ANNUAL
Making a fundamental
difference for those who
need us most in medical
dermatology
REPORT
2023
T
able
of contents
Highlights
Letter from the Chair and the CEO
Financial
review
&
outlook
17
03
Consolidated financial statements
Income statement 39
LEO Pharma in brief
05
Sustainability and ESG
Statement of comprehensive income
39
2023 performance highlights
Key figures
Our business
06
Sustainability commitments
07
Sustainability governance
Developing people and attracting diverse talent
Advancing the standard of care in medical dermatology
22
Balance
sheet
40
23
Statement of changes in equity 41
24
25
Our strategy
09
Unite as one team
10
Innovate to address patient needs
11
Drive sustainable growth 14
Fund the future 15
Driving sustainable impact
ESG performance data
Corporate matters
Board of Directors
26
Parent Company financial statements
87
29
Management’s
Statement
102
33
Leave a legacy the next generations will be proud of 16
Board committees
34
Independent Auditor’s Report
103
Global Leadership Team
35
Risk management 36
INSTAGRAM
LINKEDIN
The ESG section on pages 21-31 represents LEO Pharma’s
compliance with the statutory disclosure pursuant to Sections
99a, 99b and 99d of the Danish Financial Statements Act.
HIGHLIGHTS
LETTER FROM THE CHAIR AND THE CEO
Delivering on our promise
2023 WAS A MILESTONE YEAR
for LEO Pharma as we committed to
delivering positive EBITDA, which is a first and necessary step towards
driving profitable and sustained growth towards 2026 and beyond. And we
successfully achieved this goal.
Just a few days into 2023, we took decisive actions in our transformation
towards becoming a global leader in medical dermatology. We streamlined
our research and development model with greater emphasis on external
innovation and partnerships. Additionally, we have optimized our global
product supply setup.
Together with changes in our commercial setup and support functions
in 2022, this has contributed to our competitiveness in developing and
Making a fundamental difference for those who need us most
in medical dermatology
The challenge of skin disease is immense and the number of underserved
indications is staggering. With our strong commitment to and legacy in
medical dermatology, we are prepared to address it.
Uniting as one team
Leadership is crucial in times of change, and in 2023 we continued to
strengthen our Global Leadership Team. We welcomed Jacob
Pontoppidan Thyssen as new Chief Scientific Officer, leading Research
and Early Development and appointed Kreesten Meldgaard Madsen as
Chief Development Officer. Together, they are
commercializing the best available innovation. This agile approach,
along with other achievements in 2023, underscores our ability to execute
strategic plans and follow through on our objectives.
Financial performance
We delivered positive EBITDA in line with the upwardly revised outlook
provided in September 2023. EBITDA for the year improved to DKK 551
million, corresponding to a 5% margin. This represents a DKK 2.1 billion
absolute increase compared to 2022 and a 20 percentage point margin
uplift. The strong uplift in performance was equally achieved due to
higher revenue growth, trimming our cost base and unwavering financial
discipline across all functions.
Advancing the
standard of care,
developing people,
attracting diverse
talent and driving
sustainable impact
are business
imperatives and
key to our success.
facilitating a faster and more focused process
from research to commercialization. Nathalie
Daste joined as EVP, Global People and Corporate
Affairs, to further develop our focus on people,
communications and ESG.
It is essential for LEO Pharma that the ambitions,
skills and creativity of our employees are
harnessed in a collaborative and efficient manner,
resulting in innovative patient solutions and
growth. To achieve this, we implemented several
new initiatives in 2023 to further strengthen our
Group revenue grew by 7% (10% in constant exchange rates) and dermatology
revenue grew by 11% (15% in constant exchange rates). This was driven by the
biologic Adtralza
®
/Adbry
®
as well as core brands such as Protopic
®
and the
Fucidin
®
range. Geographically, growth was driven across our markets from
North America, Europe and China to Rest of World.
We reported a net loss of DKK 3.6 billion. The result was negatively impacted
by increasing interest expenses, project impairments and tax asset
adjustments. Many of these factors are one-off.
culture throughout the organization. These initiatives include embedding a
new set of winning behaviors all the way from recruitment to performance
management. We have also reviewed our reward structure and emphasized
frequent interactions across all layers of the organization.
We believe that the initiatives are starting to payoff, as we ended the year
with an employee engagement survey showing positive and encouraging
trends in the response to LEO Pharma as a workplace. The survey revealed
a significant increase in overall employee engagement, now standing 6
percentage points higher than at the beginning of 2023, with a total score
of 78%. Regarding the statement I would recommend LEO Pharma as a great
PAGE 3
LEO PHARMA ANNUAL REPORT 2023
We will know our transformation
has been successful when we have a
proven track record of consistent growth
and profitability, along with an attractive
pipeline comprising several late-stage
assets that address underserved
dermatological disease areas.”
HIGHLIGHTS
place to work, favorable responses increased by 12 percentage
points to 68% of the respondents.
Innovating to address patient needs
In 2023, we continued to advance medical dermatology by
scouting for external innovation in areas with high unmet need.
An agile approach allows us to identify and maximize the
value of opportunities globally through co-creation and co-
development partnerships.
Latest, we have successfully completed and announced the
results of the pivotal Phase 3 trials DELTA 1
Delivering sustainable growth
Our aim is to deliver sustainable growth by maximizing the
potential of new product launches and the core portfolio,
leveraging our global footprint and entering strategic commercial
alliances.
In 2023, Adtralza
®
/Adbry
®
was the key driver of growth. The
product is now available in 19 markets as we in 2023 obtained
commercialization in Japan, Poland, Sweden, and Denmark.
Additionally, Adtralza
®
obtained marketing
The implementation of a new capital structure demonstrates our
owners' belief in the company and solidifies our ability to pursue
value-accretive business development opportunities. We have
a strong foundation for acting on strategic opportunities that
align with our growth objectives.
Leaving a legacy the next generation will be proud of
As a purpose-driven company, we focus on making a difference
and bringing positive impacts to patients, people and the
planet. This commitment is at the core of our dedication to
leave a legacy that future generations will be proud of. During
the year, we continued to improve our corporate maturity in
Looking ahead
We have the expertise to bring innovative medical dermatology
therapies to the market and have taken bold actions to
reshape our company, ensuring we remain a strong partner to
our stakeholders. We will know our transformation has been
successful when we have a proven track record of consistent
growth and profitability, an attractive pipeline with several late-
stage assets addressing underserved dermatological disease
areas and are attracting talent worldwide.
In closing, we want to thank all our colleagues once again for your
dedication and effort. Your hard work truly makes a difference,
and DELTA 2 as well as the extension study
DELTA 3 for our topical cream formulation,
delgocitinib, in treating moderate-to-severe
chronic hand eczema and submitted a
marketing authorization application to EMA.
Currently, we are assessing ways to bring
delgocitinib to the U.S. Additionally, we
progressed temtokibart, an investigational
anti-inflammatory biologic, into Phase 2b for
atopic dermatitis.
As part of the streamlining of our Research &
Development model, we have also sharpened
our business development strategy, targeted
It is essential for
LEO Pharma that
the ambitions,
skills and creativity
of our employees
are harnessed in a
collaborative and
efficient manner,
translating into
innovative patient
solutions and growth.
approval in South Korea for patients with
moderate-to-severe atopic dermatitis.
In Germany, the first market to launch, a new
prefilled pen is offering patients an improved
treatment experience. In addition, treatment
with Adtralza
®
/Adbry
®
was expanded to include
adolescent patients in the majority of markets
including the U.S. The ongoing geographical
expansion demonstrates our commitment to
making our therapies accessible to a wider
patient base worldwide.
Funding the future
providing access to healthcare and assessed our maturity in
patient engagement.
Further driving diversity, equity and inclusion in our organization
remains high on our agenda as we strongly believe in this to foster
a good culture and further improve performance. In 2023, we
achieved a 59/41 and 50/50 male/female gender distribution
within senior and middle management, respectively. This progress
indicates that we are well on our way to achieving our 2025
target of at least a 45% representation of the underrepresented
gender at both management levels.
As part of our science-based climate target, we optimized our
energy efficiency through multiple initiatives. This resulted in a 3.1%
and we are highly encouraged by the results you have achieved.
We also extend our gratitude to our collaboration partners
across the world and to the millions of patients who put their
trust in the LEO Pharma brand every day. We remain energized
to take the next steps in making a fundamental difference for
those who need us most in medical dermatology.
at value-accretive investments. As a result of this, we acquired
Timber Pharmaceuticals in January 2024 and their TMB-001
program adds an attractive late-stage asset to our medical
dermatology pipeline with the potential to strengthen our
presence in the U.S. Importantly, it provides us with an asset which
shows promising potential in helping patients suffering from a
debilitating disease, congenital ichthyosis, for which there are
currently no approved treatment options available. The asset is
currently in Phase 3 and results are pending.
With
a
clear
strategic
direction
that
plays
to our strengths and a committed leadership team, we are
well-positioned to achieve sustainable growth, optimize
financial maneuverability and capitalize on attractive market
opportunities.
In 2023, we took significant steps to prioritize and simplify our
operations while maintaining financial discipline and achieving
high revenue growth.
reduction in our own CO2e emissions compared to 2022, and the
share of suppliers committed to reducing their climate impact
(our Scope 3) increased to 83%. A key focus of our sustainability
activities in 2023 has been to prepare for reporting under the
forthcoming EU Corporate Sustainability Reporting Directive
(CSRD). This work will continue in 2024 and 2025.
Jesper Brandgaard
Chair of the Board of Directors
Christophe Bourdon
CEO
PAGE 4
LEO PHARMA ANNUAL REPORT 2023
HIGHLIGHTS
LEO Pharma
in brief
HOW WE CREATE VALUE
Our people and resources
•
Talented and dedicated employees
•
Raw materials
•
Financial capital
•
Partnering to innovate
•
Winning behaviors
Global team of 4,300 people
Research & scouting
In joint innovation with partners and academia
across the globe, we are constantly exploring
new indications, molecules and drug technology
platforms, aiming to find and develop first-in-disease
and best-in-class treatments.
LEO PHARMA
is an independent, innovation-based
pharmaceutical company founded in 1908 and
headquartered in Ballerup, Denmark. We are com-
mitted to making a fundamental difference for those
who need us most in medical dermatology. From our
earliest history, LEO Pharma has gone beyond con-
ventional approaches to serve patients and meet
their needs.
We focus on therapies for the treatment of skin
diseases, such as psoriasis, eczema, acne and in-
fections
–
conditions that cause serious physical
and social discomfort for millions of patients around
the world. In addition, we offer an anti-coagulant
treatment for cancer patients and other specialty
patients.
Guided by our purpose of advancing the standard
of care for the benefit of people with skin conditions,
their families and society, we focus on where we can
make a difference and bring a positive impact to pa-
tients, people and the protection of our planet. We
believe that our main contribution to the next gen-
erations is to improve quality of life for people living
with skin conditions and act responsibly in everything
Manufacturing
Securing competitive, reliable and high-quality
product supply for our therapies from own
manufacturing sites and through partnerships
with CMOs and API manufacturers.
6 manufacturing sites
12 CMOs
9 API manufacturers
Fit-for-purpose development
Advancing innovative medical dermatology
therapies through clinical development in
a flexible operating model to capture both
internal and external innovation.
Commercial
execution
Our value creation
we do.
Distribution
Delivering our commercial
products via efficient,
global supply chains.
Tailoring our commercial approach to
local and regional needs, ensuring a
solid understanding of market dynamics.
Marketing through own sales force as
well as Alliance partners.
Our therapies are available in 88
countries
•
Making a fundamental difference for those who
need us most in medical dermatology
•
Advancing standard of care
•
Sharing scientific know-how
•
Developing people and attracting diverse talent
More than 95 million patients served worldwide
PAGE 5
LEO PHARMA ANNUAL REPORT 2023
2023
+15%
48%
+12
HIGHLIGHTS
GROUP
REVENUE
DKK billion
Other
Dermatology
+10% 19
10.0
10.6
11.4
GROUP REVENUE GROWTH*
(7% reported)
* In constant exchange rates
ADTRALZA
®
/ ADBRY
®
AVAILABLE
IN 19 MARKETS
2021
2022
2023
EBITDA MARGIN
%
DERMATOLOGY REVENUE GROWTH*
(11% reported)
* In constant exchange rates
FEMALE LEADERS
% of all leaders in LEO Pharma
10
5
0
-5
-
10
-15
-20
-
20%
-15%
5%
↓
RED
UCTI
O
3
N
IN
S
C
9
OPE
1 A
N
%
D
2
CO
2
e
EMISSIONS
COMPARED
TO THE 2019 BASELINE
pp
*
WOULD RECOMMEND LEO PHARMA
AS A GREAT PLACE TO WORK
( total score: 68%)
-25
2021
2022
2023
* Percentage points
Annual Employee Engagement Survey conducted
end-2023
PAGE 6
LEO PHARMA ANNUAL REPORT 2023
2.4
2.5
7.3
9.0
2.7
PERFORMANCE
HIGHLIGHTS
HIGHLIGHTS
Key figures
(DKK million)
Income statement
Group revenue
Hereof dermatology revenue
Gross profit
R&D costs
Adjusted EBITDA**
Operating profit before depreciation
and amortization (EBITDA)***
Operating profit (EBIT)
Net financials
Profit before tax
Net profit for the year
Financial position
Investments in property, plant and equipment
Non-current assets
Current assets
Total assets
Equity
Cash flow
Cash flow from operating activities
Free cash flow
Operating net working capital
Net working capital
Net interest-bearing debt
2021
2020
2019
9,957 10,133 10,805
7,259 6,894 7,069
6,048 6,773 7,455
3,101 2,020 2,444
(1,731) 820 (130)
(1,957) 521 (130)
(4,156) (726) (1,313)
(607) (354) (363)
(4,763) (1,080) (1,705)
(4,868) (951) (1,287)
800 1,164 1,328
15,110 15,243 15,339
8,585 8,610 9,421
23,695 23,853 24,760
5,537 6,947 8,088
(2,498) (737) (232)
(3,869) 314 (6,797)
4,539 3,775 4,122
1,956 2,689 4,098
11,144 10,144 9,682
Environmental, social and governance
Average number of employees
Number of employees at year-end
Number of patients*****
Total CO
2
e (Scope
1
and 2, market based)
Scope 3 Supplier engagement
Share of renewable electricity
Employee turnover rate
Lost Time Injury (LTI) rate
Employees completing global annual Code of Conduct training
Gender diversity
-
All managers
Gender diversity - Board of Directors
2021
2020
2019
(2%)
(6%)
4%
(1%) (5%) 2%
5%
(2%)
13%
7% (1%) 10%
61%
67%
69%
31%
20%
23%
(17%) 8% (1%)
(20%)
5%
(1%)
(42%) (7%) (12%)
2021
2020
2019
5,804
5,955
5,820
5,612 5,803 6,078
84,686 93,262 92,192
23,144 31,130 38,771
65
-
-
92 54
11
20 14 17
1.7
1.9
1.3
96
-
-
55/45
56/44
55/45
87.5/12.5 71/29 75/25
* Applied exchange rate for EUR in 2023: 7.4500 (average) and 7.4529 (end)
** Adjusted EBITDA derived from EBITDA + transformation and restructuring costs of DKK 75m (2022: DKK 321m)
*** EBITDA derived from operating loss (EBIT) DKK 1,699m + depreciation and amortization for the period of DKK 2,250m (2022: DKK 1,737m)
**** Updated compared to ESG data summary in LEO Pharma Sustainability Report 2022
***** Number of patients is derived from sold units and estimated average dose consumed per patient
PAGE 7
LEO PHARMA ANNUAL REPORT 2023
1,529
10,641
8,133
6,283
2,485
(228)
(782)
(375)
(4,093)
(484)
1,647
14,765
8,167
22,932
1,946
(262)
(2,274)
(334)
(3,750)
778
5,456
481
2,355
1,492
15,027
(2,577)
5,796
3,584
8,679
20,951
4,525
551
(1,093)
(2,792)
(3,607)
1,874
Revenue growth in constant exchange rates (CER)
Dermatology revenue growth
12%
Dermatology revenue growth in constant exchange rates (CER)
(12%)
(15%)
(31%)
15%
16%
no.
5,252
no.
in thousands
LTI rate
97
ratio men/women
ratio men/women
87.5/12.5
23,555
2.5
Our
business
LEO Pharma is well-
positioned to become a
global leader in medical
dermatology. The direction
forward is clear and in 2023
we took additional steps to
deliver on our strategy.
Our strategy 09
Unite as one team 10
Innovate to address patient needs 11
Drive sustainable growth 14
Fund the future 15
Leave a legacy the next generations will be proud of 16
OUR BUSINESS
Our strategy
In early 2023, LEO Pharma announced further actions to drive growth
and innovation on our path to become a global leader in medical
dermatology. The priority for the immediate future is to build on
these actions by targeting consistent growth and profitability, as
we work to continually increase our relevance to people with skin
diseases.
Unite as one team
–
to drive results together. Via strong leadership and
shared goals, we continue to develop LEO Pharma
as the workplace for diverse talent who share
a passion for delivering on our purpose. It
requires further developing our inclusive
culture, holding ourselves accountable
to our values and Winning
Behaviors and remaining
curious to learn and develop.
Make
a
Innovate to address
WE HAVE already made our mark with ingenuity, innovation and
an eye for new opportunities and trusted partnerships.
Over the past few years, we have successfully reshaped LEO
Pharma to gear our company for the future, and we are now
ready to take the next steps.
The challenge of skin disease is immense, and the number of
hard-to-treat indications is staggering. Millions of patients suffer
from clinical symptoms for which we have no answers or only
answers that fail to advance the quality of their lives.
We are ready to address the challenge. It is an area with un-
tapped potential and attractive opportunities for us to grow.
We have the expertise to bring solutions to these underserved
conditions and we have taken bold action to reshape our com-
When we look into the future, we will know our
commitment has paid off when we have an
attractive pipeline with several late-stage as-
sets addressing underserved dermatological
disease areas, are attracting talent around the
world and have a proven track record of consis-
tent profitability.
LEO Pharma is well-positioned to become a
global leader in medical dermatology. We are
already making progress and, together, we will
keep leading the way.
Our strategy unfolds from our strong culture, firmly
rooted in our core values:
Leave a legacy the next
generations will be proud of
–
by making a difference in the
world — improving skin health by
addressing unmet needs and acting
responsibly in everything we do.
fundamental
difference for
those who need
us most
patient needs
–
by developing an even deeper
understanding of hard-to-treat skin
diseases and by forging external
partnerships with innovators while we
evolve our current offerings.
pany to remain a strong partner to patients with the ability to
continue to invest in innovation.
We know our mandate goes beyond nurturing and selling
life-changing products. Our commitment to act with integrity
and responsibility and as a profitable company that can stand
on its own will be key to our success. Ultimately, we aim to make
a fundamental difference for those who need us most in medical
dermatology.
•
Integrity
•
Customer focus
•
Innovation
•
Passion
•
Adaptability
Fund our future
–
by operating profitably,
making value-accretive
investments and attracting
investors who recognize
our way of working and
our focus on medical
dermatology.
Drive sustainable
growth
– by tailoring our commercial
approach to local and
regional needs, ensuring
a solid understanding of
each market’s dynamics to
maximize the potential of
our innovative therapies.
PAGE 9
LEO PHARMA ANNUAL REPORT 2023
OUR BUSINESS
Unite as one team
It is key to LEO Pharma to harness the ambitions, skills and creativity of its
employees in a collaborative and efficient way to drive growth and innovation.
To this end, we implemented several new initiatives in 2023 to further strengthen
our culture and leadership throughout the organization.
+6
pp
*
Overall employee
engagement score
(total score: 78%)
+8 pp
Proud to work at
LEO Pharma
(total score: 79%)
+12 pp
Would recommend
LEO Pharma as a
great place to work
(total score: 68%)
* pp = percentage points
Source: Annual Employee Engagement
Survey conducted end-2023
Nurturing a winning culture
In 2023, LEO Pharma launched a new corporate strategy
and in this context defined and rolled out a set of Winning
Behaviors
designed to promote collaboration, efficiency,
simplification and accountability in our ways of working.
By inspiring every leader and employee to unite as one
team and strive for impact, our
Winning Behaviors
nur-
ture a culture that drive us towards our strategic goals.
This focus on driving clarity, alignment and engagement
is supported by our global townhall meetings, now con-
ducted on a monthly basis.
Strengthening
leadership
and
strategic
clarity
Throughout 2023, we have worked to embed the
Winning
Behaviors
from the way we recruit to performance man-
agement, people development, reward and recognition.
Recognizing the critical role of leaders, we have priori-
tized creating clear expectations for all leadership levels
and ensuring clarity about what leadership means at LEO
Pharma. An increased meeting frequency with monthly
meetings in the global senior leadership forum, including
bi-annual face-to-face sessions, has accelerated align-
ment and common direction.
Leadership at LEO Pharma is further supported by the
introduction of a new program,
Leadership and Winning
Behaviors
. The program introduces leaders to tools and
approaches fostering the desired mindset and behaviors
in their team and provides them with a common language
of leadership. Key focus areas include Building Strong and
Aligned Leadership Teams
and
Improving Interactions
and Collaboration
.
Employee Engagement Survey
An Engagement Survey conducted end-2023, with a par-
ticipation rate of 83%, provides a strong outlook for LEO
Pharma as a workplace, showing a 12 percentage points
increase since early 2023 in share of employees that
would recommend LEO Pharma as a great place to work.
Understanding of LEO Pharma's strategy, a key focus for
us, has increased by 7 percentage points. This feedback
documents the success of the engagement initiatives
conducted in 2023.
Furthermore, strong scores for diversity and inclusion as
well as positive ratings for immediate manager and team
support underline our robust team and management cul-
ture
–
a key lever for achieving our strategic ambitions. To
further support employee engagement, we will address
areas such as effective decision-making, clarity in roles,
performance feedback and accountability.
Employee Share Purchase Plan
In November 2023, all LEO Pharma employees were invited
to invest in employee shares. 41% enrolled in the program.
The aim is to enable all employees to benefit from the ex-
pected future value creation in the company, recognizing
the key role of the employees in driving the success of LEO
Pharma going forward. A similar share purchase plan was
launched in 2021. 71% of those who signed up for employee
shares back then have decided to do so again.
Our Winning Behaviors
Collaborate & put LEO Pharma first
•
Work and think as one team
•
Feedback is a gift – to give and receive
Prioritize & simplify
•
Ruthlessly prioritize
•
Simplify and say no
Be accountable & own it
•
If you see it, you own it
•
Always strive for impact
PAGE 10
LEO PHARMA ANNUAL REPORT 2023
OUR BUSINESS
Innovate to address
patient needs
KEY R& D MILESTONES 2023
FILED
At LEO Pharma, we are advancing the standard of care for the
increasing number of people living with skin diseases. We deliver
differentiated, innovative solutions addressing high unmet needs
to make a fundamental difference for those who need us most in
medical dermatology.
DELGOCITINIB
(LP0133): Our topical pan-JAK inhibitor, currently being investigated for the treatment of
adult patients with moderate-to-severe chronic hand eczema (CHE), has successfully completed the pivotal
Phase 3 clinical trials. Subsequently, a Marketing Authorization Application has been submitted to the European
Medicines Agency, while development programs are continuing in China and the Delta Teen trial continues in
Europe and North America. If approved, delgocitinib will be the first topical treatment specifically targeting
patients with moderate-to-severe CHE.
PHASE 3
TMB-001
:
A topical isotretinoin in a patented delivery system under development by Timber Pharmaceuticals,
Inc. for use in patients with moderate-to-severe subtypes of congenital ichthyosis. This term encompasses
a range of rare and debilitating skin diseases where patients currently have no FDA-approved treatment
options. The phase 3 clinical trial for TMB-001 is currently recruiting patients.
IN 2023
,
we remained committed to this ambition. We imple-
mented significant changes to our research and development
model with an emphasis on externally sourced innovation to
strengthen our pipeline. Another key priority is to maximize the
value for patients of our late-stage assets. This is achieved by
ensuring competitive labels and facilitating swift approvals and
launches bringing first-in-disease and best-in-class solutions
to patients as quickly as possible. LEO Pharma has entered a
strategic partnership with ICON which enables us to scale up
our clinical trial execution in a way that is both patient-centric
and cost-effective.
To maximize the potential of our early-stage and late-stage
pipeline activities, the Research and Development organiza-
tion has been divided into two distinct areas, Research & Early
Development and Development, both represented in the Global
Leadership Team.
Bringing differentiated innovative solutions
to market via partnerships
Our new innovation strategy leverages external innovation to
discover and develop treatments for patients living with skin
diseases. This means that we proactively scout for treatments
for skin conditions characterized by a high unmet medical need
and burden of disease for patients. Our agile research approach,
with strong scientific capabilities, allows us to identify and as-
sess external opportunities and further maximize the value of
these in co-creation and co-development with partners across
the globe.
The partnership approach is well proven in LEO Pharma.
Partnering has brought us assets like Kyntheum
®
, which was
launched in Brazil in 2023 as the first market outside the EU, and
Adtralza
®
/Adbry
®
, which is now available in 19 countries.
Partnerships will also pave the way for near-term launches. The
rights to delgocitinib were acquired from Japan Tobacco Inc.
in 2014 and a marketing authorization application has been
submitted to the European Medicines Agency currently awaiting
approval. During 2023, LEO Pharma announced the results of
the pivotal Phase 3 trials DELTA 1 and DELTA 2 as well as the
extension study DELTA 3 with delgocitinib. Both pivotal trials
achieved statistical significance for primary endpoints and all
key secondary endpoints. These trials form the clinical basis for
the submission to the regulatory authorities.
In January 2024, LEO Pharma finalized the acquisition of the
TMB-001 asset and concluded the transfer of employees from
U.S.-based Timber Pharmaceuticals. TMB-001 is currently in
Phase 3 for congenital ichthyosis, a group of rare and debilitating
skin diseases without FDA-approved treatment. It has received
Orphan Designation, Breakthrough Therapy Designation and
Fast Track Status from the FDA. This transaction adds a prom-
ising late-stage asset to LEO Pharma's medical dermatology
pipeline and strengthens our presence in the U.S.
PHASE 2B
TEMTOKIBART
(LP0145): LEO Pharma’s investigational IL-22RA1 anti-inflammatory monoclonal
antibody has been progressed into Phase 2b trial for moderate-to-severe atopic dermatitis (AD).
DISCONTINUED
IZUFORANT
(LP0190): In October, LEO Pharma and JW Pharmaceutical announced the completion of a
Phase 2a/b trial with izuforant in adults with moderate-to-severe atopic dermatitis (LP0190-1488). The study
did not meet the primary endpoint. As a result, it has been decided to terminate the program and end the
licensing agreement with JW Pharmaceutical, who will regain all rights to izuforant.
PHASE 2A
ANTI IGE+B- CELL
(LP0201): LEO Pharma acquired the world-wide rights in 2020 to develop and
commercialize the FB825 monoclonal antibody that Oneness Biotech and Microbio Shanghai continue testing
in a Phase 2a trial in allergic asthma in Taiwan.
PHASE 1A
LEO 158968
(LP0189): In February 2023, the LEO 158968 monoclonal antibody for inflammatory diseases
with high unmet medical need was progressed into clinical development by the initiation of a Phase 1a
First-in-Human study.
PRE-CLINICAL
IL- 17A PPIm : LEO Pharma successfully progressed a new potent and selective IL-17A
Protein-Protein-Interaction modulator candidate (LP0128) into preclinical development with a promising
safety profile and low predicted therapeutic dose.
PAGE 11 LEO PHARMA ANNUAL REPORT 2023
Functional impairment
OUR BUSINESS
CASE: CHRONIC HAND ECZEMA
Striving to make a
difference for people living
with chronic hand eczema
Up to one in four people living with chronic hand eczema are unable
to work, and one in eight have to leave their job and career entirely,
leading to a significant burden of cost on healthcare systems and
insurers.
CHRONIC HAND ECZEMA CAN BE A HE AVY BURDEN
Symptoms and triggers:
Pain and swelling of the hands
3
Need to avoid environmental triggers
3
Itch & burning skin
3
WITH KEY SYMPTOMS
such as itch and pain, chronic hand
eczema (CHE) is an inflammatory skin disease defined as hand
eczema lasting for more than three months or relapsing twice or
more within a year. Approximately one in ten people suffer from
the disease
1
.
CHE is a common and persistent disease that can significantly
impact quality of life. Despite this, CHE is often under-recognized
and undertreated, leading to unnecessary suffering for patients
and high healthcare costs.
The impact on physical functioning can make it difficult to touch
objects due to pain or swelling of the hands. Additionally, the
visibility of the affected hands contributes to a considerable
psychological burden, including anxiety and low self-esteem.
For people in high-risk occupations, such as nurses, hairdressers,
chefs, cleaners and caregivers, CHE is the most common occu-
pational skin disease with a prevalence of up to 40%
2
.
For these people, the consequences of their condition are more
than skin deep and for them, the right treatment would have an
impact that goes beyond the skin.
For anyone living with chronic hand eczema, this can have
a significant impact on their quality of life. Not only can it affect
their ability to do their job. For many, they may have to give up on
their dream or career because of it. Imagine that you have worked
to achieve a goal in years, and then you have to let it go, because
your hands can no longer endure the pressure. That is the daily
reality for so many living with CHE, and there is a high unmet need
for new treatment options, specifically targeting this debilitating
disease.”
Jacob Pontoppidan Thyssen
Chief Scientific Officer
Disfigurement associated with CHE can lead to:
Disruption of normal family life
3,6
Embarrassment and anxiety
3,6
Self-isolation
3,6
1
Thyssen JP, Johansen JD, Linneberg A, Menné T. The epidemiology of hand eczema in the general population--prevalence and main findings. Contact Dermatitis. 2010;62(2):75-87..
2
Thyssen JP, Schuttelaar MLA, Alfonso JH, et al. Guidelines for diagnosis, prevention, and treatment of hand eczema. Contact Dermatitis. 2022;86(5):357-378.
Alfonso JH, Bauer A, Bensefa-Colas L, et al. Minimum standards on prevention, diagnosis and treatment of occupational and work-related skin diseases in Europe
-
position paper of the
COST Action StanDerm (TD 1206). J Eur Acad Dermatol Venereol. 2017;31 Suppl 4:31-43.
3
Grant L, Seiding Larsen L, Burrows K, et al. Development of a Conceptual Model of Chronic Hand Eczema (CHE)
Based on Qualitative Interviews with Patients and Expert Dermatologists. Adv Ther. 2020;37(2):692-706.
4
Armstrong A, Hahn-Pedersen J, Bartlett C, Glanville J, Thyssen JP. Economic Burden of Chronic Hand Eczema: A Review. Am J Clin Dermatol. 2022;23(3):287-300.
5
Cortesi PA, Scalone L, Belisari A, et al. Cost and quality of life in patients with severe chronic hand eczema refractory
to standard therapy with topical potent corticosteroids. Contact Dermatitis. 2014;70(3):158-168.
6
Agner T, Elsner P. Hand eczema: epidemiology, prognosis and prevention. J Eur Acad Dermatol Venereol. 2020;34 Suppl 1:4-12.
PAGE 12
LEO PHARMA ANNUAL REPORT 2023
Psychological impairment
STUDY FINDINGS
55%
of patients spontaneously
reported difficulty holding objects in
qualitative interviews
3
65% reported limited ability to
carry out domestic chores
3
Up to 25% of patients with CHE
identified in a literature review were
unable to work
4
3-25%
had left their current
job due to CHE
4
More than
70%
of patients with
severe CHE reported problems in
performing usual activities
5
80%
of patients spontaneously
reported embarrassment with the
appearance of the hands in interviews
3
OUR BUSINESS
CASE: CHRONIC HAND ECZEMA
Interview with Birgitte
–
a trained nurse, who has lived
with chronic hand eczema for most of her life.
Eventually my hands were so bad that
I got compensation for an occupational injury…"
"Living with CHE is a lifestyle. Some things you have to be mindful
and careful of. But you have to prioritize your life. Otherwise, you
would only be able to sit at home, looking at your hands and
missing out.
The pain feels a bit like a skin scrape you get from falling off
a bike. Or the feeling of hand sanitizer on a paper cut. When I
have an eczema flare, on a scale from 1-10 I’m never below a 2.
But the itch is the worst. I almost constantly have blisters on
my hands, which itch terribly. Like a really intense mosquito bite.
Even though you know not to, you eventually scratch anyway.
Sometimes I even have to wear gloves at night, so I don’t scratch
open the blisters in my sleep
–
causing them to ooze and sting
as well.
The oozing is probably what I am most conscious of. I find it flat
out gross. So I’m constantly aware and alert, worrying that my
hands could leave a mark for others to see.
I have had CHE since I was a teenager. But I have always refused
to let it hold me back. I dreamt of becoming a nurse
–
so I did.
Today, I have worked as a nurse in more than 35 years. Working
in the intensive care unit was my dream job, but it turned out
that it was also a job, where I constantly had to wash my hands.
During this time of my life, my hands were in the worst condition
they have ever been. I had to wash my hands between 40 and
60 times a day at work
–
and my hands simply could not take
it.
Several of the people I have worked with have had to quit and
leave their dream jobs because of CHE. I think that is really sad.
Eventually my hands were so bad that I was granted compen-
sation for an occupational injury. That allowed me to work fewer
hours and I moved to the anesthesiology department with fewer
patients and more time with each of them, which means that I
wash my hands relatively less often.
That has been really good for my hands
–
and maybe for the
rest of me, too. I believe that
if
the body is feeling good,
it
im-
pacts my eczema.
You get to know your body better over time. There will be good
times and less good times, and it does come with limitations for
what you can do. Then it is up to you as a person not to feel let
down. To be strong and to accept with yourself that ‘I will feel
better again’.
Surely there will be times when you have to say no to things.
Like when my friends invite me to a 4-hour cooking class, I know
that my hands will struggle for a long time after that. So I turn it
down
–
and move on."
PAGE 13
LEO PHARMA ANNUAL REPORT 2023
19
OUR BUSINESS
Drive sustainable growth
Acne/Rosacea
Other
dermatology
3%
3%
LEO Pharma delivered organic revenue growth of 10%
(CER) in 2023 and a dermatology revenue of 15% (CER)
with significant contributions from the recent launches of
Adtralza
®
and Adbry
®
, supported by profitable growth in
core product lines.
FROM A LONG-STANDING, strong European position in topical dermatolo-
In 2023, Adtralza
®
was commercially launched in Japan, Poland, Sweden
and Denmark. Adtralza
®
also obtained approval from Korea’s Ministry of
Food and Drug Safety for patients suffering from moderate-to-severe
atopic dermatitis. The approval covers both adults and adolescents.
To further solidify its market position, a new prefilled pen was launched
in Germany offering patients an improved treatment experience.
Additionally, treatment was expanded to include adolescent patients in
most existing markets.
In December 2023, the U.S. Food and Drug Administration expand-
ed the approval of Adbry
®
to include patients aged 12-17 years with
moderate-to-severe atopic dermatitis.
Skin infection
20%
2023 DERMATOLOGY
REVENUE BY
DISEASE AREA
42%
Psoriasis
ADTRALZA
®
/
ADBRY
®
gy, we aim at delivering sustainable growth by maximizing the potential
of new product launches, continuing global expansion, leveraging the
core portfolio and entering strategic commercial alliances.
LEO Pharma holds a comprehensive portfolio of treatment options for
disease management in both psoriasis and atopic dermatitis. Our treat-
LEO Pharma is committed to continuing our efforts to bring new and
innovative treatments to the market, helping patients around the world
receive the care they need. In 2023, pre-launch activities for delgocitinib
were scaled up globally, including the assessment of ways to bring del-
gocitinib cream to the U.S. Delgocitinib is designed to address the needs
China
Eczema
32%
IN 19 MARKETS
ment options help patients along the entire disease spectrum from mild
and moderate to severe disease states.
Based on a solid understanding of each market’s dynamics, we tailor the
commercial approach to local and regional needs, thus continuously
advancing the standard of care for those patients who need us most.
Innovative portfolio
Adtralza
®
/Adbry
®
was a key growth contributor to dermatology revenue
in 2023 across the main European markets and in the U.S. Its position is
already well established with a satisfactory double-digit market share
so far across several markets reached within the first 12-18 months since
launch. Market positioning was further strengthened by the implemen-
tation of strategic and scientific programs, including 36 publications and
events designed to educate healthcare professionals on the latest de-
velopments within treatment of moderate-to-severe atopic dermatitis.
We consistently invest in scientific activities to further differentiate our
medicines, ensure the appropriate use of them and advance patient
outcomes.
Adtralza
®
/Adbry
®
is now available in 19 markets. It provides a new treat-
ment option for atopic dermatitis patients whose disease is not ade-
quately controlled with topical therapies and where such therapies are
not advisable.
of patients suffering from moderate-to-severe chronic hand eczema
(CHE). If approved, it will be a first-in-class topical JAK-inhibitor.
Core portfolio
LEO Pharma’s core business remains a source of steady cash flows, ex-
hibiting strong historical growth and profitability. The core brand names,
such as Kyntheum
®
, Enstilar
®
, Protopic
®
, Daivobet
®
and Fucidin
®
, enjoy
a loyal customer base, and we consistently leverage our commercial
infrastructure for initiatives supporting long-term growth.
Our core portfolio accounts for a significant share of total revenue and
delivered growth of 2% across our affiliates and in our Alliance partner
markets.
The U.S.
Since the commercial launch in the U.S., Adbry
®
has become a significant
growth driver. Our product strategy and commercial execution have en-
abled us to leverage our commercial platform for growing U.S. revenue
by 124% in 2023. We will continue to refine our messaging, strengthen
access to health care professionals and tailor commercial activities to
maximize the potential for Adbry
®
. In addition to the initial preparations
for launching delgocitinib, we are monitoring potential bolt-on acquisi-
tions to further underpin future growth, such as the recent acquisition of
the late-stage asset TMB-001 for the treatment of congenital ichthyosis.
China is expected to soon become one of the largest healthcare markets
globally, and dermatology is growing rapidly in the country. Our revenue
in China grew by 8% in 2023 with strong performance in the professional
hospital setting as well as in online and offline channels. By focusing on our
core strengths and leveraging our deep dermatology knowledge, we are
well-positioned to expand both the innovative and core portfolios in China.
Alliance markets
Our Alliance operating model is characterized by trusted and long-term
partnerships. In 2023, we implemented an improved, and significantly
simplified, model for operating with our Alliance partners, making this an
efficient and market specific approach that allows us to make our med-
icines available in more geographies. The Alliance markets delivered 4%
growth in 2023, driven mainly by the core portfolio.
Thrombosis
Our Thrombosis Business Unit offers a heparin-based anti-coagulation
treatment option for cancer patients and other specialty patients. 2023
was a challenging year with changing market dynamics and a contraction
of our core market. The thrombosis business is present in 24 markets with
an operating model comprising affiliates and Alliance partner markets.
In 2023, the business experienced a revenue decline of 4% compared to
2022.
PAGE 14
LEO PHARMA ANNUAL REPORT 2023
321
75
7,856
6,955
OUR BUSINESS
Fund the future
We will continue to drive innovation, growth and operational
efficiency to optimize financial maneuverability and capitalize
on attractive market opportunities.
LEO PHARMA
operates in an attractive and growing
medical dermatology market with significant unmet pa-
tient needs.
With a clear strategic direction playing to our strengths
TOTAL OPERATING COSTS*
Operating costs
Restructuring costs
DKK million
and a committed and capable leadership team, LEO
Pharma is well-positioned to achieve sustainable and
profitable organic growth, supported by selective busi-
ness development activities, and we will continue our
diligent execution of the efficiency programs to lower
LEO Pharma’s cost base.
We took important steps in 2023 with uncompromising
prioritization and simplification in our operations, financial
discipline and high revenue growth across markets and
business areas.
In September 2023, we announced a new capital struc-
ture. The LEO Foundation converted shareholder loans of
above DKK 5.5 billion to equity, while The LEO Foundation
and Nordic Capital together provided an additional cash
injection of around DKK 750 million. LEO Pharma’s bank
syndicate provided a new DKK 1.5 billion credit facility,
and we also obtained improved terms and extension of
our existing bank financing. The new capital structure
solidifies our ability to pursue value-accretive business
development opportunities while supporting continued
2021
-
1%
-
14%
2022
2023
long-term growth. * Excluding amortizations, depreciations and impairment.
PAGE 15
LEO PHARMA ANNUAL REPORT 2023
OUR BUSINESS
Leave a legacy the next
generations will be proud of
As a company committed to advancing the standard of care for the
benefit of people with skin conditions, their families and society, we
focus on where we can make a difference and bring a positive impact
to patients, people and the protection of our planet.
Partners, a global health NGO, supporting people in disaster-hit
and vulnerable communities to get vital medicines.
Develop people and attract diverse talent
We aim to create a workplace that is vibrant and dynamic and
where diverse voices and experiences are celebrated. Diversity,
In 2023 we reached an adjusted gender pay gap of 1.8%, which
refers to the wage difference between genders after accounting
for factors like experience, job level, education and occupation.
Drive sustainable impact
We recognize that we play a role in minimizing negative impact
>95
MILLION
PATIENTS SERVED WORLDWIDE
WE BELIEVE
that our main contribution to leaving a positive
legacy to the next generations is to pursue our focus on advanc-
ing the standard of care for people living with skin conditions as
well as holding ourselves to high standards in everything we do.
Advance the standard of care
Our commitment to increase the accessibility
equity and inclusion are critical elements to remain at the fore-
front of understanding and meeting the unique needs of patients
all over the world. This is reflected in several people processes,
such as our recruitment and ongoing leadership training, with the
purpose of nurturing a culture thriving on diverse perspectives
and inclusive practices. We believe that our employees are es-
sential for achieving our strategic ambitions
on climate and reducing the environment footprint from our
business while respecting the need for resilient operations. At
the same time, we constantly seek to prepare LEO Pharma for
the dynamic nature of the current business landscape, emerging
societal challenges as well as new rules and regulations.
We are committed toaddressing climate change and contributing
of innovative treatments and care to improve
patients’ quality of life means that we always
We celebrate our differences
and believe that our diverse
and it is key that our leaders support each
employee, ensuring that they
to a more sustainable future for all. Our science-based climate
targets
help
us
align
our
business
practices
1.8%
strive to provide first-in-disease or best-in-
class solutions, competitive labels, and that
we facilitate swift approvals and launches of
products. Today, our therapies are available in
88 countries and in 2023, we served more than
95 million patients worldwide.
perspectives, backgrounds and
attitudes are what enable us to
make the best decisions for LEO
Pharma and help us understand
patients better.”
Nathalie
Daste
have the skills required in their
roles today and in the future.
To further develop our business
and organization we want to
nurture diversity across our
global team. Our diversity,
Since 2019, we
have successfully
reduced our Scope
1 and 2 CO2e
emissions by 39%.
with global sustainability objectives and ensure
direction in our work to reduce negative impact on
the environment. In 2023, we reduced our Scope 1
and 2 CO2e emissions by 3.1% compared to 2022.
83% of our suppliers (by emissions) have set their
own targets validated by the Science Based
Targets initiative or announced commitments to
ADJUSTED GENDER
PAY
GAP*
To further evolve our understanding of how to
help the most underserved patients in medical
dermatology, we continuously work to integrate
Executive Vice President,
Global People & Corporate
Affairs
equity and inclusion manifesto
Curiosity Beyond
emphasizes the importance
of being curious about each other, the world,
reducing CO2, representing an increase of 17 percentage points
compared to 2022.
NATIONALITIES
REPRESENTED
AMONG EMPLOYEES
patient insights in our value chain. Based on an annual assess-
ment, we evaluate our maturity in providing access to health. To
make sure we accommodate the unmet need among diverse
populations in relevant markets, we are defining our patients’
engagement approach and how to design inclusive clinical trials.
LEO Pharma supports better access to health care for people
around the world affected by crisis by consistent engagement
in drug donations in collaboration with International Health
the patients we serve and embracing differences.
LEO Pharma globally monitors diversity factors, such as age,
gender, and seniority. At end-2023, we reached a 59/41 and
50/50 male/female gender distribution within senior and mid-
dle management, respectively. With a commitment to fostering
gender diversity across all levels of management, we are well on
the way to achieving our 2025 target of at least a 45% represen-
tation of the underrepresented gender at both management
levels.
In 2023, 99% of our employees completed the LEO Pharma Code
of Conduct Training and 98% completed our Anti-Corruption
Training.
LEO Pharma contributes to the Sustainable Development Goals
and as a participant to UN Global Compact, we are committed
to upholding and incorporating the Ten Principles into our work
in the areas of human and labor rights, the environment and
anti-corruption.
* Adjusted gender pay gap refers to the pay difference between genders after taking account of factors such as experience, job level, education and occupation.
PAGE 16
LEO PHARMA ANNUAL REPORT 2023
76
Financial
In 2023, LEO Pharma
delivered a solid uplift in
operational performance,
driven by strong revenue
growth, cost reduction
measures and strengthened
financial discipline across
all functions.
review
& outlook
1
0
%
1
5
%
275
FINANCIAL REVIEW AND OUTLOOK
Financial review and outlook
In 2023, LEO Pharma delivered a solid uplift in operational performance, driven by
strong revenue growth, cost reduction measures and strengthened financial discipline
across all functions. The operational performance resulted in a return to positive
EBITDA (DKK +2.1 billion uplift, +20 percentage points margin uplift) and double-digit
revenue growth in constant exchange rates. As a result, LEO Pharma successfully
delivered on the upwardly revised guidance provided in September 2023.
REVENUE BY THERAPEUTIC
AREA ( DKK MILLION)
11,392
10,641
Result for 2023
Group revenue increased by 7% to DKK 11,392 million in 2023.
In constant exchange rates (CER), revenue increased by 10%
compared to 2022. Dermatology revenue grew by 11% and 15% in
constant exchange rates.
EBITDA for 2023 increased to DKK 551 million, compared to a
loss of DKK 1,574 million in 2022, reflecting an uplift of DKK 2,125
million. EBITDA for the year of DKK 551 million corresponds to a
5% margin, representing a 20 percentage points uplift from last
year.
Our performance was above our profitability guidance and
within the range of our revenue growth guidance provided at
the beginning of the year.
GROUP REVENUE
GROWTH OF
IN CONSTANT
EXCHANGE
RATES
Adjusted EBITDA amounted to DKK 626 million, representing an
uplift of DKK 1,879 million and an improvement of 17% percent-
age points compared to 2022. The improvement was driven by
strong sales growth, favorable gross margin development and
lower operating expenses. The operating loss (EBIT) for 2023
amounted to DKK 1,699 million, compared to a loss of DKK 3,311
million in 2022, showing an improvement of DKK 1,612 million. EBIT
for 2023 was negatively impacted by impairment of intangible
as well as tangible assets.
We delivered a net loss of DKK 3,607 million for 2023, compared
to a net loss of DKK 4,110 million in 2022, resulting in an im-
provement of DKK 503 million. The result for 2023 was positively
impacted by the improved operational performance, as stated
above. However, it was negatively impacted by increasing in-
terest expenses, non-cash fair value remeasurement of share-
based programs and valuation adjustments of deferred taxes.
Revenue for the LEO Pharma Group
Group revenue grew by 7% (10% in CER) and dermatology rev-
enue grew by 11% to a total revenue of DKK 9,039 million (15% in
CER). This was driven by the biologic product Adtralza
®
/Adbry
®
as well as core brands such as Protopic
®
and the Fucidin
®
range.
Geographically, growth was driven by the North American region
as well as China, Southern Europe and Alliance markets.
DERMATOLOGY
REVENUE GROWTH OF
IN CONSTANT
EXCHANGE
RATES
Revenue by therapeutic area
Our eczema portfolio was the main driver for growth in 2023,
driven by the continued launch of Adtralza
®
/Adbry
®
, now avail-
able in 19 markets, as well as strong performance of Protopic
®
.
In 2023, Adtralza
®
/Adbry
®
accounted for 43% of revenue for our
eczema portfolio and the highest share of eczema revenue.
Revenue from our psoriasis portfolio remained stable at DKK 3,813
million, compared to DKK 3,912 million in 2022. Enstilar
®
remains
the bestselling psoriasis product with revenue amounting to DKK
1,421 million.
Revenue from our skin infection portfolio increased by 6% (9% in
CER) to DKK 1,771 million, driven by the Fucidin
®
range.
Revenue from our acne/rosacea portfolio amounted to DKK 317
million, which was slightly below the level for 2022. Other mature
Dermatology
Thrombosis
Other
2023
2022
PAGE 18
LEO PHARMA ANNUAL REPORT 2023
9,039
2,233
8,133
212
FINANCIAL REVIEW AND OUTLOOK
dermatology products decreased by 8% (fall of 1% in CER) to DKK
238 million in 2023.
Thrombosis revenue decreased by 4% (fall of 3% in CER) to DKK
2,141 million from DKK 2,233 million in 2022. The decrease was pri-
marily related to lower volumes in France and destocking effect
in emerging markets.
Other revenue primarily stems from divested products where LEO
Pharma is operating as a contract manufacturer. The revenue for
2023 amounted to DKK 212 million, compared to DKK 275 million
in 2022.
Revenue by region
North
America
Geographically, North America continues to be the key growth
driver with revenue of DKK 1,667 million in 2023 compared to DKK
1,117 million in 2022, corresponding to growth of 49% (57% in CER).
The higher revenue was driven by strong growth for Adbry
®
in the
U.S. reaching 148%. In addition, our revenue from products within
REVENUE BY REGION IN 2023
( DKK MILLION)
Rest of World
3,350
(29.4%)
11,392
DKK million
6,375
(56.0%)
1,667
(14.6%)
North America
Europe
Operating costs, excluding depreciation, amortization and im-
pairments, amounted to DKK 7,030 million in 2023, compared to
DKK 8,177 million in 2022 equal to a reduction of 14%.
Sales and distribution costs
The sales and distributions costs amounted to DKK 4,902 million
in 2023, compared to DKK 4,762 million in 2022. The increase was
driven by higher depreciation, amortization and an impairment
loss of DKK 526 million. The underlying sales and distribution costs
decreased by 9% despite ongoing investments and the launch
of Adtralza
®
/Adbry
®
in new markets.
Research and development costs
Research and development costs amounted to DKK 1,874 million,
compared to DKK 2,485 million in 2022. In 2023, our main R&D
activities concerned Adtralza
®
/Adbry
®
and delgocitinib to drive
continued development activities. For Adtralza
®
/Adbry
®
, our
activities comprised the ECZTEND efficacy and safety long-term
data trial as well as the AD hand Phase 3b trial start-up and
development of our new administration option, the pre-filled
pen. Our delgocitinib activities comprised development costs
costs in 2022 were impacted by impairment losses of DKK 161m
on software and development projects.
Financial items
Net financial items showed a loss of DKK 1,093 million, compared
to a loss of DKK 782 million in 2022. This was mainly driven by
an increase in interest expenses of DKK 269 million as a net
result of increasing interest rates on debt to credit institutions
and lower interest expenses on shareholder loans. Financial
expenses related to fair value remeasurement of non-cash
share-based incentive programs amounted to DKK 156 million
and other financial items of DKK 115 million covering net foreign
exchange-related items, fees, etc.
Tax income/expense
Total tax expense for the year amounted to DKK 815 million,
compared to DKK 17 million in 2022. Current tax expense de-
creased from DKK 421 million in 2022 to DKK 158 million in 2023.
Change in deferred taxes for 2023 was an expense of DKK 691
million, compared to an income of DKK 409 million in 2022. The
significant change in deferred taxes was mainly due to valuation
skin infection and psoriasis also realized a double-digit growth
rate.
Europe
Revenue in Europe increased by 3% (3% in CER) in 2023 to DKK
6,375 million, compared to DKK 6,206 million in 2022. This growth
was driven by higher demand for our core brands and the contin-
ued launch of Adtralza
®
, now available in 14 European markets.
Growth in Europe was primarily driven by Italy, Spain, Germany
and Belgium.
Rest of World
Revenue in Rest of World was on par with 2022 ending at DKK
3,350 million, which corresponds to 7% growth in constant ex-
change rates. Growth was driven by the strong performance
in China, United Arab Emirates and Southeast Asia, offset by
weaker performance in Middle East and North Africa, which was
primarily driven by Algeria, and across Latin America markets.
Costs and P&L
Total costs decreased by 6% and amounted to DKK 13,149 million
in 2023, compared to DKK 14,025 million in 2022.
Cost of sales amounted to DKK 4,281 million in 2023, correspond-
ing to a decrease of 2%, compared to DKK 4,358 million in 2022.
The gross margin was 62% in 2023, compared to 59% in 2022.
The decrease in cost of sales was driven by efficiency initiatives
across the organization as well as production efficiencies.
related to securing the finalization of Phase 3 activities lead-
ing to the submission of a Marketing Authorization Application
to the European Medicines Agency. However, the overall level
of costs declined as a result of the implementation of our new
innovation strategy strengthening our emphasis on externally
sourced innovation. In addition, a clinical program for Izuforant
and other R&D development projects were terminated resulting
in an impairment loss of DKK 141 million.
Administrative
costs
Administrative costs amounted to DKK 2,075 million in 2023, de-
creasing from DKK 2,407 million in 2022. The costs were impact-
ed negatively by DKK 75 million related to transformation and
restructuring of the organization during the year. The decrease
in administrative costs was driven by lower IT investments and
lower depreciation in 2023 compared to 2022. Administrative
adjustment for the utilization of tax losses carried forward.
Profit and loss
EBITDA DKK
55
1
M
UPLIFT
OF
2 . 1 BN
The 2023 operating profit before interest, tax, depreciation and
amortization (EBITDA) amounted to DKK 551 million, compared
to a loss of DKK 1,574 million in 2022, which was an improvement
PAGE 19
LEO PHARMA ANNUAL REPORT 2023
FINANCIAL REVIEW AND OUTLOOK
of DKK 2,125 million and a 20 percentage points improvement
compared to 2022.
The operating loss (EBIT) for 2023 amounted to DKK 1,699 million
(negative margin of 15%), compared to an operating loss of DKK
3,311 (negative margin of 31%) million for 2022, an improvement
of DKK 1,612 million and 16 percentage points compared to 2022.
This was the result of our improved operational performance, as
described above, and a negative impact due to the impairment
of intangible assets and impairment of production site and re-
lated equipment.
Net loss for the year amounted to DKK 3,607 million for 2023,
compared to a net loss of DKK 4,110 million for 2022. This was an
improvement of DKK 503 million. While EBIT increased by DKK 1,612
million, the relatively lower improvement in net loss was mainly
due to increased interest expenses, fair-value remeasurement of
non-cash share-based incentive program (recognized as finan-
cial expenses), other financial items and a significant reduction
of deferred tax assets.
Balance sheet and cash flow
Balance sheet
Total assets decreased to DKK 20,951 million as of December
31, 2023, from DKK 22,932 million as of December 31, 2022. This
was mainly driven by intangible assets decreasing by DKK 1,556
million, primarily due to amortization of DKK 1,089 million and
impairment of DKK 516 million related to tralokinumab and R&D
projects ceased during 2023.
Equity ended at DKK 4,525 million, compared to DKK 1,946 million
at the end of 2022. Equity has been strengthened significantly
during the year as a result of changes in capital structure by
converting shareholders loans to equity, in total DKK 5.6 billion, as
well as additional funding from shareholders of DKK 746 million.
In addition, the movements mainly comprised a net loss for the
year of DKK 3,607 million and positive exchange rate, reserve for
share-based payments and value adjustments of DKK 114 million.
Cash flow
Cash flow from operating activities was a net cash outflow of
DKK 1,953 million, compared to DKK 2,274 million in 2022. The
improvement of DKK 321 million was a result of improved oper-
ational performance and lower payment related to provisions,
despite higher interests of DKK 462 million and higher tax pay-
ments of DKK 1,497 million. The higher tax payments in 2023
compared to 2022 were a result of extraordinary tax payments
in 2023 related to prior year’s acquisition and large tax refunds
in 2022. Cash flow from investment activities was negative DKK
537 million, compared to DKK 1,476 million in 2022. The lower cash
flow from investing activities was mainly due to lower investment
in production facilities in 2023, as key projects move closer to
completion, and milestone payments impacted cash flow from
investing activities in 2022. Cash flow from financing activities
amounted to DKK 2,467 million, mainly related to net borrowings
of DKK 2,000 million and capital increase from shareholders of
DKK 746 million.
Subsequent
events
On January 23, 2024, LEO Pharma announced that the Group
had finalized the acquisition of the strategic asset TMB-001 from
Timber Pharmaceuticals following its Chapter 11 bankruptcy fil-
ing. The purchase price amounted to DKK 96 million.
No other significant events have occurred after the balance
sheet date.
Outlook
Follow-up on 2023 outlook
In our Annual Report for 2022, we expected revenue growth of
6-10% for 2023 and to deliver a low single-digit positive adjusted
EBITDA margin for 2023.
In September 2023, we revised the outlook for 2023 to reflect
revenue growth of 8-10% in constant exchange rates and an
adjusted EBITDA margin in the positive mid-single digit range,
compared to the previous guidance of a positive low single-digit
adjusted EBITDA margin.
Revenue growth in 2023 amounted to 10% in constant exchange
rates (reported growth of 7%) and ended at the high end of the
guidance of 6-10% provided in the Annual Report for 2022. LEO
Pharma realized an adjusted EBITDA margin of 5% and delivered
a financial result above our guidance provided at the beginning
of the year.
Despite the stronger adjusted EBITDA margin compared to 2022,
the significant negative net result for the year is not satisfactory.
2024 outlook
LEO Pharma’s key focus is to drive growth within medical derma-
tology and profitability from operations in 2024.
We anticipate revenue growth of 4-8% in 2024 in constant ex-
change rates, driven by increasing sales of Adtralza
®
/Adbry
®
and growth in our core brands. Compared to 2023, the revenue
growth is expected to be negatively impacted by generic com-
petition and price reforms in selected geographies. Delgocitinib
launch is expected during Q4 2024 and thus drive revenue
growth from 2025 and onwards.
We will continue our focus on improving operating profit by
implementing efficiencies and simplification. We expect to de-
liver a positive mid-single digit adjusted EBITDA margin in 2024.
The profitability guidance for 2024 is negatively impacted by
movements in foreign exchange rates, delayed impact of higher
input costs procured during 2023 and investments in newly ac-
quired asset from Timber Pharmaceuticals.
We expect significant improvements in EBIT and net result, al-
though still expecting to deliver both negative EBIT and net re-
sult in 2024. Potential changes in key assumptions for valuation
of intangible assets, currency rates and unexpected health care
and pricing reforms are risk factors, among others, which could
change the outlook for the year.
PAGE 20
LEO PHARMA ANNUAL REPORT 2023
OWNERSHIP
LEO Pharma A/S is co-owned by:
LEO Foundation
Through LEO Holding A/S
Lautrupsgade 7, 5th floor
2100 Copenhagen Ø, Denmark
Nordic
Capital
Through Cidron Savanna 4 SARL
8 rue Lou Hemmer
1748
Luxembourg
Foundation ownership
The LEO Foundation - through LEO Holding A/S - is
the majority owner of LEO Pharma A/S. The main
objective of the Foundation is to ensure the long-
term continuation and success of LEO Pharma as a
global, research-based pharmaceutical company.
The LEO Foundation also provides philanthropic
support to some of the world’s leading scientists
within skin research. www.leo-foundation.org
Su
s
t
ainabilit
y
and
ESG
LEO Pharma aspires to advance the standard of care
for the benefit of people with skin conditions and
improve accessibility of innovative treatments. At the
same time, we are addressing other environmental,
social and governance (ESG) risks and opportunities.
These include maintaining safe operations for our
workforce, minimizing our negative environmental
impacts, providing a diverse workplace and
ensuring business integrity across our value chain.
Sustainability is therefore at the core of LEO Pharma’s
business strategy.
Sustainability commitments 22
Sustainability governance 23
Developing people and attracting diverse talent 24
Advancing the standard of care in medical dermatology 25
Driving sustainable impact 26
ESG performance data 29
SUSTAINABILITY AND ESG
PAGE 22
LEO PHARMA ANNUAL REPORT 2023
SUSTAINABILITY AND ESG
Sustainability
governance
Our sustainability governance is built on clear
accountability and anchored in our strategy.
The Board of Directors has empowered the Global Leadership Team (GLT) to oversee sustainability
performance and drive strategic development, with individual GLT members acting as program
sponsors.
Shared GLT ownership ensures cross-functional integration. In support of this, the Corporate Affairs
function is responsible for developing and implementing LEO Pharma's sustainability strategy,
managing ESG issues and providing advisory support to issue owners and business lines. This model
ensures a comprehensive and organized approach to sustainability throughout our organization.
PAGE 23
LEO PHARMA ANNUAL REPORT 2023
SUSTAINABILITY AND ESG
Developing people and
attracting diverse talent
We believe that a diverse and inclusive work environment that empowers
individuals with diverse backgrounds, skills and perspectives is a catalyst for
innovation and enhancing performance. We are on a global diversity, equity &
inclusion (DE&I) learning journey to further develop our inclusive culture.
TARGET
Underrepresented gender
in both senior and middle
management by 2025, minimum:
45%
*
STATUS
Gender distribution in
management (%, m/w):
Senior:
59/41
Middle:
50/50
GUIDED BY
our
Curiosity Beyond
manifesto published in 2021,
we promote diversity, equity and inclusion throughout the or-
ganization.
Curiosity Beyond
is about being curious about each
other, the world and our patients. We celebrate our differences
and believe that our diverse perspectives, backgrounds and
attitudes enable us to make the best decisions for LEO Pharma
and help us understand patients better. When we collaborate
beyond roles, working styles and backgrounds, creativity sparks.
This approach is reflected in LEO Allies, our global DE&I network
aimed at engaging everyone in cross-organizational dialogue
and initiatives to increase DE&I awareness.
We continue to address unconscious bias and how we can re-
duce it in the workplace. We have integrated bias blockers in
hiring procedures and people processes. Through involvement
of multiple stakeholders, we ensure transparency and empha-
size qualifications and competencies in such a way that all
candidates are evaluated based on their skills rather than other
factors. We have also introduced gender-neutral job adver-
tisements for a more inclusive and gender-balanced range of
applicants.
A DE&I section has been added to our global onboarding pro-
gram ensuring that all new employees have a common under-
standing of our DE&I principles, and we offer inclusive leadership
people managers. In 2024, we will advance our efforts by con-
tinuing to integrate bias blockers into key processes, update DE&I
modules in onboarding processes and strengthen reporting.
People development
The collective efforts of our global team are essential for achieving
our strategic ambitions and we prioritize continuous growth for
every employee by aligning personal aspirations with future capa-
bilities. To enable people leaders to support, coach and provide
feedback to their people, we have initiated global development
training and established guides on how to best support employees
through qualitative dialogues and development conversations.
People development is a partnership, so to best equip everyone,
we have also developed employee guides on how to design your
own growth path. At our learning platform, LEO Pharma Academy,
we offer training in a variety of topics, including personal and pro-
fessional development, however when we design our development
plans, we acknowledge that learning-by-doing opportunities are
most often more impactful than classroom training.
Enabling a safe workplace
Throughout the year, we worked to continuously ensure a safe
workplace with a dedicated lead from the Environment, Health
and Safety organization. The importance of taking good care of
colleagues by reporting and acting on hazards and near-misses to
professions work together in manufacturing and office environ-
ments. Through educational communication and videos, our Global
Leadership Team strengthened our safety culture, and we included
safety discussions in town hall meetings. In addition, we have intro-
duced a global EHS training program for all new employees.
In 2023, we had one more occupational accident than in 2022.
Despite this increase, days of absence decreased significantly in
2023 and the level of severity was lower. The higher LTI rate in 2023
reflects a lower number of employees, resulting in fewer working
hours per accident.
Workforce by age
35%
30%
25%
20%
15%
10%
5%
*This means that we want a minimum of 45% women and
45% men at all managerial levels, leaving 10% flexibility for
training to our leaders. In addition, we initiated diversity events
addressing unconscious bias to employees being promoted to
prevent injuries that may cause lost worktime is fundamental for a
strong safety culture. This applies in particular when many different
0%
0-24 years
78
25-34 years
722
35-44 years
1,276
45-54 years
1,351
55-64 years
815
65+ years
48
all gender identities. The age distribution of our workforce remained stable compared to 2022.
PAGE 24
LEO PHARMA ANNUAL REPORT 2023
31%
17%
19%
1%
SUSTAINABILITY AND ESG
Advancing the standard of
care in medical dermatology
On track to increase access
maturity
Skin conditions affect millions of people worldwide who are confronted
with stigma, co-occurring health issues and inadequate access to
diagnosis, treatment and care, impeding the pursuit of a healthy life.
Measurements
& reporting
R&D
Supply &
manufacturing
IN 2023, LEO PHARMA
DONATED TREATMENTS
TO HELP
>75,000
PATIENTS
PARTNERS
WE ARE DEDICATED
to providing innovative treatments, col-
laborating with healthcare stakeholders and advocating for skin
conditions as public health priorities. Our key goal is to make a
fundamental difference for those who need us most in medical
dermatology.
Partnerships that drive progress
LEO Pharma collaborates with authorities, peers, civil society or-
ganizations and policymakers to advance the standard of care
for people with skin conditions. These partnerships are based
on shared objectives, operate transparently within legal and
ethical frameworks and are built on mutual respect. In 2023, we
responded to the initiatives of these organizations by providing
grants to Global Parents for Eczema Research, International
Alliance of Dermatological Patient Organizations/Global Skin
world and evaluate where LEO Pharma can make the biggest
impact before we set the direction for our future engagement
with patients.
Furthermore, we have taken the first steps in systematically
building an inclusive clinical trials infrastructure to make sure we
accommodate diverse populations in relevant markets where
LEO Pharma operates.
From crisis response to sustainable impact
Our commitment to address humanitarian crises around the
world remains unchanged. In 2023, we celebrated a ten-year
milestone in our close partnership with International Health
Partners
-
a partnership built on collaboration to ensure the de-
livery of our medicines to areas and patients in dire need. Over
the years, our response to emergencies has included more than
Human
rights
Governance
Delivery of care
2022
2023
2024 ambition
Distribution
Pricing
& IP
Marketing
& sales
and International Federation of Psoriasis Associations/IFPA. We
also donated drugs to International Health Partners.
Our future approach to patient engagement
In 2023, we assessed our maturity in patient engagement to
establish an evidence-based approach to evolve our under-
standing
of
patient
needs.
The
assessment
was
based
on
a standardized survey tool measuring patient engagement
via 81 validated indicators. The survey was distributed to LEO
Pharma respondents working in various functions within the ar-
eas of R&D, Supply & manufacturing, Pricing and IP, Marketing &
sales, Distribution, Delivery of care, Governance, Human rights,
Measurement & reporting. The next steps are to map our external
325,000 units of medical products that have provided essential
relief during critical situations through 26 shipments to 29 coun-
tries, reaching approximately 380,000 patients.
During 2023, we transitioned our medicine donations from ad-
hoc responses to a more systematic and well-planned process,
aiming to make a more sustainable and enduring impact on
those affected by crises. This shift represents a proactive ap-
proach where we regularly assess our stock and identify products
available for donation. Through collaboration with our partner
organization, we can better understand the specific needs and
ensure that our donations are not only timely but also aligned
with current urgencies. This change allows us to contribute more
effectively to addressing healthcare needs.
In 2023, we conducted a second Access to Healthcare maturity as-
sessment, building on last year's pilot. The assessment showed that we
successfully achieved a Base Level maturity in all nine dimensions.
LEO Pharma's proud legacy of focusing on patients was reflected in
our corporate strategy, and we further added ambition, targets and
governance to demonstrate how we fulfill our purpose. To measure
our progress, we tested a method of measuring maturity in relation to
patient engagement last year. Based on the results, starting from 2024,
LEO Pharma will initiate a maturity assessment of our patient engage-
ment across the value chain and establish its validation as well.
PAGE 25
LEO PHARMA ANNUAL REPORT 2023
SUSTAINABILITY AND ESG
Driving
sustainable
impact
We recognize the role we play in society and our responsibility to minimize negative
environmental impacts. We are dedicated to contributing to a more sustainable
future for all. Compliance, transparency and integrity are key components of our
sustainability approach, and we believe that they are essential to build trust with
our stakeholders and drive responsible business practices for the benefit of our
patients, society and the planet.
TARGET
Climate action and resource efficiency
Reduction of Scope
1 and 2 CO2e
emissions by 2030
compared to 2019:
Supplier engagement
-
share of suppliers by
emission in 2026 with climate
reduction targets (scope 3*)
ACTING ON
climate change, reducing our negative environ-
mental impact and ensuring high resource efficiency is a business
imperative, and we believe that through our own ambitions and
by expectations to our business partners, we can drive change
and support sustainable development.
electric vehicles (EV), capitalizing on the advancements
in more sustainable transportation options, particularly
in the Nordic countries, where EV readiness is high. The
car policy for new leasing contracts in Denmark was up-
dated to incentivize EV usage, and we plan to implement
We have incorporated our sup-
pliers’ climate targets into our supplier
due diligence process, requiring new
suppliers to disclose information about
their ambitions and activities.”
>50%
75%
STATUS
Total Scope 1 and 2 CO2e emissions
Tonnes CO2e
-39.2%
38,771
31,130
23,144
24,309
23,555
In 2023, we continued to progress towards our SBTi-approved
climate targets. By optimizing energy efficiency, using renew-
able energy and transitioning towards a more sustainable car
fleet, we successfully reduced our Scope
1
and 2 emissions by
39.2%, compared to the 2019 baseline. We strengthened our
internal data governance and improved data quality to obtain
more accurate presentations of our environmental footprint. We
also increased collaboration with our suppliers for them to set
science-based carbon reduction targets. To facilitate commit-
ment and collaboration, we have integrated climate-related
performance metrics into our corporate incentive plans for all
employees.
Electrification of our car fleet
Our car fleet accounted for 22% of our own CO2e emissions in
2023, corresponding to a decrease of 30 tonnes CO2e compared
to 2022. The reduction was achieved primarily by lowering the
number of vehicles in our fleet. We also doubled the share of
this transition in the rest of Europe in the coming years
and, eventually, worldwide.
Engaging with our suppliers
LEO Pharma’s own CO2e emissions correspond to approx-
imately 7.5% of total** CO2e emissions in our value chain.
By engaging with suppliers and encouraging climate
action, it is our ambition to drive impact throughout the
value chain. In 2023, we enhanced our engagement with
suppliers to qualify their CO2e emissions. We introduced
a detailed and interactive dashboard providing real-time
data of our Scope 3 emissions, expenditure and our
suppliers’ commitment to setting science-based climate
targets. This enables us to initiate dialogues with suppliers
to take climate action. Additionally, we have incorporated
our suppliers’ climate targets into our supplier due dili-
gence process, requiring new suppliers to disclose infor-
mation about their ambitions and activities. In addition,
Sven Hauptmann
Executive Vice President,
Technical Development and Supply
2019
2020
2021
2022
2023
we have developed internal recommendations to help
* Covering purchased goods and services, capital goods and upstream transport.
** Scope
1
and 2 and Scope 3 covering cat.
1:
purchased goods and services, cat. 2: capital goods and cat 4: upstream transportation and distribution.
PAGE 26
LEO PHARMA ANNUAL REPORT 2023
SUSTAINABILITY AND ESG
guide conversations with suppliers. For strategic suppliers who have not yet set
climate targets, we are developing a contingency plan to drive commitment.
In 2023, 83% of our suppliers (by emissions) had set their own SBTi-validated
targets or announced commitments to reducing CO2, representing an increase
of 17 percentage points compared to 2022.
In 2024, we aim for developing and collaborating on common initiatives on
emission reduction with our top emitting suppliers.
Use and reuse
In 2023, we improved our exhibition practices. In collaboration with a new ven-
dor, we introduced a new concept for planning and constructing our booth at
congresses. A modular assembling approach allows for a substantial portion
of booth displays and elements to be designed for reusability at future global
Caring for our planet often begins at the local level through smaller initiatives,
which, in turn, contribute to the company’s overall resource efficiency.
A few of these efforts are highlighted here.
We implemented an innovative recycling policy empowering employees to effectively
congresses.
Commitment to animal welfare
LEO Pharma is committed to responsible and ethical treatment of animals. In
2023, we underpinned this commitment by signing the Marseille Declaration.
This international declaration represents a collective pledge by organizations
to uphold the highest standards of animal welfare in research and develop-
ment, emphasizing the pursuit of innovative, alternative methods to minimize
the use of animals in scientific studies.
Vernouillet,
France
sort various types of waste. This initiative led to significant environmental benefits, with
the collection of paper, cardboard and derivatives resulting in saving 208,215 liters of
water and a reduction of 3,817 kilograms of CO2 emissions. To support biodiversity, we
have cultivated flowery fallows at the site and introduced safety walks to reinforce safety
awareness and practices.
Share of renewable electricity at manufacturing sites
By decommissioning a WFI (Water For Injection) used in manufacturing, we reduced CO2e
emissions by 600 tonnes. WFI and manufacturing of any sterile pharmaceutical require
significant use of energy. Decommissioning of machinery equipment and support utilities
in 2023 helped to reduce electricity consumption by approximately 1,150 MWh and gas
consumption by about 4%.
Dublin,
Ireland
100%
80%
60%
40%
20%
92%
91% 91%
Ballerup,
Denmark
We installed a rainwater col-
lection system that efficiently
gathers and preserves up to
6,000 liters of water per year,
contributing to the irrigation
of on-site plants. By utiliz-
ing solar panels on site, we
saved 186 MWh of energy.
Segrate,
Italy
We increased resource
efficiency by implementing
improved bulk production
machinery. It resulted in wa-
ter usage being reduced by
50% and detergent usage
being streamlined to a sin-
gle process, further reducing
our environmental footprint.
0%
2019
2020
2021
2022
2023
All manufacturing sites (Ballerup, Cork, Dublin, Esbjerg, Segrate, Vernouillet) hold ISO 14001 (Environmental management)
certifications and all sites, except Vernouillet, hold ISO 50001 (Energy Management) certifications.
PAGE 27
LEO PHARMA ANNUAL REPORT 2023
SUSTAINABILITY AND ESG
Embracing responsible business practices
TARGET
Employees completing
Code of Conduct training:
≥ 97%
STATUS
Employees completing
Code of Conduct training:
99%
Business ethics are the foundation of our conduct, ensuring
trust, transparency and integrity in the way we work. Upholding
sound business principles safeguards us from risks and is core
to our purpose of advancing the standard of care in medical
dermatology.
Fostering
transparency
framework for managing corruption risks. It will tie anti-corrup-
tion policy governance together to ensure transparency and
clear roles and responsibilities. This new framework will serve as
a robust precedent for our future compliance standards and
practices, planned for full roll-out in 2024.
Translating commitment into action
LEO Pharma is committed to protecting human rights as defined
by the UN Guiding Principles on Business and Human Rights, the
Universal Declaration of Human Rights and the International
Labour Organization’s Declaration on Fundamental Principles
and Rights at Work. As countries globally enact legislation man-
dating human rights due diligence for companies, our organiza-
tion encounters the risk of non-compliance if we lack sufficient
resources for conducting due diligence processes. Failure to
comply could result in reputational damage and potential fines or
sanctions for breaching due diligence requirements. In 2023, LEO
Pharma became a participant of the Business and Human Rights
Accelerator program under the UN Global Compact initiative. This
collaborative effort, joined by 23 other Danish companies, aims
at transforming commitment into tangible action by prioritizing
a roadmap for continuously addressing human rights issues and
enhancing the collective impact of corporations on global labor
rights throughout the value chain, including an emphasis on pro-
LEO OpenAI
To ensure data security and confidentiality, we have developed
an internal generative AI application called LEO OpenAI for all
employees. LEO OpenAI is an application built by LEO Pharma
on top of Microsoft Azure OpenAI and Azure Cognitive Search
services to offer the benefits of ChatGPT in a safe and compliant
manner, taking data privacy, intellectual property rights and
ethics into consideration. Everyday tasks, such as content
generation, summarization, semantic search and natural-
language-to-code translation, will be targets for the new AI
technology. No data sent to or generated by LEO OpenAI are
shared outside LEO Pharma.
In 2023, we rolled out a third-party compliance management
process, reinforcing the foundation for stringent anti-corruption
measures. The process enabled comprehensive
curement. The roadmap outlines LEO Pharma’s human rights risk
profile throughout the value chain and identified rights-holders
and priorities for on-going commitment. In 2024, we
of corruption risks. They also run training and awareness activi-
ties, drive due diligence on selected third-party intermediaries,
conduct appropriate monitoring activities and provide day-to-
due diligence on in-scope intermediaries, further
strengthening our risk management strategies.
We also enhanced our speak-up support structure
and governance. We implemented new policies and
procedures, including clearer roles and responsibil-
ities, decision-making process and investigation
manual. The new governance and framework is ex-
pected to enhance collaboration on investigations
and reduce turn-around time. These improvements
Upholding sound
business principles
safeguards us from
risks and is core to our
purpose of advancing
the standard of care in
medical dermatology.”
Philip Eickhoff
Chief Financial Officer
will enhance our due diligence processes for human
rights. We will strengthen governance, update risk
assessments, embed an updated supplier Code of
Conduct in contracts and conduct human rights
awareness training.
Enhancing ethical understanding
To ensure that our employees remain well-versed in
our ethical principles and standards, we conducted
a comprehensive retraining in our Code of Conduct
day advice.
reinforced our internal mechanisms, fostering transparency and
accountability within our organization. Furthermore, we devel-
oped a comprehensive principal procedure on anti-corruption
that provides guidance to the organization and sets an overall
and anti-corruption. To further strengthen our ad-
visory structure and provide dedicated support at the affiliate
level, we also appointed compliance officers. They serve as ad-
visors to the line of business on matters relating to management
PAGE 28
LEO PHARMA ANNUAL REPORT 2023
SUSTAINABILITY AND ESG
ESG
performance
data
Metric
Unit
2023
2022
2021
2020
2019
Workforce
by age
0-24 years
%
25-34 years
%
2
17
2
18
2
20
2
21
-
-
35-44 years
%
39
30
30
29
-
45-54 years
%
31
31
31
34
-
55-64 years
%
19
18
16
15
-
65+
years
%
1
1
1
1
-
Workforce
by tenure
<1
year
%
13
15
15
13
-
1≤3
years
%
23
20
32
35
-
3≤5 years
%
13
16
13
13
-
5≤10
years
%
23
20
16
17
-
10+
years
%
29
29
23
22
-
Employee turnover rate
%
26
29
20
14
17
Employee turnover rate by gender
%, men/women
25/25
29/31
16.3/17.3
-
-
Lost Time Injury (LTI) rate
LTI rate
2.5
1.9
1.7
1.9
1.3
Number of lost days
days
149
392
436
448
97
Governance
Gender diversity - Board of Directors
ratio men/women
87.5/12.5
87.5/12.5
87.5/12.5
71/29
75/25
Employees completing global annual
%
Code of Conduct training
99
97
96
-
-
Third-party intermediaries undergoing
anti-corruption due dilligence
no.
40
37
-
-
-
Number of social and/or EHS supplier audits performed
no.
1
3
5
0
* Updated compared to ESG data summary in LEO Pharma Sustainability Report 2022
** Covering cat. 1, 2 & 4 - account for 92.7% of our Scope 3 on a 2020 baseline
*** Number of patients is derived from sold units and estimated average dose consumed per patient
**** Revised definition of Executive Management to align with new legal requirements. Adjustment has resultet in a change in
the gender diversity ratio from 70/30 (men/woman) to 75/25 (men/woman) for the fiscal year 2023. Two additional direct
reports (a man and a woman) to the CEO have been excluded as they are not part of Executive Management
PAGE 29
LEO PHARMA ANNUAL REPORT 2023
Metric
Unit
2023
2022
2021
2020
2019
Environmental
Total CO2e (Scope
1
and 2, market based)
tonnes
23,555
24,309*
23,144
31,130
38,771
CO2e Scope
1
tonnes
22,851
23,524*
22,516
24,471
24,047
CO2e Scope 2 (market based) tonnes
704
785
629
6,659
14,724
CO2e Scope 2 (location based) tonnes
8,472
7,954
8,641
9,869
10,405
Total CO2e Scope 3**
tonnes
288,558
333,019
-
354,010
380,818
Scope 3 Supplier engagement
%
83
66
65
-
-
Greenhouse gas emissions intensity
tonnes/revenue
2,066
2,117
2,324
3,072
3,588
Energy
consumption
GWh
142
144
150
144
119
Share of renewable electricity
%
91
91
92
54
11
Energy intensity
GWh/revenue
0.012
0.014
0.015
0.014
0.011
Water usage
m
3
386,562
414,893
384,046
374,600
348,781
Waste (total)
tonnes
61,595
103,629
125,489
87,938
68,209
Recycling
%
94.37
97.92
98.87
98.16
98.04
Special treatment (incl. chemical waste and biological waste)
%
2.86
0.62
0.16
0.20
0.16
Incineration with energy recovery
%
2.11
1.01
0.77
0.89
1.30
Incineration without energy recovery
%
0.27
0.16
0.06
0.23
0.40
Landfill
%
0.40
0.28
0.14
0.52
0.12
Social
Number of patients***
in
thousands
96,003
89,305
84,686
93,262
92,192
Gender diversity in Executive Management**** ratio men/women
75/25
87.5/12.5
50/50
50/50
66.6/33.3
Gender diversity in senior management ratio men/women
59/41
60/40
66/34
67/33
69/31
Gender diversity in middle management ratio men/women
50/50
51/49
52/48
53/47
50/50
Gender diversity - All managers
ratio
men/women
52/48
54/46
55/45
56/44
55/45
Employees by gender
ratio
men/women
43/57
43/57
43/57
44/56
-
Joiners by gender
ratio
men/women
42/58
45/55
42/58
-
-
Internal promotion by gender
% men/woman
7.2/7.6
6.7/8.3
7.1/7.2
-
-
SUSTAINABILITY AND ESG
Sustainability
and
ESG
information
Our material impacts
ESG accounting
principles
LEO Pharma's focus on sustainability and responsible business
conduct is guided by the main sustainability issues that we can
positively impact. Our approach to sustainability is defined in
the strategy pillar Leave a legacy that future generations will
be proud of and its three underlying commitments, Advance
the standard of care in medical dermatology, Develop people
and attract diverse talent and Drive sustainable impact
through resource efficiency and responsible business practices.
Throughout the year, we have defined the following main
sustainability issues.
Access to care in medical dermatology
Limitations in access and affordability of health care are global
issues and with regards to medical dermatology, the risk of
patients’ needs not being met may increase the burden of
disease, including by causing stigmatization of those suffering
from chronic skin conditions.
We contribute to risk mitigation by providing innovative products
and collaborating with stakeholders to advance the standard of
care in medical dermatology.
Employee health and safety
Gender inequality, harassment of minorities and lack of safe
working conditions can be found across industrial value chains,
causing significant risk to the health and safety of employees,
and may reduce productivity.
We mitigate these risks through our Occupational Health &
Safety systems and by ensuring that all our people management
processes are inclusive by design. Our approach to these issues
is guided by our strategic commitments to
Develop people and
attract diverse talent
and
Drive sustainable impact through
resource efficiency and responsible business practices
.
Climate change
Industrial activity contributes to increased carbon emissions
causing climate change.
We contribute to mitigating actions by reducing our carbon
emissions in line with the requirements to keep global temperature
increases within 1.5˚C above pre-industrial levels. Our strategic
approach to this issue is guided by our commitment to Drive
sustainable impact through resource efficiency and responsible
business practices.
Environment
Pharmaceutical waste from both manufacturing processes
and patient use can be harmful to the environment, especially
if released to the external environment without proper waste
treatment.
We mitigate environmental risks from our operations by upholding
ISO14001 certification and adequate waste management
systems at our production facilities. Our strategic approach
to this issue is guided by our commitment to Drive sustainable
impact through resource efficiency and responsible business
practices.
Responsible business practices
Interactions with healthcare professionals and public officials
carry inherent corruption risks within the pharmaceutical industry.
Other potential risks include patient safety, animal welfare and
clinical trials. We mitigate these risks through appropriate training
and strong standards, policies and procedures. Our strategic
approach to this issue is guided by our commitment to
Drive
sustainable impact through resource efficiency and responsible
business practices
.
Basis of reporting
Our sustainability reporting is compliant with Sections 99a, 99b
and 99d of the Danish Financial Statements Act.
Reporting period
The ESG performance data reporting covers the period January
1 to December 31, 2023.
Scope and consolidation
The data presented in this report follow our internal data reporting
procedures to ensure data validation. Various business units
submit monthly or annual data related to environmental, social
and governance metrics. These data are internally collected
and reviewed before consolidation at global level.
Data related to employee safety, energy, waste and water
cover LEO Pharma manufacturing sites in Ballerup and Esbjerg
in Denmark, Dublin and Cork in Ireland, Segrate in Italy and
Vernouillet in France. LEO Pharma's headquarters are located at
the manufacturing site in Ballerup, Denmark. Reported energy
and water data from sites are based on meter readings and/or
supplier invoices. New production facilities are included after the
first full year of reporting following the year of commissioning.
Car fleet data cover all LEO Pharma vehicles worldwide. People
data cover all LEO Pharma employees worldwide. All employees
paid directly by LEO Pharma are included in the headcount.
The consolidation of our CO2 emissions is based on the
operational control approach and stated in accordance with
the Greenhouse Gas (GHG) Protocol.
Carbon emission conversions and calculations
To calculate LEO Pharma’s total carbon emissions, these levels
are measured using the carbon dioxide equivalent (CO2e) to
include all relevant greenhouse gasses according to the GHG
Protocol.
Emission factors used for those calculations come from:
•
UK Department for Energy Security and Net Zero
–
used for
fuels and fugitive emissions.
•
International Energy Agency
–
used for location-based
electricity.
•
Local electricity suppliers’ specific emission factors (including
green certificates)
-
used for market-based electricity.
•
Local district heating suppliers’ specific emission factors –
used for district heating (only Ballerup).
For renewable energy produced on site, an emission factor of 0
is applied.
Improved methodologies
In 2023, revisions and updates were made to the methodology
used to calculate Scope 3 carbon emissions with external
resources. These changes were subjected to a limited assurance
review during the year, ensuring a more accurate and transparent
assessment of our environmental impact.
Restatement of data from prior years
In 2023, efforts to enhance our ESG reporting procedures and
data accuracy have been undertaken, resulting in a revision of
the figures previously disclosed for Scope
1
emissions as well as
the cumulative Scope
1
and 2 emissions.
PAGE 30
LEO PHARMA ANNUAL REPORT 2023
SUSTAINABILITY AND ESG
Environmental
indicators
Total CO2e Scope 1 and 2
The sum of our CO2e Scope 1 and 2 emissions is calculated using
the reported market-based Scope 2 emissions. See accounting
principles for CO2e Scope 1 and 2. Measured in tonnes.
CO2e Scope 1
We follow the GHG Protocol corporate standard for calculating
our CO2e emissions and cover all direct emissions of greenhouse
gases from our operations. Scope 1 covers direct emissions from
owned and leased-in assets. It includes direct emissions from our
production facilities and emissions from our fossil fueled vehicles.
Measured in tonnes.
CO2e Scope 2 (market and location based)
We follow the GHG Protocol for calculating our CO2e emissions
and for our Scope 2 report on both our market- and location-
based emissions in line with GHG Protocol Scope 2 guidance.
Scope 2 covers indirect emissions from purchased electricity,
district heating and our electric vehicles. In 2022, we performed
an assessment of operational control over all leased offices. The
conclusion confirmed that we do not have overall operational
control and no revisions to reported Scope 2 emissions is
necessary. Measured in tonnes.
CO2e Scope 3
We follow the GHG Protocol for calculating our Scope 3 emissions.
Scope 3 emissions are defined in 15 sub-categories, which include
all other indirect emissions in our value chain. Our Scope 3 reporting
includes category
1
Purchased goods and services, category 2
Capital goods and category 4 Upstream transportation and
distribution. Categories
1,
2 & 4 emissions account for 92.7% of
our total Scope 3 emissions on a 2020 baseline. Data for Scope
3 in 2021 are unavailable because Scope 3 calculations were not
conducted that year. Measured in tonnes.
Scope 3 Supplier engagement
We follow the GHG Protocol for calculating our Scope 3 CO2e
emissions inventory and use an internal supplier tracker list to
record suppliers' commitments to SBTi. The Scope 3 Supplier
engagement is determined by dividing the total emissions of
the suppliers committed to SBTi or publicly committed to reduce
carbon emissions by the total emissions of all suppliers. Measured
in percentage.
Energy consumption
Energy consumption is measured as the consumption of
electricity, natural gas, heat, steam and fuels used at our six
manufacturing sites. Data are based on meter readings and
invoices. Measured in GWh.
GHG emissions intensity
GHG emissions intensity is calculated using the total Scope 1 &
2 (market-based) emissions in tonnes divided by total revenue in
DKK million. Measured in tonnes per DKK million.
Share of renewable electricity
Share of renewable electricity consumption is calculated
according to the GHG Protocol Scope 2 Guidelines. Measured in
percentage.
Energy intensity
Energy intensity is calculated using the total energy consumption
in GWh divided by total revenue in DKK million. Measured in GWh
per DKK million.
Water
usage
Water usage is measured as the sum of water used at our
manufacturing sites, based on meter readings. Measured in
cubic meters.
Waste (total)
Waste is measured based on the sum of waste disposal at our
manufacturing sites and is based on data provided by waste
management contractors. Measured in tonnes.
Waste by treatment
Waste by treatment covers: 1) Recycling, 2) Special treatment
(incl. chemical waste and biological waste), 3) Incineration with/
without energy recovery and 4) Landfill. Measured in percentage.
Social indicators
Gender diversity in leadership
Gender diversity is calculated using global employee data.
Executive management is defined as the CEO and direct reports
with management responsibilities who are part of the Global
Leadership Team. Senior management is defined as all employees
(people managers) in bands C and D. Middle management is
defined as employees (people managers) in band E and below.
We define managers as those with minimum one internal direct
report and on a management job path. Calculated based on
December 31, 2023 numbers. Measured in percentage.
Employees by gender
The percentage of women in LEO Pharma is calculated by dividing
the number of women by the total number of employees. The
percentage of men in LEO Pharma is calculated by dividing the
number of men by the total number of employees. Calculated
based on December 31, 2023 numbers. Measured in percentage.
Joiners by gender
The percentage of female joiners is calculated by dividing the
number of female joiners by the total number of joiners. The
percentage of male joiners is calculated by dividing the number
of male joiners by the total number of joiners. Joiners are defined
as all employees hired from January 1
-
December 31, 2023.
Measured in percentage.
Internal promotion rate by gender
The percentage of annual promotion rate for women is calculated
by dividing the number of women promoted in a year by the
average headcount (women) through a year. The percentage
of annual promotion rate for men is calculated by dividing the
number of men promoted in a year by the average headcount
(men) through a year. Promotions are defined as moving to a
higher job level. Measured in percentage.
Workforce by age
Age is calculated as full years. Calculated based on December
31, 2023 numbers. Measured in percentage.
Workforce by tenure
Tenure is calculated as full years. Only internal employees are
included. Calculated based on December 31, 2023 numbers.
Measured in percentage.
Employee turnover rate
The employee turnover rates include both voluntary and
involuntary turnover. The annual turnover rate is calculated
by dividing the number of employees leaving in a year by the
average headcount through a year. Measured in percentage.
Employee turnover rate by gender
The employee turnover rates by gender include both voluntary
and involuntary turnover. The annual turnover rate (women) is
calculated by dividing the number of women leaving in a year
by the average headcount (women) through a year. The annual
turnover rate (men) is calculated by dividing the number of men
leaving in a year by the average headcount (men) through a
year. Measured in percentage.
Lost Time Injury (LTI) rate
Global LTI rate per million working hours is calculated by dividing
the number of global injuries with more than one day’s absence
from work x 1,000,000 working hours by the total number of working
hours based on local standard working hours. Measured in LTI rate.
Number of lost days
Lost days due to global LTI’s are tracked by each of our sites.
Measured in number of days.
Governance indicators
Gender diversity at Board level
Measured by reviewing the gender representation of LEO
Pharma’s Board of Directors. The percentage of women is cal-
culated by dividing the number of women by the number of
members on the Board of Directors, excluding employee-elect-
ed Board members. The percentage of men is calculated by
dividing the number of men by the number of members on the
Board of Directors, excluding employee-elected Board members.
Calculated based on December 31, 2023 numbers. Measured in
percentage.
Employees completing global annual Code of Conduct training
Measured as the percentage of employees completing Code of
Conduct e-learning. Measured in percentage.
Third-party intermediaries undergoing
anticorruption due diligence
Number of third-party intermediaries undergoing anti-corrup-
tion due diligence covering distributors, wholesalers, licensees
and contract sales organizations. Measured in number.
Number of social and /or EHS supplier audits
Annual sum of social and EHS supplier audits performed by LEO
Pharma or a contracted auditor. Measured in number of audits.
PAGE 31
LEO PHARMA ANNUAL REPORT 2023
CORPORATE MATTERS
Board of Directors
Chair
Vice Chair
Jesper Brandgaard
Board member since 2021
Nationality:
Danish
Special competencies:
Board leadership, executive
management in the biopharmaceutical industry
Board committees, LEO Pharma A/S:
Remuneration & Nomination Committee (Chair)
IPO Preparedness Committee (Chair)
Career:
Professional board member. EVP Biopharm &
Legal Affairs; CFO & EVP Finance, Legal & IR; SVP Corp.
Finance, Novo Nordisk A/S. Chair of Board of Directors,
Simcorp A/S. COO & CFO, EAC Nutrition
Education:
MBA, MSc Economics & Auditing.
BSc Economics & Business Administration, CBS
Other board memberships:
•
Novonesis (Vice Chair)
•
WilliamDemant Invest (Vice Chair)
•
WilliamDemant
Foundation
•
VækstPartner Kapital Advisory Board
Peter Haahr
Board member since 2021
Nationality:
Danish
Special competencies:
Strategy and operations in life
science industry, financial management and capital
markets
Board committees, LEO Pharma A/S:
Audit Committee
Remuneration & Nomination Committee
Scientific Committee
IPO Preparedness Committee
Career:
CEO, LEO Foundation. CFO, Novo Holdings. Several
national and international leadership positions, Novo
Nordisk A/S. Equity Analyst, various financial institutions
Education:
EMBA, IMD, Switzerland. MSc Finance &
Accounting, Aarhus University
Other board memberships:
•
World Diabetes Foundation
•
House of Denmark
•
StockRate Asset Management
Paul Navarre
Board member since 2022
Nationality:
French
Special competencies:
Board leadership, executive
management in the healthcare industry
Board committees, LEO Pharma A/S:
Audit Committee
Career:
Professional chairman & board member. Senior
advisor to BCG and Private Equity funds. CEO of Ferring Inc.
President of Allergan International and other leadership roles.
Commercial Leadership Country Roles at Procter and Gamble
Education:
Insead Corporate Governance Certification.
MBA, Institut Superieur Du Commerce in Paris
Other board memberships:
•
HTL Biotech (Chair)
•
Hallura (Vice Chair)
•
Cerba Healthcare (Chair)
Jesper Mailind
Board member since 2018
Nationality:
Danish
Special competencies:
Executive management in
healthcare, medical devices and industry
Career:
Professional board member. CEO, LEO
Foundation, CEO GN Resound, RTX and SVP in Nycomed
A/S (Takeda)
Education:
MBA, Insead
Other board memberships:
•
Aidian Oy (Chair)
•
RTX
A/S
•
Etac AB
•
Contour Design A/S
Jonas Agnblad
Board member since 2021
Nationality:
Swedish
Special competencies:
Corporate finance (M&A) and
private equity investments in the healthcare sector
Board committees, LEO Pharma A/S:
Remuneration & Nomination Committee
Scientific Committee
IPO Preparedness Committee
Career:
Partner, Nordic Capital Advisors. Multiple board
assignments across the healthcare industry including
pharma, medtech and healthtech. Warburg Dillon Read
(M&A/corporate finance)
Education:
MSc in Economics and Business
Administration, Stockholm School of Economics
Other board memberships:
•
Corpuls
•
Orchid Orthopedic Solutions
•
Sunrise Medical
•
Vivecti
Jannie Kogsbøll
Employee-elected Board member since 1998
Nationality:
Danish
Career:
Process Assistant, Production Ballerup. Joined
LEO Pharma in 1985
Other board memberships:
•
A/B Stenrosen (Chair)
•
LEO Foundation
•
LEO Holding A/S
Karin Attermann
Employee-elected Board member since 2008
Nationality:
Danish
Career:
Sr. Compliance Manager Business Ethics, Global
Risk & Compliance. Regional Compliance Manager,
Region Europe+. Joined LEO Pharma in 1988
Education:
BA in English and German
Other board memberships:
•
LEO Pharma Social Club
“Personaleforeningen LEO” (Chair)
Franck Maréno
Employee-elected Board member since 2018
Nationality:
Danish
Career:
Principal Technician, Fucidin
®
API Fermentation
and FAR Project. Joined LEO Pharma in 2008
Education:
AP Graduate Laboratory and Biotechnology
“Technonome”
Other board memberships:
•
LEO Foundation
•
LEO Holding A/S
•
LEO Pharma Technicians Club
Signe Maria Christensen
Employee-elected Board member since 2018
Nationality:
Danish
Board committees, LEO Pharma A/S:
Remuneration & Nomination Committee
Scientific Committee
Career:
Sr. Strategic Alliance Manager, Portfolio Strategy
and Partnering. Joined LEO Pharma in 2011
Education:
MSc in chemical engineering and PhD in
organic chemistry, Technical University of Denmark
Other board memberships:
•
LEO Pharma Academics Association (Vice Chair)
Elisabeth
Svanberg
Board member since 2022
Nationality:
Swedish
Special competencies:
Biotech and the pharmaceutical
industry, product development and medical affairs
Board committees, LEO Pharma A/S:
Scientific
Committee
Career:
Chief Medical Officer at Kuste Biopharma. Chief
Development Officer at Ixaltis SA. Vice President at
Janssen Pharmaceuticals
Education:
MD, PhD Gothenburg University, Sweden
Other board memberships:
•
Egetis Therapeutics AB
•
Galapagos NV
•
Amolyt Pharma SAS
•
EPICS
Therapeutics
Lars Green
Board member since 2021
Nationality:
Danish
Special competencies:
Executive finance and business
management in healthcare and bio-industrial solutions
Board committees, LEO Pharma A/S:
Audit Committee (Chair)
Career:
Professional board member. CFO & EVP, Finance,
IT & Legal, Novozymes A/S. EVP Business Services &
Compliance; SVP & Regional CFO, North America; SVP
Finance, Novo Nordisk A/S
Education:
MSc Business Administration, Aarhus School
of Business, Denmark
Other board memberships:
•
LEO Foundation
•
LEO Holding A/S
•
The Danish Committee on Corporate Governance
Jan van de Winkel
Board member since 2017
Nationality:
Dutch
Special competencies:
Therapeutic antibody creation
and development, biotechnology industry, executive
management
Board committees, LEO Pharma A/S:
Scientific Committee (Chair)
Career:
Co-founder, President & CEO of Genmab A/S.
VP and Scientific Director of Medarex Europe. Professor
in Immunotherapy at Utrecht University
Education:
MSc Biology and PhD in Immunology,
Radboud University, Nijmegen, The Netherlands
Other board memberships:
•
Hookipa Pharma (Chair)
PAGE 33
LEO PHARMA ANNUAL REPORT 2023
CORPORATE MATTERS
Board committees
Audit Committee
Remuneration and
Nomination Committee
Scientific Committee
IPO Preparedness
Committee
The Board of Directors has established an Audit Committee
to assist in overseeing aspects related to financial reporting,
auditing, risk management, currency and investment policies
and compliance. The Audit Committee comprises at least
three members, two appointed by the shareholders and the
remaining members by and among the Board of Directors.
The members possess the relevant qualifications specified in
the Rules of Procedure of the Audit Committee.
The Audit Committee has the following
members:
The Board of Directors has established a Remuneration
and Nomination Committee to assist in aspects related to
remuneration, assessment and nomination. The Remuneration
and Nomination Committee meets when required, but at least
four times a year, and comprises at least three members, two
appointed by the shareholders and the remaining members
by and among the Board of Directors.
The Remuneration and Nomination Committee
has the following members:
The Board of Directors has established a Scientific Committee
to assist in overseeing the Research and Development
Strategy and the R&D pipeline. The Scientific Committee
meets when required, but at least four times a year. The
Scientific Committee comprises at least two members
appointed by the Board of Directors.
The Scientific Committee has the following
members:
The Board of Directors has established an IPO Preparedness
Committee. The Committee oversees the development and
execution of plans to secure that the financial and structural
profile of LEO Pharma matches peer benchmarks, preparing
the company for a public listing.
The IPO Preparedness Committee comprises at least three
members, two appointed by the shareholders and the
remaining members by and among the Board of Directors.
The IPO Preparedness Committee has the
following members:
Lars Green
Peter Haahr
Jesper Brandgaard
Jonas Agnblad
Jan van de Winkel
Jonas Agnblad
Peter Haahr
Jesper Brandgaard
Jonas Agnblad
(Chair)
(Chair)
(Chair)
(Chair)
Paul Navarre
Christian
Peter
Haahr
Signe Maria
Elisabeth
Svanberg
Signe Maria
Peter Haahr
Hedegaard*
Christensen
Christensen
* Non-Board member appointed by Nordic Capital
PAGE 34
LEO PHARMA ANNUAL REPORT 2023
CORPORATE MATTERS
Global Leadership Team
Christophe Bourdon
Chief Executive Officer
Joined:
2022
Nationality:
French-German
Career:
CEO at Orphazyme A/S. Senior Vice
President, General Manager at Amgen. Senior
Vice President at EMEAC
Education:
MBA from IMD, BA from ISG
Other positions: Board member at Sobi
Brian Hilberdink
Executive Vice President
Region North America
Philip Eickhoff
Chief Financial Officer
Global Finance and Business Services
Joined:
2022
Nationality:
Danish
Career:
CFO at Topsoe. CFO at Atos Medical.
Regional CFO North America & Pacific at
Coloplast
Education:
M.Sc., Finance & Accounting from
Copenhagen Business School
Kreesten Meldgaard Madsen
Chief Development Officer
Global Development
Nathalie
Daste
Executive Vice President
Global People & Corporate Affairs
Joined:
2023
Nationality:
French
Career:
Chief People Officer, Head of Strategy
and Commercial Excellence at Centogene.
Independent Executive Advisor. Global Head of
Talent at EGA. Chief of Staff to the President of
Novartis Diagnostics
Education:
Master in Economics and
Management from ESSEC Business School. MBA in
Strategy and Finance from INSEAD
Becki Morison
Executive Vice President
Global Product Strategy & International
Sven Hauptmann
Executive Vice President
Technical Development and Supply
Joined:
2022
Nationality:
German
Career:
Senior Vice President, Drug Product
Manufacturing at Roche. Vice President, Small
Molecules Manufacturing at Roche
Education: Ph.D. in Chemistry from the Technical
University of Darmstadt
Jacob Pontoppidan Thyssen
Chief Scientific Officer
Research & Early Development
Joined:
2022
Joined:
2016
Operations
Joined:
2023
Nationality:
Canadian
Career:
Senior Vice President, Sales and
Commercial at Novo Nordisk. President at Novo
Nordisk Canada Inc.
Education: BA, Arts & Science from Queen’s
University
Nationality:
Danish
Career:
Head of R&D Asia Pacific Hub at LEO
Pharma. Medical Doctor at Capital Region of
Denmark. Vice President and Head of Global
Clinical Development at ALK Abelló
Education:
Medical Doctor and PhD in
Epidemiology from Aarhus University
Joined:
2020
Nationality:
American
Career:
Vice President/General Manager at Eli
Lilly and Company. Director at First Health
Education:
BA, Psychology and Religion from
Denison University
Nationality:
Danish
Career:
Consultant Dermatologist at Bispebjerg
Hospital. Professor at Copenhagen University.
Guest Professor at University of Zürich
Education: Medical Doctor, PhD and
DmSci in Allergy and Dermatitis from University
of Copenhagen
PAGE 35
LEO PHARMA ANNUAL REPORT 2023
On March 14, 2023, LEO Pharma announced
a split of our R&D organization into two
distinct functions. To lead Research & Early
Development, LEO Pharma appointed Dr.
Jacob Pontoppidan Thyssen as Executive
Vice President and Chief Scientific Officer.
The change was done to support the
significant shift in R&D to a research model
which aims at driving the pipeline with
externally sourced innovation.
End of May 2023, EVP of Thrombosis &
Special Projects Guillaume Clément left
LEO Pharma.
On June 20, 2023, LEO Pharma announced
that Jörg Möller left the organization
following the changes in R&D earlier in the
year. At the same time, Kreesten Meldgaard
Madsen was appointed Chief Development
Officer, responsible for Global Development.
On October 1, 2023, EVP Dennis Schmidt
Pedersen left the organization and Nathalie
Daste joined as new EVP, Global People &
Corporate Affairs.
CORPORATE MATTERS
Risk management
Through our operations, we are exposed to a broad array of risks with
potential impact on business results. Our Enterprise Risk Management
program has been implemented to ensure a structured, methodological
and effective management of key risks across our value chain.
Risk management program
As a global pharmaceutical company, LEO Pharma operates in
a highly complex business environment. Through our operations,
we are exposed to a broad array of risks. These risks may have
a significant impact on our business if not properly identified,
evaluated, managed and monitored. An Enterprise Risk
Management (ERM) program has therefore been implemented to
ensure a structured, methodological and effective management
of key risks across our value chain.
In 2023, we further anchored the ERM program and processes
across LEO Pharma, and the assessment methodology and
tools were strengthened. The Global Leadership Team (GLT)
and Audit Committee (AC) held dedicated sessions to discuss
implementation of the ERM program and its continued refinement.
Risk management governance
At LEO Pharma, the Board of Directors holds the overall
responsibility for ERM, with delegation of the role of oversight of
the ERM program to the AC.
The CEO and the GLT are responsible for ensuring that the
ERM program is implemented and for setting the overall risk
management strategy and risk appetite. The CEO and the
GLT ultimately own and must manage all relevant risks in each
business area.
The Enterprise Risk team in the Global Ethics, Risk and Compliance
function drives implementation and maintenance of the ERM
program and execution of the ERM process, and it supports
leadership teams across the organization in fulfilling their ERM-
related roles and responsibilities.
Risk identification and evaluation
Leadership teams in the business areas identify their key risks
through a structured process that includes risk interviews and
workshops. This process is facilitated by the Enterprise Risk team
on a half-yearly basis. Identified risks are evaluated in terms of
impact (financial, reputational, compliance, quality, safety) and
likelihood. For each key risk, a clear scenario, a set of assumptions
and an overview of implemented mitigating measures are
developed.
Risk monitoring and reporting
Following the identification and evaluation of key risks across the
organization, the Enterprise Risk team prepares consolidated key
risk profiles for LEO Pharma. The consolidated key risk profiles are
shared with the CEO and the GLT and, ultimately, the AC for their
respective discussion, review and evaluation. The risk profiles are
also shared with the Board of Directors on an annual basis.
This approach fosters transparency concerning key risks,
exposure across LEO Pharma’s global value chain and creates a
solid foundation for the prioritization of resources and execution
of risk mitigation activities.
PAGE 36
LEO PHARMA ANNUAL REPORT 2023
CORPORATE MATTERS
KEY
RISKS
Macro-economic conditions
Cyber security
New product launches
Market access and pricing pressure
Supply disruption and
financial
commitments
Third-party compliance
The global economy is facing pressures
from increasing inflation and interest
rates as well as stagnating global trade
growth. As a result, healthcare budgets
in countries are tight and payers re-
main focused on reducing drug spend
by exercising increased pressure on the
pharmaceutical industry. Similarly, pa-
tients have become more price sensi-
tive in view of inflation outpacing salary
increases.
Remote/flexible work practices and
adoption of cloud services are among
many factors contributing to a re-
cord high number of cyber-attacks
throughout the world in 2023. Numerous
high-profile organizations have fallen
victim to some form of cyber-attack,
severely affecting their IT infrastructure,
production and distribution. Any form
of cyber security breach may happen
anywhere along LEO Pharma’s global
value chain and across all locations.
The success of a new product launch
depends on many factors, some of
which are beyond our control. Events
such as authorities requesting addi-
tional clinical trial data or delays at the
manufacturing sites can have serious
consequences for regulatory approv-
al processes and subsequent product
launches. Moreover, results of reim-
bursement negotiations are crucial to
successful product commercialization.
Achieving an acceptable pricing and
reimbursement level for our products is
essential to our ability to launch new in-
novative treatments and commercialize
our existing portfolio. This depends on
various factors, such as competition, dis-
count demands from private and pub-
lic payers, as well as negotiations with
national health authorities. Meanwhile,
healthcare budgets in many countries
are under tremendous pressure, which
has translated into health authorities and
payers seeking more aggressive price
concessions from drug manufacturers.
LEO Pharma's manufacturing lines are
unique. This leads to limited flexibility to
move products between manufacturing
lines, and, in turn, an increased vulnera-
bility to disruptions in supply caused by
natural disasters or other adverse events.
Meanwhile, ongoing global supply chain
challenges are putting further pressure on
our manufacturing operations. For certain
products, LEO Pharma relies on contract
manufacturer organizations (CMO), which
increases the risk of exposure to product
supply shortages, quality issues and finan-
cial commitments on minimum ordering of
products for a certain period.
As part of our global business activi-
ties, LEO Pharma engages with a broad
range of third-party intermediaries,
with a significant number of interactions
taking place in countries that have high
perceived levels of corruption and weak
law enforcement. Under local and glob-
al anti-corruption laws, LEO Pharma
can be held liable for corrupt acts com-
mitted by our intermediaries.
Increased cost-consciousness of pay-
ers and patients could increase pric-
ing pressures on LEO Pharma's existing
products, lead to more challenging ne-
gotiations for reimbursement of future
products as well as affect the volume
of products used. Currently, growing
inflation also affects prices of raw ma-
terials used in LEO Pharma's products,
thereby increasing the overall produc-
tion costs. As result, expected product
sales and profitability could be im-
pacted negatively.
Being targeted by a cyber-attack can
result in significant business disruption,
financial losses and fines imposed by
authorities. This can have a negative
impact on expected sales and prof-
its and limit patients' access to LEO
Pharma's products.
Delay in marketing authorization or
non-approval of a new product can
have a negative impact on expected
sales and profits and also limit or de-
lay patients' access to new innovative
treatments.
Not achieving acceptable reimburse-
ment and pricing levels would limit
LEO Pharma's ability to launch and
commercialize our products. This could
have a negative impact on expected
sales and the possibility for patients to
benefit from new innovative treatments.
Supply disruptions could lead to LEO
Pharma's products being out of stock
in certain markets. This would in turn
affect LEO Pharma's ability to serve our
patients as well as lead to lost sales
and reputational damage. Financial
commitments of minimum ordering can
impact LEO Pharma's operating finan-
cial result.
Wrongdoings of third-party interme-
diaries acting on LEO Pharma's behalf
can expose us to financial loss and rep-
utational damage.
LEO Pharma monitors the macro-eco-
nomic situation and is working closely
with payers and other stakeholders to
demonstrate the value of our products.
Various strategies are being deployed
to contain increases in production costs
and other costs.
LEO Pharma has implemented several
mitigating measures to manage ex-
posure from cyber security threats, in-
cluding, but not limited to, conducting
information security awareness train-
ing as well as improving our technical
capabilities to prevent, detect and re-
spond to attempted attacks.
LEO Pharma works closely with regula-
tory authorities to be able to promptly
respond to their requests.
LEO Pharma closely monitors mar-
ket access and pricing developments
and requirements in key markets, while
working actively with payers, advoca-
cy groups and authorities to sufficiently
document the value of our products
(e.g. through clinical trial data).
Strategies for increased internal capabil-
ity or external sourcing are continuously
evaluated and include monitoring as
well as upgrading manufacturing lines.
Furthermore, safety stock is kept, com-
pensating for a potential breakdown.
Contracts are reviewed continuously to
monitor potential breach of minimum or-
dering clauses with CMOs.
LEO Pharma conducts anti-corrup-
tion due diligence for selected types of
third-party intermediaries.
PAGE 37
LEO PHARMA ANNUAL REPORT 2023
MITIGATING
ACTIONS
IMPACT
RISK
AREA
LEO PHARMA ANNUAL REPORT 2023
CONSOLIDATED FINANCIAL STATEMENTS
PAGE 39 LEO PHARMA ANNUAL REPORT 2023
Income statement
January 1 - December 31
(DKK million) Note 2023 2022
Revenue 2 11,392 10,641
Cost of sales 3, 10, 13 (4,281 ) (4,358 )
Gross profit 7,111 6,283
Sales and distribution costs 3, 9, 10 (4,902 ) (4,762 )
Research and development costs 3, 9, 10 (1,874 ) (2,485 )
Administrative costs
3, 4, 5, 9,
10, 11, 19 (2,075 ) (2,407 )
Other operating income 6 58 73
Other operating expenses 6 (17 ) (13 )
Operating profit/(loss) (1,699 ) (3,311 )
Financial income 7 47 3
Financial expenses 4, 7 (1,140 ) (785 )
Profit/(loss) before tax (2,792 ) (4,093 )
Income tax 8 (815 ) (17 )
Net profit/(loss) for the year (3,607 ) (4,110 )
Statement of comprehensive income
January 1 - December 31
(DKK million) Note 2023 2022
Net profit/(loss) for the year (3,607 ) (4,110 )
Other comprehensive income
Remeasurement of defined benefit obligations 19 (38 ) 329
Tax on other comprehensive income 8 8 (52 )
Items that will not subsequently be reclassified to the
income statement
18 (30 ) 277
Foreign exchange adjustments, subsidiaries (80 ) 137
Fair value adjustments on hedging instruments 21, 22 (29 ) 61
Tax on other comprehensive income 8 6 (17 )
Items that are or may subsequently be reclassified to
the income statement
18 (103 ) 181
Total other comprehensive income/(loss) after tax (133 ) 458
Total comprehensive income/(loss) (3,740 ) (3,652 )
LEO PHARMA ANNUAL REPORT 2023
CONSOLIDATED FINANCIAL STATEMENTS
PAGE 40 LEO PHARMA ANNUAL REPORT 2023
Balance sheet at December 31
Assets
(DKK million) Note 2023 2022
Goodwill 192 192
Intellectual property rights 4,501 5,595
Software 1,206 1,253
Development projects and software in progress 200 615
Intangible assets 9 6,099 7,655
Land and buildings 1,007 938
Plant and machinery 1,004 899
Other fixtures and fittings, tools and equipment 150 177
Assets under construction 2,355 2,694
Property, plant and equipment 10 4,516 4,708
Right-of-use assets 306 399
Right-of-use assets 11 306 399
Deferred tax assets 15 1,157 1,809
Pensions 19 145 144
Other financial assets 23 49 50
Other non-current assets 1,351 2,003
Non-current assets 12,272 14,765
Inventories 13 4,866 4,580
Trade receivables 12 2,142 2,136
Tax receivables 545 234
Other receivables 14 414 550
Prepaid expenses 16 307 289
Other financial assets 23 189 108
Cash 216 270
Current assets 8,679 8,167
Assets 20,951 22,932
Balance sheet at December 31
Equity and liabilities
(DKK million) Note 2023 2022
Share capital 17 383 321
Reserves (183 ) (107 )
Retained earnings 4,325 1,732
Equity 4,525 1,946
Loans and credit institutions 21, 23 10,404 13,764
Deferred tax liabilities 15 30 39
Pensions 19 77 71
Provisions 20 131 290
Lease liabilities 11 238 317
Tax payables 130 489
Other non-current liabilities 461 175
Non-current liabilities 11,471 15,145
Loans and credit institutions 21, 23 265 407
Trade payables 1,243 1,302
Provisions 20 925 979
Lease liabilities 11 87 125
Tax payables 285 515
Other payables 24 2,150 2,513
Current liabilities 4,955 5,841
Liabilities 16,426 20,986
Equity and liabilities 20,951 22,932
LEO PHARMA ANNUAL REPORT 2023
CONSOLIDATED FINANCIAL STATEMENTS
PAGE 41 LEO PHARMA ANNUAL REPORT 2023
Statement of changes in equity
January 1 - December 31
Note 2023 2022
Reserves Reserves
(DKK million)
Share
capital
Foreign
currency
translation
reserves
Hedging
reserves
Other
capital
reserves
Retained
earnings Total
Share
capital
Foreign
currency
translation
reserves
Hedging
reserves
Other
capital
reserves
Retained
earnings Total
Equity at January 1 321 (184 ) 43 34 1,732 1,946 320 (322 ) (1 ) 9 5,530 5,537
Comprehensive income
for the year:
Net profit/(loss) for the year - - - - (3,607 ) (3,607 ) - - - - (4,110 ) (4,110 )
Other comprehensive income 18 - (80 ) (23 ) - (30 ) (133 ) - 137 44 - 277 458
Total comprehensive income/(loss)
for the year - (80 ) (23 ) - (3,637 ) (3,740 ) - 137 44 - (3,833 ) (3,652 )
Transactions with owners:
Increase of capital 17 62 - - - 6,238 6,300 1 - - - 35 36
Purchase of treasury shares - - - - (8 ) (8 ) - - - - - -
Share-based payment 4 - - - 27 - 27 - - - 25 - 25
Total transactions with owners 62 - - 27 6,230 6,319 1 - - 25 35 61
Equity at December 31 383 (264 ) 20 61 4,325 4,525 321 (184 ) 43 34 1,732 1,946
LEO PHARMA ANNUAL REPORT 2023
CONSOLIDATED FINANCIAL STATEMENTS
PAGE 42 LEO PHARMA ANNUAL REPORT 2023
1. Income tax in 2023 is impacted by exit tax paid of
DKK 618m, related to a merger in 2019 (Intendis GmbH).
2. Income tax in 2022 is impacted by utilization
of tax loss by the joint taxtion group and
the settlement of the APA Agreement 2009-
2015 between Denmark and Ireland.
3. Capital increase in 2023 included a capital
injection from shareholders of DKK 746m.
4. At December 31, 2023, DKK 37m of the cash were
deposited in restricted bank accounts (2022: DKK 21m).
Cash flow statement
January 1 - December 31
(DKK million) Note 2023 2022
Operating profit/(loss) (1,699 ) (3,311 )
Non-cash items
Depreciation, amortization and impairment losses 9, 10, 11 2,250 1,737
Adjustments for non-cash operating items, etc. 25 1,394 1,668
Changes in working capital 25 (509 ) (785 )
Cash items
Payment of provisions and other non-current liabilities 20 (1,442 ) (1,605 )
Interest, etc., received 27 37
Interest, etc., paid (916 ) (454 )
Income tax, received/paid (1,058 )
1)
2)
Cash flows from operating activities (1,953 ) (2,274 )
Investments in intangible assets 9 (207 ) (898 )
Investments in property, plant and
equipment
10 (349 ) (597 )
Proceeds from sale of intangible assets - 4
Proceeds from sale of property, plant and equipment 19 3
Sale of subsidiaries and activities, net of cash received - 12
Cash flows from investing activities (537 ) (1,476 )
(DKK million) Note 2023 2022
Proceeds from loans 21 2,750 4,451
Repayment of loans 21 (750 ) (900 )
Overdraft facilities 21 (69 ) 108
Issuance of loans (87 ) -
Proceeds from issue of shares 17 746
3)
Purchase of treasury shares 17 (8 ) -
Repayment of lease liabilities 11 (115 ) (119 )
Cash flows from financing activities 2,467 3,576
Net cash flow for the period (23 ) (174 )
Cash, January 1 270 432
Effect of foreign exchange rate changes of cash (31 ) 12
Cash at December 31
4)
Notes - Group
Notes to the income statement
Notes to the cash flow statement
1
Basis of reporting
44 12 Trade receivables 62 25 Other cash flow adjustments 82
2
Revenue
3
Staff expenses and remuneration to the Executive Management
and Board of Directors
47
13
Inventories
48
14 Other receivables
63
63
Notes - Additional information
4
Share-based payment
49
5
Fees to auditors appointed at the Annual General Meeting 52
6
Other operating income and expenses 52
7
Financial income and expenses 52
8
Income tax 53
Notes to the balance sheet
9
Intangible assets 55
10
Property, plant and equipment 58
11
Leases
60
15 Deferred tax
64
26 Guarantees, contingencies and commitments
83
16 Prepaid expenses
66
27 Related party transactions
84
17 Share capital
66
28 Events after the balance sheet date
84
18 Other comprehensive income
67
29 Company overview
85
19
Pensions
68
20 Provisions
70
21 Financial risks
72
22 Derivatives - hedge accounting
76
23 Financial assets and liabilities by category
79
24 Other payables
82
CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Basis of reporting
Basis of preparation
The consolidated financial statements have been prepared in accordance with International Accounting
Standards (IFRS) as adopted by the EU, and the additional requirements of the Danish Financial State-
ments Act for Class Large C companies.
On February 22, 2024 the Board of Directors and the Executive Management considered and approved
the 2023 Annual Report of LEO Pharma A/S. The Annual Report will be presented to the shareholders of
LEO Pharma A/S for approval at the ordinary Annual General Meeting on February 29, 2024.
The consolidated financial statements are presented in Danish kroner (DKK), which is also the functional
currency of the Parent Company.
The accounting policies are unchanged compared to last year, except the matters described in the section
Changes in presentation
Rounding
In general, rounding may cause minor variances in sums and percentages in the Annual Report.
Global market and climate uncertainties
Management continuously assesses the overall geopolitical uncertainties, supply situation, increasing
inflation and interest rates, which may have an impact on areas with significant accounting estimate
and/or judgment.
Similar to last year, the war in Ukraine has not significantly impacted LEO Pharma’s activities. In 2023,
revenue from Russia, Ukraine and Belarus amounted to 2% (2022: 2%) of the total revenue. All revenues
from these countries respect the sanctions imposed on Russia.
In addtion, Management has assesed the qualitative and quantitative impact of climate-related risks
when determining estimates and assumptions.
As of December 31, 2023, Management estimates and assumptions have been updated to assess the
recoverability of the asset base, including goodwill, intellectual property rights, development projects,
deferred tax assets and trade receivables. The indirect effects of the geopolitical uncertainties and
climate-related risks were not a triggering event for impairments in 2023.
Application of materiality
In the preparation of the consolidated financial statements, LEO Pharma aims to focus on information
that is considered to be material and relevant to the users of the consolidated financial statements.
The consolidated financial statements are the result of aggregating large numbers of transactions into
classes of similar items, according to their nature or function. If a line item is not individually material, it is
aggregated with other items of a similar nature in the consolidated financial statements or in the notes.
IFRS contain extensive disclosure requirements. The specific disclosures required by IFRS are provided in
the consolidated financial statements unless the information is considered immaterial to the users.
PAGE 44
LEO PHARMA ANNUAL REPORT 2023
current situation. Therefore, the actual amounts may differ from the estimated amounts, as more
Note
Key accounting estimates and judgments
Estimate/judgment
8 Income tax
Provisions for uncetain tax positions
Estimate
9 Intangible assets
Useful lives and valuation of intangible assets
Estimate/judgment
13
Inventories
Cost of inventories
Estimate
15 Deferred tax
Valuation of deferred tax assets
Estimate/judgment
CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Basis of reporting (continued)
General accounting policies
Consolidation
The consolidated financial statements comprise LEO Pharma A/S and entities in which LEO Pharma A/S
directly holds more than 50% of the votes or otherwise exercises control.
The consolidated financial statements are prepared by combining the financial statements of the Parent
Company and all subsidiaries, with subsequent elimination of intercompany transactions, intercompany
shareholdings and balances as well as unrealized profits from intercompany transactions. The financial
statements of all companies have been prepared by applying the Group’s accounting policies.
Changes in presentation
Income statement
LEO Pharma have performed an assessment of the classification of costs in the income statement to
support a true and fair view of the presentation by function. As a consequense, the comparative figures
for 2022 have been restated.
The impact is as following:
•
Cost of good sold decreased by DKK 298m
•
Sales and distribution costs increased by DKK 26m
•
Research and development costs increased by DKK 11m
•
Administrative costs increased by DKK 313m
•
Other opererating expenses decreased by DKK 52m
The changes in presentation had no impact on operating profit/(loss), net profit, equity or total asset.
Presentation of share based payments
For cash-settled share-based payment arrangements, the awards measured
at grant value are recognized as staff cost over the vesting period with
the balance on liability. The liability is remeasured at each reporting date
and at settlement date at fair value. For 2023 changes in the liability as a result of
the remeasurement to fair value are recognized in the income statement under other
financial expenses. The impact of the remeasurement in 2022 of DKK 2 million have been recognized under
staff cost.
Implementation of new standards and interpretations
Effective from January 1, 2023, LEO Pharma implemented all new or changed accounting standards and
interpretations. The adoption had no material impact on the disclosures or the amounts reported in the
consolidated financial statements.
New and revised IFRS issued, but not yet effective, that are relevant to the Group
IASB has issued new or amended accounting standards and interpretations that have not yet become
effective. LEO Pharma expects to adopt the IFRS standards and interpretations when they become
mandatory. LEO Pharma does not expect adoption of these standards will have a material impact on the
consolidated financial statements in future periods.
Foreign currency translation
On initial recognition, transactions in foreign currencies are translated at the exchange rates at the trans-
action date. Exchange differences arising between the rates on the transaction dates and payment dates
are recognized in financial items in the income statement.
Receivables, payables and other monetary items in foreign currencies are translated at the exchange
rates on the balance sheet date. Any differences between the exchange rate on the balance sheet date
and the exchange rate at the time when the receivable or the payable arises, or on recognition in the
most recent financial statements, are recognized in financial income or financial expenses in the income
statement.
On consolidation of foreign subsidiaries with a functional currency other than DKK, income statements are
translated into DKK at the average exchange rates for the year and balance sheet items are translated
at the exchange rates on the balance sheet date. The effects of the translation of the opening equity of
foreign subsidiaries at the exchange rates on the balance sheet date and the translation of the statement
of comprehensive income from average exchange rates to the exchange rates on the balance sheet date
are recognized in other comprehensive income.
Cash flow statement
The cash flow statement is prepared according to the indirect method based on operating profit/(loss).
The statement shows cash flows from operating, investing and financing activities as well as cash and
cash equivalents at the start and end of the year.
Cash flows from operating activities are calculated as the Group’s operating profit/(loss), adjusted for
non-cash operating items, such as depreciation, amortization and impairment losses, as well as changes
in working capital. Working capital comprises inventories, trade receivables, trade payables, etc.
Cash flows from investing activities comprise payments from acquisitions and disposals of intangible assets,
property, plant and equipment as well as net investments in securities.
Cash flows from financing activities comprise payments from the raising and repayment of short-term and
long-term debt and payments to and from shareholders. Cash solely comprise cash at bank and in hand.
PAGE 45
LEO PHARMA ANNUAL REPORT 2023
CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Basis of reporting (continued)
Definitions/Non-GAAP measures
The consolidated financial statement include financial performance measures that are not defined
according to IFRS. These measures are considered to provide valuable information to stakeholders and
Management. Since other companies might calculate these differently from LEO Pharma Group, they
may not be comparable to the measures applied by other companies. These financial measures should
therefore not be considered a replacement for performance measures as defined under IFRS, but rather
as supplementary information.
Revenue year 0 - Revenue year -1
EBITDA
Operating profit/(loss) before financial income and expenses, tax, depreciation and amortization.
Adjusted EBITDA
Operating profit/(loss) before transformation and restructuring costs, financial income and expenses, tax,
depreciation and amortization.
Transformation and restructuring costs are the non-core and non-recurring costs overseen by the IPO
Preparedness Committee to execute the strategic plans and structural profile of LEO Pharma towards
delivering sustainable profitability and potential public listing.
Revenue growth
x 100
Revenue year -1
Free cash flow
Cash flow from operating activities less cash flow from investing activities.
Dermatlogy
revenue growth
Derm rev. year 0
-
Derm rev. year -1
Derm rev. year -1
x 100
Operating working capital
Inventories and trade receivables (before provision for bad debt) less trade payables.
Net working capital
Current assets less current liabilities used in, or necessary for, the Group’s operations.
Gross profit/(loss)
Gross margin
Revenue
R&D costs
R&D costs (of revenue)
Revenue
x 100
x 100
Net interest-bearing debt
The market value of interest-bearing liabilities (financial liabilities) less the market value of cash at bank
and in hand and other easily convertible interest-bearing current assets.
Average number of full-time employees
The average number of employees is calculated as the average of the number of permanent employees
at the end of each month.
Adjusted EBITDA margin
Adjusted EBITDA
Revenue
x 100
EBITDA margin
EBITDA
Revenue
x 100
Operating profit margin
Operating profit/(loss) (EBIT)
Revenue
x 100
PAGE 46
LEO PHARMA ANNUAL REPORT 2023
Revenue from the sale of goods for resale and finished goods is recognized in the income state-
ment when control has been transferred at a point in time. Generally, this is when delivery and
Revenue is measured at fair value, which corresponds to the amount of consideration to which
nized exclusive of VAT and net of sales deductions, including product returns, as well as discounts
Revenue includes license income and sales-based royalties from out-
licensed products as well as milestone payments and other revenue in connection with partner-
ships. These revenues, except for royalties, are recognized when the performance obligation is
satisfied, i.e. when transferred to the customer. For sales-based royalties, revenue is recognized
Change to revenue segments
The segment structure by region has been changed to support both our commerical operation
and operating model. The segments have been changed to "Europe", "North America" and "Rest
CONSOLIDATED FINANCIAL STATEMENTS
Note 2
Revenue
Contract balances
Generally, billing occurs subsequent to revenue recognition, resulting in trade receivables. The Group’s
payment terms are typically between 45
-
90 days. However, the Group sometimes receives upfront
payments related to various sales and distribution rights where the upfront payments are recognized over
time, resulting in contract liabilities. Contract liabilities are recognized as revenue in line with fulfillment of
the contract obligation.
Unsatisfied performance obligations
The Group’s remaining performance obligations expected to be recognized in subsequent year amounts
to DKK 35m (2022: DKK 33m), which will be recognized in 2024. The obligations comprise of contracts where
the Group has an obligation to deliver goods.
Timing of revenue recognition
Revenue totaling DKK 11,392m (2022: DKK 10,641m) comprised performance obligations satisfied at a point
in time of DKK 11,392m (2022: DKK 10,637m) and performance obligations satisfied over time of DKK 0m
(2022: DKK 4m).
PAGE 47
LEO PHARMA ANNUAL REPORT 2023
6,375
3,350
11,392
6,206
10,641
North America
Rest of World
Psoriasis
3,813
3,912
Skin infection
1,771
1,664
Eczema
2,900
1,969
Acne/Rosacea
317
328
Other Mature Dermatology
238
260
Total
Dermatology
9,039
8,133
Thrombosis
2,141
2,233
CMO/Divested
212
275
Total
11,392
10,641
Revenue by category
Products
11,264
10,527
Sales-based royalties
57
60
Other
71
54
Total
11,392
10,641
CONSOLIDATED FINANCIAL STATEMENTS
Note 3
Staff expenses and remuneration to the Executive
Management and Board of Directors
Remuneration to the Executive Management and Board of Directors
1.
For detailed information reference is made to Note 4 Share-based payment.
2.
In 2023, total staff expenses were impacted by DKK 55m as a consequence of announced restructuring of LEO Pharma (2022: DKK 248m).
3.
Members of the Executive Management participate in short- and long-term incentive programs that provide a bonus for the achievement of
predetermined targets.
4.
References are made to Note 4 Share-based payments and Note 27 Related party transactions.
5.
Reference is made to page 35 "Global Leadership Team". Other members of the Executive Management are both current members, and former
members who have left LEO Pharma during 2023.
PAGE 48
LEO PHARMA ANNUAL REPORT 2023
Accounting
policies
Wages, salaries, social security expenses, annual leave and sick leave, bonuses and non-mon-
etary benefits are recognized in the year in which the associated services are rendered by
employees of the Group. Where the Group provides long-term employee benefits, the costs are
accrued to match the rendering of the services by the employees concerned.
(DKK million)
Salaries
Bonus
3)
Pensions
Share-based
payments
4)
Total
remuneration
excluding
severance
payments
Severance
payments
Total
remuneration
after
severance
payments
2023
Registered members of the
Executive Management
12
12
2
3
29
-
29
Other members of
Executive Management
5)
24
23
4
12
63
68
131
Board of Directors
5
-
-
1
6
-
6
Total
41
35
6
16
98
68
166
(DKK million)
2023
2022
Wages and salaries
3,078
3,614
Hereof capitalized staff expenses
(34)
(54)
Pensions – defined benefit plans
6
8
Pensions – defined contribution plans
258
269
Share-based payment
1)
43
45
Social security expenses
337
349
Other employee expenses
213
253
Total staff expenses
2)
3,901
4,484
Staff expenses included in:
Cost of sales
757
780
Sales and distribution costs
1,813
2,050
Research and development costs
573
793
Administrative costs
758
861
Total staff expenses
3,901
4,484
Average number of full-time employees
2022
Registered members of the
Executive Management
10
13
1
14
38
12
50
Other members of
Executive Management
5)
29
22
4
13
68
22
90
Board of Directors
5
-
-
2
7
-
7
Total
44
35
5
29
113
34
147
CONSOLIDATED FINANCIAL STATEMENTS
Note 4
Share-based payment
Reconciliation of outstanding employee awards
2023
2022
ESPP
EPSPP
ESPP
EPSPP
Number of matching shares
(equity-settled)
(cash-settled)
(equity-settled)
(cash-settled)
Outstanding at January 1
740,920
45,504
-
-
Granted
-
-
861,392
62,920
Forfeited
(123,745)
(5,429)
(120,472)
(17,416)
Outstanding at December 31
617,175
40,075
740,920
45,504
Fair value at grant (DKK/unit)
-
-
30.40
30.40
Current fair value (DKK/unit)
92.08
92.08
30.71
30.71
Measurement of fair value of employee matching shares
Employee matching shares
In 2022, the Group launched a voluntary employee share-based program (ESPP) and a corresponding
cash-settled phantom program (EPSPP
–
Employee Phantom Share Purchase Plan). The program gave
employees the opportunity to buy shares (“employee shares”). In addition, the employee received the right
to an additional matching share of which 50% vest after three years of employment and 50% vest in the
event of a potential listing with a market condition that the fair value of LEO Pharma must increase to at
least 1.5 times the subscription price. Management considers it more likely than not that a listing will be
successful within the coming years. Therefore, it is concluded that the matching shares shall be classified
as equity-settled.
The details are only relating to the matching share program and not the employee shares.
The fair value of granted awards is estimated using a binomial valuation model of market conditions considering the terms and
conditions upon which the awards were granted. In addition to the market condition, the fair value of LEO Pharma must increase
to at least 1.5 times the subscription price. The inputs used in the measurement of the fair values at grant date of the share-based
payment plans were as follows:
PAGE 49
LEO PHARMA ANNUAL REPORT 2023
Accounting
policies
For equity-settled share-based payment arrangements, the warrants and shares are meas-
ured at fair value at grant date and recognized as a staff cost over the vesting period with the
balance on equity. On initial recognition, an estimate is made of the number of awards expected
to vest. Subsequently, the amount recognized is adjusted to reflect the number of awards for
which the service and non-market performance conditions are expected to be met and awards
expected to vest.
For cash-settled share-based payment arrangements, the awards measured at grant value
are recognized as staff cost over the vesting period with the balance on liability. The liability is
remeasured at each reporting date and at settlement date at fair value. Any changes in the
liability as a result of the remeasurement to fair value are recognized in profit or loss under other
financial expenses.
ESPP
EPSPP
EPSPP
(equity-settled)
(cash-settled)
(cash-settled)
Grant date
Measurement
date
Measurement
date
January 1, 2022
December 31, 2023
December 31, 2022
Fair value of shares at grant date
47.72
101.36
47.72
Expected volatility (weighted-average)
26.4%
28.2%
26.5%
Expected life (weighted-average, years)
4.9
3.4
3.9
Expected dividend
-
-
-
Risk-free interest rate
(based on governance bonds)
-0.57% to 0.08%
2.71%
to
3.17%
2.39% to 2.56%
CONSOLIDATED FINANCIAL STATEMENTS
Note 4
Share-based payment
(continued)
Management Incentive Program (MIP)
Equity-settled share agreements
Executive Management receives warrants as a part of their long-term incentive program. The members
of Executive Management must remain employed by the Group until the vesting date. The market condi-
tion of the warrants is subject to a fair value increase in LEO Pharma shares of at least 1.5 times of the
subscription price and an exercise cap of three times the subscription value. In case of non-listing, the
warrants become exercisable after seven years and will be cash-settled. Management considers it more
likely than not that a listing will be successful within the coming years. It is therefore concluded that the
warrants shall be classified as equity-settled.
In addition, members of the Board of Directors have been granted the opportunity to purchase warrants.
In addition, the Chair has been granted warrants, identical to the warrants granted under the MIP.
Reconciliation of outstanding equity-settled awards
Phantom Share Agreement (cash-settled)
Follows the same terms and conditions as the Management Incentive Program but is
predetermined to be settled in cash.
Reconciliation of outstanding cash-settled awards
PAGE 50
LEO PHARMA ANNUAL REPORT 2023
Number of warrants
Total 2023
Total 2022
Outstanding at January 1
5,016,838
3,010,678
Granted during the year
2,016,905
2,031,923
Forfeited during the year
(781,443)
(25,763)
Outstanding at December 31
6,252,300
5,016,838
Exercisable at December 31
-
-
Fair value at grant (DKK/unit)
6.77 to 8.87
7.58
Average exercise share price
47.72
47.72
Number of phantom shares
Phantom Share
Agreement 2023
Phantom Share
Agreement 2022
Outstanding at January 1
5,101,250
3,504,684
Instruments granted
200,000
2,063,864
Forfeited during the year
(283,992)
(467,298)
Outstanding at December 31
5,017,258
5,101,250
Fair value at grant date (DKK/unit)
43.21
7.58
Initial expected total cost (million DKK)
217
38
Instruments for which it is expected to vest
5,017,258
5,101,250
Current fair value (DKK/unit)
43.21
7.97
Total expected settlement
217
41
Liability at December 31 (million DKK)
198
30
CONSOLIDATED FINANCIAL STATEMENTS
Note 4
Share-based payment
(continued)
Measurement of fair value
The fair value of awards is estimated using a binomial valuation model of market conditions taking into
account the terms and conditions. Expected volatility has been based on an evaluation of the histori-
cal volatility of comparable companies’ share prices. This was based on a standard deviation of weekly
returns over a five-year period. The expected term of the instruments has been based on projected exit
date and their probabilities and estimates assessed by Management.
Equity-settled share-based payment arrangements
The input used in the measurement of the fair values at grant date of the equity-settled share-based
payment plans was as follows:
Grant date
Grant date
March 1, 2023
July 8, 2022
Fair value of shares at grant date (DKK)
47.72
47.72
Expected volatility (weighted average)
27.3%
26.0%
Expected life (weighted average, years)
4.1
4.2
Expected dividend
-
-
Risk-free interest rate (based on government bonds)
2.51% to 2.79%
0.88% to 1.43%
Cash-settled share-based payment arrangements
The input used in the measurement of the fair values at grant date of the cash-settled share-based
payment plans was as follows:
Measurement
date
Measurement
date
December 31, 2023
December 31, 2022
Fair value of shares at grant date (DKK)
101.36
47.72
Expected volatility (weighted average)
28.2%
26.5%
Expected life (weighted average, years)
3.4
3.7
Expected dividend
-
-
Risk-free interest rate (based on government bonds)
2.71%
to
2.79%
2.43% to 2.56%
Financial impact
At December 31, 2023, the total carrying amounts of liabilities arising from the share-based payment
transactions were DKK 200m (2022: DKK 31m). The intrinsic value at December 31, 2023 of liability related
to vested phantom shares was DKK 130m (2022: DKK 16m).Total expenses recognized in 2023 from share-
based payment transactions in the income statement amount to DKK 199m (2022: DKK 45m) of which DKK
156m are fair value adjustment to the cash-settled program recognized under financial expenses.
The cost of DKK 27m (2022: DKK 25m) arises from equity-settled share-based payment transactions.
On January 1, 2024, LEO Pharma offered all employees in the Group the opportunity to participate in a
new round of Employee Share Purchase Plan. To participate in the plan, the employees are required to
invest 3% of their base salary over 12 months into shares and will receive matching shares at vesting. 1,683
colleagues signed up for the share purchase plan. This corresponds to 41 % of those eligible to join.
PAGE 51
LEO PHARMA ANNUAL REPORT 2023
CONSOLIDATED FINANCIAL STATEMENTS
Note 5
Fees to auditors appointed at the Annual
General Meeting
(DKK million)
Note 6
Other operating income and expenses
2022
Note 7
Financial income and expenses
(DKK million)
2022
1.
Classification of sales-related royalty expenses was
changed from other operating expenses to cost of
sales. Comparative figures have been restated (2022:
DKK 52m).
2.
Other financial income primarily comprise fair value
adjustment relating renegotiated loan terms of DKK
15m, and other income relating defined benefit plans of
DKK 12m.
3.
Foreign exchange gains amount to DKK 502m (2022:
DKK 700m) and foreign exchange losses amount to DKK
553m (2022: DKK 769m) for the Group.
4.
Reference is made to Note 4 Share-based payment.
5.
Other financial expenses primarily comprise
commitment fees related to syndicated facility
agreement.
(DKK million)
2023
2022
Gain from sale of assets
10
14
Other operating income
48
59
Other operating income
58
73
Loss from sale of assets
8
9
Other operating expenses
9
4
Other operating expenses
17
13
1)
PAGE 52
LEO PHARMA ANNUAL REPORT 2023
Accounting policies
Other operating income and expenses comprise items of a secondary nature to the Group’s
primary activities, i.e. gains and losses on divestments of intellectual property rights and on sale
of property, plant and equipment.
Accounting
policies
Financial income and expenses comprise interest, realized and unrealized exchange rate adjust-
ments and market value adjustments of financial assets. Market value adjustments of currency
derivatives that have not been entered into for hedging purposes are presented as financial
income and expenses.
Statutory audit
8
9
Tax and VAT advice
1
2
Non-audit services
1
2
Total
10
13
Interest income
11
3
Gain arising from financial assets designated
at fair value through profit and loss
5
-
Other financial income
31
2)
-
Financial income
47
3
Interest expenses, related parties
175
233
Interest expenses, credit institutions
647
319
Interest expenses, lease liabilities
10
11
Loss arising from financial assets designated
at fair value through profit and loss
-
15
Foreign exchange loss, net
3)
51
69
Fair-value remeasurement (non-cash) of share based incentive plans
4)
156
-
Other financial expenses
5)
101
138
Financial expenses
1,140
785
CONSOLIDATED FINANCIAL STATEMENTS
Note 8
Income tax
Accounting
policies
Tax for the year, which consists of the year’s current tax, the change in deferred tax and adjustments
in respect of previous years, is recognized in the income statement at the amount that can be attrib-
uted to the profit or loss for the year and in other comprehensive income at the amount that can be
attributed to items in other comprehensive income.
The change in deferred tax as a result of changed income tax rates or tax rules is recognized in the
income statement. Interest on tax cases that are ongoing or have been settled during the year is
reported under financial items.
Current tax for the year is calculated on the basis of the income tax rates and rules applicable at
the balance sheet date. The Parent Company, the Danish subsidiary and LEO Holding A/S are jointly
taxed.
Key accounting estimates
Uncertain tax positions
As a global company, the Group will from time to time have tax audits and discussions with tax author-
ities in various countries regarding tax issues within transfer pricing, direct taxes and indirect taxes.
In the opinion of Management, appropriate estimates have been made in the financial statements for
current tax audits and exposures related to uncertain tax positions.
The estimates are based on expected value or the most likely amount, whichever method best predicts
the resolution of the uncertainty, and the effects thereof are recognized as part of tax receivables/
payables and deferred tax. Due to the uncertainty associated with the outcome and timing, it will be
possible that, on the conclusion of open tax matters at a future date, the final outcome may differ
significantly from the amounts recognized.
Pilar II
In 2023, The Danish Ministry of Taxation adopted the EU Minimum Tax Directive in Danish national
legislation (Pillar II) effective from 1 January 2024. Under the legislation, the Parent company will be
required to pay the top-up tax on profits of its subsidiaries that are taxed at an effective tax rate of
less than 15 %.
The main jurisdictions in which exposures to this top-up tax may exist will potentially include Ireland
and Australia. 95% of the estimated top-up tax relates to Ireland; however, Ireland is planning to
increase their corporate tax rate from
12,5% to 15% in 2024 which may reduce or eliminate the top-up tax. It is assessed that the estimated
top-up tax could be up to 35 mDKK.
The information is based on the preparation of the consolidated financial statements of 2023, consid-
ering only significant adjustments that would have been required applying the legislation.
All requirements by the legislation have not been fully assessed in 2023, resulting in the actual impact
of the implementation of Pillar II may have been significantly different if the legislation was fully imple-
mented for the year ending 31 December 2023. The Group is continuously assessing the impact of the
Pillar II legislation on its future financial performance.
PAGE 53
LEO PHARMA ANNUAL REPORT 2023
CONSOLIDATED FINANCIAL STATEMENTS
Note 8 Income tax (continued)
(DKK million)
2022
1.
For a specification of tax on other comprehensive
income, reference is made to Note 18 Other
comprehensive income.
Tax effect of:
Differences in the income tax rates of foreign subsidiaries
compared to the Danish corporate income tax rate
62
2.2%
232 5.7%
Non-deductible expenses/non-taxable income and other permanent differences
(83)
(3.0)%
(45)
(1.1)%
Other taxes
(9)
(0.3)%
(6)
(0.1)%
Change in deferred tax as a result of changes in income tax rates
(43)
(1.5)%
(13) (0.3)%
Change in valuation of net deferred tax assets
(1,404)
(50.3)%
(1,011)
(24.7)%
Prior-year tax adjustments
48
1.7%
(74) (1.8)%
Effective tax/tax rate for the year
(815)
(29.2)%
(17) (0.4)%
PAGE 54
LEO PHARMA ANNUAL REPORT 2023
Current tax
(158)
(421)
Prior-year adjustments, current tax
(1)
13
Prior-year adjustments, deferred tax
49
(87)
Change in deferred tax
(691)
409
Total tax income/(expense) for the year
(801)
(86)
Tax for the year is included in
Tax on profit/(loss) for the year
(815)
(17)
Tax on other comprehensive income
1)
14
(69)
Total tax income/(expense) for the year
(801)
(86)
Reconciliation of the Group’s effective tax rate relative to the Danish corporate income tax rate
2023
2022
DKK million
%
DKK million
%
Profit/(loss) before tax
(2,792)
(4,093)
Calculated tax, 22%
614
22.0%
900
22.0%
CONSOLIDATED FINANCIAL STATEMENTS
Note 9
Intangible assets
Accounting
policies
Goodwill
At initial recognition, goodwill is recognized in the balance sheet at cost. Subsequently, goodwill is
measured at cost less accumulated impairment losses. Goodwill is not amortized.
Intellectual property rights
Intellectual property rights are measured at cost less accumulated amortization and impairment
losses. Amortization is provided on a straight-line basis over the expected useful lives of the assets.
Amortization of intellectual property rights is recognized in sales and distribution costs and research
and development costs in the income statement. Costs relating to the maintenance of patents, etc.
are expensed in the income statement as incurred.
Software
IT software purchased or internally developed is measured at cost less accumulated amortization
and impairment losses. Amortization is provided on a straight-line basis over the expected useful
lives. Amortization and impairment losses are recognized in the income statement as administrative
costs.
Development projects and software in progress
Development projects and software in progress are recognized as intangible assets if the recognition
criteria are met:
•
the projects are clearly defined and identifiable;
•
the Group intends to use the projects once completed;
•
the future earnings from the projects are expected to cover the development and administrative
costs;
•
and the cost can be reliably measured.
The costs to software in progress includes direct salaries, materials and other direct costs attributable
to the development activities. R&D intangible asset are capitalized as development project, when
milestone payments related to aquired clinical intellectual rigths with the intention to market at a
future stage and it is probable that future earnings can cover production, sales and distribution costs,
administrative costs and development costs. Other development costs are recognized in the income
statement as incurred.
Development projects are assessed on an ongoing basis with due account of development progress,
expected approvals and commercial utilization. Development projects are not amortized, as the
assets are not available for use.
In line with industry practice, internal and subcontracted development costs are expensed as they
are incurred, due to significant regulatory uncertainties and other uncertainties inherent in the devel-
opment of new products. After marketing approval by a regulatory authority is obtained or consid-
ered highly probable, costs are capitalized as intangible assets.
Useful lives are determined at the acquisition date and reassessed annually. The expected useful lives
are as follows:
Intellectual property rights 5-15 years
Software 3-10 years
Key accounting judgment
Impairment test and valuation
Management makes judgements to assess if any indications of impairment occurs. To identify impair-
ment events, management consider the following events:
•
Changes in patent and license rights
•
Changes to expected future cash inflows to the Group
•
Research and development results
•
Technological
changes
•
Development of competing products
Key accounting estimates
Estimated future cash flow
To determine the value in use, the discounted cash flow approach is applied. The expected future
cash flows are based on budgets and target plans for the patent period or other applicable period
for marketable products. The budgets and target plans are based on the Management’s expecta-
tions of current market conditions and future growth expectations.
The key factors used in calculating the value are revenue, costs of goods sold, operating expenses,
EBITDA, working capital, capital expenditures and discount rate.
Estimated useful lives
Useful life is estimated individually in each case and is initially assessed when the assets are acquired
or brought into use. Management assesses intangible assets for changes in useful lives and impair-
ment on an annual basis.
PAGE 55
LEO PHARMA ANNUAL REPORT 2023
CONSOLIDATED FINANCIAL STATEMENTS
Note 9
Intangible assets (continued)
Impairment testing
Goodwill and intangible assets under construction are tested for impairment annually or if there is
indications of impairment during the year. Intangible assets, with definite useful lives measured at cost, are
assessed if there is an indication of impairment. If a write-down is required, the carrying amount is written
down to the recoverable amount, being the higher of fair value less costs of disposal or 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.
Goodwill:
LEO Pharma is considered as a single identifiable group of assets that generates independent
cash inflows, as Management makes decisions and assesses business performance on the consolidated
level.
R&D Intangible assets: The Group performs annually impairment tests on single aquired development assets,
not yet commercialized. Assets not yet commercialized are presented in the asset category development
projects and software in progress. For intellectual property rights, impairment test are performed when
impairment indications are identified.
Methodology
Goodwill:
The recoverable amount of the CGU is based on a method on assessing the fair value less cost
of disposal, the fair value of LEO Pharma is based on actual valuation of the share price (enterprise value)
of LEO Pharma compared with the carrying amount of equity.
R&D Intangible assets: The recoverable amount of intellectual property rights and development projects
are based on value-in-use method of the discounted expected future cash flows. The recoverable amounts
of the specific assets are compared with the carrying amount.
Impairment in 2023
Based on the impairment tests prepared at year-end, a total impairment of DKK 516m has been recognized
in 2023. Impairment loss of DKK 375m relates to intellectual property rights and the loss is recorded under
sales and distribution cost. Impairment loss of DKK 141m relates to cancelled development projects recorded
under research and development costs. No reversals of impairment losses from prior periods have been
recorded in 2023.
The impairment of IP rights in 2023 relates to the asset tralokinumab within a specific geographical area.
The expected future cash flows have been updated to reflect the current market conditions, competition
of competing products and changes in Management expectation to business plans.
The assumptions used in the impairment test of the IP asset are;
•
Revenue growth until time of loss of exclusivity. Whereof revenue decline until expected closure
•
Gross margin in the forecasted periods is on the same level as the gross margin of the Group
•
Sales and distribution costs are forecasted based on the current level of the existing sales organization
with a declining trend over the period as the organization matures
•
WACC amounts to 10% after tax based on the Groups cost of capital and the market benchmark.
The impairment loss recognized on development projects amounts to DKK 141m and is primarily related to
the development project of Izuforant (DKK 109m). The clinical program was terminated as the Phase 2 a/b
trial with Izuforant did not meet its primary endpoint. Consequently, the recoverable amount is determined
at DKK 0m. Other impairment losses of development projects amounted to DKK 32m.
Impairment in 2022
Impairment losses of DKK 15m are recognized under research and development costs and impairment
losses of DKK 161m are recognized under administrative costs. No reversals of impairment losses from prior
periods have been recorded in 2022.
The impairment recognized under administrative cost of DKK 161m comprises of software development
projects which have been cancelled during 2022. Consequently, the recoverable amount is determined
at DKK 0m.
Impact of changes in key assumptions
The Group has conducted an analysis of the sensitivity of changes in the key assumptions in the impairment
test. Management believes that any reasonably possible change in the key assumptions would not cause
the carrying amount to exceed the recoverable amount.
The sensitivity analyses are based on a change in an assumption while holding all other assumptions
constant. When preparing the impairment test, Management considering the sensitivity of changes in the
key assumptions, to evaluate the inherent risk of valuation of the recoverable amount.
PAGE 56
LEO PHARMA ANNUAL REPORT 2023
CONSOLIDATED FINANCIAL STATEMENTS
1.
Additions consist of DKK 16m (2022: DKK 41m) related
to development projects and DKK 47m (2022: DKK 95m)
related to IT projects.
2.
Total development projects and software in progress
DKK 200m (2022: DKK 615m) consist of software in
progress DKK 32m (2022: DKK 323m), and development
projects DKK 168m (2022: DKK 292m).
3.
Additions consist of capitalized milestone payment
from approval of Adtralza
®
by the Japanese Ministry of
Health, Labor and Welfare in December 2022.
PAGE 57
LEO PHARMA ANNUAL REPORT 2023
(DKK million)
Goodwill
Intellectual
property rights
Software
Development
projects and
software in
progress
Total
intangible
assets
Cost at January 1
192
14,076
2,594
2,380
19,242
Exchange rate adjustment
-
(7)
-
-
(7)
Additions during the year
-
-
-
63
1)
63
Disposals during the year
-
-
(37)
(1,897)
(1,934)
Transfers
-
-
328
(337)
(9)
Cost at December 31
192
14,069
2,885
209
17,355
Amortization and impairment
losses at January 1
-
(8,481)
(1,341)
(1,765)
(11,587)
Exchange rate adjustment
-
2
-
-
2
Amortization for the year
-
(714)
(375)
-
(1,089)
Impairment for the year
-
(375)
-
(141)
(516)
Disposals during the year
-
-
37
1,897
1,934
Amortization and impairment
losses at December 31
-
(9,568)
(1,679)
(9)
(11,256)
Carrying amount at December 31
192
4,501
1,206
200
2)
6,099
Note 9
Intangible assets (continued)
2023
2022
Intellectual
Development
projects and
software in
Total
intangible
Goodwill
property rights
Software
progress
assets
192
13,928
2,498
2,629
19,247
-
5
-
-
5
-
143
3)
-
136
1)
279
-
-
-
(274)
(274)
-
-
96
(111)
(15)
192
14,076
2,594
2,380
19,242
-
(7,772)
(974)
(1,847)
(10,593)
-
(1)
-
-
(1)
-
(708)
(367)
-
(1,075)
-
-
-
(176)
(176)
-
-
-
258
258
-
(8,481)
(1,341)
(1,765)
(11,587)
192
5,595
1,253
615
2)
7,655
CONSOLIDATED FINANCIAL STATEMENTS
Note 9
Intangible assets (continued)
Research and development costs
In 2023, research and development costs recognized in the income statement amounted to DKK 1,874m
(2022: DKK 2,485m), including impairment losses of DKK 516m (2022: DKK 15m).
Research and development costs primarily comprise internal and external costs related to studies,
employee costs, materials, depreciation, impairment losses and other directly attributable costs.
Development projects
At December 31, 2023, development projects comprise Temtokibart DKK 78m (2022: DKK 78m), Delgocitinib
DKK 73m (2022: DKK 66m), Izuforant DKK 0m (2022: DKK 109m) and other development projects DKK 17m
(2022: DKK 39m).
Intellectual property rights
At December 31, 2023, intellectual property rights primarily comprise of the dermatology portfolio (mainly
Skinoren
®
, Advantan
®
, Travocort
®
and Travogen
®
) with a carrying amount of DKK 2,808m (2022: DKK
3,081m), Protopic
®
and Pimafucort
®
with a carrying amount of DKK 577m (2022: DKK 798m), tralokinumab
with a carrying amount of DKK 907m (2022: DKK 1,430m) and Kyntheum
®
with a carrying amount of DKK
122m (2022: DKK 157m).
Note 10 Property, plant and equipment
(DKK million)
2023
2022
Amortization and impairment losses are specified as follows:
Sales and distribution costs
1,089
564
Research and development costs
141
161
Administrative costs
375
526
Total
1,605
1,251
PAGE 58
LEO PHARMA ANNUAL REPORT 2023
Accounting
policies
Property, plant and equipment are measured at cost less accumulated depreciation and
impairment losses. Cost comprises the acquisition price and other directly attributable costs until
the date on which the asset is available for use. For self-constructed assets, cost comprises the
direct costs of materials, subsuppliers and salaries, etc. The total cost of an asset is broken down
into components that are depreciated separately if the expected useful life of the individual
components are not the same.
Depreciation is provided on a straight-line basis from the date of acquisition, or from when the
asset is available for use, over the expected useful life. Reassessment is performed once a year
to ascertain that the depreciation profile reflects the expected useful lives and future residual
values of the assets. Land is not depreciated.
The expected useful lives are as follows:
Buildings
10-50 years
Plant and machinery
5-10 years
Other fixtures and fittings, tools and equipment 3-10 years
Leasehold improvements
Depreciated over
the term of the lease
Impairment testing
The carrying amount of property, plant and equipment is reviewed in order to determine whether
there is any indication of impairment losses.
If the recoverable amount of an asset is estimated to be less than the carrying amount, an
impairment loss is recognized. For 2023, impairment losses of DKK 178m were recognized (2022:
DKK 23m).
CONSOLIDATED FINANCIAL STATEMENTS
Note 10 Property, plant and equipment (continued)
2023
2022
1.
Fixed assets under construction are mainly related
to the construction of a new plant in Denmark with a
carrying amount of DKK 1,746m, construction of a new
plant in Ireland with a carrying amount of DKK 424m.
2.
Impairment of expansion of an existing plant in Ireland
3.
Assets pledged as collateral for loans amount to DKK
2,553m (2022: DKK 2,575m)
4.
Fixed assets under construction are mainly related
to the construction of a new plant in Denmark with a
carrying amount of DKK 1,619m, expansion of an existing
plant in Ireland with a carrying amount of DKK 245m,
construction of a new plant in Ireland with a carrying
amount of DKK 337m and expansion of an existing plant
in France DKK 424m.
(DKK million)
2023
2022
Depreciation and impairment losses are specified as follows:
Cost of sales
429
248
Sales and distribution costs
15
14
Research and development costs
23
26
Administrative costs
68
70
Total
535
358
PAGE 59
LEO PHARMA ANNUAL REPORT 2023
CONSOLIDATED FINANCIAL STATEMENTS
Note 11 Leases
Accounting
policies
The right-of-use assets and corresponding lease liabilities are recognized at the commencement
date, i.e. the date on which the underlying asset is ready for use. Right-of-use assets are measured
at cost, corresponding to the lease liability recognized, adjusted for any lease prepayments, includ-
ing dismantling and restoration costs. The lease liabilities are measured at the present value of lease
payments to be made over the lease term. The lease payments are discounted using the borrowing
rate stated in the contract.
Depreciation follows the straight-line method over the lease term or the useful life of the right-of-use
asset, whichever is shortest.
The lease payments include fixed payments less any lease incentives receivable and variable lease
payments that depend on an index or a rate. If the contract holds an option to purchase, extend
or terminate a lease and it is reasonably certain to be exercised by the Group, the lease payment
will include those elements. The variable lease payments that do not depend on an index or a rate
are recognized as expenses in the period in which the event or condition that triggers the payment
occurs.
The Group applies the short-term lease recognition exemption to lease contracts that, at the
commencement date, have a lease term of 12 months or less for all classes of underlying asset, and
the exemption for lease contracts for which the underlying asset is of low value. Lease payments on
short-term leases and leases of low-value assets are recognized as expenses on a straight-line basis
over the lease term.
For land and buildings classes of assets, non-lease components, i.e. the service element, will not be
separated from the lease components and will thereby form part of the right-of-use asset and lease
liability recognized in the balance sheet.
Lease assets are depreciated over the lease terms which are:
Buildings
5-10 years
Cars etc.
3-5 years
Judgments on determining the lease term
For contracts with a rolling term (evergreen leases), the lease term is estimated at five years. Buildings
of a strategic importance are estimated based on the time frame necessary to vacate the premises.
The estimated lease term is reassessed at each reporting date.
PAGE 60
LEO PHARMA ANNUAL REPORT 2023
(DKK million)
Land and
buildings
Cars, etc.
Total
2023
Cost at January 1
575 150
725
Exchange rate adjustment
(10)
(5)
(15)
Additions/remeasurements during the year
(11)
40
29
Disposals during the year
(78)
(29)
(107)
Cost at December 31
476 156
632
Depreciation and impairment losses at January 1
(253)
(73)
(326)
Exchange rate adjustment
-
4
4
Depreciation for the year
(65)
(45)
(110)
Disposals during the year
77
29
106
Depreciation and impairment losses at December 31
(241)
(85)
(326)
Carrying amount at December 31
235
71
306
(DKK million)
2023
2022
Lease liabilities at January 1
442
502
Additions/remeasurements during the year
11
47
Payments
(115)
(119)
Exchange rate adjustments
(13)
12
Lease liabilities at December 31
325
442
Of which classified as:
Non-current liabilities
238
317
Current liabilities
87
125
Lease liabilities at December 31
325
442
CONSOLIDATED FINANCIAL STATEMENTS
Note 11 Leases (continued)
The amounts recognized impact the operating cash outflow by DKK 10m (2022: DKK 11m) as well as the
cash outflow from financing activities by DKK 115m (2022: DKK 119m).
PAGE 61
LEO PHARMA ANNUAL REPORT 2023
(DKK million)
2023
2022
The following are the amounts recognized in the income statement:
Depreciation expenses of right-of-use assets
(included in administrative costs)
(110)
(116)
Impairment for the year (included in administrative costs)
-
(12)
Interest expenses on lease liabilities
(10)
(11)
Total amount recognized in the income statement
(120)
(139)
(DKK million)
2022
Land and
buildings
Cars, etc.
Total
Cost at January 1
562
155
717
Exchange rate adjustment
10
3
13
Additions/remeasurements during the year
19
34
53
Disposals during the year
(16)
(42)
(58)
Cost at December 31
575
150
725
Depreciation and impairment losses at January 1
(184)
(70)
(254)
Exchange rate adjustment
-
1
1
Depreciation for the year
(73)
(43)
(116)
Impairment for the year
(12)
-
(12)
Disposals during the year
16
39
55
Depreciation and impairment losses at December 31
(253)
(73)
(326)
Carrying amount at December 31
322
77
399
CONSOLIDATED FINANCIAL STATEMENTS
Note 12
Trade receivables
The table below details the risk profile for trade receivables based on the Group’s provision matrix. The
Group’s historical credit losses do not show different patterns for customer segments. Historical credit
losses are assessed by country of incorporation.
Maturity analysis of trade receivables
Movements in write-downs, which are included in trade receivables
(DKK million)
Carrying amount at January 1
Write-down recognized
Realized losses
Write-down reversals
Write-downs at December 31
2022
Not past due
0%
1,984
0
1,984
Overdue by up to 3 months 3% 98 (3) 95
Overdue by 3-6 months 11% 44 (5) 39
Overdue by 6-12 months 26% 19 (5) 14
Overdue by more than 12 months 89% 33 (29) 4
Trade receivables at December 31
2,178
(42)
2,136
PAGE 62
LEO PHARMA ANNUAL REPORT 2023
Accounting
policies
Trade receivables are expected to be realized within 12 months from the balance sheet date
and are classified as trade receivables and presented as current assets.
On initial recognition, trade receivables are measured at transaction price, and subsequently at
amortized cost, which usually corresponds to the nominal value less write-downs to counter the
risk of losses. Write-downs are calculated using the ‘full lifetime expected credit losses’ method,
whereby the likelihood of non-fulfilment throughout the lifetime of the financial asset is taken
into consideration.
(DKK million)
Expected
credit loss
rate
Trade
receivables
Write-
downs
Total
2023
Not past due
0%
1,895
0
1,895
Overdue by up to 3 months
1%
185
(2)
183
Overdue by 3-6 months
1%
30
(0)
29
Overdue by 6-12 months
12%
24
(3)
21
Overdue by more than 12 months
65%
39
(26)
14
Trade receivables at December 31
2,173
(31)
2,142
(DKK million)
2023
2022
Trade receivables
2,173
2,178
Allowances for expected credit losses
(31)
(42)
Trade receivables at December 31
2,142
2,136
2023
42
10
0
(21)
31
2022
35
32
(13)
(12)
42
CONSOLIDATED FINANCIAL STATEMENTS
Note 13 Inventories
(DKK million)
2023
2022
Raw materials and consumables
1,323
885
Work in progress
2,263
2,426
Finished goods and goods for resale
1,280
1,269
Total
4,866
4,580
Write-down, provision end of the period
377
340
Cost of goods sold included under cost of sales
3,465
3,428
Note 14
Other receivables
(DKK million)
2023
2022
Public authorities, VAT, etc.
248
312
Financial derivatives
71
160
Deposits
14
19
Other
81
59
Total
414
550
PAGE 63
LEO PHARMA ANNUAL REPORT 2023
Accounting
policies
Inventories are measured at the lower of costs and net realizable value and are assigned using
the first-in-first-out (FIFO) cost formula.
Finished goods and work in progress comprise the cost of raw materials, consumables, direct
labor and indirect production costs. Indirect production costs comprise indirect consumables
and labor, as well as maintenance and depreciation of the machinery, factory buildings and
equipment used in the manufacturing process, and the costs of factory administration and
management.
The net realizable value of inventories is calculated as the sales price less the costs of comple-
tion and the expenses incurred to effect the sale and is determined allowing for marketability,
obsolescence and development in expected sales price. Obsolete goods, including slow-mov-
ing goods, are written down.
Key accounting estimates
Cost of inventories
Management uses the standard cost method to measure cost and performs a yearly assess-
ment to determine if it results in approximate cost. The standard cost is adjusted if there are
significant deviations.
Indirect production overheads are calculated on the basis of relevant assumptions concerning
capacity utilization, production time and other relevant factors and allocated on the basis of
the normal production capacity.
CONSOLIDATED FINANCIAL STATEMENTS
Note 15 Deferred tax
Accounting
policies
Deferred tax is recognized on all temporary differences between the carrying amounts of assets and
liabilities and their tax bases, except for temporary differences arising on initial recognition of a trans-
action that is not a business combination, and with the temporary difference ascertained at the time
of initial recognition affecting neither the financial result nor the taxable income.
Deferred tax is measured on the basis of the income tax rates and tax rules enacted in the respective
countries at the balance sheet date.
Deferred tax assets, including the tax assets on tax loss carry forwards, are recognized in the balance
sheet at the value at which the assets are expected to be utilized.
Deferred tax assets and liabilities are offset if the Group has a legal right to offset these and intends to
settle these on a net basis or to realize the assets and settle the liabilities simultaneously.
Pillar II
The Group has applied the temporary exception issued by the International Accounting Standard
Board (IASB) in May 2023 from the accounting requirements for deferred taxes in IAS 12. Accordingly,
the Group neither recognizes nor discloses information about deferred tax assets and liabilities related
to Pillar II income taxes.
Key accounting estimates
Management’s estimate of future income according to budgets, forecasts, business plans and initi-
atives scheduled for the coming years supports the utilization of the deferred tax assets within the
foreseeable future. A forecast period of five years is applied to the estimated utilization of deferred
tax assets for LEO Pharma A/S and the companies under the joint taxation.
Key accounting judgments
Significant assumptions for the valuation in the recognized deferred tax asset are both the ability to
meet the objectives in the strategy for the next five years, as well as the return from the investment
portfolio within the joint taxation group. The return from the investment portfolio is sensitive towards
the general market fluctuations.
The recognized deferred tax assets in the Parent Company LEO Pharma A/S as of December 31, 2023
were assessed to DKK 373m (2022: DKK 785m). The assessment takes into account the taxable loss in
2023 in joint taxation. The excess deferred tax assets in LEO Pharma A/S were therefore subject to
valuation allowance of DKK 1,404m in 2023 (2022: DKK 1,011m).
The unused tax loss carried forward relating to LEO Pharma A/S, do not expire.
PAGE 64
LEO PHARMA ANNUAL REPORT 2023
CONSOLIDATED FINANCIAL STATEMENTS
Note 15 Deferred tax (continued)
2023
2022
1.
Driven by the loss before tax in LEO Pharma A/S.
2.
Prior year adjustments primarily derive from tax return
2022 true up in LEO Pharma A/S.
PAGE 65
LEO PHARMA ANNUAL REPORT 2023
(DKK million)
Effect of foreign Adjustment of
currency deferred tax at
Movements
Balance at
exchange
beginning
during
January
1
differences
of year
the year
Balance at
December
31
Effect of foreign
Adjustment of
currency
deferred tax at
Movements
Balance at
exchange
beginning
during
Balance at
January
1
differences
of year
the year
December
31
Intangible assets
1,071 0 (25) 112
1,158
820 (0) 22 229 1,071
Property, plant and equipment
433 0 77 121
631
530 (1) (109) 13 433
Inventories
862
(2)
-
(268)
592
463 (2)
-
401 862
Provisions
153
(1)
89
(41)
200
169 0 (10) (6) 153
Other items
61 2 3 (7)
59
101 5 (7) (38) 61
Interest limitation balance
87
-
(14) 130
203
-
-
25
62
87
carry forward
Tax loss carry forwards
1)
1,727 0 (81) 666
2,312
965
-
3 759 1,727
Valuation allowances on
deferred tax assets
(2,624)
-
-
(1,404)
(4,028)
(1,602)
-
(11)
(1,011)
(2,624)
Total temporary differences
1,770 (1) 49 (691)
1,127
1,446
2
(87)
2)
409
1,770
Deferred tax assets
1,809 (5) 49 (696)
1,157
1,453 2 (89) 443 1,809
Deferred tax liabilities
39 (4)
-
(5)
30
7 0 (2) 34 39
Deferred tax assets/(tax liabilities)
1,770 (1) 49 (691)
1,127
1,446
2
(87)
409
1,770
CONSOLIDATED FINANCIAL STATEMENTS
Note 16
Prepaid expenses
Note 17
Share capital
2023
The share capital comprises 383,043,887 shares for a nominal value of DKK 1. The share capital is divided
into 155,343,654 A-shares and 227,700,233 B-shares. Each A-share carries 10 votes and B-shares carry
1
vote per share.
During 2023, a capital increase was carried out through a capital injection of DKK 746m and conversion
of shareholder loans to equity, increasing the share capital by 62,157,896 shares of DKK 101 per share,
amounting to DKK 6,300m, including share premium.
No shares or shareholders have any additional special rights.
2022
The share capital comprisesd 320,885,991 shares of a nominal value of DKK 1. The share capital is divided
into 125,000,000 A-shares and 195,885,991 B-shares. Each A-share carries 10 votes, where B-shares carries
1 vote per share.
During 2022, capital increases related to the share-based payments were carried out, increasing the
share capital by 740,920 shares, amounting to DKK 36m, including share premium. Please refer to Note 4
Share-based payment.
No shares or shareholders have any additional special rights.
1.
Including treasury shares.
2.
Acquisitions of treasury shares relates to employee
shares bought back from employees no longer working
in LEO Pharma. Total acquired treasury shares during the
year amounted to DKK 8m and 0.03% of the total share
capital.
PAGE 66
LEO PHARMA ANNUAL REPORT 2023
Accounting
policies
Share capital comprises the number of shares multiplied by their nominal value, and are clas-
sified as equity. Transaction costs directly attributable to an equity transaction are recognized
directly in equity, net of tax.
Treasury shares
Cost of acquisition as well as proceeds from sale of treasury shares are recognized directly in
equity as retained earnings.
Accounting
policies
Prepaid expenses include advance payments made to vendors that will be incurred and
expensed in subsequent financial reporting periods. When the period for full expense recog-
nition is longer than one year from the balance sheet date, the portion to be expensed subse-
quent to one year is classified as non-current.
(DKK million)
2023
2022
Prepaid clinical trials
176
180
Prepaid IT expenses
77
58
Other prepaid expenses
54
51
Total
307
289
Number of shares 2023
A-shares
B-shares
1)
Total
Number of shares at January 1
125,000,000
195,885,991
320,885,991
Capital increase
30,343,654
31,814,242
62,157,896
Number of shares at December 31
155,343,654
227,700,233
383,043,887
2023
2022
Number of treasury shares at January 1
-
-
Additions during the year
123,745
2)
-
Number of treasury shares at December 31
123,745
-
Number of shares 2022
A-shares
B-shares
Total
Number of shares at January 1
125,000,000
195,145,071
320,145,071
Capital increase
-
740,920
740,920
Number of shares at December 31
125,000,000
195,885,991
320,885,991
Treasury shares
CONSOLIDATED FINANCIAL STATEMENTS
Note 18 Other comprehensive income
2023
2022
(DKK million)
Foreign currency
translation
reserve
Hedging
reserve
Retained
earnings
Other
comprehensive
income
Foreign currency
translation
reserve
Hedging
reserve
Retained
earnings
Other
comprehensive
income
Other comprehensive income
Items that will not subsequently be reclassified to the
income statement:
Remeasurement of defined benefit obligations
-
-
(38)
(38)
-
-
329
329
Tax on other comprehensive income
-
-
8
8
-
-
(52)
(52)
Items that will not subsequently be reclassified to the
income statement
-
-
(30)
(30)
-
-
277
277
Items that are or may subsequently be reclassified to
the income statement:
Foreign exchange adjustments, subsidiaries
(80)
-
-
(80)
137
-
-
137
Value adjustments of hedging instruments for the year
-
(29)
-
(29)
-
61
-
61
Tax on other comprehensive income
-
6
-
6
-
(17)
-
(17)
Items that are or may subsequently be reclassified to
the income statement:
(80)
(23)
-
(103)
137
44
-
181
Other comprehensive income/loss for the year
(80)
(23)
(30)
(133)
137
44
277
458
PAGE 67
LEO PHARMA ANNUAL REPORT 2023
CONSOLIDATED FINANCIAL STATEMENTS
Note 19
Pensions
Defined contribution plans
The Group operates a number of pension plans for certain groups of employees in various countries. These
plans are externally funded through payments of premiums to insurance companies and pension funds
that are legally separated from the Group. The Group’s responsibility towards current or former employees
is limited to the payment of the premiums.
Defined benefit plans
In a few countries, the Group operates defined benefit plans. In defined benefit plans, the Group is under
an obligation to pay a defined benefit on retirement. The most significant of these are in Ireland and the
UK. The defined benefit plans expose the Group to actuarial risks, such as longevity, interest rate, salary,
market risks and currency risks.
The plans in Ireland and the UK are funded and constituted under a trust whose assets are legally sepa-
rated from those of the Group. Under the scheme-funding regime introduced by the UK Pensions Act 2004,
the trustees are required to undertake regular scheme-funding valuations for the plans and to establish a
schedule of contributions and a recovery plan when there is a shortfall in the plans. The plans entitle the
employees to an annual pension on retirement based on service and salary level up to retirement.
Key assumptions and sensitivity analysis
The most significant assumptions used in the calculation of the obligation concerning defined benefit plans
is the discount rate and the expected inflation. The sensitivity analysis indicates what the development
in the obligation would be on any change in the individual discount rate, inflation rate or life expectancy.
However, the discount rate and inflation rate will most likely be correlated and consequently result in a
different fair value of plan assets as well.
The applied average discount rate is 3.9% (2022: 4.3%), and the applied average inflation rate is 2.3% (2022:
2.6%).
2023
2022
Sensitivity analysis
Ireland (0.25%)
UK (0.10%)
Ireland (0.25%)
UK (0.10%)
Decrease in discount rate
30
7
29
7
Increase in inflation rate
7
3
7
3
PAGE 68
LEO PHARMA ANNUAL REPORT 2023
Accounting
policies
Defined contribution plans
Payments to defined contribution plans are recognized in the income statement for the period
to which they relate, and any amounts payable are recognized as other payables under current
liabilities in the balance sheet.
Defined benefit plans
In defined benefit plans, the Group has an obligation to pay a defined benefit on retirement. The
actuarially calculated present value less the fair value of any plan assets is in the balance sheet
recognized under pensions.
The present value is calculated on the basis of assumptions relating to future developments
in salary, interest rates, inflation, mortality and other factors. The present value is calculated
solely for the benefits to which the employees have earned a right through their employment
by the Group. Plan assets are recognized to the extent that the Group is able to obtain future
economic benefits in the form of reimbursement from the pension scheme or reduction of future
payments. Pension costs for the year are recognized in the income statement on the basis of
actuarial estimates and financial expectations at the beginning of the year. Actuarial gains and
losses are recognized in other comprehensive income. Past service costs are recognized in the
income statement as incurred.
The value of the defined benefit plans is based on valuations from external actuaries. The
valuation is based on a number of actuarial assumptions, including discount rates, expected
return on plan assets, expected growth in wages and salaries, mortality and retirement benefits.
The discount rate is the most significant assumption used in the calculation of the obligation
concerning defined benefit plans.
CONSOLIDATED FINANCIAL STATEMENTS
1.
Other includes Germany, France and Italy
PAGE 69
LEO PHARMA ANNUAL REPORT 2023
Note 19 Pensions (continued)
2023
2022
(DKK million)
Ireland
UK
Other
1)
Total
Ireland
UK
Other
1)
Total
Present value of defined benefit plans:
Present value of defined benefit plans at January 1
708
480
158
1,346
1,026
834
213
2,073
Effect of exchange rate adjustment
2
12
-
14
(1)
(35)
1
(35)
Current service costs
-
-
6
6
-
-
8
8
Interest expenses
26
23
6
55
15
16
2
33
Actuarial (gains)/losses from changes in demographic assumptions
-
(6)
-
(6)
-
1
1
2
Actuarial (gains)/losses from changes in financial assumptions
32
28
7
67
(315)
(310)
(52)
(677)
Actuarial (gains)/losses from experience adjustments
11
16
3
30
12
11
2
25
Benefits paid to employees
(30)
(24)
(6)
(60)
(29)
(37)
(17)
(83)
Past service costs
-
(6)
-
(6)
-
-
-
-
Present value of defined benefit obligation at December 31
749
523
174
1,446
708
480
158
1,346
Fair value of plan assets:
Fair value of plan assets at January 1
723
588
108
1,419
916
758
115
1,789
Effect of exchange rate adjustment
2
14
2
18
(1)
(35)
1
(35)
Actuarial gains/(losses) from return on plan assets
34
18
1
53
(186)
(130)
(5)
(321)
Interest income
26
29
4
59
13
13
1
27
Benefits paid to employees
(30)
(24)
(5)
(59)
(29)
(37)
(4)
(70)
Employer contributions
10
14
-
24
10
19
-
29
Fair value of plan assets at December 31
765
639
110
1,514
723
588
108
1,419
Net retirement benefit obligations/(asset) at December 31
(16)
(116)
64
(68)
(15)
(108)
50
(73)
Recognized as:
Other non-current assets
16
116
13
145
15
108
21
144
Non-current liabilities
-
-
77
77
-
-
71
71
Net retirement benefit obligations/(asset) at December 31
(16)
(116)
64
(68)
(15)
(108)
50
(73)
Specification of amount recognized in the statement of
comprehensive income:
Actuarial gains and (losses)
9
20
9
38
117
168
44
329
Total
9
20
9
38
117
168
44
329
CONSOLIDATED FINANCIAL STATEMENTS
Note 20
Provisions
Accounting
policies
Provisions are recognized when the Group has a legal or a constructive obligation as a result of past
events, it is probable that there may be an outflow of economic resources to settle the obligation,
and the obligation can be measured reliably.
Provisions are measured as the best estimate of the costs required to settle the liabilities at the
balance sheet date.
Provisions for sales deductions and product returns are recognized at the time that the related reve-
nue is recognized. Unsettled deductions and returns are recognized as provisions when the timing or
amount is uncertain. Where absolute amounts are known, the deductions are recognized as other
liabilities.
Employee-related provisions includes provisions for restructuring and other employee-related provi-
sions. Provisions for restructuring costs are recognized when a constructive obligation exists, detailed
restructuring plans are in place and a valid expectation of those affected has been raised.
Other provisions consist of different types of other provisions, including provisions for legal disputes,
onerous contracts and other restructuring provisions.
Key accounting judgments
Provisions for onerous contracts
Management makes judgments about probability of the future unavoidable costs, commitments
under the contract and the uncertainty of the future economic benefits for the specific onerous
contract.
When Management considers an unavoidable loss is more likely than not, a provision for a onerous
contract is recognized. The provision is measured as the difference between the expected benefits
from a contract and the unavoidable costs of meeting the contract obligations.
Key accounting estimates
Provisions for sales deductions
Sales discounts and rebates are predominately issued in the U.S. in connection with various commer-
cial arrangements, managed healthcare organizations, co-pay arrangements and government
programs such as Medicaid and Medicare.
Management’s estimate of sales discounts and rebates is based on a calculation that includes a
combination of historical utilization data, and expectations in relation to the development in sales.
Furthermore, specific circumstances regarding the different programs are considered. The obligations
concerning sales discounts and rebates are incurred at the time that the sale is recorded. However,
the actual discount or rebate related to a specific sale may be invoiced six to twelve months later.
The Group considers the provisions recognized for sales discounts and rebates to be reasonable and
appropriate based on currently available information. However, the actual amounts of discounts
and rebates may differ from the amounts estimated by Management, as more detailed information
becomes available.
PAGE 70
LEO PHARMA ANNUAL REPORT 2023
CONSOLIDATED FINANCIAL STATEMENTS
Note 20
Provisions (continued)
1.
Additions and reversals includes net DKK 24m related
to announced restructuring of LEO Pharma (2022: DKK
248m).
2.
Utillization includes DKK 322m related to announced
restructuring provision (2022: DKK 238m).
3.
Addition of DKK 69m is related to one onerous contract,
recognized as part of cost of sales.
PAGE 71
LEO PHARMA ANNUAL REPORT 2023
(DKK million)
Sales
deductions
Product
returns
Employee-
related
provisions
Other
provisions
Total
2023
Provisions at January 1
453
121
481
214
1,269
Exchange rate adjustment
(12)
(4)
3
3
(10)
Additions during the year
1,390
120
128
1)
37
1,675
Utilization during the year
(1,018)
(51)
(337)
2)
(52)
(1,458)
Reversals during the year
(169)
(22)
(60)
1)
(85)
(336)
Transfer
-
-
(84)
-
(84)
Provisions at December 31
644
164
131
117
1,056
Of which classified as:
Non-current liabilities
1
53
25
52
131
Current liabilities
643
111
106
65
925
Provisions at December 31
644
164
131
117
1,056
(DKK million)
2022
Sales
deductions
Product
returns
Employee-
related
provisions
Other
provisions
Total
Provisions at January 1
385
173
468
216
1,242
Exchange rate adjustment
16
7
-
1
24
Additions during the year
1,224
57
368
1)
168
3)
1,817
Utilization during the year
(1,151)
(91)
(293)
2)
(70)
(1,605)
Reversals during the year
(21)
(25)
(70)
1)
(93)
(209)
Transfer
-
-
8
(8)
-
Provisions at December 31
453
121
481
214
1,269
Of which classified as:
Non-current liabilities
1
54
167
68
290
Current liabilities
452
67
314
146
979
Provisions at December 31
453
121
481
214
1,269
3
29
CONSOLIDATED FINANCIAL STATEMENTS
Note 21 Financial risks
Financial risks
As a consequence of the Group's operations, investments and financing, the Group is exposed to a variety
of financial risks:
•
Market risks, i.e. currency risk, interest rate risk, etc.
•
Credit risk
•
Liquidity risk
The Group’s overall risk management programs focus on the unpredictability of financial markets and seek
to minimize the potential adverse effects on the Group’s performance. The Group uses derivative financial
instruments to hedge certain risk exposures.
Risk management is undertaken by the treasury department, subject to objectives and policies approved
by the Executive Management. Those objectives and policies are outlined in the internal Treasury Policy,
which incorporates cash flow hedges of highly probable forecasted sales and purchase transactions.
Furthermore, the internal Treasury Policy covers policies on foreign exchange risk, credit risk on financial
counterparties and includes the permitted use of financial instruments. The Group only hedges commer-
cial exposures and, consequently, does not enter into derivative transactions for trading or speculative
purposes.
Currency risk
Being a global company with DKK as its presentation currency, the Group undertakes transactions
denominated in foreign currencies, and foreign exchange risk, therefore, has a significant impact on the
income statement, balance sheet and cash flow statement. The overall objective of foreign exchange risk
management is to reduce the short-term impact of exchange rate fluctuations on earnings and cash flow.
The Group is mainly exposed to USD, GBP, CNY, CAD, as well as other currencies either through direct
sales to and purchases from third parties or indirect sales through a subsidiary. Currency risk arises due
to imbalances between income and costs in each individual currency and because the Group has more
assets than liabilities in foreign currencies in connection with its global operations.
The Group hedges future expected cash flows on an 18-month rolling basis. The Group's forward foreign
exchange contract policy is described in Note 22 Derivatives
-
hedge accounting.
Foreign currency sensitivity analysis
The sensitivity analysis below shows the estimated impact on net profit/(loss) caused by revaluation of
balance sheet items and hedging instruments of an increase of 5% in the key currencies to which the Group
was exposed on December 31 versus DKK. The analysis shows the impact of foreign currency exchange
differences on the Group’s monetary assets and liabilities and foreign exchange forward contracts at the
end of the year. A similar negative change in exchange rates would have an equivalent opposite effect
on net profit/(loss).
1.
This is mainly as a consequence of the changes in fair
value of derivative instruments designated as cash flow
hedges.
Foreign currency sensitivity analysis
(DKK million)
USD
GBP
CNY
CAD
Other
PAGE 72
LEO PHARMA ANNUAL REPORT 2023
2023
Profit/(loss) for the year
Other comprehensive income
1)
(12)
(9)
(5)
(5)
6
(27)
(25)
(21)
-
-
CONSOLIDATED FINANCIAL STATEMENTS
Note 21 Financial risks (continued)
Interest rate risk
Interest rate risk is the risk of interest rate fluctuations resulting in changed costs related to floating-rate
loans. Long-term funding at floating interest rates is mitigated by entering into interest rate CAPS and
Collars as hedge instruments. Hedging of interest rate risk is approved by the Executive Management, and
hedge effectiveness is assessed on a regular basis. No ineffectiveness was observed during 2023 or 2022.
The table below shows the current loans with our banking partners.
2023
1.
Floating rate is currently fixed via CAPS and Collars
hedging instruments. The weighted average effective
rate including the hedging instruments amounts to 6.69%
(2022: 5.77%). Reference is made to Note 22 Derivatives
-
hedge accounting
.
2.
The next rate renewal will occur in 3.6 years (2022: 4
months).
3.
The next rate renewal will occur in 3.5 years (2022: 4.7
PAGE 73
LEO PHARMA ANNUAL REPORT 2023
Total
10,669
10,772
10,841
(DKK million)
Expiry of commitment
Fixed/ floating
Weighted avg. effective
interest rate %
Amortized
cost
Nominal
value
Fair value
Syndicated facility
2029
Floating
7.57
1)
8,434
8,507
8,507
Mortgage loans
2038
Fixed 3-5 years
2)
4.64
1,186
1,200
1,244
Mortgage loans
2042
Fixed 3-5 years
3)
4.54
1,049
1,065
1,090
years).
2022
(DKK million)
Expiry of commitment
Fixed/ floating
Weighted avg. effective
interest rate %
Amortized
cost
Nominal
value
Fair value
Syndicated facility
2027
Floating
6.19
1)
6,542
6,593
6,593
Mortgage loans
2038
Fixed 3-5 years
2)
1.47
1,185
1,200
1,187
Mortgage loans
2042
Fixed 3-5 years
3)
4.80
1,049
1,065
1,053
Total
8,776
8,858
8,833
CONSOLIDATED FINANCIAL STATEMENTS
Note 21 Financial risks (continued)
Interest rate sensitivity analysis
One percentage point increase in interest rates would reduce profit for the year by DKK 10m (2022: DKK
55m) and increase other comprehensive income by DKK 35m (2022: DKK 96m), based on interest-bearing
debt at December 31, with floating rate not hedged, and the change in fair value of the interest hedging
instruments.
The calculation method applied in the sensitivity analysis is based on the current duration of interest-bear-
ing debt as of December 31 and the change in fair value of the interest hedging instruments.
Credit risk
The Group’s products are primarily sold to pharmacies, wholesalers and hospitals, both publicly and
privately owned. Historically, realized losses sustained on trade receivables have been insignificant, which
was also the case in both 2023 and 2022, referring to Note 12 Trade receivables.
The Group has no significant concentration of credit risk related to trade receivables, as the exposure
is spread over a large number of counterparties and customers. As such, the Group has no significant
reliance on any specific customer. The Group continues to monitor the credit exposure on all customers,
both new and existing, following principles delineated by the curent credit policy.
The Group recognizes a loss allowance for expected credit losses and writes off trade receivables when
there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect
of recovery. The write-down amount is recognized in the income statement under sales and distribution
costs. Subsequent recovery of amounts previously written down is credited against sales and distribution
costs.
The Group has a non-recourse factoring program, for selected global customers to optimize working
capital. At year-end, the Group has settled trade receivables, without recourse, having due dates after
December 31, amounting to DKK 374m in 2023 (2022: DKK 425m).
To manage credit risk on financial counterparties, the Group only enters into derivative financial instruments
with financial counterparties possessing a satisfactory long-term credit rating assigned by at least one out
of the three international credit rating agencies: Standard & Poor’s, Moody’s and Fitch. If a counterparty
has a rating below Investment Grade, the Group minimizes the risk by maintaining the lowest possible
bank balance, or by spreading the risk between several banks.
At year-end, the bank balances with a rating below Investment Grade are low, and therefore, the credit
risk is considered to be low. Furthermore, the credit risk on bond investments is limited, as investments are
in highly liquid bonds with solid credit ratings, such as Investment Grade.
Liquidity risk
It is of great importance that the Group maintains a financial reserve to cover the Group's obligations,
explore investment opportunities and to provide the capital necessary to offset changes in the Group's
liquidity due to changes in the cash flow from operating activities.
The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrow-
ing facilities by continuously monitoring forecast and actual cash flows.
Cash resources and financing facilities
In 2023, the Group renegotiated the loan terms on the existing syndicated facility, resulted in both an
increase in the available credit facility by DKK 1,500m, and improved loan terms. The improvements
included a decrease in the effective interest rate during the lifetime of the new arrangement as well as a
postponement of the loan termination date to January 1, 2029. The renegotiated terms were not assessed
substantially different to the previous loan terms, as the fair value of the liability before and after the modi-
fication was not significantly changed. Under IFRS 9, a gain or loss is recognized equal to the difference
between the present value of the cash flows under the original and modified terms, discounted at the
original effective interest rate. A gain of DKK 15m was recognized as a result of the modification. Fees of
DKK 34m relating to the modification is capitalized on the liability, and amortized to financial expenses
over the extended lifetime of the facility.
Loan covenant on EBITDA for selected established brands in the product portfolio is included in the Group's
financial agreements. No financial covenant breaches were encountered during the year or are forecasted
for the following year.
The Group has access to unused financing facilities of DKK 4,253m (2022: DKK 4,783m), of which unused
and secured overdraft facilities amounted to DKK 4,074m (2022: DKK 4,505m) as of the reporting date. The
remaining amount of DKK 179m (2022: DKK 278m) primarily consists of cash and cash equivalents. Other
obligations are met from operating cash flows and proceeds from maturing financial assets.
PAGE 74
LEO PHARMA ANNUAL REPORT 2023
CONSOLIDATED FINANCIAL STATEMENTS
Note 21 Financial risks (continued)
Changes in borrowings
2023
2022
1.
Other non-cash items mainly comprises accrued
interest expenses, amortization of capitalized borrowing
costs and exchange rate adjustments.
The table below analyzes the Group's financial liabilities in relevant maturity groupings, based on their
contractual maturities for all liabilities at amortized cost, and financial derivatives at fair value for which
the contractual maturities are essential for the understanding of the timing of the cash flows.
Maturity of contractual cash flows
2023
2022
(DKK million)
Financial liabilities at amortized cost
Contractual
amount
Less than 1
year
1-3 years
4-5 years
More than 5
years
Contractual
amount
Less than 1
year
1-3 years
4-5 years
More than 5
years
Bank and mortgage loans
14,455
702
1,157
1,247
11,349
10,893
799
828
6,795
2,471
Loans from related parties
-
-
-
-
-
7,829
25
49
1,074
6,681
Trade and other payables
3,365
3,365
-
-
-
3,777
3,777
-
-
-
Other long-term liabilities
178
-
-
-
178
175
-
-
-
175
Financial derivatives at fair value
Forward contracts used as hedging instruments
15
15
-
-
-
50
50
-
-
-
Total contractual cash flow at December 31
18,013
4,082
1,157
1,247
11,527
22,724
4,651
877
7,869
9,327
PAGE 75
LEO PHARMA ANNUAL REPORT 2023
(DKK million)
Borrowings
January 1
Proceeds from
borrowings
Repayments of
borrowings
Debt
conversion
Other non-
cash
items
1)
Borrowings
December 31
Borrowings
January
1
Proceeds from
borrowings
Repayments of
borrowings
Other non-
cash
items
1)
Borrowings
December 31
Loans from related parties
5,395
-
-
(5,555)
160
-
5,161
-
-
234
5,395
Bank and mortgage loans
8,776
2,750
(819)
-
(38)
10,669
5,108
4,559
(900)
9
8,776
Lease liabilities
442
-
(115)
-
(2)
325
502
-
(119)
59
442
Total borrowings
14,613
2,750
(934)
(5,555)
120
10,994
10,771
4,559
(1,019)
302
14,613
Of which classified as:
Non-current
10,642
14,081
Current
352
532
Total
10,994
14,613
CONSOLIDATED FINANCIAL STATEMENTS
Note 22 Derivatives - hedge accounting
Forward foreign exchange contracts
It is the policy of LEO Pharma to enter into either forward foreign exchange contracts or currency options
in order to hedge the forecasted sales and purchase transactions based on gradually reducing the hedge
ratio from 80% to 20% during a time horizon of 18 months. Concerning the hedging of highly probable fore-
casted sales and purchases, as the critical terms (i.e. the notional amount, life and underlying value) of the
forward foreign exchange contracts and their corresponding hedged items are the same, LEO Pharma
makes both a quantitative and qualitative assessment of effectiveness. It is expected that the value of
the forward contracts and the value of the corresponding hedged items will change systematically in
opposite directions in response to movements in the underlying exchange rates.
Forward foreign exchange contract assets and liabilities are presented as either other receivables or as
other payables in the balance sheet. Reference is made to Note 23 Financial assets and liabilities.
The financial contracts are expected to impact the income statement for the next 18 months when the
cash flow hedges mature and the fair value is transferred to either financial income or financial expenses.
A loss of DKK 1m has been deferred for recognition until 2024 (2022: a loss of DKK 16m was deferred until
2023). Ineffectiveness relating to contractual contracts amounted to a loss of DKK 4m (2022: DKK 0m)
during 2023.
The fair value loss on forward foreign exchange contracts of DKK 12m at the end of 2023 is recognized
in the income statement under foreign exchange loss, net (2022: gain of DKK 14m recognized in foreign
exchange loss, net).
In order to mitigate the currency risks described in Note 21 Financial risks, LEO Pharma has entered into
the forward foreign exchange contracts specified in the table on the next page.
PAGE 76
LEO PHARMA ANNUAL REPORT 2023
Accounting
policies
Derivative financial instruments
Derivative financial instruments are used to manage the exposure to interest rate and foreign
exchange rate risk. None of the derivative financial instruments are held for trading. On initiation
of the contract, LEO Pharma designates each derivative financial contract as either a hedge of
the fair value of a recognized asset or liability (fair value hedge) or as a hedge of a future trans-
action (cash flow hedge).
All contracts are initially recognized at fair value and subsequently remeasured at fair value at
the end of the reporting period. The resulting gain or loss is recognized in the income statement
immediately, unless the derivative is designated and effected as a cash flow hedging instru-
ment. In this case the timing of the recognition in the income statement depends on the nature
of the hedge relationship.
Hedge accounting
LEO Pharma designates certain derivatives as hedging instruments in respect of foreign currency
risk as either cash flow or fair value hedges, and certain derivatives as hedging instruments in
respect of interest rate risk as cash flow hedges. The fair value adjustment on qualifying hedging
instruments is recognized in the income statement when the hedging instrument is designated
as a fair value hedge. Value adjustments of the effective part of cash flow hedges are recog-
nized in equity through other comprehensive income. The cumulative value adjustment of these
contracts is transferred from other comprehensive income to the income statement in financial
income and financial expenses.
Discontinuance of cash flow hedging
When a hedging instrument expires or is sold, but the hedge still meets the criteria for hedge
accounting, any cumulative gain or loss existing in equity at that time remains in equity and is
recognized when the forecast transaction is ultimately recognized in the income statement.
When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was
reported in equity is transferred to the income statement immediately under financial income or
financial expenses.
CONSOLIDATED FINANCIAL STATEMENTS
Note 22 Derivatives - hedge accounting (continued)
Forward foreign exchange contracts
Fair value adjustment
Carrying amount
Carrying amount
recognized in other
Fair value adjustment
Average
Contract
of the hedging
of the hedging
comprehensive
recognized in the
(DKK million)
hedge rate
Notional value
value DKK
instrument
assets
instrument
liabilities
income
income statement
2023
Cash flow hedges
Sold
USD
6.81
35
238
3
-
29
-
Sold CNY
0.95
575
546
1
1
2
-
Sold
GBP
8.51
22
185
-
1
(6)
-
Sold CAD
5.06
100
506
1
2
(15)
-
Sold other currencies
N/A
N/A
399
1
5
2
-
Fair value hedges
Bought USD (net)
6.85
73
501
2
14
-
(56)
Bought
GBP
8.59
10
82
-
-
-
2
Sold CAD
4.93
10
49
-
2
-
17
Bought/sold other currencies (net)
N/A
N/A
331
4
2
-
18
Forward foreign exchange contracts at December 31
12
27
12
(19)
2022
Cash flow hedges
Bought USD (net)
7.33
82
606
2
40
(47)
-
Sold
GBP
8.56
25
214
6
-
10
-
Sold CAD
5.31
71
378
15
1
23
-
Sold CNY
1.00
350
350
-
1
3
-
Sold other currencies
N/A
N/A
356
3
4
4
-
Fair value hedges
Sold USD (net)
6.85
46
312
8
-
-
52
Bought
GBP
8.61
13
112
-
3
-
1
Sold CAD
5.42
10
54
3
-
-
(4)
Bought/sold other currencies (net)
N/A
N/A
416
8
2
-
12
Forward foreign exchange contracts at December 31
45
51
(7)
61
PAGE 77
LEO PHARMA ANNUAL REPORT 2023
CONSOLIDATED FINANCIAL STATEMENTS
Note 22 Derivatives - hedge accounting (continued)
In order to mitigate the interest rate risk described in Note 21 Financial risks, LEO Pharma has entered into the following interest rate hedges:
Interest rate hedges
Change in fair value
(DKK million)
Notional principal value
recognized in other
comprehensive income
Fair value assets (liabilities)
Average fixed
interest rate
2023
Cash flow hedges
CAP - Syndicated facility
1,500
(34)
31
0.10%
Collar - Syndicated facility
6,000
(7)
(1)
1.63% - 3.75%
Total
(41)
30
2022
Cash flow hedges
CAP - Syndicated facility
1,500
62
65
0.10%
Collar - Syndicated facility
6,000
6
6
1.63% - 3.75%
Total
68
71
At December 31, 2023, the fair value of DKK 31m (2022: DKK 71m) is recognized in other receivables, and a fair value loss of DKK 1m in other payables.
PAGE 78
LEO PHARMA ANNUAL REPORT 2023
CONSOLIDATED FINANCIAL STATEMENTS
Note 23 Financial assets and liabilities by category
Accounting
policies
Financial instruments
Financial assets and financial liabilities are recognized when LEO Pharma
becomes a party to the contractual provisions of the instrument. Financial
assets other than trade receivables are initially measured at fair value.
Transaction costs that are directly attributable to the acquisition or issue
of the financial assets and financial liabilities (other than financial assets
and financial liabilities at fair value through profit and loss) are added to
or deducted from the fair value of the financial assets or financial liabili-
ties, as appropriate, on initial recognition.
Financial assets
All recognized financial assets are required to be measured subsequently
at amortized cost or fair value on the basis of the business model for
managing the financial assets and the contractual cash flow charac-
teristics of the financial assets. Financial securities primarily consist of
bonds. Investments in bonds that are held within a business model where
the objective is to collect the contractual cash flows are subsequently
measured at amortized cost. Investments that are held within a busi-
ness model where the objective is both to collect the contractual cash
flows and to sell are subsequently measured at fair value through other
comprehensive income. All other investments, including equity invest-
ments, are subsequently measured at fair value through profit and loss.
Other securities, which comprise listed bonds and shares, are classified
as current assets and measured at fair value through profit and loss.
Securities that are subsequently measured at amortized cost or at fair
value through other comprehensive income are subject to impairment.
Financial liabilities
All financial liabilities are subsequently measured at amortized cost using
the effective interest method.
Financial instruments measured at fair value
Financial instruments measured at fair value can be divided into three
categories:
Level 1
-
Quoted prices (unadjusted) in active markets for identical assets
or liabilities;
Level 2
-
Inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (i.e. prices) or
indirectly (i.e. derived from prices);
Level 3
-
Inputs for assets or liabilities that are not based on observable
market data.
Fair value of financial instruments carried at amortized cost
The fair value of the short-term financial assets and other financial liabil-
ities carried at amortized cost is not materially different from the carrying
amount. In general, fair value is determined primarily on the basis of the
present value of expected future cash flows. Where the market price is
available, however, this is deemed to be the fair value.
PAGE 79
LEO PHARMA ANNUAL REPORT 2023
CONSOLIDATED FINANCIAL STATEMENTS
Note 23
Financial assets and liabilities by category (continued)
Categories of financial assets and financial liabilities
(DKK million)
Carrying amount
Fair value
Carrying amount
Fair value
2022
2022
PAGE 80
LEO PHARMA ANNUAL REPORT 2023
Carried at amortized cost
216
2,513
136
2,865
102
6
108
37
37
3,010
216
2,513
136
2,865
102
6
108
37
37
3,010
270
2,528
50
2,848
108
19
127
139
139
3,114
3,764
6,542
2,234
5,395
442
175
18,552
5
5
46
46
18,603
Cash and bank balances
270
Trade and other receivables
2,528
Other financial assets
50
Financial assets at amortized cost
2,848
Carried at fair value through profit/(loss) (FVTPL)
Other financial assets
108
Derivative instruments in designated fair value hedging relationships
19
Financial assets at fair value through profit/(loss)
127
Carried at fair value through other comprehensive income
Derivative instruments in designated cash flow hedging relationships
139
Financial assets at fair value through other comprehensive income
139
Total financial assets
3,114
Carried at amortized cost
3,366
8,434
2,235
-
325
461
14,820
18
18
10
10
14,848
3,366
8,507
2,334
-
345
461
15,012
18
18
10
10
15,040
Trade and other payables
3,764
Bank loans (current and non-current)
6,593
Mortgage loans
2,240
Loans from related parties
4,120
Lease liabilities (current and non-current)
454
Other non-current liabilities
175
Financial liabilities at amortized cost
17,346
Carried at fair value through profit/(loss) (FVTPL)
Derivative instruments in designated fair value hedging relationships
5
Financial liabilities at fair value through profit/(loss) (FVTPL)
5
Carried at fair value through other comprehensive income
Derivative instruments in designated cash flow hedging relationships
46
Financial liabilities at fair value through other comprehensive income
46
Total financial liabilities
17,397
CONSOLIDATED FINANCIAL STATEMENTS
Note 23
Financial assets and liabilities by category (continued)
Fair value measurements
The fair value of derivative financial instruments is measured on the basis of the quoted market prices
of financial instruments traded in active markets (Level 1 input). If an active market exists, the fair value
is based on the most recently observed market price at the end of the year. If a financial instrument is
quoted in a market that is not active, LEO Pharma bases its valuation on the most recent transaction price.
Adjustment is made for subsequent changes in market conditions, for instance by including transactions
in similar financial instruments assumed to be motivated by normal business considerations.
If an active market does not exist, the fair value of standard and simple financial instruments, such as
forward foreign exchange contracts, interest rate swaps, currency swaps and unlisted bonds, is measured
according to generally accepted valuation techniques (Level 2 input), where market-based parameters
are used to measure the fair value.
Level 3 input is used, where Valuation methods where possible input is not based on observable market
data (Level 3 input).
Fair value hierarchy of financial assets and liabilities measured or disclosed at fair value at
December 31:
2023
2022
(DKK million)
Level 1
Level 2
Level 3
Total
Financial assets:
Danish mortgage bonds
108
-
-
108
Derivative instruments
-
158
-
158
Total
108
158
-
266
Financial liabilities:
Bank loans
-
6,593
-
6,593
Mortgage loans
-
2,240
-
2,240
Loans from related parties
-
4,120
-
4,120
Derivative instruments
-
51
-
51
Total
-
13,004
-
13,004
PAGE 81
LEO PHARMA ANNUAL REPORT 2023
(DKK million)
Level 1
Level 2
Level 3
Total
Financial assets:
Other financial assets
102
-
-
102
Derivative instruments
-
43
-
43
Total
102
43
-
145
Financial liabilities:
Bank loans
-
8,507
-
8,507
Mortgage loans
-
2,334
-
2,334
Loans from related parties
-
-
-
-
Derivative instruments
-
28
-
28
Total
-
10,869
-
10,869
(DKK million)
2023
2022
Employee-related
735
898
Sales deductions
372
408
Clinical trial expenses
173
272
Public authorities
100
90
Accrued interests
87
72
Royalties
55
0
Financial derivatives
30
50
Milestone payments
-
143
2)
Accounts and other payables
1)
598
580
Total
2,150
2,513
CONSOLIDATED FINANCIAL STATEMENTS
Note 24 Other payables
Note 25
Other cash flow adjustments
1.
Accounts and other payables primarily consist of
accrued expenses related to core business activities with
expected payout under 12 months.
2.
Accrued milestone payment from approval of
Adtralza
®
by the Japanese Ministry of Health, Labor
and Welfare in December 2022.
3.
Other non-cash adjustments primarily consist of
remeasurement of defined benefit obligations of DKK
329m
PAGE 82
LEO PHARMA ANNUAL REPORT 2023
Accounting
policies
Other payables comprise amounts owed to employees, including wages, salaries, holiday
pay, salary/wages related items; amounts owed in connection with purchase of development
projects; amounts owed related to clinical trials; amounts owed related to sales deduction and
promotion fee; amounts owed to the public authorities, such as VAT; accrued derivatives and
other such as distributor expenses, promotional tax and product listing agreements, etc.
Clinical trials can take several years to complete. Therefore, Management is required to make
estimates based on the progress and costs incurred to date for the ongoing trials. Judgments
are made on determining the amount of costs to be expensed during the period or recognized
as prepaid expenses or other payables on the balance sheet.
(DKK million)
2023
2022
Other non-cash adjustments:
Gain/loss on sale of non-curent assets etc.
(2)
(6)
Changes in provisions
1,227
1,632
Changes in other non-current liabilities
286
-
Change in provision for defined benefit plans
5
(357)
Change in inventory write-downs
37
13
Change in provisions for bad debt
(11)
7
Share-based payments
(129)
25
Other non-cash adjustments
(19)
354
3)
Total
1,394
1,668
Change in Working capital
Change in inventories
(323)
(724)
Change in receivables, prepaid expenses, etc.
94
181
Change in current liabilities
(280)
(242)
Total
(509)
(785)
CONSOLIDATED FINANCIAL STATEMENTS
Note 26
Guarantees, contingencies and commitments
Guarantees
The total guarantee commitments for LEO Pharma amount to DKK 114m at December 31, 2023 (2022: DKK
136m).
Contractual obligations and commitments
The table below shows contractual obligations, not recognized in the consolidated financial statements.
(DKK million)
2023
2022
Intangible assets
429
333
Property, plant and equipment
130
137
Total
559
470
The commitments related to intangible assets
comprise milestone payments concerning the develop-
ment of new products and intellectual property rights from acquisitions. Commercial milestones, royalties,
and other payments based on a percentage of sales generated from sale of goods following marketing
approval are excluded from the contractual commitments because of their contingent nature, related to
future sales.
The commitments regarding property, plant and equipment
relate primarily to two major expansions of
production facilities. One project relates to the construction of a new plant in Denmark, while the other
project relates to the expansion of an existing plant in Ireland.
Pending lawsuits
At the end of 2023, there were pending lawsuits filed by and against LEO Pharma concerning rights and
claims related to products in LEO Pharma’s portfolio. LEO Pharma does not expect these or other pending
cases to have any significant effect on the Group’s financial position.
LEO Pharma is involved in a number of legal proceedings. In the opinion of Management, the outcome of
these proceedings are currently assessed not to have a material impact on the financial position or cash
flows. Such proceedings may, however, develop over time, and new proceedings may occur which could
have a material impact on LEO Pharma’s financial position and/or cash flows.
Tax
As a global business, LEO Pharma will from time to time have tax audits and discussions with tax authorities
in various countries regarding tax issues, including transfer pricing and indirect taxes. Please refer to the
description of uncertain tax positions in Note 8 Income tax.
PAGE 83
LEO PHARMA ANNUAL REPORT 2023
CONSOLIDATED FINANCIAL STATEMENTS
Note 27
Related party transactions
LEO Pharma A/S’ related parties comprise:
•
The controlling owner, LEO Holding A/S, and the ultimate Parent of the Group, the LEO Foundation
•
The associate, Skinvision B.V.
•
Members of the LEO Foundation’s Board of Trustees and Executive Board, and of LEO Pharma A/S’ and
LEO Holding A/S’ Board of Directors and Executive Management, as well as close relatives of these
persons
Other owners with significant influence:
•
Nordic Capital (Through - Cidron Savanna 4 SARL)
Transactions and balances with the LEO Foundation:
•
Loan of DKK 0m (2022: DKK 1,025m)
•
Interest expenses of DKK 18m (2022: DKK 25m)
•
Income of DKK 0m (2022: DKK 0m)
•
Payables of DKK 0m (2022: Payables of DKK 0m)
Transactions and balances with LEO Holding A/S:
•
Tax settlement of DKK 5m (2022: DKK 356m)
•
Loan of DKK 0m (2022: DKK 4,370m)
•
Interest expenses of DKK 158m (2022: DKK 208m)
•
Receivables regarding joint taxation of DKK 171m (2022: DKK 0m)
•
Conversion of shareholder loan to equity of DKK 5,555m (2022: DKK 0m)
•
Capital increase of DKK 596m (2022: DKK 0m)
Transactions and balances with Nordic Capital:
•
Capital increase of DKK 149m (2022: DKK 0m)
Transactions and balances with the members of the Board of Directors or the Executive Management:
•
Travel expenses, etc. to Board of Directors or their representatives amounts to DKK 1m (2022: DKK 1m).
•
Selected members of the Board of Directors have purchased and been awarded warrants as part of
the Management Incentive Program Purchase of DKK 1m (2022: DKK 1m)
Fair value remeasurement (non-cash) of financial liability arising from historical granted programs from
2021 and 2022 to key management personnel including Executive Management totaling DKK 97m (2022:
DKK 2m). The impact is due to fair-value remeasurement of the management incentive program reflecting
higher valuation of the company.
The incentive program is linked to successful transformation of the company and an IPO. For key manage-
ment personnel reference is made to page 35 “Global Leadership Team”. The total fair value remeasurement
of financial liability (also including other employees other than key management personnel) is included in
Note 7 Financial income and expenses.
There were no other transactions with the Board of Directors or the key management personnel or their
relatives besides as stated above.
For information concerning remuneration, please refer to Note 3 Staff expenses and remuneration to the
Executive Management an Board of Directors.
The LEO Pharma Group is included in the consolidated financial statements of the LEO Foundation.
Note 28
Events after the balance sheet date
LEO Pharma announced on January 23, 2024, that the Group finalized the acquisition of the strategic
asset TMB-001 from Timber Pharmaceuticals following its chapter 11 bankruptcy filing. The purchase price
amounted to DKK 96 million.
No other significant events after the balance sheet date have occurred.
PAGE 84
LEO PHARMA ANNUAL REPORT 2023
CONSOLIDATED FINANCIAL STATEMENTS
1. Under liquidation
PAGE 85
LEO PHARMA ANNUAL REPORT 2023
Note 29
Company overview
Activities
Country
Share of ownership %
Sales and distribution
Production
Marketing & services
Other
Parent
Company
LEO Pharma A/S
Denmark
●
▲
◆
▼
Subsidiaries
SARL LEO Pharma
1)
Algeria
100
◆
LEO Pharma Pty Ltd
Australia
100
●
LEO Pharma GmbH
Austria
100
●
LEO Pharma N.V.
Belgium
100
●
LEO Pharma LTDA
Brazil
100
●
LEO Pharma Inc.
Canada
100
●
LEO Pharma Consultancy Company Ltd.
China
100
◆
LEO Pharma Trading Company Ltd.
China
100
●
LEO Pharma s.r.o.
Czech Republic
100
◆
Løvens Kemiske Fabriks Handelsaktieselskab
Denmark
100
▼
LEO Pharma OY
Finland
100
●
Laboratoires LEO S.A.S
France
100
●
▲
LEO Pharma GmbH
Germany
100
●
LEO Pharmaceutical Hellas S.A.
Greece
100
●
DKLEO Pharma Private Limited
1)
India
100
▼
LEO Laboratories Ltd.
Ireland
100
●
▲
Wexport Ltd.
Ireland
100
▲
LEO Pharma Holding Ltd.
Ireland
100
▼
LEO Pharma Manufacturring Italy S.R.L.
Italy
100
▲
LEO Pharma S.p.A.
Italy
100
●
CONSOLIDATED FINANCIAL STATEMENTS
1. Under liquidation
PAGE 86
LEO PHARMA ANNUAL REPORT 2023
Note 29
Company overview (continued)
Activities
Country
Share of ownership %
Sales and distribution
Production
Marketing & services
Other
LEO Pharma K.K.
Japan
100
●
LEO Pharmaceuticals, S. de R.L. de C.V. Mexico
100
●
LEO Pharma LLC
1)
Morocco
100
◆
LEO Pharma BV
Netherlands
100
●
LEO Pharma Ltd.
New Zealand
100
●
LEO Pharma AS
Norway
100
●
LEO Pharma Sp. z o.o.
Poland
100
◆
LEO Pharma Global Business Service Center Sp. z o.o.
Poland
100
▼
LEO Farmacêuticos Lda.
Portugal
100
●
LEO Pharmaceutical Products LLC
Russia
100
●
LEO Pharma Asia PTE Ltd.
1)
Singapore
100
◆
LEO Pharma Yuhan Hoesa
South Korea
100
●
Laboratorios LEO Pharma S.A.
Spain
100
●
LEO Pharma AB
Sweden
100
●
LEO Pharmaceutical Products Sarath Ltd.
Switzerland
100
●
LEO Pharma SARL
1)
Tunisia
100
●
LEO Laboratories Ltd. United Kingdom
100
●
LEO Pharma Inc.
USA
100
●
LEO Spiny Merger Sub. Inc. USA
100
▼
LEO US Holding Inc.
USA
100
▼
Associates
SkinVision B.V Netherlands
22
▼
PARENT COMPANY FINANCIAL STATEMENTS
Income statement
January
1
-
December 31
(DKK million)
Note
2023
2022
Revenue
2
11,497
12,935
Cost of sales
3,
9
(8,018)
3,479
(9,508)
3,427
Gross profit
Sales and distribution costs
3,
8,
9
(4,368)
(3,929)
Research and development costs
3,
8,
9
(1,718)
(2,270)
Administrative costs
3, 4, 8, 9
(1,614)
52
(14)
(4,183)
(1,878)
60
(24)
(4,614)
Other operating income
Other operating expenses
Operating profit/(loss)
Income from investments in subsidiaries
10
1,829
1,189
Financial income
5
126
41
Financial expenses
5
(1,162)
(3,390)
(777)
(4,161)
Profit/(loss) before tax
Income tax
6
(250)
13
Net profit/(loss) for the year
(3,640)
(4,148)
PAGE 88
LEO PHARMA ANNUAL REPORT 2023
PARENT COMPANY FINANCIAL STATEMENTS
Balance sheet at December 31
Assets
Balance sheet at December 31
Equity and liabilities
PAGE 89
LEO PHARMA ANNUAL REPORT 2023
(DKK million)
Note
2023
2022
Intellectual property rights
8
9
10
11
13
12
14
4,393
5,471
Software
1,206
1,253
Goodwill
136
149
Development projects and software in progress
200
609
Intangible
assets
5,935
7,482
Land and buildings
464
493
Plant and machinery
324
448
Other fixtures and fittings, tools and equipment
84
122
Assets under construction
1,767
1,641
Property, plant and equipment
2,639
2,704
Investments in subsidiaries
4,053
11,030
Deferred tax assets
373
785
Pensions
14
21
Other financial assets
49
50
Other non-current assets
4,489
11,886
Non-current assets
13,063
22,072
Inventories
3,430
2,952
Trade receivables
484
522
Loans to subsidiaries
1,455
1,487
Receivables from subsidiaries
630
1,994
Tax receivables
207
27
Other receivables
219
332
Prepaid expenses
261
245
Other financial assets
189
108
Cash
1
4
Current
assets
6,876
7,671
Assets
19,939
29,743
(DKK million)
Note
2023
2022
Share capital
383
321
Net revaluation, subsidiaries
2,674
9,659
Reserves
976
1,232
Retained earnings
455
(9,270)
Equity
4,488
1,942
Provisions
15
30
101
Loan and credit institutions
16
10,404
130
13,764
489
Tax payables
Other non-current liabilities
16
357
10,921
175
14,529
Total non-current liabilities
Provisions
15
86
285
Loan and credit institutions
16
230
652
327
2,059
188
369
752
7,036
3,133
447
Trade payables
Loans from subsidiaries
Payables to subsidiaries
Tax payables
Other payables
17
988
1,250
Current liabilities
4,530
13,272
Liabilities
15,451
27,801
Equity and liabilities
19,939
29,743
PARENT COMPANY FINANCIAL STATEMENTS
Statement of changes in equity January
1
-
December 31
(DKK million)
Share capital
Net revaluation,
subsidiaries
Reserve for
currency hedging
Reserves
Other
capital reserve
Reserve for
development
projects
Retained
earnings
1.
Reference is made to Note 10 Investments in
subsidiaries.
2.
Reference is made to Note 17 Share capital in the
consolidated financial statements.
2022
Equity at January 1
320
7,881
(1)
9
1,563
(4,153)
5,619
Net profit/(loss) for the year
-
1,189
-
-
-
(5,337)
(4,148)
Foreign exchange rate
adjustment, subsidiaries
-
137
-
-
-
-
137
Other movements on subsidiaries
1)
-
200
-
-
-
(248)
(48)
Capitalized development costs, net
-
-
-
-
(408)
408
-
Value adjustments of hedging instruments
-
-
61
-
-
-
61
Remeasurement of defined
benefit pension obligations
-
302
-
-
-
27
329
Tax on changes in equity
-
(50)
(17)
-
-
(2)
(69)
Transactions with owners
Increase of capital
2)
1
-
-
-
-
35
36
Share-based payments
-
-
-
25
-
-
25
Total transactions with owners
1
-
-
25
-
35
61
Equity at December 31
321
9,659
43
34
1,155
(9,270)
1,942
PAGE 90
LEO PHARMA ANNUAL REPORT 2023
Total
2023
Equity at January 1
321
9,659
43
34
1,155
(9,270)
1,942
Net profit/(loss) for the year
-
1,829
-
-
-
(5,469)
(3,640)
Foreign exchange rate
adjustment, subsidiaries
-
(80)
-
-
-
-
(80)
Dividend received from subsidiaries
-
(8,649)
-
-
-
8,649
-
Other movements, subsidiaries
1)
-
(61)
-
-
-
61
-
Capitalized development costs, net
-
-
-
-
(260)
260
-
Value adjustments of hedging instruments
-
-
(29)
-
-
-
(29)
Remeasurement of defined
benefit pension obligations
-
(30)
-
-
-
(8)
(38)
Tax on changes in equity
-
6
6
-
-
2
14
Transactions with owners
Increase of capital
2)
62
-
-
-
-
6,238
6,300
Purchase of treasury shares
-
-
-
-
-
(8)
(8)
Share-based payments
-
-
-
27
-
-
27
Total transactions with owners
62
-
-
27
-
6,230
6,319
Equity at December 31
383
2,674
20
61
895
455
4,488
Notes
-
Parent
Company
Notes to the income statement
Notes to the balance sheet
Notes - Additional information
1 Accounting policies
92
8 Intangible assets
96
19 Guarantees, contingencies and commitments
101
2 Revenue
93
9 Property, plant and equipment
97
20 Other notes
101
3 Staff expenses
93
10 Investments in subsidiaries
98
4 Share-based payment
94
11 Deferred tax
98
5 Financial income and expenses
95
12 Other receivables
98
6 Income tax
95
13
Inventories
98
7 Proposed distribution of net profit/(loss) for the year
95
14 Prepaid expenses
98
15
Provisions
99
16 Loans and credit institutions and other non-current liabilities
100
17 Other payables
100
18 Contractual obligations
100
PARENT COMPANY FINANCIAL STATEMENTS
Note 1 Accounting policies
The Parent Company’s financial statements are presented in accordance with the Danish Financial State-
ments Act for companies in reporting class large C.
The accounting policies of the Parent Company are consistent with the accounting policies of the Group,
except for IFRS 16 leases and the treatment of goodwill. In addition, the policies described below are
implemented for the Parent Company. The accounting policies are unchanged compared to last year,
except for Changes in presentation described below.
General information
In accordance with the exemption clauses in Section 86(4) and Section 96(3) of the Danish Financial
Statements Act, no separate cash flow statement or disclosure of audit fee have been prepared for the
Parent Company.
Changes in presentation
Income statement
LEO Pharma have performed an updated assessment of the classification of costs in the income statements
to support a true and fair view of the costs’ recognition by function. As a consequense, the comparative
figures for 2022 have been restated.
The impact is as following:
•
Cost of sales decreased by DKK 17m
•
Research and development costs decreased by DKK 58m
•
Administrative costs increased by DKK 127m
•
Other operating costs decreased by DKK 52m
The changes in presentation had no impact on operating profit/(loss), net profit, equity or total asset.
Presentation of share-based payments
For cash-settled share-based payment arrangements, the awards measured
at grant value are recognized as staff cost over the vesting period with
the balance on liability. The liability is remeasured at each reporting date
and at settlement date at fair value.
For 2023 changes in the liability as a result of the remeasurement to fair value are recognized in the income
statement under other financial expenses. The impact of the remeasurement in 2022 of DKK 1m have been
recognized under staff cost.
Goodwill
Goodwill is measured at cost less accumulated amortization and impairment. Amortization is calculated
using the straight-line method over the expected useful life, estimated at 15 years. This estimate was made
on the basis of estimated useful lives of the other assets acquired in the transaction.
Investments in subsidiaries
In the Parent Company’s financial statements, investments in subsidiaries and associates are recognized
according to the equity method. The share of the results of subsidiaries less unrealized intra-group gains
is recognized in the Parent Company’s income statement. Net revaluation of investments in subsidiaries
exceeding the dividend declared by such companies is recognized in equity as reserve for net revaluation
according to the equity method.
Tax
The Parent Company is jointly taxed with its Danish subsidiary. The Parent Company and its Danish subsid-
iary settle the tax with its owner and the administration company LEO Holding A/S. The current Danish tax
is allocated between the jointly taxed companies in proportion to their taxable income.
Equity
Reserve for development costs
The reserve for internal development costs comprises capitalized development costs. This reserve cannot be
used for dividends or distributions or to cover losses. If the recognized development costs are sold or otherwise
excluded from the company’s operations, the reserve will be dissolved and transferred directly to the distrib-
utable reserves under equity. If the recognized development costs are written down, the part of the reserve
corresponding to the write-down of the development costs will be reserved. If a write-down of development
costs is subsequently reserved, the reserve will be re-established. The reserve is reduced by amortization of
capitalized development costs on an ongoing basis.
PAGE 92
LEO PHARMA ANNUAL REPORT 2023
(DKK million)
2023
2022
Revenue by category
Products
11,076
12,514
Sales-based royalties
421
421
Total
11,497
12,935
PARENT COMPANY FINANCIAL STATEMENTS
Note 2
Revenue
Note 3
Staff expenses
1.
Reference is made to Note 4 Share-based payment.
Change to revenue segments
The segment structure by region has been changed to support both our commerical operation and
operating model. The segments have been changed to "Europe", "North America" and "Rest of World".
The comparative figures for 2022 have been restated.
For a description of the Parent Company’s remuneration to the Executive Management and the Board
of Directors, please refer to Note 3 Staff expenses and remuneration to the Executive Management and
Board of Directors in the consolidated financial statements.
PAGE 93
LEO PHARMA ANNUAL REPORT 2023
(DKK million)
2023
2022
Revenue by market
Europe
7,688
7,971
North America
1,511
2,581
Rest of World
2,298
2,383
Total
11,497
12,935
(DKK million)
2023
2022
Wages and salaries
1,239
1,596
Hereof capitalized staff expenses
(28)
(42)
Pensions
125
141
Share-based payment
1)
31
29
Social security expenses
27
19
Other employee expenses
38
59
Total staff expenses
1,432
1,802
Staff expenses included in:
Cost of sales
256
326
Sales and distribution costs
149
243
Research and development costs
420
599
Administrative costs
607
634
Total staff expenses
1,432
1,802
Average number of full-time employees
1,410
1,897
PARENT COMPANY FINANCIAL STATEMENTS
Note 4
Share-based payment
Description of share-based payment arrangements
Terms and conditions, measurement of grant date fair value, etc. for share-based payment arrangements
in LEO Pharma A/S are the same as for the Group. We refer to Note 4 Share-based payment in the
consolidated financial statements.
Reconciliation of outstanding equity-settled awards
At December 31, 2023, the total carrying amounts of liabilities arising from the share-based payment
transactions were DKK 154m (2022: DKK 23m). The intrinsic value at December 31, 2023 of liability related
to vested phantom shares was DKK 101m (2022: DKK 12m).
Total expenses recognized in 2023 from share-based payment transactions in the income statement
amount to DKK 151m (2022: DKK 29m), of which DKK 120m are
fair value adjustment to the cash-settled program recognized under financial expenses. The cost of DKK
18m (2022: DKK 15m) arises from equity-settled share-based payment transactions.
PAGE 94
LEO PHARMA ANNUAL REPORT 2023
Reconciliation of outstanding employee awards
2023
2022
Number of
matching shares
ESPP
(equity-
settled)
EPSPP
(cash-settled)
ESPP
(equity-settled)
EPSPP
(cash-settled)
Outstanding at January 1
465,016
11,320
-
-
Granted
-
-
555,296
15,832
Forfeited
(84,452)
(3,045)
(90,280)
(4,512)
Outstanding at December 31
380,564
8,275
465,016
11,320
Fair value at grant (DKK/unit)
-
-
30.40
30.40
Current fair value (DKK/unit)
92.08
92.08
30.71
30.71
In number of warrants
Total 2023
Total 2022
Outstanding at January 1
3,943,314
2,815,973
Granted during the year
1,416,905
1,153,104
Forfeited during the year
(607,082)
(25,763)
Outstanding at December 31
4,753,137
3,943,314
Exercisable at December 31
-
-
Fair value at grant (DKK/unit)
6.77 to 8.87
7.58
Average exercise share price (DKK/unit)
47.72
47.72
Reconciliation of outstanding cash-settled awards
Number of phantom shares
Phantom Share
Agreement 2023
Phantom Share
Agreement 2022
Outstanding at January 1
3,894,082
2,141,750
Instruments granted
200,000
2,063,864
Forfeited during the year
(184,989)
(311,532)
Outstanding at December 31
3,909,093
3,894,082
Fair value at grant date (DKK/unit)
43.21
7.58
Initial expected total cost (million DKK)
169
29
Instruments for which it is expected to vest
3,909,093
3,894,082
Current fair value (DKK/unit)
43.21
7.97
Total expected settlement
169
31
Liability at December 31, 2023 (million DKK)
154
23
Financial impact
PARENT COMPANY FINANCIAL STATEMENTS
Note 5
Financial income and expenses
Note 6
Income tax
Note 7 Proposed distribution of net profit/(loss) for the year
1.
Foreign exchange gains amount to DKK 496m (2022:
DKK 705m) and foreign exchange losses amount to DKK
537m (2022: DKK 758m).
2.
Other financial expenses primarily comprise
commitment fees related to syndicated facility
agreement.
3.
Reference is made to Note 11 Deferred tax
(DKK million)
2023
2022
Net revaluation, subsidiaries
1,829
1,189
Retained earnings
(5,469)
(5,337)
Total
(3,640)
(4,148)
PAGE 95
LEO PHARMA ANNUAL REPORT 2023
(DKK million)
2023
2022
Interest income, related parties
96
40
Other interest income
9
1
Gain arising from financial assets measured at
fair value through profit and loss
5
-
Other financial income
16
-
Total financial income
126
41
Interest expenses, related parties
282
246
Interest expenses, credit institutions
626
310
Foreign exchange rate losses, net
1)
41
53
Financial assets write-down
-
15
Fair-value remeasurement (non-cash) of share based incentive plans
120
-
Other financial expenses
2)
93
153
Total financial expenses
1,162
777
(DKK million)
2023
2022
Current tax
172
(15)
Prior-year adjustments, current tax
(2)
9
Prior-year adjustments, deferred tax
50
(76)
Change in deferred tax
(462)
3)
76
Total tax income/(expense) for the year
(242)
(6)
Tax on profit/(loss) for the year
(250)
13
Tax on changes in equity
8
(19)
Total tax income/(expense) for the year
(242)
(6)
PARENT COMPANY FINANCIAL STATEMENTS
Note 8
Intangible assets
2023
2022
Intellectual
Development
projects and
software in
Total
intangible
1.
Additions consist of DKK 16m (2022: DKK 41m) related
to development projects, and DKK 47m (2022: DKK 95m)
related IT projects.
2.
Reference is made to Note 9 Intangible assets in the
Goodwill
property rights
Software
progress
assets
consolidated financial statements.
192 13,769 2,498 879 17,338
-
143
4)
-
136
1)
279
-
-
-
(250)
(250)
-
-
96 (110) (14)
192 13,912 2,594 655 17,353
(30) (7,743) (974) (118) (8,865)
(13) (698) (367)
-
(1,078)
-
-
-
(178)
(178)
2)
-
-
-
250
250
3.
Total development projects and software in progress
DKK 200m (2022: DKK 609m) consist of software in
progress DKK 32m (2022: DKK 316m), and development
projects DKK 168m (2022: DKK 293m).
4.
Additions consist of capitalized milestone payment
from approval of Adtralza
®
by the Japanese Ministry of
Health, Labor and Welfare in December 2022.
(43)
(8,441)
(1,341)
(46)
(9,871)
149
5,471
1,253
609
3)
7,482
(DKK million)
2023
2022
Amortization and impairment losses are specified as follows:
Sales and distribution costs
1,078
652
Research and development costs
141
63
Administrative costs
388
541
Total
1,607
1,256
PAGE 96
LEO PHARMA ANNUAL REPORT 2023
(DKK million)
Goodwill
Intellectual
property
rights
Software
Development
projects and
software in
progress
Total
intangible
assets
Cost at January 1
192
13,912
2,594
655
17,353
Additions during the year
-
-
-
63
1)
63
Disposals during the year
-
-
(37)
(178)
(215)
Transfers
-
-
328
(331)
(3)
Cost at December 31
192
13,912
2,885
209
17,198
Amortization and impairment
losses at January 1
(43)
(8,441)
(1,341)
(46)
(9,871)
Amortization for the year
(13)
(703)
(375)
-
(1,091)
Impairment for the year
-
(375)
-
(141)
(516)
2)
Disposals during the year
-
-
37
178
218
Amortization and impairment
losses at December 31
(56)
(9,519)
(1,679)
(9)
(11,263)
Carrying amount at December 31
136
4,393
1,206
200
3)
5,935
PARENT COMPANY FINANCIAL STATEMENTS
Note 9
Property, plant and equipment
2023
2022
1.
Fixed assets under construction are mainly related to
the construction of a new plant with a carrying amount
of DKK 1,746m (2022: DKK 1,619m). The new plant is
expected to start production in 2025.
2.
Assets pledged as collateral for loans amount to DKK
2,503m (2022: DKK 2,522m)
(DKK million)
2023
2022
Depreciation and impairment losses are specified as follows:
Cost of sales
134
135
Sales and distribution costs
1
2
Research and development costs
18
20
Administrative costs
38
42
Total
191
199
PAGE 97
LEO PHARMA ANNUAL REPORT 2023
(DKK million)
Land and
buildings
Plant and
machinery
Other fixtures
and fittings,
tools and
equipment
Assets under
construction
1)
Total property,
plant and
equipment
Cost at January 1
1,217
1,540
489
1,641
4,887
Exchange rate adjustment
-
-
-
-
-
Additions during the year
-
-
3
138
141
Disposals during the year
(10)
(138)
(120)
-
(268)
Transfers
2
5
7
(12)
2
Cost at December 31
1,209
1,407
379
1,767
4,762
Depreciation and impairment
losses at January 1
(724)
(1,092)
(367)
-
(2,183)
Exchange rate adjustment
-
-
-
-
-
Disposals during the year
7
138
106
-
251
Depreciation for the year
(28)
(128)
(33)
-
(189)
Impairment loss for the year
-
(1)
(1)
-
(2)
Depreciation and impairment at
December 31
(745)
(1,083)
(295)
-
(2,123)
Carrying amount at December 31
464
324
84
1,767
2,639
2)
Land and
buildings
Plant and
machinery
Other fixtures
and fittings,
tools and
equipment
Assets under
construction
1)
Total
property,
plant and
equipment
1,204
1,471
465
1,494
4,634
-
-
(2)
1
(1)
-
-
20
244
264
(1)
(12)
(13)
-
(26)
14
81
19
(98)
16
1,217
1,540
489
1,641
4,887
(695)
(978)
(335)
-
(2,008)
-
(1)
1
-
-
1
12
11
-
24
(28)
(113)
(40)
-
(181)
(2)
(12)
(4)
-
(18)
(724)
(1,092)
(367)
-
(2,183)
493
448
122
1,641
2,704
2)
PARENT COMPANY FINANCIAL STATEMENTS
Note 10 Investments in subsidiaries Note 12 Other receivables
Note 13 Inventories
Reference is made to Note 29 Company overview in the consolidated financial statements.
Note 11 Deferred tax
(DKK million)
2023
2022
Deferred tax assets/(liabilities) at January 1
785
785
Adjustment related to previous years
50
(76)
Deferred tax on equity
(1)
(19)
Deferred tax on profit for the year
(461)
95
Deferred tax assets/(tax liabilities) at December 31
373
785
For description of basis for recognition of deferred tax assets, reference is made to Note 15 Deferred tax in the
consolidated financial statements.
Note 14
Prepaid expenses
(DKK million)
2023
2022
Prepaid clinical trials
176
180
Prepaid IT expenses
75
58
Other prepaid expenses
10
7
Total
261
245
Classified as follows:
Deferred tax assets
373
785
Deferred tax assets/(tax liabilities)
373
785
PAGE 98
LEO PHARMA ANNUAL REPORT 2023
(DKK million)
2023
2022
Cost at January 1
1,371
1,595
Additions during the year
-
1
Disposals during the year
(1)
(232)
Other movements
9
7
Cost at December 31
1,379
1,371
Value adjustment at January 1
9,659
7,881
Exchange rate adjustment
(80)
137
Share of profit/(loss) for the year
1,829
1,189
Dividend
(8,649)
(32)
Disposals during the year
0
173
Other movements
(85)
311
Value adjustment at December 31
2,674
9,659
Carrying amount at December 31
4,053
11,030
(DKK million)
2023
2022
Public authorities, VAT, etc.
138
133
Financial derivatives
71
160
Other
10
39
Total
219
332
(DKK million)
2023
2022
Raw materials and consumables
1,042
653
Work in progress
1,414
1,358
Finished goods and goods for resale
974
941
Total
3,430
2,952
PARENT COMPANY FINANCIAL STATEMENTS
Note 15 Provisions
1.
Additions and reversals includes net DKK 47m related
to announced restructuring of LEO Pharma (2022: DKK
164m).
2.
Utillization includes DKK 161m related to announced
restructuring provision (2022: DKK 109m).
3.
Addition of DKK 69m is related to one onerous contract,
recognized as a part of cost of sales.
PAGE 99
LEO PHARMA ANNUAL REPORT 2023
(DKK million)
Employe-
related
provisions
Other provisions
Sales
deductions
Total
2023
Provisions at January 1
200
184
2
386
Exchange rate adjustment
(1)
0
(0)
(1)
Additions during the year
65
1)
18
-
83
Utilization during the year
(171)
(53)
-
(224)
Reversals during the year
(10)
1)
(75)
(2)
(87)
Transfer
(41)
-
-
(41)
Provisions at December 31
42
74
-
116
Of which classified as:
Non-current liabilities
11
19
-
30
Current liabilities
31
55
-
86
Provisions at December 31
42
74
-
116
(DKK million)
2022
Employee-
related
provisions
Other provisions
Sales
deductions
Total
Provisions at January 1
130
135
8
273
Exchange rate adjustment
1
-
-
1
Additions during the year
221
1)
167
3)
2
390
Utilization during the year
(124)
2)
(70)
(5)
(199)
Reversals during the year
(28)
1)
(48)
(3)
(79)
Provisions at December 31
200
184
2
386
Of which classified as:
Non-current liabilities
62
39
-
101
Current liabilities
138
145
2
285
Provisions at December 31
200
184
2
386
PARENT COMPANY FINANCIAL STATEMENTS
Note 16 Loans and credit institutions and other
non-current liabilities
(DKK million)
2023
2022
Mortgage loans
2,235
2,234
Bank loans
8,399
6,505
Debt to related parties
-
5,394
Other non-current liabilities
357
175
Total
10,991
14,308
Falling due in:
Less than one year
230
369
Between one and five years
200
7,487
After five years
10,561
6,452
Total
10,991
14,308
Cash resources and financing facilities
In 2023, LEO Pharma renegotiated the loan terms in the existing syndicated facility agreement, which
resulted in both an increase in the available credit-facility by DKK 1,500m and improved loan terms. The
improvements included a decrease in the effective interest rate as well as an extension of the loan termi-
nation date to January 1, 2029.
The renegotiated terms were not assessed substantially different to the previous loan terms, as the fair
value of the liability before and after the modification was not significantly changed. Refer to Note 21
Financial risks in the consolidated financial statements.
Note 17 Other payables
(DKK million)
2023
2022
Employee-related
269
404
Sales deductions
91
128
Clinical trials expenses
173
272
Accrued interests
87
72
Royalties
55
-
Financial derivatives
30
50
Milestone payments
-
143
1)
Accounts and other payables
283
181
Total
988
1,250
Note 18
Contractual obligations
Operating lease obligations
The Parent Company has lease obligations of DKK 37m (2022: DKK 35m), of which DKK 25m is related to
lease of office premises from subsidiary (2022: DKK 23m).
1.
Accrued milestone payment from approval of Adtralza
®
by the Japanese Ministry of Health, Labor and Welfare in
December 2022.
PAGE 100
LEO PHARMA ANNUAL REPORT 2023
PARENT COMPANY FINANCIAL STATEMENTS
Note 19
Guarantees, contingencies and commitments
Guarantees
The total guarantee commitment for the Parent Company amounts to DKK 463m (2022: DKK 476m) at
December 31, 2023.
As of December 31, 2023, LEO Pharma has issued guarantees to subsidiaries of DKK 399m (2022: DKK 357m),
of which DKK 257m (2022: DKK 252m) is related to pension obligations. In addition to the guarantees for
subsidiaries, the Parent Company has issued guarantees related to various commercial activities.
Contractual obligations and commitments
The table below shows contractual obligations, not recognized in the Parent Company's financial state-
ments.
(DKK million)
2023
2022
Intangible assets
429
333
Property, plant and equipment
47
60
Total
476
393
The commitments related to intangible assets
comprise milestone payments concerning the development
of new products and intellectual property rights from acquisitions. Commercial milestones, royalties and
other payments based on a percentage of sales generated from sale of goods following marketing
approval are excluded from the contractual commitments because of their contingent nature related to
future sales.
The commitments regarding property, plant and equipment
relate primarily to the construction of a new plant
in Denmark.
Pending lawsuits
At the end of 2023, there were pending lawsuits filed by and against LEO Pharma A/S concerning rights
and claims related to products in LEO Pharma’s portfolio. LEO Pharma A/S does not expect the pending
cases to have any significant effect on the Parent Company’s financial position.
LEO Pharma A/S is involved in a number of legal proceedings. In the opinion of Management, the outcome of
these proceedings will not have a material impact on the financial position or cash flows. Such proceedings
will, however, develop over time, and new proceedings may occur which could have a material impact on
LEO Pharma’s financial position and/or cash flows.
Tax
The Parent Company is jointly taxed with its Danish subsidiary and its owner LEO Holding A/S. The Parent
company is jointly and severally liable together with the other companies in the joint taxation scheme for
Danish corporate taxes and withholding taxes on dividends, interest and royalties within the joint taxation
scheme.
LEO Pharma A/S is jointly registered for VAT purposes with LEO Holding A/S, Løvens Kemiske Fabriks
Handelsaktieselskabet A/S and is jointly liable for the payment thereof.
As a global business, LEO Pharma will from time to time have tax audits and discussions with tax authorities
in various countries regarding tax issues, including transfer pricing and indirect taxes issues. Please refer to
the description of uncertain tax positions in Note 8 Income tax in the consolidated financial statements.
Note 20 Other notes
For financial risks, please refer to Note 21 Financial risks in the consolidated financial statements.
For disclosures on assets measured at fair value, please refer to Note 23 Financial assests and liabilities in
the consolidated financial statements.
For related party transactions, please refer to Note 27 Related party transactions in the consolidated
financial statements.
For events after the balance sheet date, please refer to Note 28 Event after the balance sheet date in the
consolidated financial statements.
PAGE 101
LEO PHARMA ANNUAL REPORT 2023
MANAGEMENT’S STATEMENT
PAGE 102
LEO PHARMA ANNUAL REPORT 2023
INDEPENDENT AUDITOR’S REPORT
PAGE 103
LEO PHARMA ANNUAL REPORT 2023
INDEPENDENT AUDITOR’S REPORT
PAGE 104
LEO PHARMA ANNUAL REPORT 2023
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