under the February 2017 program is eight years from the date of grant.
Warrants granted from November 2017 (Equity-settled)
In November 2017, the Board of Directors were authorized to grant warrants for up to 250,000 shares of nominally
DKK 0.1 per warrant (pre-split: 25,000 shares of nominally DKK 1) in the company in the period until March 31, 2022.
In June 2020, the Board of Directors were authorized to grant warrants for up to an additional 250,000 (pre-split:
25,000) shares in the company in the period until June 25, 2025. At December 31, 2021, the Board of Directors have
granted in total 398,280 (December 31, 2020: 235,930 (pre-split: 23,593)) warrants under this authorization.
Warrants granted under the November 2017 equity incentive plan are classified as equity settled and generally vest
over four years’ service periods in periodic installments that may or may not be equal, which triggers linear or graded
vesting profiles. Certain warrants under this program vest immediate upon grant. The life of the warrants under the
November 2017 program varies from 4-10 years from the date of grant.
The table below summarizes share-based compensation expenses included in the statement of comprehensive
income:
DKK’000 2021 2020
Research and development costs 6,750 5,542
Administrative costs 2,274 1,354
9,024 6,896
The following schedule specifies the movements of number and weighted average exercise price of outstanding
warrants for 2021 and 2020:
Equity settled warrants
Weighted Weighted
average average
exercise grant date
price per fair value
Board of Executive warrant per warrant
Number of warrants Directors board Employees Total (DKK) (DKK)
Outstanding, December 31, 2019 7,108 8,000 7,310 22,418 654 335
Granted during the period 0 0 1,175 1,175 228 703
Outstanding, December 31, 2020 7,108 8,000 8,485 23,593 633 353
Granted during the period 3,750 10,596 3,984 18,330 967 1,099
Effect of 10-for-1 share split 97,722 167,364 112,221 377,307
Outstanding, December 31, 2021 108,580 185,960 124,690 419,230 78 68
UNION therapeutics 50Annual Report 2021 Consolidated financial statements
con note 6
Notes
6. Share-based payment continued
Cash settled warrants
Number of warrants
Former
employees Total
Weighted
average ex-
ercise price
per warrant
(DKK)
Weighted
average
grant date
fair value
per warrant
(DKK)
Outstanding, December 31, 2019 4,465 4,465 240 100
Granted during the period 0 0 0 0
Outstanding, December 31, 2020 4,465 4,465 240 100
Granted during the period 0 0 0 0
Effect of 10-for-1 share split 40,185 40,185
Outstanding, December 31, 2021 44,650 44,650 24 10
Warrant related disclosures
Across all warrant programs, the weighted average remaining contractual life for warrants outstanding was 3.2 years
and 3.5 years at December 31, 2021 and 2020, respectively.
Across all warrant programs, the range of the exercise price for warrants outstanding was DKK 0.1-124 at December
31, 2021 (December 31, 2020, pre-split: DKK 1-815).
On December 31, 2021, 265,696 (December 31 2020, pre-split:18,859) warrants had vested and were exercisable.
The weighted average exercise price per warrant was DKK 67.24 at December 31, 2021 (December 31, 2020, pre-split:
DKK 541.99).
Determination of fair value of warrants
UNION determines and calculates the fair value of each equity-settled warrant at grant date and for each cash-settled
warrant, at each balance sheet date, using the Black-Scholes pricing model. This pricing model requires the input of
subjective assumptions such as:
• Dividend yield: Is determined to be zero.
• The expected stock price volatility: As it is not possible to estimate the expected volatility of a non-publicly listed
entity’s share price, UNION has estimated the fair value of its warrants by using the volatility of an appropriate peer
group of listed international biotechnology companies.
• The risk-free interest rate, which is based on the Danish government bonds having a yield with a maturity equal to
the expected term of the option in effect at the time of grant.
• The expected life of warrants, which is based on vesting terms, expected rate of exercise and life terms in the
warrant program.
• Estimate of UNION therapeutics A/S’ market share price. As UNION therapeutics A/S is not listed on a stock
exchange, the estimated fair value of the warrants at each measuring date, using the Black-Scholes model, has
been established by assuming that the value of UNION therapeutics A/S’ shares is the price per share determined
at the latest financing round and considering additional subsequent valuation inflection points and relevant facts
and circumstances.
UNION therapeutics 51Annual Report 2021 Consolidated financial statements
Notes
6. Share-based payment continued
Valuation assumptions for warrants in 2021 and 2020
The fair value at each measuring date in 2021 and 2020 is measured using the following significant assumptions:
Dec. 31 Dec. 31
2021 2020
Equity-settled warrants
Dividend yield - -
Volatility (%) 54-76 61-77
Risk-free interest rate -0.2% - -0.4% -0.4% - -0.6%
Market share price range applied (2020: pre-split) DKK 160 DKK 534-1,600
Exercise price (2020: pre-split) DKK 0.1-124 DKK 1 - 534
Expected life of equity-settled warrants granted 5 years 5 years
The grant date fair value per warrant (2020: pre-split) DKK 83-160 DKK 533-932
Dec. 31 Dec. 31
2021 2020
Cash-settled warrants
Dividend yield - -
Volatility (%) 76 67
Risk-free interest rate -0.2% -0.6%
Market share price at year end (2020: pre-split) DKK 160 DKK 1,600
Exercise price (2020: pre-split) DKK 24.0 DKK 239.8
Expected life of cash-settled warrants at end period 3.1 year 4.1 year
The end period fair value per warrant (2020: pre-split) DKK 136 DKK 1,359
Reconciliation of fair value of cash-settled warrants:
DKK’000 Cash settled warrants
At January 1, 2020 1,443
Fair value adjustment through comprehensive income 4,626
At December 31, 2020 6,069
Fair value adjustment through comprehensive income 5
At December 31, 2021 6,074
7. Other operating income
Other operating income consists of government grants and other items secondary to the company’s activities. In
2020 UNION received a governmental grant from Innovation Fund Denmark. The grant provides compensation for
a part of certain project-specific research and development expenses, including wages and salaries. There are no
unfulfilled conditions or other contingencies attached to the government grant that has to be recognized.
In 2021, the company recognized DKK 6.2m (2020: DKK 9.0m) as Other operating income, hereof income from the
government grant accounts for DKK 6.2m (2020: DKK 8.7m).
UNION therapeutics 52Annual Report 2021 Consolidated financial statements
con note 7
Notes
8. Financial income and expenses
Financial income
DKK’000 Notes 2021 2020
Interest income 0 6
Foreign exchange gains 4,286 0
4,286 6
Financial expenses
DKK’000 Notes 2021 2020
Interest expenses 1,184 380
Interest expenses, lease liabilities 32 11
Fair value adjustment, Convertible debt (unrealized) 18 1,741 0
Interest expenses, European Investment Bank loan (amortized cost) 10,891 9,409
Foreign exchange loss 0 272
Fair value adjustment, warrant and put option (unrealized) 17 0 12,012
13,848 22,084
Foreign exchange gains in 2021 primarily relates to USD positions related to the Innovent agreement.
No fair value adjustment of warrants and put option in 2021, as the assumed market share price has not changed.
9. Income taxes
The major components of income tax benefit for the years ended December 31, 2021 and 2020 are:
DKK’000 2021 2020
Income taxes in the statement of profit or loss
Net result before tax -61,501 -86,406
Corporate income tax rate in Denmark 22% 22%
Computed corporate income tax (benefit) -13,530 -19,009
Prior year adjustments 1,983 -15
Adjustment for non-deductible expenses 3,748 106
Adjustment for research and development super deduction -7,532 -4,027
Adjustment for warrant 1,983 1,517
Change in deferred tax asset not recognized 7,873 15,918
Tax expense/(benefit) for the period -5,475 -5,510
Deferred tax in the statement of financial position
Tax deductible losses 15,952 22,262
European Investment Bank loan facility 0 2,484
Research and development capitalized 11,312 0
Other temporary differences 5,420 52
Deferred tax asset/(liability) at December 31 32,684 24,798
Deferred tax assets not recognized
Deferred tax assets not recognized -32,684 -24,798
Deferred tax at December 31 0 0
UNION therapeutics 53Annual Report 2021 Consolidated financial statements
con note 8-9
Notes
10. Result per share
Basic result per share is calculated as the net result for the period that is allocated to the parent company’s ordinary
shares, divided by the weighted average number of shares outstanding. Diluted result per share is calculated as the
net result for the period that is allocated to the parent company’s shares, divided by the weighted average number
of shares outstanding and adjusted by the dilutive effect of potential shares. The result for the period and weighted
average number of shares used in the calculation of basic and diluted result per share are as follows:
DKK’000, except share amounts and per share amounts Notes 2021 2020
Result for the year -56,026 -80,896
Weighted average number of shares outstanding 6,977,910 5,447,310
Average dilutive effect of outstanding stock options and warrants 0 0
Average number of diluted shares 6,977,910 5,447,310
Basic net result per share -8 -15
Diluted net result per share -8 -15
The following potential ordinary shares are anti-dilutive and are therefore not included in the weighted average num-
ber of shares for the purpose of diluted earnings per share:
Notes 2021 2020
Outstanding warrants under employee incentive programs 6 463,880 280,580
Outstanding warrants relating to European Investment Bank loan facility 17 115,572 112,680
Contingent issuable shares relating to convertible loans 18 570,860 0
Total outstanding warrants 1,150,312 393,260
On December 29, 2021, a 10-for-1 stock split of issued and outstanding ordinary shares was approved on an extraor-
dinary general meeting. The stock split also resulted in a reduction of the nominal value of the Company’s ordinary
shares from DKK 1 to DKK 0.1. Retrospective effect has been given with respect to the number of shares used in the
calculation and disclosure of basic and diluted earnings per share.
9. Income taxes continued
The biotechnology and pharmaceutical industry is subject to considerable risks and uncertainties. UNION has so far
reported significant losses and, consequently, has unused tax losses. Management has concluded that deferred tax
assets should not be recognized at December 31, 2021 (none recognized at December 31, 2020) due to uncertainty
related to future utilization of loss carry-forward.
Deferred tax assets and liabilities are offset when; there is a legally enforceable right to set off current tax assets
against current tax liabilities, 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. Deferred tax is calculated at the tax rates that are expect-
ed to apply in the period when the liability is settled or the asset is realized, based on tax laws and rates that have
been enacted or substantively enacted at the statement of financial position date.
Income tax receivables are recognized in accordance with the Danish tax credit scheme (Skattekreditordningen).
Companies covered by the tax credit scheme may obtain payment of the tax base of losses originating from research
and development expenses of up to DKK 25.0m (tax value of DKK 5.5m). Under Danish tax legislation, UNION is eligi-
ble to receive DKK 5.5m in 2021 (DKK 5.5m in 2020) in cash relating to the surrendered tax loss based on qualifying
research and development expenses. These tax receipts comprise the majority of the current tax benefit in 2021 and
2020, respectively.
The unused tax losses can be carried forward indefinitely.
UNION therapeutics 54Annual Report 2021 Consolidated financial statements
con note 10
Notes
Acquisition of PDE4-inhibitor program
In June 2020, UNION entered into an asset purchase agreement with Leo Pharma A/S. Pursuant to this agreement,
Leo Pharma A/S sold and transferred certain intangible rights in the form of patents and compound data relating to
the ‘PDE4 inhibitor compounds’ to UNION.
In consideration of the acquisition of the intangible rights, in 2020, UNION paid in cash DKK 1.7m and by issuance and
grant of 12,044 shares of nominal 1 DKK at a rate of DKK 1,237 per share, equivalent to a value of DKK 14.9m. The
value of the intangible assets acquired, is measured at the fair value of the cash paid and of the equity instruments
granted, with reference to the corresponding increase in equity of DKK 14.9m. The applied rate per share is deter-
mined with reference to the share price applied in the capital increase completed by UNION in May 2020.
Under the terms of the Agreement, UNION agreed to make future payments to LEO Pharma A/S that were contingent
upon the achievement of specified clinical, regulatory, and sales milestones. UNION applies the cost accumulation
method for the accounting for such contingent payments.
Under the agreement, UNION will, subject to meeting certain clinical, regulatory, and sales milestones, pay in cash to
the seller up to USD 202m equivalent to DKK 1,240m. Also, UNION will pay to the seller low single-digit percentage
royalty applied on net sales of covered products until the expiry of the royalty term which ends at the latest on the
twelfth anniversary of the first commercial sale of covered products.
The acquired intangible asset is not being amortized until approval of the underlying asset has been received from
regulatory authorities.
Management has in 2020 and 2021 not identified indicators of impairment concerning the acquired intangible rights.
An impairment test has been carried out in 2021. Present value has been calculated based on 12 years of discounted
cash flow using a WACC of 14%. The impairment test shows no signs of impairment.
11. Intangible assets
Patents, trademarks
and other rights
DKK’000 2021 2020
Cost
At January 1 16,566 0
Additions 0 16,566
At December 31 16,566 16,566
Depreciation
At January 1 0 0
At December 31 0 0
Net book value
At December 31 16,566 16,566
UNION therapeutics 55Annual Report 2021 Consolidated financial statements
con note 11
Notes
Right-of- Other
DKK’000 Notes use assets equipment Total
Cost
At January 1, 2020 650 95 745
Adjustments -206 0 -206
Additions 0 0 0
At December 31, 2020 444 95 539
Depreciation
At January 1, 2020 217 64 281
Adjustments -65 0 -65
Additions 136 19 155
At December 31, 2020 288 83 371
Net book value
At December 31, 2020 156 12 168
Right-of-use assets
The company leases its office premises in Copenhagen. The property lease is non-cancellable in the period through
June 15, 2023. Hereafter, the option to terminate is six months. The contract does not provide a right, obligation, nor
an option to buy the office premises. The contract contains both lease and non-lease components according to the
specific pricing of the services in the agreements.
In 2021 and 2020, the expense related to variable lease payments not included in the lease liabilities amounts to DKK
0.1m and DKK 0.1m, respectively, and was recognized in administrative costs.
12. Property, plant and equipment
Right-of- Other
DKK’000 Notes use assets equipment Total
Cost
At January 1, 2021 444 95 539
Additions 1,203 140 1,343
Disposals 0 -78 -78
At December 31, 2021 1,647 157 1,804
Depreciation
At January 1, 2021 288 83 371
Additions 330 21 351
Disposals 0 -78 -78
At December 31, 2021 618 26 644
Net book value
At December 31, 2021 1,029 131 1,160
UNION therapeutics 56Annual Report 2021 Consolidated financial statements
con note 12
Notes
Loss of subscribed share capital
As a result of the group’s accounting policy, financing strategy and utilization of the credit facility provided by the Eu-
ropean Investment Bank, at December 31, 2020 the company had lost more than 50% of its subscribed share capital.
Following the capital increase in February 2021, the share capital was re-established.
Share capital
On December 29, 2021, a 10-for-1 stock split of issued and outstanding ordinary shares was approved at an extraordi-
nary general meeting. The stock split also resulted in a reduction of the nominal value of the company’s ordinary
shares from DKK 1 to DKK 0.1.
Following the share split, the share capital comprises 6,596,000 shares of nominal DKK 0.1, each of which have been
issued and paid in full. Only one class of shares exists and no shares carry any special rights.
Share
Number capital
of shares (DKK’000)
Share capital at January 1, 2020 515,448 515
Capital increase at May 7, 2020 35,367 36
Capital increase at June 23, 2020 12,044 12
Share capital at December 31, 2020 562,859 563
Share capital at January 1, 2021 562,859 563
Capital increase at February 9, 2021 96,741 97
Effect of 10-for-1 share split at December 29, 2021 5,936,400 0
Share capital at December 31, 2021 6,596,000 660
The share split directly affects granted warrants, as warrants effectively split 10-for-1, while the exercise price of each
warrant is reduced to 1/10 of the pre-split value. The total value of granted warrants is unchanged. For effect on war-
rants granted as share based payment, earnings per share, warrants granted in relation to the European Investment
Bank loan and the convertible loan, refer to note 6, 10, 17 and 18, respectively.
13. Other receivables and prepayments
Dec. 31 Dec. 31
DKK’000 2021 2020
VAT receivables 4,224 972
Prepayments 2,170 119
Other receivables 1,651 9,012
8,045 10,103
In 2021, Other receivables primarily consist of the government grant from Innovation Fund Denmark not yet fully
paid out. There are no unfulfilled conditions or other contingencies attached to the government grant that have to be
recognized. In 2020 Other receivables included the government grant receivables of DKK 8.7m from Innovation Fund
Denmark.
14. Capital management and share capital
Capital Management
The Board of Directors monitor the share- and capital structure to ensure that UNION’s capital resources support the
strategic goals. UNION’s goal is to maintain a strong capital base to maintain confidence from investors, creditors,
employees and collaboration partners, and a continuous advancement of the research and development pipeline and
business in general.
UNION is primarily financed through equity investments from shareholders, convertible loans, and a long-term loan
agreement with the European Investment Bank. UNION has also obtained financing through license agreements
and governmental grants. The adequacy of UNION’s available funds will depend on various factors, including the
advancement of the research and development programs, the magnitude of investments in these programs, and
UNION’s ability to establish commercial collaboration and licensing agreements with partners.
As such, UNION may require additional funds and may attempt to raise additional funds through equity or debt
financings, license, and collaborative agreements with partners, or from other sources.
For further information regarding the European Investment Bank loan and the convertible loan, refer to note 17 and
18, respectively.
UNION therapeutics 57Annual Report 2021 Consolidated financial statements
con note 13-14
Notes
Falling due Falling due Falling due Total
Carrying within between after contractual
DKK’000 amount 1 year 1-5 years 5 years cash flows
2021
Long-term debt (amortized cost)* 99,286 0 118,136 0 118,136
Trade payables (amortized cost) 11,424 11,424 0 0 11,424
Lease liabilities (amortized cost) 1,090 471 681 0 1,152
Convertible loans (fair value) 63,778 0 80,903 0 80,903
Warrant and put option (fair value) 18,480 18,480 0 0 18,480
194,058 30,375 199,720 0 230,095
2020
Long-term debt (amortized cost) 88,894 0 118,136 0 118,136
Trade payables (amortized cost) 7,350 7,350 0 0 7,350
Lease liabilities (amortized cost) 167 167 0 0 167
Warrant and put option (fair value) 18,018 18,018 0 0 18,018
114,429 25,535 118,136 0 143,671
* Of which DKK 79m falls due in January 2023.
Interest rate 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.
UNION has no significant interest-bearing debt with variable interest, and UNION’s interest rate risks primarily relate
to the position of cash in banks. As such, no separate analysis is provided.
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of chang-
es in foreign exchange rates. UNION’s exposure to the risk of changes in foreign exchange rates primarily relates to
the company’s operating activities when revenue or expense transactions are denominated in a foreign currency as
well as cash positions in foreign currency. UNION maintains GBP, USD and PLZ bank deposits at a level necessary to
support the short-term funding requirements.
15. Other payables
DKK’000 2021 2020
Salary related payables 1,711 1,889
Other liabilities 25,482 4,894
27,193 6,783
Other liabilities primarily comprise accruals for clinical research organizations costs. Clinical activity level was signifi-
cantly higher at year-end 2021 compared to year-end 2020.
16. Financial risks
The company’s financial risks are managed by the Executive Board. The company has identified financial risks, but
follows a policy where management continually monitors the following defined risks: liquidity risk, interest rate risk,
currency risk and credit risk.
Liquidity risk
Liquidity risk is the risk that UNION will not be able to meet its financial obligations as they fall due. The Executive
Board monitors its risk of a shortage of funds using a liquidity planning tool.
The company’s objective and policy are to maintain a balance between continuity of funding and flexibility using
equity investments from shareholders and external loans.
UNION has no unused credit facilities at December 31, 2021 or December 31 2020.
The following are the contractual undiscounted out flows associated with the company’s financial liabilities in the
current and prior year based on their contractual maturities.
The amounts disclosed in the tables are the contractual undiscounted cash flows (including interest payments).
Balances due within 12 months equal their carrying balances as the impact of discounting is not significant, except
for convertible loans.
UNION therapeutics 58Annual Report 2021 Consolidated financial statements
con note 15-16
Notes
The following key methods and assumptions were used to estimate the fair values of the European Investment Bank
warrant and put option (level 3):
The fair value of the warrant and put option is estimated using the Black-Scholes Valuation model. This valuation
method requires management to make certain assumptions about the model inputs, such as the underlying share
price and volatility. The probabilities of the various estimates within the applied range can be reasonably assessed
and are used in management’s estimate of fair value.
Dec. 31 Dec. 31
DKK’000 2021 2020
Dividend yield - -
Volatility (%) 76 67
Annual risk-free interest rate -0.2% -0.6%
Market share price at year-end (2020: pre-split) DKK 160 DKK 1,600
Exercise price (2020: pre-split) DKK 0.1 DKK 1
Life of option 1-3 years 2-4 years
Sensitivity
At December 31, 2020 and December 31, 2021, other things being equal, a 1% increase in the share price will result in
a 1% increase in the fair value of the warrant put option. Similarly, a 1% decrease in the share price will reduce the fair
value of the warrant put option by 1%.
Reconciliation of fair value measurements under Level 3 hierarchy:
Warrant and put option
At December 31, 2019 6,006
Fair value adjustment through profit or loss (unrealized) 12,012
At December 31, 2020 18,018
Fair value adjustment through profit or loss (unrealized) 0
Warrants added 462
At December 31, 2021 18,480
Fair value adjustments through profit or loss are recognized in the statement of comprehensive income as financial
income or financial expenses, as applicable.
17. European Investment Bank Loan
Loan facility and warrant and put option agreement with the European Investment Bank
On December 29, 2021, a 10-for-1 stock split of issued and outstanding ordinary shares was approved at an extraordi-
nary general meeting. The share split directly affects granted warrants, as warrants effectively split 10-for-1, while
the exercise price of each warrant is reduced to 1/10 of the pre-split value. The total value of granted warrants is
unchanged. Refer to note 14.
In October 2017, UNION entered into a finance contract with the European Investment Bank ensuring a loan facility of
EUR 20.0m.
Under the finance contract, the loan shall be disbursed in up to two tranches and the repayment date is no later than
the fifth anniversary of the relevant disbursement date. The loan agreement is subject to a number of financial and
non-financial terms.
In January 2018, UNION called the first of the two tranches under the finance contract. The first tranche totalled EUR
7.0m. The loan and accumulated interest fall due for payment in January 2023.
In December 2019, UNION called the second of the two tranches under the finance contract. The second tranche
totalled EUR 3.3m. The loan and accumulated interest fall due for payment in December 2024.
As consideration for the loan, UNION has granted 186,910 (pre-split: 18,691) warrants to the European Investment
Bank that vest relative to the draw-down on the loan in two tranches. Each warrant entitles the European Investment
Bank to subscribe for 1 share of nominal DKK 0.1 (pre-split: DKK 1) against payment of exercise price of DKK 0.1
(pre-split: DKK 1). Vested warrants can be exercised in part or in full at any time at the discretion of the European
Investment Bank. Warrants not exercised after 20 years shall lapse.
Upon draw-down of the first tranche in 2018, 87,220 (pre-split: 8,722) warrants vested. Upon draw-down of the
second tranche in 2019, 25460 (pre-split: 2,546) warrants vested, and 74,230 (pre-split: 7,423) warrants were lapsed
and became void.
In 2021, the European Investment Bank has been granted additional 2,889 warrants. 115,572 warrants were outstand-
ing at December 31, 2021 (December 31, 2020: 112,683 (pre-split: 11,268)).
The loan agreement further includes an embedded derivative in form of a put option, pursuant to which the European
Investment Bank may require UNION to purchase all, or part of the vested warrants held by the European Investment
Bank at an option price equivalent to the fair value of the warrants at the time of exercise.
As part of the loan agreement, UNION entered into a floating charge agreement pursuant to which a floating charge
of EUR 2.0m is pledged. Furthermore, UNION entered into a negative pledge preventing it to subsist any security over
any of its assets. Refer to note 23.
UNION therapeutics 59Annual Report 2021 Consolidated financial statements
con note 17
Notes
Since the convertible debt instrument includes conversion features resulting in settlement in a variable number of
shares, the convertible debt instrument does not comprise an equity component. The convertible debt instrument
includes the following elements:
• Fixed rate debt host contract
• Embedded prepayment option (exit event)
• Embedded prepayment option (De-SPAC)
• Cap on conversion price at maturity
Management has designated, due to the existence of non-closely related embedded derivatives, the entire debt
instrument to be carried at fair value through profit or loss using a probability weighted expected return method.
Changes arising from changes in the company’s own credit risk are recognized in other comprehensive income. The
inputs used in the valuation as at 31 December, 2021 are detailed in the table below:
Assumptions applied
Discount rate 36.6%
Probability of conversion at maturity 1%
Probability of conversion due to exit event, including De-SPAC event 99%
18. Convertible loans
In July 2021, UNION issued a convertible debt instrument of DKK 62.0m, which was received from various parties,
including members of the Board of Directors and Executive Management. The company elected the fair value option
and accounts for both the debt and the embedded derivatives as a single instrument that is measured at fair value,
whereby the convertible debenture at initial recognition is designated at fair value and subsequently remeasured with
the change being presented on the statement of profit or loss for the reporting period.
The following table summarizes the changes in the convertible debt instrument 2021:
DKK thousands
Carrying amount at January 1, 2021 0
Amount received July 2021 62,037
Fair value adjustment through profit or loss, included in finance expenses 1,741
Carrying amount at fair value at December31, 2021 63,778
The convertible loan is mesured at fair value (level 3) taking into account:
• The convertible loan is a fixed rate loan carrying an interest rate of 9% with maturity on 16 July 2024
• The convertible loan is denominated in DKK
• Conversion or repayment at maturity. On the maturity date, July 16, 2024, UNION has the discretion to 1) convert
the loan into new shares of the company as the share price at the latest capital increase with a deduction of 15%.
If the loan is converted at maturity, the conversion price has a cap of DKK 160 per share minus 15%; or 2) repay the
loan in cash to the extent that the loan amount and accrued interest has not been converted into shares and the
company’s existing loan to the European Investment Bank has been repaid or consent has been provided by the
European Investment Bank, though with bondholder’s discretion to elect conversion to equity.
• Mandatory conversion in the occurrence of an exit-event including 1) an admission to trading of the company’s
shares on a regulated market (IPO), 2) a trade sale of more than 90% of the company’s shares and 3) an equity
financing with issuance of new shares with proceeds of minimum DKK 120m.
• Conversion or repayment in connection with a De-SPAC transaction. In the event of a De-SPAC transaction the
lenders have the discretion to demand the outstanding loan amount repaid in cash or converted into shares with
a conversion price equal to the final offer price with a deduction of 15%. In the event of a De-SPAC transaction the
lenders may elect to demand the loan repaid in cash against receiving additional 6% interest rate.
UNION therapeutics 60Annual Report 2021 Consolidated financial statements
con note 18
Notes
19. Related party disclosures
UNION’s related parties comprise significant shareholders, Board of Directors, Executive Management, and close
members of the family of these persons.
Besides paying the salary, board fees and share-based payment to the Executive Management and Board of Direc-
tors, as further described below, the company did not carry through any transactions with its related parties besides
the below-mentioned transactions.
Other Convertible
DKK’000 Period income Purchases loan Payables
Transactions with other related parties:
Clinical-Microbiomics A/S 2021 0 0 0 0
2020 301 0 0 0
Cajaikas ApS 2021 0 1,755 0 0
2020 0 1,260 0 0
Black Swans Exist ApS 2021 0 2,294 0 42
2020 20 671 0 49
Executive Management and Board of Directors 2021 0 0 3,394 0
2020 0 0 0 0
The company has received employee services from Anne Kathrine Toft-Kehler, M.D. specializing in ophthalmolo-
gy and spouse of Rasmus Vendler Toft-Kehler, a Principal Shareholder and member of the Board of Directors and
Executive Management. The employee benefits paid to Anne Kathrine Toft-Kehler amounted to DKK 480 thousand
for the financial year ended December 31, 2021 and DKK 480 thousand for the financial year ended December 31
2020. Anne Kathrine Toft-Kehler works on the pre-clinical programs. Her appointment was approved by the Board of
Directors.
The company has received consultancy services from H & L Invest ApS, which is 50% owned by Stig Løkke Pedersen,
Chair of the Board of Directors. The expenses related to such services amounted to 60 thousand for the financial year
ended December 31, 2021, which does not form part of the board fees payable to Stig Løkke Pedersen.
18. Convertible loans continued
The sensitivity of the required return towards key assumptions regarding probabilities has been analyzed.
The below table, shows the market value of the convertible loan assuming a fixed discount rate of 36.6% if the proba-
bility associated with an exit event is changed:
Calculated
Probability debt at
of exit Dec. 31
event (DKK‘000)
9 4% 62, 74 3
9 6% 6 3 ,18 6
9 8 % 6 3 , 62 9
9 9 % 6 3 ,7 78
100% 64,072
UNION therapeutics 61Annual Report 2021 Consolidated financial statements
con note 19
Notes
Holding companies
The company is jointly controlled by the holding companies Vendler ApS and Manjin ApS, which are owned by mem-
bers of the Executive Board. There were no transactions between UNION and the holding companies neither in the
financial year ended December 31, 2021 nor in the financial year ended December 31, 2020.
Associated parties
Clinical-Microbiomics A/S
UNION rendered administrative services to Clinical-Microbiomics A/S in 2020. Clinical-Microbiomics A/S is partly
owned by UNION therapeutics A/S’ holding companies and members of the Executive Board of UNION therapeutics
A/S are appointed to the Board of Directors of Clinical-Microbiomics A/S.
Cajaikas ApS
UNION renders contract research and management services from Cajaikas ApS. Cajaikas ApS is owned by a member
of the Board of Directors of UNION therapeutics A/S.
Black Swans Exist ApS
UNION renders recruitment services from, and in 2020 also rendered administrative services to, Black Swans Exist
ApS. Black Swans Exist ApS is partly owned by UNION therapeutics A/S’ holding companies, Manjin ApS and Vendler
ApS.
20. Changes in liabilities arising from financing activities
2021 Non-cash changes
Addition Foreign
Cash Fair value during the exchange
DKK’000 2020 flows adjustment period Interest adjustment 2021
Debt facility 88,894 0 0 0 10,429 -37 99,286
Convertible loan 0 62,037 1,741 0 0 0 63,778
Leasing liability 167 -312 0 1,203 32 0 1,090
Total 89,061 61,725 1,714 1,203 10,461 -37 164,154
2020 Non-cash changes
Addition Foreign
Cash Adjustment during the exchange
DKK’000 2019 flows opening period Interest adjustment 2020
Debt facility 79,558 0 0 0 9,409 -73 88,894
Leasing liability 451 -155 -140 0 11 0 167
Total 80,009 -155 -140 0 9,420 -73 89,061
19. Related party disclosures continued
UNION therapeutics 62Annual Report 2021 Consolidated financial statements
con note 20
Notes
21. Cash flow statement - adjustment for non-cash items
DKK’000 2021 2020
Income taxes -5,475 -5,510
Depreciation and amortization 351 155
Financial costs/income 10,229 21,918
Share-based compensation costs 9,024 6,896
Other adjustments, primarily exchange rate adjustments 0 0
14,129 23,459
22. Cash flow statement - changes in net working capital
DKK’000 2021 2020
Changes in other receivables 7,362 -8,358
Changes in VAT receivables -3,253 -624
Changes in prepayments -2,051 -65
Changes in employee related liabilities 221 1,358
Changes in trade payables 4,074 6,147
Changes in other liabilities 28,409 3,487
34,762 1,945
23. Contingent assets and liabilities, contractual obligations and pledges
Pledges
UNION has entered into a floating charge agreement with the European Investment Bank pursuant to which a floating
charge of EUR 2.0m (2020: EUR 2.0m) is pledged. Furthermore, the company has entered into a negative pledge
preventing it from placing any of its assets as security, excluding the aforementioned floating charge to the European
Investment Bank.
Contingent payments under out-license agreements
UNION is entitled to potential milestone payments and royalties on successful commercialization of products devel-
oped under license agreements with an external party (refer to note 3). Since the size and timing of such payments
are uncertain until the milestones are reached or sales are generated, the agreements may qualify as contingent as-
sets. However, it is associated with a very high degree of uncertainty to measure the value of such contingent assets,
and, accordingly, no such assets have been recognized.
Contingent payment of acquisition of intangible assets
As part of the acquisition of intangible rights, UNION may be required to make milestone and royalty payments to the
seller. Refer to note 11.
24. Events after the balance sheet date
No significant events after the balance sheet date, that could be of material importance to the company’s financial
position.
UNION therapeutics 63Annual Report 2021 Consolidated financial statements
con note 21-24
Parent financial statements
Statement of comprehensive income 65
Cash flow statement 65
Statement of financial position 66
Statement of changes in equity 67
Notes
1. Accounting policies 68
2. Critical accounting estimates and judgements 68
3. Revenue 68
4. Research and development costs
and Administrative costs 69
5. Staff costs 70
6. Share-based payment 71
7. Other operating income 73
8. Financial income and expenses 74
9. Income taxes 74
10. Intangible assets 75
11. Property, plant and equipment 76
12. Other receivables and prepayments 77
13. Capital management and share capital 78
14. Other payables 78
15. Investments in subsidiaries 79
16. Financial risks 79
17. European Investment Bank Loan 80
18. Convertible loans 81
19. Related party disclosures 82
20. Changes in liabilities arising from
financing activities 83
21. Cash flow statement - adjustment for non-cash
items 84
22. Cash flow statement - changes in
net working capital 84
23. Contingent assets and liabilities,
contractual liabilities, and pledges 84
UNION therapeutics 64Annual Report 2021 Parent financial statements
parent financial statements
DKK’000 Notes 2021 2020
Revenue 3 118,912 0
Research and development costs 4 -155,528 -65,121
Administrative costs 4 -21,724 -8,270
Operating result before other income -58,340 -73,391
Other operating income 7 5,980 9,049
Operating result -52,360 -64,342
Financial income 8 4,289 46
Financial expenses 8 -13,823 -21,957
Result before tax -61,894 -86,253
Tax benefit/(expense) 9 5,500 5,515
Result for the year -56,394 -80,738
Other comprehensive income or loss
Items that may be reclassified to profit or loss in subsequent periods, net of tax
Exchange differences on translation of foreign operations 0 0
Other comprehensive result for the year, net of tax 0 0
Total comprehensive result for the year -56,394 -80,738
Result for the period and total comprehensive result is attributable to the shareholders of UNION therapeutics A/S.
Statement of comprehensive income
DKK’000 Notes 2021 2020
Result for the year -56,394 -80,738
Adjustment for non-cash items 21 12,827 23,447
Changes in net working capital 22 34,725 2,027
Changes in non-current financial assets -130 -10
Interest received 0 6
Interest paid -1,158 -261
Income taxes received/(paid) 5,500 4,170
Cash flow from operating activities -4,630 -51,359
Investment in intangible assets 10 0 -1,668
Investment in property, plant and equipment 11 -140 0
Cash flow from investing activities -140 -1,668
Proceeds from capital increase 154,786 43,749
Costs associated with capital increase -15 -70
Proceeds from issuance of convertible loans 18 62,037 0
Lease instalments 20 -312 -155
Cash flow from financing activities 216,496 43,524
Net cash flow for the year 211,726 -9,503
Cash at the beginning of the year 36,027 45,827
Exchange rate adjustments of cash 3,582 -297
Cash and cash equivalents at end of the year 251,335 36,027
Cash and cash equivalents as per statement of financial position 251,335 36,027
Non-cash investing activities
Non-cash capital increases included in equity 0 14,898
Cash flow statement
UNION therapeutics 65Annual Report 2021 Parent financial statements
par comprehensive cash flow
Dec. 31 Dec. 31
DKK’000 Notes 2021 2020
Assets
Non-current assets
Intangible assets 10 16,566 16,566
Property, plant and equipment 11 1,160 168
Investments in subsidiaries 15 226 40
Other receivables 252 122
Total non-current assets 18,204 16,896
Current assets
Tax receivables 9 5,500 5,500
Receivables from group entities 1,120 1,353
Other receivables and prepayments 12 7,908 10,102
Cash and cash equivalents 251,335 36,027
Total current assets 265,863 52,982
Total assets 284,067 69,878
Dec. 31 Dec. 31
DKK’000 Notes 2021 2020
Equity and liabilities
Equity
Share capital 13 660 563
Other reserves 48,042 -59,248
Total equity 48,702 -58,685
Non-current liabilities
Long-term debt 16 99,286 88,894
Cash-settled warrant obligation 6 6.074 6,069
Deferred revenue 3 876 0
Lease liabilities 16 661 0
Convertible loans 16 63,778 0
Total non-current liabilities 170,675 94,963
Current liabilities
Lease liabilities 16 429 167
Trade payables 16 11,391 7,350
Warrant and put option 18,480 18,018
Deferred revenue 3 7,344 0
Payables to group entities 430 1,268
Other payables 14 26,616 6,797
Total current liabilities 64,690 33,600
Total liabilities 235,365 128,563
Total equity and liabilities 284,067 69,878
Statement of financial position
UNION therapeutics 66Annual Report 2021 Parent financial statements
par financial position
Other
reserves
(Accu-
mulated
deficit)/
Share Retained
DKK’000 Notes capital earnings Total
Equity at January 1, 2020 515 -39,309 -38,794
Result for the period 0 -80,738 -80,738
Other comprehensive income or loss 0 0 0
Total comprehensive result for the year 0 -80,738 -80,738
Transactions with owners:
Capital increases 13 48 58,600 58,648
Transaction costs 0 -70 -70
Share-based compensation 6 0 2,269 2,269
Equity at December 31, 2020 563 -59,248 -58,685
Other
reserves
(Accu-
mulated
deficit)/
Share Retained
DKK’000 Notes capital earnings Total
Equity at January 1, 2021 563 -59,248 -58,685
Result for the period 0 -56,394 -56,394
Other comprehensive income or loss 0 0 0
Total comprehensive result for the year 0 -56,394 -56,394
Transactions with owners:
Capital increases 13 97 154,689 154,786
Transaction costs 0 -15 -15
Share-based compensation 6 0 9,010 9,010
Equity at December 31, 2021 660 48,042 48,702
Statement of changes in equity
UNION therapeutics 67Annual Report 2021 Parent financial statements
par equity
Notes
1. Accounting policies
Basis of preparation
The parent company financial statements of UNION therapeutics A/S have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by the EU and additional Danish requirements. The
accounting policies are the same as for the consolidated financial statements with the supplementary accounting
policies for the parent described below. For detailed description of the accounting policies of the group, please refer
to note 1 in the consolidated financial statements.
The parent company financial statements are presented in DKK.
Supplementary accounting policies for the Parent Company
Investments in subsidiaries
Investments in subsidiaries are measured in the parent company financial statements at the lower of cost and recov-
erable amount. Distributed dividends are recognized in the income statement of the parent company.
2. Critical accounting estimates and judgements
Management assesses that, in respect of the financial reporting for the parent company, no accounting estimates or
judgements are made when applying the parent company’s accounting policies, which are significant to the financial
reporting apart from those disclosed in note 2 in the consolidated financial statements.
3. Revenue
Innovent agreement
On September 28, 2021, UNION therapeutics A/S entered into a strategic collaboration and license agreement for oris-
milast with Innovent Biologics Inc (the Innovent Agreement). As part of the Innovent Agreement, UNION therapeutics
A/S is entitled to receive a non-refundable, non-creditable and not subject to off-set up-front payment of USD 20m
(DKK 127m) and is eligible to receive future milestones and option payments of up to USD 250m, of which up to USD
247m is contingent on the achievement of certain development and regulatory milestones across multiple therapeutic
indications and on the achievement of certain sales-based milestones. Lastly, UNION therapeutics A/S is entitled to
receive a sales-based royalty fee ranging from a high single digit to a low twenties percentage of all net sales of orismi-
last in Greater China (including Mainland China, Hong Kong, Macau and Taiwan) by or on behalf of Innovent.
Within the Innovent Agreement, UNION therapeutics A/S identified three performance obligations: (1) delivery of li-
cense for orismilast (at a point in time), (2) delivery of Phase 2 study data for orismilast (over time) (3) Option to enter
into agreement regarding topical formulation (over time).
Out of the total contract value of DKK 1,715m (USD 270m) excluding royalties, the upfront payment of DKK 127m has
been recognized as the transaction price, as the future potential milestone and option amounts were not deemed to
be highly probable as they are contingent upon success in future clinical trials and regulatory approvals which are
not within UNION therapeutics A/S’ control and were uncertain at the inception of the agreement. Milestones will be
recognized when their achievement are deemed to be highly probable, and a significant revenue reversal would not
occur. Upon commercialization of products, if any, under this agreement, royalties and net sales-based milestones
will be recognized when the related sales occur.
The transaction price of DKK 127m was at the inception of the contract allocated to the performance obligations
based on the best estimate of relative stand-alone selling prices. As such, DKK 117m was allocated to the perfo-
mance obligation related to to the delivery of license of orismilast, DKK 10m was allocated to the performance obliga-
tion related to the delivery of Phase 2 study data for orismilast. The transaction price of DKK 127m comprise UNION
therapeutics A/S’ unconditional rights to considerations under the Innovent agreement.
The performance obligations related to the delivery of licenses were completed at a point in time (September 2021) and
UNION therapeutics A/S recognized DKK 117m as revenue in September 2021. The performance obligation regarding
Phase 2 study data will be completed as the study progress. Revenue will be recognized over time based on incurred
cost as a percentage of total expected cost.
Other out-license agreements
In January 2019, UNION therapeutics A/S entered into an out-licensing agreement with an external party. Under the
terms of the agreement, UNION therapeutics A/S is eligible for upfront and milestone payments upon successful
achievement of certain research and development and regulatory approval milestones, as well as royalties on sales.
Revenue
DKK’000 Notes 2021 2020
License revenue from upfront payment recognized over time 1,886 0
License revenue from upfront payment recognized at a point in time 117,026 0
118,912 0
Geographical split of revenue:
Denmark 0 0
Greater China 118,912 0
118,912 0
UNION therapeutics 68Annual Report 2021 Parent financial statements
par note 1-3
Notes
3. Revenue continued
100% of UNION therapeutics A/S’ revenue in 2021 arise from the Innovent agreement. Payment terms are between
30 and 60 days.
Deferred revenue
Deferred revenue at December 31, 2021 of DKK 8.2m represents the aggregated amount of the transaction price allo-
cated to the performance obligations that are unsatisfied at the end of the reporting period. Deferred revenue of DKK
7.3m, presented as Current relates to performance obligations that UNION therapeutics A/S expects to satisfy during
the coming twelve months, whereas the Non-current portion of DKK 0.9m, represents performance obligations that
UNION therapeutics A/S expects to satisfy after the coming twelve months.
Deferred revenue
DKK’000 2021 2020
At January 1 0 0
Portion of upfront payment recognized over time 10,106 0
Recognized as revenue -1,886 0
At December 31 8,220 0
Of which is presented as:
Non-current 876 0
Current 7,344 0
Joint arrangements
For the Innovent agreement UNION therapeutics A/S and Innovent Biologics have agreed on an initial joint develop-
ment plan in respect of activities that support the development of orismillast. Costs under any such joint develop-
ment plan will be shared between Innovent Biologics and UNION therapeutics A/S, with UNION therapeutics A/S
covering 90% and Innovent Biologics covering 10% of such costs. In the accounting for the Innovent Biologics collab-
oration agreement, this joint development is considered a joint operation as defined in IFRS 11 “Joint Arrangements”.
Accordingly, UNION therapeutics A/S is accounting for the assets, liabilities, revenues and expenses related to its
interest in the joint operation in accordance with the IFRSs applicable to the particular assets, liabilities, revenues and
expenses.
4. Research and development costs and Administrative costs
Research and development costs are primarily external and, to a lesser extent, internal costs incurred in the devel-
opment of UNION therapeutics A/S’ product candidates. Substantial portions of the company’s clinical studies are
performed by third-party laboratories, medical centres or clinical research organizations.
DKK’000 Notes 2021 2020
Research and development costs
Employee benefit costs 5 19,250 7,454
Share-based compensation 6 6,740 5,541
External costs 129,538 52,126
155,528 65,121
Higher activity level in 2021 compared to 2020 caused the increase in research and development costs. Additionally,
employee costs have increased as an effect of the strengthening of the research and development organization.
Administrative costs consist primarily of personnel costs and costs related to corporate functions and business
development. In addition, administrative costs include depreciation and other expenses for UNION therapeutics A/S’
headquarters.
DKK’000 Notes 2021 2020
Administrative costs
Employee benefit costs 5 7,451 4,025
Share-based compensation 6 2,275 1,354
External costs 11,647 2,736
Depreciation 11 351 155
21,724 8,270
To support the increased activity level in research and development the administrative functions have also been
strengthened resulting in higher employee costs. Supported by external service providers systems, processes and
compliance efforts have been revised and optimized, together with other preparations for future growth. This has led
to an increase in external costs, most of which are one-off costs.
UNION therapeutics 69Annual Report 2021 Parent financial statements
par note 4
Notes
5. Staff costs
DKK’000 Notes 2021 2020
Wages and salaries 23,673 9,518
Defined contribution plans 1,005 300
Other social security costs 1,452 410
Share-based compensation 6 9,015 6,896
Other staff costs 571 1,250
35,716 18,374
Research and development costs 25,990 12,995
Administrative costs 9,726 5,379
35,716 18,374
Average number of full-time equivalents 24 9
5. Staff costs continued
Remuneration to Executive Board and Board of Directors
2021
Executive Board of
DKK’000 Board Directors Total
Wages and salaries 6,938 888 7,826
Share-based compensation 3,545 1,819 5,364
Social security 10 0 10
10,493 2,707 13,200
2020
Executive Board of
DKK’000 Board Directors Total
Wages and salaries 4,693 140 4,833
Share-based compensation 644 391 1035
Social security 7 0 7
5,344 531 5,875
Executive board members are the key management personnel of UNION therapeutics A/S.
UNION therapeutics 70Annual Report 2021 Parent financial statements
par note 5
Notes
6. Share-based payment
Warrant programs
UNION therapeutics A/S has established share-based incentive programs (equity-settled and cash-settled) for
members of the Board of Directors, members of the Executive Board and key personnel in the form of warrants.
Warrants are granted by the Board of Directors in accordance with authorizations given to it by the general meeting of
shareholders and as incorporated into the company’s articles of associations.
On December 29, 2021, a 10-for-1 stock split of issued and outstanding ordinary shares was approved at an extraordi-
nary general meeting. The share split directly affects granted warrants, as warrants effectively split 10-for-1, while
the exercise price of each warrant is reduced to 1/10 of the pre-split value. The total value of granted warrants is
unchanged. Refer to note 13.
Warrants granted in February 2017 (Cash-settled)
In April 2017, the general meeting of shareholders granted warrants with rights to subscribe for up to 44,650 shares
of nominal 0.1 with an exercise prise of DKK 23.98 per warrant (pre-split: 4,465 shares of nominally DKK 1 in the com-
pany with an exercise price of DKK 239.80 per warrant). At December 31, 2021, the Board of Directors have granted
in total 44,650 (December 31, 2020: 44,650 (pre-split: 4,465)) warrants under this program. These warrants vest and
become exercisable upon an “exit event”, defined as an event of IPO, merger, demerger, or solvent liquidation, which
triggers an immediate expense recognition upon grant. These warrants may be settled in equity instruments of the
company or in cash at the discretion of the warrant holder. Accordingly, these warrants are classified as cash-settled
warrants. The life of the warrants under the February 2017 program is eight years from the date of grant.
Warrants granted from November 2017 (Equity-settled)
In November 2017, the Board of Directors were authorized to grant warrants for up to 250,000 shares of nominally
DKK 0.1 per warrant (pre-split: 25,000 shares of nominally DKK 1) in the company in the period until March 31, 2022.
In June 2020, the Board of Directors were authorized to grant warrants for up to an additional 250,000 (pre-split:
25,000) shares in the company in the period until June 25, 2025. At December 31, 2021, the Board of Directors have
granted in total 398,280 (December 31, 2020: 235,930 (pre-split: 23,593)) warrants under this authorization.
Warrants granted under the November 2017 equity incentive plan are classified as equity settled and generally vest
over four years’ service periods in periodic installments that may or may not be equal, which triggers linear or graded
vesting profiles. Certain warrants under this program vest immediate upon grant. The life of the warrants under the
November 2017 program varies from 4-10 years from the date of grant.
The table below summarizes share-based compensation expenses included in the statement of comprehensive
income:
DKK’000 2021 2020
Research and development costs 6,740 5,541
Administrative costs 2,275 1,354
9,015 6,895
The following schedule specifies the movements of number and weighted average exercise price of outstanding
warrants for 2021 and 2020:
Equity-settled warrants
Weighted Weighted
average average
exercise grant date
price per fair value
Board of Executive warrant per warrant
Number of warrants Directors board Employees Total (DKK) (DKK)
Outstanding, December 31, 2019 7,108 8,000 7,310 22,418 654 335
Granted during the period 0 0 1,175 1,175 228 703
Outstanding, December 31, 2020 7,108 8,000 8,485 23,593 633 354
Granted during the period 3,750 10,596 3,984 21,230 967 1,099
Effect of 10-for-1 share split 97,722 167,364 112,221 377,307
Outstanding, December 31, 2021 108,580 185,960 124,690 419,230 78 68
UNION therapeutics 71Annual Report 2021 Parent financial statements
par note 6
Notes
6. Share-based payment continued
Cash-settled warrants
Weighted Weighted
average average
exercise grant date
price per fair value
Former warrant per warrant
Number of warrants employees Total (DKK) (DKK)
Outstanding, December 31, 2019 4,465 4,465 240 100
Granted during the period 0 0 0 0
Outstanding, December 31, 2020 4,465 4,465 240 100
Granted during the period 0 0 0 0
Effect of 10-for-1 share split 40,185 40,185
Outstanding, December 31, 2021 44,650 44,650 24 10
Warrant related disclosures
Across all warrant programs the weighted average remaining contractual life for warrants outstanding was 3.2 years
and 3.5 years at December 31, 2021 and 2020, respectively.
Across all warrant programs, the range of the exercise price for warrants outstanding was DKK 0.1-124 at December
31 2021 (December 31, 2020, pre-split: DKK 1-815).
On December 31, 2021, 265,705 (December 31 2020, pre-split: 18,859) warrants had vested and were exercisable. On
December 31, 2021 the weighted average exercise price per warrant was DKK 67.24 (December 31, 2020, pre-split:
541.99).
Determination of fair value of warrants
UNION therapeutics A/S determines and calculates the fair value of each equity settled warrant at grant date and for
each cash-settled warrant, at each balance sheet date, using the Black-Scholes pricing model. This pricing model
requires the input of subjective assumptions such as:
• Dividend yield: Is determined to be zero.
• The expected stock price volatility: As it is not possible to estimate the expected volatility of a non-publicly listed
entity’s share price, UNION therapeutics A/S has estimated the fair value of its warrants by using the volatility of an
appropriate peer group of listed international biotechnology companies.
• The risk-free interest rate, which is based on the Danish government bonds having a yield with a maturity equal to
the expected term of the option in effect at the time of grant.
• The expected life of warrants, which is based on vesting terms, expected rate of exercise and life terms in the
warrant program.
• Estimate of UNION therapeutics A/S’ market share price. As UNION therapeutics A/S is not listed on a stock ex-
change the estimated fair value of the warrants at each measuring date, using the Black-Scholes model, has been
established by assuming that the value of UNION therapeutics A/S’ shares is the price per share determined at the
latest financing round and considering additional subsequent valuation inflection points and relevant facts and
circumstances.
UNION therapeutics 72Annual Report 2021 Parent financial statements
Notes
6. Share-based payment continued
Valuation assumptions for warrants in 2021 and 2020
The fair value at each measuring date in 2021 and 2020 is measured using the following significant assumptions:
Dec. 31 Dec. 31
2021 2020
Equity-settled warrants
Dividend yield - -
Volatility (%) 54-76 61-77
Risk-free interest rate -0.2% - -0.4% -0.4% - -0.5%
Market share price range applied (2020: pre-split) DKK 160 DKK 534-1,600
Exercise price (2020: pre-split) DKK 0.1-124 DKK 1 - 534
Expected life of equity-settled warrants granted 5 years 5 years
The grant date fair value per warrant (2020: pre-split) DKK 83-160 DKK 533-932
31 Dec. 31 Dec.
2021 2020
Cash-settled warrants
Dividend yield - -
Volatility (%) 76 67
Risk-free interest rate -0.2% -0.6%
Market share price at year end (2020: pre-split) DKK 160 DKK 1,600
Exercise price (2020: pre-split) DKK 24.0 DKK 239.8
Expected life of cash-settled warrants at end period 3.1 year 4.1 year
The end period fair value per warrant (2020: pre-split) DKK 136 DKK 1,359
Reconciliation of fair value of cash settled warrants:
DKK’000 Cash settled warrants
At January 1, 2020 1,443
Fair value adjustment through comprehensive income 4,626
At December 31, 2020 6,069
Fair value adjustment through comprehensive income 5
At December 31, 2021 6,074
7. Other operating income
Other operating income consists of government grants and other items secondary to the company’s activities. In
2020 UNION therapeutics A/S received a grant from Innovation Fund Denmark. The grant provides compensation
for a part of certain project-specific research and development expenses, including wages and salaries. There are no
unfulfilled conditions or other contingencies attached to the government grant that has to be recognized.
In 2021, the company recognized DKK 6.0m (2020: DKK 9.0m) as Other operating income, hereof income from the
government grant accounts for DKK 6.0m (2020: DKK 8.7m).
UNION therapeutics 73Annual Report 2021 Parent financial statements
par note 7
Notes
8. Financial income and expenses
Financial income
DKK’000 Notes 2021 2020
Interest income 0 6
Interest income, group entities 3 40
Foreign exchange gains 4,286 0
Fair value adjustment, warrant and put option (unrealized) 17 0 0
4,289 46
Financial expenses
DKK’000 Notes 2021 2020
Interest expenses 1,159 380
Interest expenses, lease liabilities 32 11
Fair value adjustment, Convertible debt (unrealized) 18 1,741 0
Interest expenses, European Investment Bank loan (amortized cost) 10,891 9,408
Foreign exchange loss 0 146
Fair value adjustment, warrant and put option (unrealized) 17 0 12,012
13,891 21,957
Foreign exchange gains in 2021 primarily relates to USD positions related to the Innovent agreement.
No fair value adjustment of warrants and put option in 2021, as the assumed market share prise has not changed.
9. Income taxes
The major components of income tax benefit for the years ended December 31, 2021 and 2020 are:
DKK’000 2021 2020
Income taxes in the statement of profit or loss
Net result before tax -61,894 -86,253
Corporate income tax rate in Denmark 22% 22%
Computed corporate income tax (benefit) -13,617 -18,976
Prior year adjustments 1,983 -15
Adjustment for non-deductible expenses 3,748 79
Adjustment for research and development super deduction -7,532 -4,027
Adjustment for warrant 1,983 1,517
Change in deferred tax asset not recognized 7,935 15,907
Tax expense/(benefit) for the period -5,500 -5,515
Deferred tax in the statement of financial position
Tax deductible losses 15,952 22,251
European Investment Bank loan facility 0 2,484
Research and development capitalized 11,312 0
Other temporary differences 5,920 63
Deferred tax assets/(liabilities) at December 31 32,684 24,798
Deferred tax assets not recognized
Deferred tax assets not recognized -32,684 -24,798
Deferred tax at December 31 0 0
UNION therapeutics 74Annual Report 2021 Parent financial statements
par note 8-9
Notes
9. Income taxes continued
The biotechnology and pharmaceutical industry is subject to considerable risks and uncertainties. UNION therapeu-
ticst A/S has so far reported significant losses and, consequently, has unused tax losses. Management has conclud-
ed that deferred tax assets should not be recognized at December 31, 2021 (none recognized at December 31, 2020),
due to uncertainty related to future utilization of tax loss carry-forward.
Deferred tax assets and liabilities are offset when; there is a legally enforceable right to set off current tax assets
against current tax liabilities, 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. Deferred tax is calculated at the tax rates that are expect-
ed to apply in the period when the liability is settled or the asset is realized, based on tax laws and rates that have
been enacted or substantively enacted at the statement of financial position date.
Income tax receivables are recognized in accordance with the Danish tax credit scheme (Skattekreditordningen).
Companies covered by the tax credit scheme may obtain payment of the tax base of losses originating from research
and development expenses of up to DKK 25.0m (tax value of DKK 5.5m). Under Danish tax legislation, UNION ther-
apeutics A/S is eligible to receive DKK 5.5m in 2021 (DKK 5.5m in 2020) in cash relating to the surrendered tax loss
based on qualifying research and development expenses. These tax receipts comprise the majority of the current tax
benefit in 2021 and 2020, respectively.
The unused tax losses can be carried forward indefinitely.
10. Intangible assets
Patents, trademarks
and other rights
DKK’000 2021 2020
Cost
At January 1, 2021 16,566 0
Addition 0 16,566
At December 31, 2021 16,566 16,566
Depreciation
At January 1, 2021 0 0
At December 31, 2021 0 0
Net book value
At December 31, 2021 16,566 16,566
UNION therapeutics 75Annual Report 2021 Parent financial statements
par note 10
Notes
10. Intangible assets continued
Acquisition of PDE4-inhibitor program
In June 2020, UNION therapeutics A/S entered into an asset purchase agreement with Leo Pharma A/S. Pursuant to
this agreement, Leo Pharma A/S sold and transferred certain intangible rights in the form of patents and compound
data relating to the ‘PDE4 inhibitor compounds’ to UNION therapeutics A/S.
In consideration of the acquisition of the intangible rights, in 2020, UNION therapeutics A/S paid in cash DKK 1.7m
and by issuance and grant of 12,044 shares of nominal 1 DKK at a rate of DKK 1,237 per share, equivalent to a value
of DKK 14.9m. The value of the intangible assets acquired, is measured at the fair value of the cash paid and of the
equity instruments granted, with reference to the corresponding increase in equity of DKK 14.9m. The applied rate per
share is determined with reference to the share price applied in the capital increase completed by UNION therapeu-
tics A/S in May 2020.
Under the terms of the Agreement, UNION therapeutics A/S agreed to make future payments to LEO Pharma A/S that
were contingent upon the achievement of specified clinical, regulatory, and sales milestones. UNION therapeutics
A/S applies the cost accumulation method for the accounting for such contingent payments.
Under the agreement, UNION therapeutics A/S will, subject to meeting certain clinical, regulatory, and sales mile-
stones, pay in cash to the seller up to USD 202m equivalent to DKK 1,240m. Also, UNION therapeutics A/S will pay to
the seller low single-digit percentage royalty applied on net sales of covered products until the expiry of the royalty
term which ends at the latest on the twelfth anniversary of the first commercial sale of covered products.
The acquired intangible asset is not being amortized until approval of the underlying asset has been received from
regulatory authorities. Management has in 2020 and 2021 not identified indicators of impairment concerning the
acquired intangible rights.
An impairment test has been carried out in 2021. Present value has been calculated based on 12 years of dicounted
cash flow using a WACC of 14%. The impairment test shows no signs of impairment.
11. Property, plant and equipment
Right-of- Other
DKK’000 Notes use assets equipment Total
Cost
At January 1, 2021 444 95 539
Additions 1,203 140 1,343
Disposals 0 -78 -78
At December 31, 2021 1,647 157 1,804
Depreciation
At January 1, 2021 288 83 371
Additions 330 21 351
Disposals 0 -78 -78
At December 31, 2021 618 26 644
Net book value
At December 31, 2021 1,029 131 1,160
UNION therapeutics 76Annual Report 2021 Parent financial statements
par note 11
Notes
11. Property, plant and equipment continued
Right-of- Other
DKK’000 Notes use assets equipment Total
Cost
At January 1, 2020 650 95 745
Adjustments -206 0 -206
Additions 0 0 0
At December 31, 2020 444 95 539
Depreciation
At January 1, 2020 217 64 281
Adjustments -65 0 -65
Additions 136 19 155
At December 31, 2020 288 83 371
Net book value
At December 31, 2020 156 12 168
Right-of-use assets
The company leases its office premises in Copenhagen. The property lease is non-cancellable in the period through
June 15, 2023. Hereafter, the option to terminate is six months. The contract does not provide a right, obligation, nor
an option to buy the office premises. The contract contains both lease and non-lease components according to the
specific pricing of the services in the agreements.
In 2021 and 2020, the expense related to variable lease payments not included in the lease liabilities amounts to DKK
0.1m and DKK 0.1m, respectively, and was recognized in administrative costs.
12. Other receivables and prepayments
31 Dec. 31 Dec.
DKK’000 2021 2020
VAT receivables 4,224 972
Prepayments 2,170 119
Other receivables 1,494 9,011
7,908 10,102
In 2021, Other receivables primarily consist of the government grant from Innovation Fund Denmark not yet fully
paid out. There are no unfulfilled conditions or other contingencies attached to the government grant that have to be
recognized. In 2020, Other receivables included the government grant receivables of DKK 8.7m from Innovation Fund
Denmark.
UNION therapeutics 77Annual Report 2021 Parent financial statements
par note 12
Notes
Share
Number capital
of shares (DKK’000)
Share capital at January 1, 2020 515,448 515
Capital increase at May 7, 2020 35,367 36
Capital increase at June 23, 2020 12,044 12
Share capital at December 31, 2020 562,859 563
Share capital at January 1, 2021 562,859 563
Capital increase at February 9, 2021 96,741 97
Effect of 10-for-1 share split at December 29, 2021 5,936,400 0
Share capital at December 31, 2021 6,596,000 660
The share split directly affects granted warrants, as warrants effectively split 10-for-1, while the exercise price of
each warrant is reduced to 1/10 of the pre-split value. The total value of granted warrants is unchanged. For effect on
warrants granted as share based payment, warrants granted in relation to European Investment Bank loan and the
convertible loan, refer to note 6, 17 and 18, respectively.
14. Other payables
DKK’000 2021 2020
Salary related payables 1,552 1,889
Other liabilities 25,064 4,908
26,616 6,797
Other liabilities primarily comprise accruals for clinical research organizations costs. Clinical activity level was signifi-
cantly higher at year- end 2021 compared to year-end 2020.
13. Capital management and share capital
Capital Management
The Board of Directors monitors the share- and capital structure to ensure that UNION therapeutics A/S’ capital
resources support the strategic goals. UNION therapeutics A/S’ goal is to maintain a strong capital base so as to
maintain confidence from investors, creditors, employees and collaboration partners, and a continuous advancement
of the research and development pipeline and business in general.
UNION therapeutics A/S is primarily financed through equity investments from shareholders, convertible loans, and a
long-term loan agreement with the European Investment Bank. UNION therapeutics A/S has also obtained financing
through license agreements, governmental grants. The adequacy of UNION therapeutics A/S’ available funds will
depend on various factors, including the advancement of the research and development programs, the magnitude
of investments in these programs, and UNION therapeutics A/S’ ability to establish commercial collaboration and
licensing agreements with partners.
As such, UNION therapeutics A/S may require additional funds and may attempt to raise additional funds through
equity or debt financings, license and collaborative agreements with partners, or from other sources.
For further information regarding the European Investment Bank loan and the convertible loan, refer to note 17 and
18, respectively
Loss of subscribed share capital
As a result of the group’s accounting policy, financing strategy and utilization of the credit facility provided by the Eu-
ropean Investment Bank, at December 31 2020 the company had lost more than 50% of its subscribed share capital.
Following the capital increase in February 2021, the share capital was re-established.
Share capital
On December 29, 2021, a 10-for-1 stock split of issued and outstanding ordinary shares was approved at an extraordi-
nary general meeting. The stock split also resulted in a reduction of the nominal value of the company’s ordinary
shares from DKK 1 to DKK 0.1.
Following the share split the share capital comprises 6,596,000 shares of nominal DKK 0.1, each of which have been
issued and paid in full. Only one class of shares exists, and no shares carry any special rights.
UNION therapeutics 78Annual Report 2021 Parent financial statements
par note 13-14
Notes
Falling due Falling due Falling due Total
Carrying within between after contractual
DKK’000 amount 1 year 1-5 years 5 years cash flows
2021
Long-term debt (amortized cost)* 99,286 0 118,136 0 118,136
Trade payables (amortized cost) 11,391 11,391 0 0 11,391
Lease liabilities (amortized cost) 1,090 471 681 0 1,152
Convertible loans (fair value) 63,778 0 80,903 0 80,903
Warrant and put option (fair value) 18,480 18,480 0 0 18,480
194,025 30,342 199,720 0 230,062
2020
Long-term debt (amortized cost) 88,894 0 118,136 0 118,136
Trade payables (amortized cost) 7,350 7,350 0 0 7,350
Lease liabilities (amortized cost) 167 167 0 0 167
Warrant and put option (fair value) 18,018 18,018 0 0 18,018
114,429 25,535 118,136 0 143,671
*Of which DKK 79m falls due in Janaury 2023.
Interest rate 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.
UNION therapeutics A/S has no significant interest-bearing debt with variable interest, and UNION therapeutics A/S’
interest rate risks primarily relate to the position of cash in banks. As such, no separate analysis is provided.
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of chang-
es in foreign exchange rates. UNION therapeutics A/S’ exposure to the risk of changes in foreign exchange rates
primarily relates to the company’s operating activities when revenue or expense transactions are denominated in a
foreign currency as well as cash positions in foreign currency. UNION therapeutics A/S maintains GBP, USD and PLZ
bank deposits at a level necessary support the short-term funding requirements.
15. Investments in subsidiaries
DKK’000 2021 2020
Cost at January 1 40 40
Additions 186 0
Cost at December 31 226 40
Carrying amount at December 31 226 40
Voting rights
Name and registered office and ownership
UNION therapeutics North America Inc.,
Collateral MMA, 33 Bedford street, Suite 9, Lexington MA 02420 100%
UNION therapeutics Research Services ApS, Tuborg Havnevej 18, 2900 Hellerup 100%
UNION therapeutics Germany GmbH, Alter Kirchenweg 83, 24983 Handewitt 100%
16. Financial risks
The company’s financial risks are managed by the Executive Board. The company has identified financial risks, but
follows a policy where management continually monitors the following defined risks: liquidity risk, interest rate risk,
currency risk and credit risk.
Liquidity risk
Liquidity risk is the risk that UNION therapeutics A/S will not be able to meet its financial obligations as they fall due.
The Executive Board monitors its risk of a shortage of funds using a liquidity planning tool.
The company’s objective and policy are to maintain a balance between continuity of funding and flexibility through
the use of equity investments from shareholders and external loans.
UNION therapeutics A/S has no unused credit facilities at December 31, 2021 or at December 31, 2020.
The following are the contractual undiscounted out flows associated with the company’s financial liabilities in the
current and prior year based on their contractual maturities. The amounts disclosed in the tables are the contractual
undiscounted cash flows (including interest payments). Balances due within 12 months equal their carrying balances
as the impact of discounting is not significant, except for convertible loans.
UNION therapeutics 79Annual Report 2021 Parent financial statements
par note 15-16
Notes
The following key methods and assumptions were used to estimate the fair values of the European Investment Bank
warrant and put option (level 3):
The fair value of the warrant and put option is estimated using the Black-Scholes Valuation model. This valuation
method requires management to make certain assumptions about the model inputs, such as the underlying share
price and volatility. The probabilities of the various estimates within the applied range can be reasonably assessed
and are used in management’s estimate of fair value.
31 Dec. 31 Dec.
DKK’000 2021 2020
Dividend yield - -
Volatility (%) 76 67
Annual risk-free interest rate -0.2% -0.6%
Market share price at year-end (2020: pre-split) DKK 160 DKK 1,600
Exercise price (2020: pre-split) DKK 0.1 DKK 1
Life of option 1-3 years 2-4 years
Sensitivity
At December 31, 2020 and December 31, 2021, other things being equal, a 1% increase in the share price will result in
a 1% increase in the fair value of the warrant put option. Similarly, a 1% decrease in the share price will reduce the fair
value of the warrant put option by 1%.
Reconciliation of fair value measurements under Level 3 hierarchy:
Warrant and put option
At December 31, 2019 6,006
Fair value adjustment through profit or loss (unrealized) 12,012
At December 31, 2020 18,018
Fair value adjustment through profit or loss (unrealized) 0
Warrants added 462
At December 31, 2021 18,480
Fair value adjustments through profit or loss are recognized in the statement of comprehensive income as financial
income or financial expenses, as applicable.
17. European Investment Bank Loan
Loan facility and warrant and put option agreement with the European Investment Bank
On December 29, 2021, a 10-for-1 stock split of issued and outstanding ordinary shares was approved at an extraordi-
nary general meeting. The share split directly affects granted warrants, as warrants effectively split 10-for-1, while
the exercise price of each warrant is reduced to 1/10 of the pre-split value. The total value of granted warrants is
unchanged. Refer to note 13.
In October 2017, UNION therapeutics A/S entered into a finance contract with the European Investment Bank ensur-
ing a loan facility of EUR 20.0m.
Under the finance contract, the loan shall be disbursed in up to two tranches and the repayment date is no later than
the fifth anniversary of the relevant disbursement date. The loan agreement is subject to a number of financial and
non-financial terms.
In January 2018, UNION therapeutics A/S called the first of the two tranches under the finance contract. The first
tranche totalled EUR 7.0m. The loan and accumulated interest fall due for payment in January 2023.
In December 2019, UNION therapeutics A/S called the second of the two tranches under the finance contract. The
second tranche totalled EUR 3.3m. The loan and accumulated interest fall due for payment in December 2024.
As consideration for the loan, UNION therapeutics A/S has granted 186,910 (pre-split: 18,691) warrants to the
European Investment Bank that vest relative to the draw-down on the loan in two tranches. Each warrant entitles the
European Investment Bank to subscribe for 1 share of nominal DKK 0.1 (pre-split: DKK 1) against payment of exercise
price of DKK 0.1 (pre-split: DKK 1). Vested warrants can be exercised in part or in full at any time at the discretion of
the European Investment Bank. Warrants not exercised after 20 years shall lapse.
Upon draw-down of the first tranche in 2018, 87,220 (pre-split: 8,722) warrants vested. Upon draw-down of the
second tranche in 2019, 25,460 (pre-split: 2,546) warrants vested, and 74,230 (pre-split: 7,423) warrants were lapsed
and became void.
In 2021, the European Investment Bank has been granted additional 2,889 warrants. 115,572 warrants were outstand-
ing at December 31, 2021 (December 31, 2020: 112,683 (pre-split: 11,268).
The loan agreement further includes an embedded derivative in form of a put option, pursuant to which the European
Investment Bank may require UNION therapeutics A/S to purchase all or part of the vested warrants held by the
European Investment Bank at an option price equivalent to the fair value of the warrants at the time of exercise.
As part of the loan agreement, UNION therapeutics A/S entered into a floating charge agreement pursuant to which
a floating charge of EUR 2.0m is pledged. Furthermore, UNION therapeutics A/S entered into a negative pledge
preventing it to subsist any security over any of its assets. Refer to note 23.
UNION therapeutics 80Annual Report 2021 Parent financial statements
par note 17
Notes
• Conversion or repayment in connection with a De-SPAC transaction. In the event of a De-SPAC transaction the
lenders have the discretion to demand the outstanding loan amount repaid in cash or converted into shares with
a conversion price equal to the final offer price with a deduction of 15%. In the event of a De-SPAC transaction the
lenders may elect to demand the loan repaid in cash against receiving additional 6% interest rate.
Since the convertible debt instrument includes conversion features resulting in settlement in a variable number of
shares, the convertible debt instrument does not comprise an equity component. The convertible debt instrument
includes the following elements:
• Fixed rate debt host contract
• Embedded prepayment option (exit event)
• Embedded prepayment option (De-SPAC)
• Cap on conversion price at maturity
Management has designated, due to the existence of non-closely related embedded derivatives, the entire debt
instrument to be carried at fair value through profit or loss using a probability weighted expected return method.
Changes arising from changes in the company’s own credit risk are recognized in other comprehensive income. The
inputs used in the valuation as at December 31, 2021 are detailed in the table below:
Assumptions applied
Discount rate 36.6%
Probability of conversion at maturity 1%
Probability of conversion due to exit event, including De-SPAC event 99%
18. Convertible loans
In July 2021, UNION therapeutics A/S issued a convertible debt instrument of DKK 62.0m, which was received from
various parties, including members of the Board of Directors and Executive Management. The company elected the
fair value option and accounts for both the debt and the embedded derivatives as a single instrument that is meas-
ured at fair value, whereby the convertible debenture at initial recognition is designated at fair value and subsequently
remeasured with the change being presented on the statement of profit or loss for the reporting period.
The following table summarizes the changes in the convertible debt instrument 2021:
DKK thousands
Carrying amount at January 1, 2021 0
Amount received July 2021 62,037
Fair value adjustment through profit or loss, included in finance expenses 1,741
Carrying amount at fair value at December31, 2021 63,778
The convertible loan is mesured at fair value (level 3) taking into account:
• The convertible loan is a fixed rate loan carrying an interest rate of 9% with maturity on July 16, 2024
• The convertible loan is denominated in DKK
• Conversion or repayment at maturity. On the maturity date, July 16, 2024, UNION therapeutics A/S has the discre-
tion to 1) convert the loan into new shares of the company as the share price at the latest capital increase with a
deduction of 15%. If the loan is converted at maturity, the conversion price has a cap of DKK 160 per share minus
15%; or 2) repay the loan in cash to the extent that the loan amount and accrued interest has not been converted
into shares and the company’s existing loan to the European Investment Bank has been repaid or consent has been
provided by the European Investment Bank, though with bondholder’s discretion to elect conversion to equity.
• Mandatory conversion in the occurrence of an exit-event including 1) an admission to trading of the company’s
shares on a regulated market (IPO), 2) a trade sale of more than 90% of the company’s shares and 3) an equity
financing with issuance of new shares with proceeds of minimum DKK 120m.
UNION therapeutics 81Annual Report 2021 Parent financial statements
par note 18
Notes
19. Related party disclosures
UNION therapeutic A/S’ related parties comprise significant shareholders, Board of Directors, Executive Manage-
ment, and close members of the family of these persons as well as subsidiaries.
Besides paying the salary, board fees and share-based payment to the Executive Management and Board of Direc-
tors, as further described below, the company did not carry through any transactions with its related parties besides
the below-mentioned transactions.
Other Convertible Payables/
DKK’000 Period income Purchases loan (Receivables)
Transactions with other related parties:
Clinical-Microbiomics A/S 2021 0 0 0 0
2020 301 0 0 0
Cajaikas ApS 2021 0 1,755 0 0
2020 0 1,260 0 0
Black Swans Exist ApS 2021 0 2,294 0 42
2020 20 671 0 49
Executive Management and Board of Directors 2021 0 0 3,394 0
2020 0 0 0 0
UNION therapeutics North America Inc 2021 123 31
2020 113 1,510 0 -285
UNION therapeutics Research Services ApS 2021 0 400 0 0
2020 0 0 0 0
UNION therapeutics Germany GmbH 2021 0 2,003 0 -721
2020 0 0 0 0
The company has received employee services from Anne Kathrine Toft-Kehler, M.D. specializing in ophthalmology and
spouse of Rasmus Vendler Toft-Kehler, a Principal Shareholder and member of the Board of Directors and Executive
Management. The employee benefits paid to Anne Kathrine Toft-Kehler amounted to DKK 488 thousand for the
financial year ended December 31, 2021 and DKK 480 thousand for the financial year ended December 31, 2020. Anne
Kathrine Toft-Kehler works on the pre-clinical programs. Her appointment was approved by the Board of Directors.
18. Convertible loans continued
The sensitivity of the required return towards key assumptions regarding probabilities has been analyzed.
The below table, shows the market value of the convertible loan assuming a fixed discount rate of 36.6% if the proba-
bility associated with an exit event is changed:
Calculated
Probability debt at
of exit Dec. 31
event (DKK ‘000)
9 4% 62, 74 3
9 6% 6 3 ,18 6
9 8 % 6 3 , 62 9
9 9% 6 3 ,7 7 8
100% 64 ,072
UNION therapeutics 82Annual Report 2021 Parent financial statements
par note 19
Notes
19. Related party disclosures continued
The company has received consultancy services from H & L Invest ApS, which is 50% owned by Stig Løkke Pedersen,
Chair of the Board of Directors. The expenses related to such services amounted to 60 thousand for the financial year
ended December 31, 2021, which does not form part of the board fees payable to Stig Løkke Pedersen.
Holding companies
The company is jointly controlled by the holding companies Vendler ApS and Manjin ApS, which are owned by
members of the Executive Board. There were no transactions between UNION therapeutics A/S and the holding com-
panies neither in the financial year ended December 31, 2021 nor in the financial year ended December 31, 2020.
Associated parties
Clinical-Microbiomics A/S
UNION therapeutics A/S rendered administrative services to Clinical-Microbiomics A/S. Clinical-Microbiomics A/S
is partly owned by UNION therapeutics A/S’ holding companies, and members of the Executive Board of UNION
therapeutics A/S are appointed to the Board of Directors of Clinical-Microbiomics A/S.
Cajaikas ApS
UNION therapeutics A/S renders contract research and management services from Cajaikas ApS. Cajaikas ApS is
owned by a member of the Board of Directors of UNION therapeutics A/S.
Black Swans Exist ApS
UNION therapeutics A/S renders recruitment services from, and in 2020 also rendered administrative services to,
Black Swans Exist ApS. Black Swans Exist ApS is partly owned by UNION therapeutics A/S’ holding companies,
Manjin ApS and Vendler ApS.
20. Changes in liabilities arising from financing activities
2021 Non-cash changes
Addition Foreign
Cash Fair value during the exchange
DKK’000 2020 flows adjustment period Interest adjustment 2021
Debt facility 88,894 0 0 0 10,429 -37 99,286
Convertible loans 0 62,037 1,741 0 0 0 63,778
Lease liability 167 -312 0 1,203 32 0 1,090
Total 89,061 61,725 1,741 1,203 10,461 -37 164,154
2020 Non-cash changes
Addition Foreign
Cash Adjustment during the exchange
DKK’000 2019 flows opening period Interest adjustment 2020
Debt facility 79,558 0 0 0 9,409 -73 88,894
Leasing 451 -155 -140 0 11 0 167
Total 80,009 -155 (140) 0 9,420 -73 89,061
UNION therapeutics 83Annual Report 2021 Parent financial statements
par note 20
Notes
21. Cash flow statement - adjustment for non-cash items
DKK’000 2021 2020
Income taxes -5,500 -5,515
Depreciation and amortization 351 155
Financial costs/income 8,961 21,911
Share-based compensation costs 9,015 6,896
Other adjustments, primarily exchange rate adjustments 0 0
12,827 23,447
22. Cash flow statement - changes in net working capital
DKK’000 2021 2020
Changes in other receivables 7,519 -8,358
Changes in VAT receivables -3,272 -624
Changes in prepayments -2,051 -65
Changes in employee related liabilities -336 1,358
Changes in intercompany payables -838 1,434
Changes in intercompany receivables 233 -1,313
Changes in trade payables 5,278 6,148
Changes in investments in subsidiaries -186 -40
Changes in other liabilities 28,378 3,487
34,725 2,027
23. Contingent assets and liabilities, contractual obligations and pledges
Pledges
The company has entered into a floating charge agreement with the European Investment Bank pursuant to which a
floating charge of EUR 2.0m (2020: EUR 2.0m) is pledged. Furthermore, the group has entered into a negative pledge
preventing it from placing any of its assets as security, excluding the aforementioned floating charge to the European
Investment Bank.
Contingent payment under out-license agreements
UNION therapeutics A/S is entitled to potential milestone payments and royalties on successful commercialization of
products developed under license agreements with an external party (reference is made to note 3). Since the size and
timing of such payments are uncertain until the milestones are reached or sales are generated, the agreements may
qualify as contingent assets. However, it is associated with a very high degree of uncertainty to measure the value of
such contingent assets, and, accordingly, no such assets have been recognized.
Contingent payment of acquisition of intangible assets
As part of the acquisition of intangible rights, UNION therapeutics A/S may be required to make milestone and royalty
payments to the seller. Refer to note 10.
UNION therapeutics 84Annual Report 2021 Parent financial statements
par note 21-23
Statement by the Board of Directors and
the Executive Board
Executive Board
Board of Directors
UNION therapeutics 85Annual Report 2021 Statement by the Board of Directors and the Executive Board
statement by BoD and EB
Independent Auditors Report
Opinion
Basis for opinion
Statement on the Management’s review
Management’s responsibilities
for the financial statements
UNION therapeutics 86Annual Report 2021 Independent Auditors Report
independent auditor
Independent Auditors Report
Auditor’s responsibilities for the
audit of the financial statements
EY Godkendt Revisionspartnerselskab
UNION therapeutics 87Annual Report 2021 Independent Auditors Report
This annual report contains forward-looking
statements. All statements other than state-
ments of historical facts contained in this
report, such as statements regarding future
results of operations and financial position,
business strategy, prospective products,
availability of funding, clinical trial results,
product approvals and regulatory pathways,
collaborations, timing and likelihood of suc-
cess, plans and objectives of management for
future operations, and future results of current
and anticipated products, are forward-looking
statements.
These forward-looking statements are based
on current expectations and beliefs, as well as
assumptions concerning future events. These
statements involve known and unknown risks,
uncertainties and other factors that could
cause actual results to differ materially from
the results discussed in the forward-looking
statements.
Forward looking
statements
Any forward-looking statement made in this
report speaks only as of the date of this report
and represents estimates and assumptions only
as of the date of this report.
Except as required by law, UNION assumes no
obligation to update these statements publicly,
whether as a result of new information, future
events or otherwise after the date of this report.
UNION therapeutics 88Annual Report 2021 Forward looking statements
forward looking statements
Page 13
Psoriasis
1 GlobalData, DRG report (2021): Psoriasis – Disease Landscape & Forecast. Published: March 31, 2021.
2 GlobalData, DRG report (2021): Psoriasis – Disease Landscape & Forecast. Published: March 31, 2021, and Publication: Armstrong et al.
(2021) Psoriasis Prevalence in Adults in the United States. JAMA Dermatol. Published online June 30, 2021.
3 Stern RS, Nijsten T, Feldman SR, Margolis DJ, Rolstad T. (2004) Psoriasis is common, carries a substantial burden even when not extensive,
and is associated with widespread treatment dissatisfaction. J Investig Dermatol Symp Proc. 2004;9(2):136-139.
Page 15
Atopic dermatitis
1 Silverberg JI. (2017) Public Health Burden and Epidemiology of Atopic Dermatitis. Dermatol Clin. 2017;35(3):283-289.
2 GlobalData, DRG report (2020): Atopic Dermatitis – Disease Landscape & Forecast. Published: November 12, 2020.
Page 16
Hidradenitis suppurativa
1 GlobalData report (2019): Hidradenitis Suppurativa – Epidemiology Forecast to 2028. Published: July 2019.
2 von der Werth JM, Jemec GB. (2001) Morbidity in patients with hidradenitis suppurativa. Br J Dermatol. (2001) 144:809–13.
Page 18
Niclosamide
1 Weiss et al. (2021) Niclosamide shows strong antiviral activity in a human airway model of SARS-CoV-2 infection and a conserved
potency against the Alpha (B.1.1.7), Beta (B.1.351) and Delta variant (B.1.617.2). PLoS One. Published: December 2, 2021, and TFF (2022)
Pharmaceuticals Announces Inhaled Niclosamide Significantly Inhibits Viral Replication of the Omicron Variant of
SARS-CoV-2. Published: February 24, 2022.
Page 19
COVID-19 and Immunocompromised patients
1 MacMillan (2022). What Does It Mean To Be ‘Immunocompromised’? Yale Medicine. Published: February 14, 2022.
Link: https://www.yalemedicine.org/news/what-does-immunocompromised-mean
Sources Company information
E-mail: in fo@uniontherapeutics .com
Phone: +4 5 61 7 7 7 4 3 5
CVR-nr.: 33 96 375 0
Auditors
EY Godkendt Revisionspartnerselskab
Established
October 10, 2011
Sources and Company information
UNION therapeutics 90Annual Report 2021 Sources and Company information
sources and company info
E-mail: info@uniontherapeutics.com
Phone: +45 61777435
CVR-nr.: 33963750
Production and layout: NOTED
“ UNION develops innovative drug candidates
to improve the quality of life for people with
immunological and infectious diseases.”