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2022
Annual
Report
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Table of Contents
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1
ONWARD at a Glance
5
2
Message from the
Chairman & CEO
7
Achievements
11
Overview
23
5
Our Strategy
31
6
Research &
Preclinical Development
33
7
ARC Therapy
Product Development
49
8
Clinical Trials &
Regulatory Approvals
59
9
Commercialization
65
10
People & Culture
79
11
Corporate Responsibility
85
12
Privacy & Data Governance
93
13
Operational Review
95
14
Financial Review
103
15
2023 Outlook
109
16
Governance
111
17
Risk Management
& Control
133
18
Investor Relations
169
19
Report of the Non-Executive
Directors
173
In this Annual Report ‘ONWARD’, ‘the Company’, ‘the Group’,
‘we’, ‘us’ and ‘our’ are used interchangeably to refer to
ONWARD Medical N.V. and/or any of its subsidiaries, in
general or where no useful purpose is served by identifying
the particular company
20
Board of Directors’
Statements
181
21
Remuneration Report
183
22
Financials
197
23
Consolidated Financial
Statements
199
24
Company Financial
Statements
285
25
Other Information
301
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Founded in 2015
100 employees
HQ in Eindhoven, the Netherlands
Science and Engineering Center in Lausanne, Switzerland
Growing US presence in Boston, Massachusetts
IPO 2021, Euronext Brussels and Amsterdam; EUR 150M+
raised since inception
ONWARD
at a Glance
Technology – 2 purpose-built neuromodulation platforms
that stimulate the spinal cord via implantable (ARC
IM
) or
external (ARC
EX
) technologies
Innovation – 8 FDA Breakthrough Device Designations and
>330 issued or pending patents
Clinical validation – One pivotal trial completed with
positive top-line results reported for ARC
EX
; positive interim
outcomes also reported for ARC
IM
blood pressure indication
Commercialization - Large total available market (EUR
20B+); first commercial sale expected late 2023; deep
pipeline; favorable reimbursement; strategic relationship
with Christopher & Dana Reeve Foundation
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Message from the
Chairman & CEO
Dear Shareholders, Colleagues, Partners, and Collaborators,
2022 was an important and eventful year for ONWARD, filled with achievements and
milestones across our range of activities.
We continued to advance our scientific understanding, validated by publications in
leading peer-reviewed journals and fueled by grant awards to support our progress
in developing therapies for mobility, upper extremity movement, and the use of brain-
computer interfaces. We completed development of our ARC
IM
IPG, a purpose-designed
neurostimulator. We added 24 new patents, bringing our total of issued or pending
patents to over 330 worldwide. And we made excellent progress in the conduct of clinical
studies, reporting positive top-line data from our first pivotal study (Up-LIFT), positive
observational data from the LIFT Home study, and positive outcomes data from the first
10 participants using our ARC
IM
Therapy to better regulate low blood pressure after spinal
cord injury. Perhaps most importantly, we continued to strengthen our Board of Directors
and Leadership Team, adding several highly capable leaders to help grow the company to
its full potential.
As we shared last year, it is a privilege to lead this company with its many wonderful
employees, research collaborators, and business partners. Our work is important and
meaningful, and together we are focused on making a difference in the lives of people with
spinal cord injury (SCI).
For those of you who are learning about ONWARD for the first time, we are here to address
an important and prevalent problem. Nearly 7,000,000 people worldwide have spinal cord
injury
1
. While most people associate SCI with paralysis and loss of sensation, there are
often other accompanying challenges such as infection, incontinence, pressure sores, poor
blood pressure regulation, and loss of sexual function. The quality of life following spinal
cord injury can be quite poor for the injured and their caregivers. SCI is also an expensive
condition, with the average lifetime cost of care exceeding EUR 2.2M for someone with
paraplegia and EUR 4.4M for someone with tetraplegia
2
.
Conventional rehabilitation does not provide adequate benefit, with most people reaching
a plateau in their progress after three to six months. Thereafter, many of those injured face
decades of continuing challenges, declines in quality of life, and dependence on outside
care. ONWARD seeks to solve this unmet need by delivering durable therapies that can
improve strength, function, and quality of life, even for those injured many years ago.
Our Vision
Empowered by movement, people with spinal cord injury will enjoy life in every way that
matters to them.
Our team is pursuing this vision with urgency and determination, developing ARC Therapy
with the intent to commercialize and make our solutions broadly available starting late
2023 in the United States and Europe. We have two technology platforms, one external
(called ARC
EX
) and the other implantable (called ARC
IM
).
The work to complete and commercialize these platforms is aided by eight FDA
Breakthrough Device Designation awards and protected by more than 330 issued
or pending patents worldwide. While many of these innovations were created by our
innovative R&D team, others have been exclusively licensed from the top neuroscience
research universities around the world, underscoring ONWARD as a pioneer and a leader
in our space.
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Benefitting from our successful initial public offering on Euronext in late 2021, we remain
well capitalized and focused on fulfilling our vision to help people with spinal cord injury in
their activities of daily life. We pledge to be good stewards of this capital and hope both
new and existing investors enjoy good returns, financial and otherwise, from this journey
you have undertaken alongside us.
We are aided in our pursuits by our many strong relationships with SCI advocacy groups
across the globe, such as the Christopher and Dana Reeve Foundation in the United
States. We are grateful for these partnerships and the insights they provide.
We are proud of our many achievements in 2022 and we have an ambitious set of goals for
2023 and beyond. Please sign up for updates on our website or follow ONWARD on social
media so we can keep you well informed of our progress throughout the year.
Warm regards,
Jan Øhrstrøm & Dave Marver
1
Kumar et al. 2018, “Traumatic Spinal Injury: Global Epidemiology and Worldwide Volume”, World Neurosurg., vol. 113, pp. e345-e363, May
2018, doi: 10.1016/j.wneu.2018.02.033.
2
2020 NSCISC Annual Report, US
Dave Marver
CEO
Jan Øhrstrøm
Chairman
2
Message from the Chairman & CEO
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Achievements
Science
Together with our research partners at École polytechnique fédérale de Lausanne
(EPFL), Lausanne University Hospital (CHUV) and .NeuroRestore we continued to make
remarkable progress in the quest to develop therapies to help people with SCI as well as
those living with other movement disabilities, such as Parkinson’s disease.
•
In February, the Company’s technology was leveraged to enable people with the most
severe form of spinal cord injuries to stand and walk again. This breakthrough was
published in the journal
Nature Medicine
and highlighted in major media outlets
around the globe.
•
In April, the
New England Journal of Medicine
highlighted the use of the Company’s
innovative approach to treating orthostatic hypotension (low blood pressure) in
a patient with MSA-P, a form of Parkinson’s disease that affects the sympathetic
nervous system.
•
In June, research published in
Nature Neuroscience
demonstrated the potential for
ONWARD ARC
IM
Therapy to restore movement and function in hands and arms after
spinal cord injury.
•
In November, ONWARD and our research partners at EPFL and CEA-Clinatec were
awarded a second grant from the European Innovation Council to further develop an
innovative Brain-Computer Interface (BCI) technology for restoring mobility and upper
limb function in people with spinal cord injury. The grant will fund integration between
our implanted ARC
IM
system, which delivers targeted, programmed stimulation of
the spinal cord, and Clinatec’s WIMAGINE, an implantable device that records and
decodes the brain’s cortical signal to predict a person’s intention to move. We believe
the development of a BCI platform has the potential to make ONWARD therapies even
more effective as we proceed to 2
nd
and 3
rd
generations of our system.
The Company also announced that it was the First Place Winner of the 2022 Brain-
Computer Interface (BCI) Award. The award was granted to ONWARD and several
research partners for their submission, “Walking naturally after spinal cord injury
using a brain-spine interface.” This application focused on the work being done under
the Reverse Paralysis project to develop a fully implantable BCI to help people walk
more naturally after spinal cord injury with the benefit of ONWARD ARC Therapy. The
International BCI Award is given by the BCI Award Foundation and is one of the top
accolades recognizing outstanding and innovative research in this field. In 2022, more
than 100 projects were submitted, and only 12 finalists selected, including teams from
Stanford University and the University of California San Francisco.
•
In November, the Company’s research partners from EPFL and CHUV published
pioneering research in Nature, in which they identified the precise neurons that restore
walking after paralysis. This paper detailed the results from 9 participants in the STIMO
trial, all of whom were able to stand and walk with the benefit of ARC Therapy.
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Intellectual Property
The Company added 24 patents to its formidable IP portfolio, now totaling over 330 issued
and pending patents. We also obtained option rights to license intellectual property from
EPFL and CHUV, which allows the Company to develop and commercialize a novel Brain-
Computer Interface, that captures brain signals and triggers spinal cord stimulation to
restore voluntary control over paralyzed limbs. These rights also support the development
and commercialization of therapies to alleviate gait disorders (freezing of gait, etc.) in
people with Parkinson’s disease by stimulating the spinal cord.
Innovation & Clinical Development
•
In May 2022, the first participant was enrolled in the HemON feasibility study, a
precursor to the upcoming planned pivotal trial with ARC
IM
for blood pressure, a study
called EMPOWER BP. This was the first human use of the ONWARD ARC
IM
implantable
pulse generator (IPG). This purpose-built IPG delivers targeted electrical stimulation
precisely to the areas of the spinal cord responsible for triggering or controlling
movement and autonomic functions that may be affected by a spinal cord injury or
neurodegenerative disorder.
•
In September, we achieved a very important milestone, reporting positive top-line
results from our Up-LIFT pivotal study evaluating ARC
EX
Therapy. The study enrolled
65 people at 14 leading SCI centers in the US, Europe, and Canada, and achieved
its primary effectiveness endpoint of improvement in upper extremity strength and
function in people with SCI. With these important results, the Company is preparing to
submit for regulatory approval in both the US and Europe.
•
In October, we released data from the LIFT Home observational study, which evaluated
the feasibility and safety of ARC
EX
Therapy when used at home. Participants performed
training on activities of daily living three times per week over a one-month period.
Approximately 97% of these sessions were completed without usability issues,
supporting the feasibility of home-based treatment.
•
During 2022 and early 2023, we added five more Breakthrough Device Designations
(BDD), bringing our total to eight BDDs for ARC Therapy. The FDA’s Breakthrough
Device program is designed to help patients and their physicians receive timely access
to innovative technologies that have the potential to provide more effective treatment
or diagnosis for debilitating conditions of great unmet need, such as SCI. The FDA will
provide ONWARD with priority review and the opportunity to interact with their experts
throughout the premarket review phase. In short, we are hopeful these designations
result in faster access to these important therapies.
•
In December, we reported positive interim clinical outcomes from the first ten people
treated to regulate blood pressure with implantable ARC Therapy, including HemON
study participants. ARC
IM
Therapy immediately improved blood pressure levels in all
study participants, who also reported improved quality of life, increased energy and
vitality, and reduced dizziness. Based on these promising interim outcomes, we are
preparing to initiate further clinical trials to include U.S. participants in 2023.
3
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Corporate
We continued to enhance our organizational capabilities and augment our leadership
team in preparation for commercialization of our initial therapy, expected late 2023. The
Company also enhanced its visibility in the financial markets:
•
In March, the Company was added to Euronext Brussels’ Bel-Small Index.
•
In March, the Company confirmed its expectation that it had sufficient cash runway
through the end of 2024.
•
In April, Bryan, Garnier & Co, a leading investment bank focused on growth companies,
initiated research coverage on the Company.
•
In 2022 and early 2023, we welcomed several seasoned professionals to ONWARD,
each with talent and experience to help us grow into our next phase as a commercial
enterprise. Kristina Dziekan and Vivian Riefberg were added to our Board of Directors.
Kristina formerly led international reimbursement and market access for Medtronic
Neuromodulation and most recently served in a similar role at Alcon. Vivian retired
in 2020 as a senior partner with McKinsey & Company, where she co-led their US
healthcare practice and led their US government practice.
•
We added Lara Smith Weber as CFO and Zouhir Mechta as VP Operations. After
spending nearly 20 years in various finance leadership roles in Europe, Lara led the
NASDAQ IPO for MorphoSys. Zouhir brings expertise gained during a long career in
operations leadership for J&J and Dentsply Sirona.
•
In early 2023, we further strengthened our leadership team with the hiring of Erika
Ross as VP Global Clinical & Regulatory and Sarah Moore as VP Global Marketing.
Erika joined from Abbott Neuromodulation, where she led clinical activities for their
neuromodulation franchise, and was previously at Cala Health, where she managed
the scientific research program that led to de novo clearance and launch of the
company’s neurostimulation technology. Sarah joined from Nevro, an implantable
neuromodulation company, where she served as Head of Commercial Marketing.
Prior to that, she held various leadership roles in global marketing across multiple J&J
medical device franchises.
Forward-Looking Information / Statements
This document contains certain forward-looking statements with respect to the financial
condition, results of operations and business of ONWARD and certain of the plans and
objectives of ONWARD with respect to these items. In particular, the words ‘expect’,
‘anticipate’, ‘estimate’, ‘may’, ‘should’, ‘could’, ‘would’, ‘believe’, ‘outlook’, ‘potential’, ‘will’,
‘planned’, ‘pipeline’, ‘seek’ and similar expressions are intended to identify forward-looking
statements. By their nature, forward-looking statements involve risk and uncertainty
because they relate to events and depend on circumstances that will occur in the future.
Actual results may differ materially from those expressed in these forward-looking
statements, and you should not place undue reliance on them. For a discussion of factors
that could cause future results to differ from such forward-looking statements, see also
the Risk management and control of this Annual Report. For this reason, we can offer no
assurances that the forward-looking statements published here will prove correct at a future
date, and ONWARD assumes no duty to update any such forward-looking statements.
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At ONWARD, our mission is to enable people with spinal cord injury (SCI) to regain
movement and other bodily functions so they can enjoy life in every way that matters to
them. We develop and plan to commercialize therapies that address major challenges
faced by people with SCI, leveraging the Company’s ARC
IM
and ARC
EX
platforms to address
a broad spectrum of injury locations and impairment severities. While our primary objective
is to serve the needs of people with SCI, we envision that our therapies may also benefit
other populations with similar challenges, such as people who have suffered stroke or
who have Parkinson’s disease or other neurodegenerative disorders. We also aim to
reward those who invest their capital, time, and ideas in our Company, while engaging in
sustainable, equitable, and inclusive business practices.
Overview
The Case for Innovative Therapies
Seven million people worldwide have an SCI, and the annual global incidence of new
injuries exceeds 768,000. In the US and Europe alone, approximately 650,000 people live
with SCI, and the annual incidence of new cases is about 50,000 (31,800 in Europe and
18,000 in the US).
SCI results not only in disability, decreased quality of life and poor health for individuals,
but also in significant costs for economies, due to lost productivity and high healthcare
costs. The average lifetime cost to support a person with a severe SCI can exceed USD 5M.
Injuries to the spinal cord occur primarily as a result of automobile accidents and falls, and
disproportionately affect young men.
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A large unmet medical need
US
Prevalence
Incidence
299,000
1
18,000
1
1
2022 NSCISC Annual Statistical Report Complete Public Version
2
European prevalence calculated by annual Incidence* 25 years of additional lifetime expectancy
3
Kumar et al. 2018, Traumatic Spinal Injury: Global Epidemiology and Worldwide Volume
(traumatic spinal injury is broader than traumatic spinal cord injury).
Market
Europe
Prevalence
Incidence
352,000
2
31,800
3
4
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Damage to the spinal cord
resulting in loss of function
1
2022 NSCISC Annual Statistical Report Complete Public Version
•
Nearly half of the injuries occur
between the ages of 16 and 30 years
1
•
78% of new SCI cases are male
1
Profile of SCI Patient
SCI Causes
Currently, the neuromodulation market
is comprised primarily of revenues
from spinal cord stimulation for pain
management and deep brain stimulation
for Parkinson’s disease, essential tremor,
dystonia and epilepsy. The market is
forecast to
reach USD 8.7 B by 2028 and
is expected to grow to exhibit a CAGR of
12.5% over the same period.
SCI Causes &
Patient Profile
15.3% Violence
8.3% Sports
37.7% Vehicular
3.7% Medical, Surgical
31.4% Falls
3.6% Other
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Opportunity to create new segment, stimulating the
spinal cord for movement and autonomic functions
2
Sources: Global News Wire – Vantage Market Research, 2022;
Fortune Business Insights Spinal Cord Stimulation Market; Harmsen I,
E, Hasanova D, Elias G, J, B, Boutet A, Neudorfer C, Loh A, Germann J, Lozano A, M: Trends in Clinical Trials for Spinal Cord Stimulation.
Stereotact Funct Neurosurg 2021;99:123-134 I 4 Johnson RL, Wilson CG. A review of vagus nerve stimulation as a therapeutic
intervention. J Inflamm Res. 2018;11:203-213; Mayo Clinic
$8.7B
12.5%CAGR
Neurostimulation has emerged as a dynamic field for treatment of a range of
clinical conditions
(2028E)
(2022 – 2028E)
$2.9B
8.0%CAGR
Spinal cord stimulation and DBS are most well-developed current applications
(2019)
(2020 - 2026)
Growth Trends:
•
Rising prevalence of neurological disorders
•
Increasing capital availability
•
Emergence of minimally invasive approaches
ONWARD is pioneering a new segment within neuromodulation, by stimulating the spinal
cord to restore mobility and autonomic functions in people with SCI, and potentially also
those with stroke and Parkinson’s disease.
Neurostimulation
Market
Deep Brain Stimulation
Addiction, Chronic pain, Cluster
headache, Dementia, Depression
(major), Huntington’s disease, MS,
Stroke, Tourette, Traumatic brain
injury, Sleep disorder, Autism
2
2
Emerging
Vagus Nerve Stimulation
Alzheimer’s, Obesity, Lung
injury, Cardiovascular disease,
Stroke, Diabetes, Anxiety,
Pain management
Spinal Cord Stimulation
Mobility, blood pressure
control,bladder and bowel
control, trunk control,
upper limb function, sexual
function, spasticity
Sacral Nerve Stimulation
Interstitial cystitis
ONWARD Focus
Deep Brain Stimulation
Dystonia, Epilepsy, Essential
tremor, Obsessive-compulsive
disorder, Depression,
Parkinson’s disease
FDA Approved
Hypoglossal Nerve Stimulation
Sleep apnea
Vagus Nerve Stimulation
Depression, Epilepsy
Spinal Cord Stimulation
Pain management
Sacral Nerve Stimulation
Urinary incontinence,
Fecal incontinence
4
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Our strategy is to build an enduring, impactful, and successful medical device company
that makes a meaningful difference in the lives of people with SCI and their loved ones.
•
We work with leading neuroscience researchers across the globe to identify
breakthrough therapies for people with SCI and other movement-related challenges.
•
We leverage our R&D, clinical and regulatory capabilities to develop proprietary
technologies that are well suited to deliver our breakthrough therapies at scale, and we
protect these innovations via rigorous IP prosecution.
•
We plan to commercialize these breakthrough therapies in our target markets, using a
direct channel to SCI clinics and hospitals with functional neurosurgery expertise.
Our Strategy
Stages for the Execution of Our Strategy
ARC Therapy
Product Development
Clinical Trials &
Regulatory Clearance
Commercialization
Research &
Pre-Clinical Development
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ONWARD has relationships with leading academic research centers throughout the
world.
The Company’s primary relationship is with the company founders and their
highly productive laboratory at .NeuroRestore, a research initiative of CHUV and EPFL.
.NeuroRestore is led by Prof. Grégoire Courtine and neurosurgeon Dr. Jocelyne Bloch. In
2014, Prof. Courtine and Dr. Bloch co-founded ONWARD’s predecessor entity alongside
other researchers in neuroscience and neurosurgery. Prof. Courtine also serves as
ONWARD’s Chief Science Officer on a part-time basis.
Through its network of advanced research facilities in Switzerland, .NeuroRestore’s
research activities span the continuum from basic research to preclinical research to
human proof-of-concept studies. Several projects with potential for commercialization
have already progressed to the human proof-of-concept stage. ONWARD will select the
most promising of these projects to develop and commercialize, based primarily on clinical
results and commercial viability. The ARC
IM
platform can be leveraged for each of the
indications with minor software and firmware modifications.
Research & Preclinical
Development
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Technology, research, and medical expertise across
continuum of research stages
UNIFR – Fribourg
University of Fribourg
Pre-Clinical Center
CHUV – Lausanne
University Hospital of Lausanne #9
worldwide Newsweek magazine
Suva – Sion
Specialized Center for
Acute Spinal Cord Injury
EPFL – Geneva
More than 2,000 scientists
#1 Neuroscience hub in Europe
Network of Advanced
Research Facilities
Fribourg
Lausanne
Geneva
Sion
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Basic
Mechanisms
Preclinical
Therapy
Translation
Scale Up
Clinical
Proof of Concept
Commercial Engine
Therapy
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High quality research underlies our
therapies, validated by the caliber
of .NeuroRestore’s publications
Science
www.nature.com/nm / February 2022
Vol. 28 No. 2
CD19 CAR T cells in
follicular lymphoma
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The .NeuroRestore team has published extensively in some of the most prestigious
scientific journals. In 2018, Prof. Courtine and colleagues reported clinical results in Nature
demonstrating, for the first time in humans, that motor control and the ability to walk
continuously for at least 20 and up to 90 minutes could be restored even after complete
paralysis
1
. These results were obtained using an implanted platform consisting of an
implantable pulse generator (IPG) and an epidural lead. In February 2022, the team’s
latest results were published in
Nature Medicine
2
. Three participants with complete
sensorimotor SCI (AIS-A), who could neither contract their leg muscles nor take a single
step, were implanted with a new lead developed by ONWARD. On the first day following
implant, all participants were able to take steps independently on a treadmill with body
weight support. After five months of rehabilitation, they were able to use their legs to
stand, walk, swim, and/or cycle, and also regained control of their trunk muscles. The
recovery of both leg and trunk motor function enabled participants to stand independently
in community settings.
In 2022, the .NeuroRestore team published groundbreaking research on several topics that
may be important for ONWARD in the future:
Therapy to Restore Movement in Hands & Arms
An article in
Nature Neuroscience
3
presenting a potentially more effective approach
to restore movement and function in the upper limbs after SCI using an implantable
neurostimulation system that modulates the spinal cord region involved in controlling
hand and arm function. This preclinical data indicated that precise electrical stimulation
targeting relevant spinal cord segments enhanced muscle activation and strength and
facilitated more efficient hand and arm movements.
Treating Hypotension for Neurodegenerative Condition
A study in the
New England Journal of Medicine
(NEJM)
4
presenting the case of a 48
year-old person suffering from MSA-P, a form of Parkinson’s disease that affects the
sympathetic nervous system. For more than 18 months, severe orthostatic hypotension
(low blood pressure) had left this patient bedridden and unable to walk or stand. Following
the implant of a system that stimulates the spinal cord, the patient was able to walk more
than 250 meters.
This implant technique had already been used to treat orthostatic hypotension in people
with SCI, but this was the first time the approach had been shown to improve the quality of
life of a person suffering from a neurodegenerative disease.
Identifying Neurons that Restore Walking after Paralysis
A study in
Nature
5
identified the specific neurons that are activated and remodeled by
spinal cord stimulation, enabling people with SCI to stand, walk, and rebuild muscle mass.
This discovery marks a fundamental, scientific breakthrough. The researchers believe it is
crucial to understand exactly how neuronal reorganization occurs in order to develop more
effective treatments and improve the lives of as many people as possible.
This paper also detailed the multi-year STIMO study, in which all participants regained
motor function and the ability to walk after targeted epidural electrical stimulation of the
area of the spinal cord that controls leg movement.
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ARC Therapy: A Breakthrough in Neuromodulation Technology
ONWARD’s ARC Therapy applies targeted, programmed stimulation of the spinal cord
to restore movement, independence, and health in people with SCI. The stimulation can
be delivered by an implantable platform, called ARC
IM
, or an external, transcutaneous
platform, called ARC
EX
.
Spinal Cord Injury Disrupts the Brain-Body Connection
When the spinal cord is injured, communication between the brain and the parts of the
nervous system located beneath the lesion is interrupted, either completely or partially.
The person may lose all feeling or movement – or both – in these areas. Functions and
organs controlled by the autonomic nervous system may also be affected, leading to
difficulty with breathing, swallowing, regulating blood pressure, sexual arousal, and bowel
and bladder function. This disruption of the body-brain feedback loop can cause a host of
debilitating conditions. People with SCI at the thoracic or cervical level are most affected
by this loss of function.
Nevertheless, even in cases of complete SCI, some neural pathways in the spinal cord
remain intact but inactive. At present, rehabilitation approaches aim to mobilize these
latent nerve connections and promote regeneration through intensive physiotherapy.
Unfortunately, these activity-based therapies have few benefits for people who cannot
produce movements voluntarily. Some symptoms and conditions can be managed with
medication, such as antispasmodics to reduce involuntary muscle contractions, or
with devices, such as catheters to facilitate urination. However, these solutions can be
cumbersome and carry the risk of harmful side effects.
There is an urgent need for more effective therapies that enable people with SCI to live
more independent, high-quality lives. This is where ONWARD’s ARC Therapy has the
potential to make a dramatic impact.
ARC Therapy Activates Intact Nerve Fibers With Biomimetic Stimulation
As detailed in the previous section, the technology developed by ONWARD is based on
pioneering research over the last two decades, led by Prof. Courtine and Dr. Bloch, which
has pinpointed the location of neurons in the spinal cord responsible for triggering a
movement or function.
By delivering precisely timed and calibrated electrical impulses to specific areas of the
spinal cord, ARC Therapy mimics the natural pattern of nerve signals sent by the brain.
When combined with voluntary efforts to move, this enables users to improve motor control
in the arms, legs, or trunk, making daily activities, like moving in and out of a wheelchair,
much easier. Moreover, programmed neurostimulation has the potential to improve the
management of internal functions, chiefly blood pressure and bowel and bladder control.
Moreover, programmed neurostimulation has the potential to improve the management of
internal functions, chiefly regulation of blood pressure and bowel and bladder control.
Most participants in clinical trials using ARC Therapy regain some degree of independent
movement even when the stimulation is switched off. This remarkable result can be explained
by the fact that ARC Therapy stimulates intact nerve fibers responsible for carrying
messages from the body back to the spinal cord (afferent nerves), and “retrains” them to
perform a different function, showing the remarkable plasticity of the nervous system.
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Three Priority Indications to Improve Quality of Life After SCI
Upper Limb Mobility
Since 2015, 60% of new SCIs in the US have resulted in some form of tetraplegia
6
.
Injuries
at the cervical level of the spine (C1-C7) can result in loss of sensory and motor connections
to all areas below the neck, including the arms and legs. Without the use of our hands, most
activities of daily life (such as grooming and eating) become extremely challenging. Better
arm and hand function is therefore an important rehabilitation goal for a majority of people
with SCI, consistently ranked ahead of walking or sexual function
7
.
In 2022, we completed follow-up in our Up-LIFT pivotal and LIFT Home clinical trials. The
Up-LIFT study was designed to evaluate the safety and effectiveness of non-invasive
electrical spinal cord stimulation administered by a clinical version of ARC
EX
to treat
functional deficits of the upper limbs in people with chronic tetraplegia. Positive topline
results from the Up-LIFT study were announced in September 2022, showing that the study
had met its primary effectiveness endpoint of improvement in upper extremity strength
and function, with no reported serious device-related adverse events.
Blood Pressure Regulation
The inability to regulate blood pressure following an SCI has profound consequences in
both the acute and chronic stages and affects nearly 40% of people with SCI
8
.
Immediately
after injury, blood rushes to the area of the lesion and causes swelling, which starves the
nerve cells of oxygen, compounding the initial damage. The outcome for many patients
could be vastly improved if clinicians were able to intervene immediately to prevent
inflammation by controlling blood pressure, blood flow, and oxygenation.
At the chronic stage, after the injury has healed, fluctuations in blood pressure drastically
impact quality of life, especially for people with tetraplegia. It can cause a range of
debilitating conditions, including stroke, fatigue, chronic hypotension, and a life-
threatening form of hypertension known as autonomic dysreflexia
9
. Chronic hypotension
affects a person’s ability to perform everyday movements like sitting up or leaning over and
can inhibit their ability to engage in activity-based rehabilitation.
The spinal lead developed by ONWARD specifically for blood pressure regulation has the
potential to not only better regulate blood pressure, but also, thanks to its placement in the
thoracic area, to improve the tone and control of the trunk muscles.
In 2022, we reported positive interim clinical outcomes from the first ten people treated with
implantable ARC Therapy to regulate blood pressure, including HemON study participants.
ARC
IM
Therapy immediately improved blood pressure levels in all study participants, who
also reported fewer episodes of hypotension, improved quality of life, increased energy
and vitality, and reduced dizziness. Based on these promising interim outcomes
10
, we are
preparing to initiate further clinical trials, to include U.S. participants, in 2023.
Lower Limb Mobility
In addition to blood pressure regulation, we plan to further investigate the use of ARC
IM
to
improve mobility by restoring movement in the legs and feet. This will build on the success of
STIMO, a first-in-human study that determined the safety and effectiveness of our therapy
to restore walking in individuals with chronic SCI resulting in complete or partial paraplegia.
Starting in 2016, nine participants received high-intensity neurorehabilitation that
combined precisely timed epidural stimulation with over-ground, robot-assisted
rehabilitation training. After completing the STIMO program, all participants reported
improvements in mobility and substantial neurological recovery. Several were able to walk
on a treadmill without using their hands for support and, more remarkably, to stand and
walk at will even while the stimulation was inactive.
While walking may seem like an ambitious goal for many people with SCI, even modest
gains in lower limb function can make a big difference. Incorporating ARC
IM
Therapy in
post-acute clinical rehabilitation programs has the potential to vastly improve long-term
outcomes for the recently injured by promoting neurological recovery. Additionally, we
envision that ARC
IM
stimulation may someday be used “on the go” to enable a variety
of everyday movements, including standing and movement of lower limbs as part of a
person’s therapy and activities of every day life.
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1
Wagner
, F.B., Mignardot, JB., Le Goff-Mignardot, C.G. et al. “Targeted neurotechnology restores walking in humans with spinal cord
injury”,
Nature
563, pp. 65–71 (2018)
2
Rowald, A.,
Komi
, S.,
Demesmaeker
, R., et.al., “Activity-dependent spinal cord neuromodulation rapidly restores trunk and leg motor
functions after complete paralysis”,
Nature Medicine
, vol 28, pp. 260–271 (2022)
3
Barra
, B., Conti, S., Perich, M.G., et.al,, “Epidural electrical stimulation of the cervical dorsal roots restores voluntary upper limb control in
paralyzed monkeys”,
Nature Neuroscience
(25), pp. 924–934 (2022)
4
Squair
, J.W., Berney, M., Castro Jimenez, M., et.al., “Implanted System for Orthostatic Hypotension in Multiple-System Atrophy”,
New
England Journal of Medicine
, vol. 386, pp. 1339–1344 (2022)
5
Kathe
, C., Skinnider, M.A., Hutson, T.H., et.al., “The neurons that restore walking after paralysis,”
Nature
, vol. 611, pp. 540–547 (2022)
6
National Spinal Cord Injury Statistical Center (NSCISC), Facts and Figures at a Glance, Birmingham, AL: University of Alabama at
Birmingham, 2021
7
Source: Candy Tefertiller, PT, DPT, PhD, NCS, Executive Director of Research, Craig Hospital, presented at Unite2Fight Paralysis
Conference, 2020. Adapted from Anderson (2004). Targeting Recovery: Priorities of the Spinal Cord-Injured Population. J Neurotrauma.
21(10): 1371-83.
8
Krassioukov A., Claydon V.E. The clinical problems in cardiovascular control following spinal cord injury: an overview. Prog Brain Res.
2006;152:223-9. doi: 10.1016/S0079-6123(05)52014-4. PMID: 16198703
9
Carlozzi, N. E., Fyffe, D., Morin, K. G., Byrne, R., Tulsky, D. S., Victorson, D., Lai, J.-S., & Wecht, J. M. (2013). Impact of blood pressure
dysregulation on health-related quality of life in persons with spinal cord injury: Development of a conceptual model. Archives of Physical
Medicine and Rehabilitation, 94(9), 1721–1730. https://doi.org/10.1016/j.apmr.2013.02.024
Wecht, J. M. (2022). Management of blood pressure disorders in individuals with spinal cord injury. Current Opinion in Pharmacology, 62,
60–63. https://doi.org/10.1016/j.coph.2021.10.003
10
ONWARD press release issued 8 December 2023 - ONWARD Reports Interim Clinical Outcomes for Implantable ARC Therapy
Demonstrating Potential to Improve Blood Pressure Regulation after Spinal Cord Injury
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ONWARD has developed two targeted, programmable neurostimulation platforms: an
implantable system, ARC
IM
, and a non-invasive, transcutaneous system, ARC
EX
, both of
which have been awarded FDA Breakthrough Device Designation for a range of indications.
Both systems contain the same basic elements: an electrical impulse generator, electrodes
placed in proximity to the spinal cord, and a programmer that enables clinicians to set
stimulation therapy parameters and users to control therapy.
The two ARC Therapy platforms share common components and have a similar user
interface. This optimizes our use of development resources while providing users with
a consistent, easy-to-use experience. We envision that ARC
IM
and ARC
EX
may be used
in conjunction in the same individual, for example leveraging ARC
IM
for blood pressure
regulation while using ARC
EX
for upper limb training.
Two platforms, one system
ARC
IM
has four components (see next page)
1
:
•
A
lead
implanted on the spinal cord in the area corresponding to the movement or
function being targeted by the therapy. ONWARD is currently developing a family of
leads that are optimized for precise placement in different areas of the spinal cord, both
in terms of their shape and the configuration of the electrodes.
•
An
implantable pulse generator
(IPG) implanted under the skin in the abdominal
area and connected to the lead through a wire. When switched on, this device delivers
precisely timed and calibrated bursts of electricity to specific electrodes in the lead.
•
An
external hub
that connects wirelessly to the IPG to turn therapy on or off, set or
update the frequency and intensity of the impulses, recharge the device through the skin,
and integrate external sensors via wireless connections and sensor-specific algorithms.
The hub is worn on a belt around the waist.
•
Dedicated apps for efficiency and ease of use: ARC
IM
PRO app
that clinicians use to
create and adjust stimulation programs using a tablet connected wirelessly to the Hub.
ONWARD expects to use mobile phone and smartwatch technology to enable users to
turn the stimulation on or off and adjust certain parameters through the myARC
IM
app
using voice commands.
ARC Therapy
Product Development
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1
The smartwatch in the graphic may be a smartphone once development has been completed
Note: The renderings in the above graphic are illustrative; the design of commercial products may differ.
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ARC
IM
Leads
ARC
IM
is currently targeted toward improving lower limb mobility and blood pressure
regulation. Other potential indications may be explored in the future, including spasticity
reduction, improved sexual function, and bladder control, each enabled by further
development of the ONWARD proprietary lead portfolio.
Arm & Hand Function
Blood Pressure & Trunk Control
Mobility (Walking & Standing)
Bladder & Bowel Control
C4
T11
T10
T12
L1
S1
L5
S4
7
ARC Therapy
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ARC
EX
is targeted toward improving strength and function of the upper limbs. It is designed
for a typical, periodic use in rehabilitation sessions in the clinic and at home. In the future,
ARC
EX
may be used to target additional indications, such as trunk control and mobility.
ARC
EX
has three components:
1.
External electrodes
placed on the skin of the neck near the area of the spinal cord that
controls movement in the arms and hands.
2. A
stimulator
that delivers programmed electrical impulses directly to the electrodes.
3.
Dedicated apps for efficiency and ease of use: ARC
EX
PRO app,
which connects
wirelessly to the stimulator to program the therapy and adjust parameters and the
MyARC
EX
app for users to easily control the stimulation.
ARC
EX
Non-Invasive Platform
External system for transcutaneous
stimulation of the spinal cord
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Note: The renderings in the above graphic are illustrative; the design of commercial products may differ.
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The development, manufacture, and marketing of ONWARD’s ARC Therapy and
associated technology is subject to government regulation in the United States,
Europe, and other countries. To apply for regulatory clearance or approval to
market our devices in any of these jurisdictions, we must complete extensive human
clinical trials that demonstrate their safety and efficacy. In the US, clinical trials
are a requirement for Premarket Approval (PMA) and increasingly also for de novo
clearance and 510(k) submission, all of which we expect to pursue for ARC therapies.
Similarly, under the European Medical Device Regulation (MDR), clinical investigations
are required in view of completing conformity procedures to obtain a CE mark, a
prerequisite for marketing the device in the European Economic Area (EEA).
FDA Regulatory Process
To obtain FDA clearance or approval for a medical device, companies must complete
several steps:
1.
Determine the device’s classification (Class I, II or III).
In the US, ARC
IM
is a Class III
12
device that will require PMA approval, although
for at least one indication it may pursue Humanitarian Device Exemption (HDE)
approval. ARC
EX
is expected to be a Class II device.
2.
Develop the prototype and conduct preclinical testing and verification.
3.
Conduct human clinical trials (early feasibility studies, followed by feasibility
studies and then pivotal studies) and improve the investigational device based on
study results.
Clinical Trials &
Regulatory Activity
In the US, clinical trials of investigational devices must be conducted in accordance
with the FDA’s investigational device exemption (IDE) regulations, which govern
labeling, prohibit promotion of the investigational device, and specify an array of
recordkeeping, reporting, and monitoring responsibilities of study sponsors
and investigators.
If the device presents a “significant risk” to human health, as defined by the FDA,
the
device sponsor must submit an IDE application, supported by appropriate data, such
as animal and or laboratory test results, showing that it is safe to test the device in
humans and that the testing protocol is scientifically sound. In addition, the study
must be approved by, and conducted under the oversight of, an Institutional Review
Board (IRB) for each clinical site. The IRB is responsible for the initial and continuing
review of the IDE and may pose additional requirements for the conduct of the study.
Once the IDE application is approved by the FDA and relevant IRBs, human clinical
trials may begin at a specific number of sites and with a specific number of patients.
If the device presents a non-significant risk to human health, the sponsor may begin
the clinical trial aſter obtaining approval of one or more IRBs without separate
approval from the FDA, but must still follow abbreviated IDE requirements, such as
monitoring the investigation, ensuring that the investigators obtain informed consent,
and labeling and record-keeping requirements.
ONWARD plans to submit an IDE application for the ARC
IM
blood pressure and
mobility indications. For ARC
EX
upper limbs indication, ONWARD will follow
abbreviated IDE requirements.
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During the study, ONWARD, as the study sponsor, is required to comply with the
applicable FDA requirements, including, for example, trial monitoring, selecting clinical
investigators and providing them with the investigational plan, and ensuring IRB review
and adverse event reporting. The clinical investigators we work with are also subject to
FDA regulations and must obtain informed consent from patients, rigorously follow the
investigational plan and study protocol, control the disposition of the investigational
device, and comply with all reporting and recordkeeping requirements.
4.
Submit a pre-market notification or application, in the case of a Class II or Class III
device, which can be one of the following:
a.
510(k): a premarketing submission to demonstrate equivalence to existing device(s)
to obtain clearance that the device to be marketed is safe and effective.
b.
Premarket Approval (PMA), an application containing sufficient valid scientific
evidence to provide reasonable assurance that the device is safe and effective for
its intended use or uses.
c.
Humanitarian Device Exemption (HDE), an approval pathway created by the FDA
for a humanitarian use device (HUD) intended to treat or diagnose a disease or
condition that affects fewer than 8,000 individuals in the US per year. The HDE
application is similar in both form and content to the PMA application but is exempt
from the PMA’s effectiveness requirements.
d.
De novo classification, also known as the Evaluation of Automatic Class III
Designation. Created under the Food and Drug Administration Modernization Act of
1997 (FDAMA), this option provides an alternate pathway to classify novel devices
that carry low to moderate risk. Devices classified through the de novo process may
be marketed and used as predicates for future 510(k) submissions.
5.
Wait for FDA review and approval. During this process FDA may request several
clarifications to be provided by the manufacturer.
6.
Maintain FDA compliance for the device’s lifespan.
EU Regulatory Process
To be marketed in member countries of the European Economic Area (EEA), our products
must comply with the essential requirements of the new Medical Devices Regulation
(MDR) (2017/745), which became fully applicable on 26 May 2021. The regulation aims
to ensure that a device is deemed acceptable across several dimensions, including its
appropriateness for the intended use, its safety, performance, labeling and packaging,
and the effects of transportation and storage, and that it shows a positive balance of
benefit versus risk for the end user.
To obtain approval to market a device in the EEA, companies must:
1.
Determine the device’s classification (Class I, IIa, IIb, or III) according to the
associated risks.
In Europe, ARC
IM
is expected to be designated as Class III,
and ARC
EX
is expected to
be designated as Class IIa.
In Europe, ARC
IM
is expected to be designated as Class III,
and ARC
EX
is expected to
be designated as Class IIa.
2.
Establish a quality system (QMS) to manage the medical device. The QMS is audited
annually by the notified body, resulting in the issuance of a certificate that establishes
that the QMS is compliant with the ISO 13485 standard.
3.
Produce a technical file to satisfy EU MDR General Safety and Performance
Requirements (GDPR), including the following information:
•
Product description and specifications
•
Manufacturing information
•
Risk management file
•
Design verification and validation test reports
•
Clinical evaluation
•
Labeling
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For Class III devices, a Design Dossier must be compiled containing the data of the
technical file along with a description of the design process for the device.
4.
Undergo review by a notified body to prove device conformity.
The conformity assessment procedure varies according to the type of medical
device and its classification. Except for low-risk medical devices (Class I non-sterile,
non-measuring devices), this conformity assessment is conducted by a notified
body accredited by a member state of the EEA.
A successful assessment results in the issuance of the CE marking certificate for
the medical device along with an ISO 13485 certificate that establishes that the
device is compliant with the General Safety and Performance Requirements and
European standards.
5.
Declare conformity of medical device
The Declaration of Conformity is a legally binding document issued by the company
which declares that the device meets all of the General Safety and Performance
Requirements as laid out by EU MDR and any other applicable regulatory standards.
Clinical Trials
Clinical trials are an essential part of the regulatory process. Like any other step in the
process of developing and testing a new medical device, it is important to note that the
results of clinical trials may be unfavorable; moreover, even if the intended safety and
efficacy success criteria are achieved, the trial results may not be considered sufficient
for regulatory authorities to grant approval or clearance of a product. Additionally, after
a trial begins, it may be terminated at any time for various reasons, including a belief
that the risks to study subjects outweigh the anticipated benefits. For more information
on ONWARD’s clinical trials, please refer to the
section in the operational review.
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ONWARD does not currently offer any products for commercial sale. We are working
towards approval of the ARC
IM
device for the blood pressure indication and aim to receive
regulatory clearance and start commercialization in late 2025. We believe that we will
receive the necessary regulatory approvals in the US and Europe to start commercializing
ARC
EX
in late 2023. However, our plans to commercialize our products depend on our ability
to demonstrate their safety and effectiveness to regulatory authorities, as described in the
previous section.
Geographical Focus & Commercial Objectives
ONWARD plans to market ARC Therapy products in the US and Europe, where most people
with SCI are cared for by a limited number of trauma and rehabilitation centers. When
people suffer an SCI, they typically undergo emergency surgery in a trauma center, after
which they spend one week in intensive care. They then begin rehabilitation training, which is
generally provided by specialized clinics that have the necessary expertise and equipment.
Commercialization
In most cases, this rehabilitation lasts three to six months, although in some markets it can
extend to one year, after which ongoing therapy aims chiefly to maintain functional gains.
They may also seek rehabilitation in later years, due to complications, or as new therapies
emerge that may result in restoration of function.
In the initial period following commercial launch, our focus will be on the US and four
select European markets: Germany, France, the UK and the Netherlands. These markets
were selected based on their attractive reimbursement environment for new medical
technologies and their sophisticated SCI rehabilitation infrastructure. The Company may
modify target markets to optimize likelihood of commercial success.
We plan to deploy a direct sales and service organization, as the total number of facilities
to be targeted — whether to market our therapies or to support surgical interventions —
around 200. If FDA clearance or approval or CE certification permits us to pursue entry
into other large markets, including in Asia, we will likely do so via a distribution partner.
We will continue to evolve our commercial strategy to optimize the Company’s probability
of success.
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Commercial Strategy
Call Points
US
Europe
Germany (DE)
Netherlands (NL)
Specialized Rehabilitation Clinics
Specialized Rehabilitation Clinics
France (FR)
United Kingdom (UK)
Pursue highly concentrated customer
base with direct field organization
Focus
Target the US and select European
markets with sophisticated
neurorehabilitation infrastructure and
favorable reimbursement for innovative
medical technology
~200
105
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(2019)
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Specific customer targets at
each stage in patient journey
Injury
Decompression
Surgery
24 hours
Intensive
Care
~7 days
Acute Phase
Sub-Acute Phase
Trauma
Centers
Trauma and
functional neurosurgeons
Clinician Customers
in Patient Journey
Rehabilitation
3-6 months
Plateau
12+ months
Intermediate Phase
Chronic Phase
SCI
Rehabilitation
Clinics
Neurologists,
rehabilitation physicians
and
therapists
Functional neurosurgeons
Patients & caregivers
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Physicians will prescribe ARC
EX
for clinic or home
use and refer patients for ARC
IM
implants
•
Order clinic use
•
Prescribe home use
Referral to functional
neurosurgeon for implant
surgery (likely <2hr)
Decision–Maker
Neurologists &
Rehabilitation Clinicians
Referral Pathway
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Rehabilitation Clinics
Our marketing efforts will focus on clinicians managing SCI patients in specialty
rehabilitation clinics. These include neurologists, rehabilitation physicians, physical
therapists, and occupational therapists who provide post-injury rehabilitation training and
ongoing support to those who are chronically injured. The latter constitutes the largest pool of
SCI patients globally.
We expect clinicians to use our therapies as follows:
•
Apply ARC Therapy using ARC
EX
in clinics
•
Prescribe ARC
EX
for use at home
•
Refer patients to functional neurosurgeons for implantation of ARC
IM
and subsequent use
of ARC Therapy in clinics and at home
There are a limited number of specialty rehabilitation clinics in the US and Europe. In the
US, we expect to target the 105 SCI rehabilitation clinics certified by the Commission of
Accredited Rehabilitation Facilities (CARF). CARF certification means that a clinic has a
comprehensive integrated inpatient rehabilitation program, outpatient medical rehabilitation
program, home and community services, residential rehabilitation, and vocational services
1
.
Though SCI rehabilitation in the US is not limited to these centers, CARF-certified clinics
provide a robust referral base for the Company’s products and will serve as focused and
fertile marketing targets.
In the four selected European markets, there are a total of 83 SCI specialty rehabilitation
centers: 27 in Germany
2
, 10 in the UK
3
, 8 in the Netherlands
4
, and 38 in France.
Hospitals & Ambulatory Surgery Centers
When patients are referred for an implant of ARC
IM
, surgery is typically carried out
in hospitals or ambulatory surgery centers by functional neurosurgeons. These
neurosurgeons are already familiar with device therapy and neuromodulation, and
routinely perform implants for deep brain stimulation and spinal cord stimulation for pain
therapy. As the implant procedure for ARC
IM
is substantially similar to that for spinal cord
stimulation for pain, we expect little resistance to adoption and a minimal training burden.
Trauma Centers
In addition to rehabilitation centers, we plan to target trauma centers to provide our
therapies at the acute or subacute stage. Level 1 trauma centers provide total care for all
aspects of an injury, and prompt availability of relevant specialists such as neurosurgeons
5
.
They are thus an access point to acute and subacute SCI patients, and to neurosurgeons
who can implant ARC
IM
devices. We envision that the blood pressure management
indication may be well suited for acute management of SCI, by helping to stabilize blood
pressure and promote spinal cord perfusion.
In the U.S., most SCI patients are treated at just 190 Level 1 or major trauma centers
6
. In the
four selected European markets, there are 152 major trauma centers: 27 in the UK
7
, 11 in the
Netherlands
8
, 91 in Germany
9
, and 23 in France
10
.
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Reimbursement Landscape in the United States
Upon FDA approval of ARC Therapy in the United States (US), we expect ARC
IM
will be
sold to hospitals and ambulatory surgery centers for use by functional neurosurgeons.
We expect ARC
EX
will be sold to specialty rehabilitation clinics as well as directly to SCI
patients for use in the home.
In both US and non-US markets, the Company’s ability to successfully commercialize and
achieve market acceptance of its products depends in significant part on the availability
of adequate financial coverage and reimbursement from third-party payors, including
governmental payors, managed care organizations, and private health insurers. Third-
party payors decide which treatments they will cover and establish reimbursement rates
for those treatments and increasingly they examine cost effectiveness of medical devices
as well as safety and efficacy when making coverage and payment decisions.
Given that no uniform policy for coverage and reimbursement exists across our target
markets or even within some markets and coverage and reimbursement can differ
significantly from payor to payor, commercialization efforts to identify optimized pathways
for reimbursement, coverage, and payment started in 2022 and will continue into 2023. Our
clinical and economic evidence generation plans will also continue into 2023 to support
third-party payor review.
MCIT Repeal & TCET Pathway
In November of 2021, the Centers for Medicare and Medicare Services (CMS) rescinded
the Medicare Coverage of Innovative Technology (MCIT) final rule. This rule was originally
proposed in September of 2020 with the intent of ensuring Medicare coverage upon FDA
clearance for devices which were awarded FDA Breakthrough Designation. Concerns
regarding lack of controls to ensure Medicare populations were studied and lack of a
mechanism to remove coverage if safety concerns arise were cited as reasons for repeal.
Despite the repeal, CMS reiterated its commitment to create a pathway for coverage
upon FDA clearance for Breakthrough Devices and is working with industry stakeholders,
physician societies, and patient groups to develop an alternate pathway called
Transitional Coverage for Emerging Technologies (TCET).
While this pathway is still under
consideration, it could positively affect devices with Breakthrough Designations, such
as ARC
EX
and ARC
IM
, by providing Medicare coverage from day one through a post-FDA
clearance period.
A public hearing on the matter is scheduled for April 2023.
Coding & Payment
Because the implant procedure for ARC
IM
is substantially similar to that which is currently
used to implant spinal cord stimulation devices for pain management, existing codes
may be used.
Facility payments include the cost of the device but not physician services, which are
billed separately. Medicare pays the Hospital Outpatient Department a single amount
for the full system implant, while the Ambulatory Surgery Center is paid separately for
the lead and generator implantation, resulting in a higher payment amount. Private
payers tend to pay 25% more than Medicare. Medicare payment systems tend to lag
new technology. The systems are prospective, such that payment amounts for a given
procedure are determined in advance based on historical claims data. The established
payments are then applied to a combination of diagnosis and procedure codes. Because
they use predetermined fixed-payment amounts, the systems can underpay for new, more
impactful technologies. As a result, Medicare created a new-technology payment process
for the hospital outpatient setting.
For the hospital outpatient setting, the process for recognizing and rewarding an
impactful new technology is called a Transitional-Pass-Through (“TPT”) payment. To
qualify, a technology must be too new to be represented in Medicare’s historical claims
data. It must also be clinically significant based on the literature and “not insignificantly”
more expensive. TPT status is granted quarterly and can be applied for prior to FDA
approval. Acceptance to the program results in two to three years of market-price
data gathering before a payment amount is established. Having an FDA-designated
breakthrough product satisfies the “clinically significant” criterion. The Company plans to
evaluate the pursuit of a TPT payment for its therapies once the first pivotal trial for ARC
IM
is initiated in the US.
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In the inpatient setting, Medicare’s New Technology Add-on Payment (“NTAP”) provides
additional payment for implantable devices for a limited duration, typically up to 3 years.
Similar to the outpatient TPT payment process described in the preceding paragraph,
the FDA Breakthrough Device Designation awarded to ARC
IM
increases the likelihood of
qualification for NTAP.
There are also existing provider payment codes for physical therapy, which could
encompass the use of ARC Therapy. Use of these codes may decrease the evidence
requirements for US commercial launch and shorten time to revenue.
ARC
EX
is designed as Durable Medical Equipment (“DME”) and would be categorized under
a different set of codes called HCPCS. The initially applicable DME code is a miscellaneous
code, which may be used upon FDA clearance and launch of the product. Because this
code is intended to be used for new technology it has no set price, allowing the Company to
establish its desired price in the marketplace before receiving a product-specific code.
Prior to achieving a specific DME code for ARC
EX
in the US, the Company can pursue sales
through the Veterans Health Administration, through private payors using miscellaneous
HCPCS codes, and via direct-to-patient sales. The Company views these as important
pathways not only to generate revenue, but to establish pricing history and generate real-
world evidence.
Reimbursement in Europe
The path forward in Europe is more varied than in the United States. The Company
has analyzed the reimbursement environment in four European markets and its launch
strategy will consider the attractiveness of their reimbursement posture toward new
medical technologies and the sophistication of their SCI rehabilitation infrastructure.
Based on these criteria and preliminary inputs that will be further validated in 2023, our
most likely initial European market for ARC
EX
is Germany, with our three other markets
(France, the United Kingdom, and the Netherlands) to be included in our current ARC
EX
market access planning. All four markets are also viable ARC
IM
targets, with plans to
further undertake reimbursement planning in 2023 and 2024.
In Germany, medical devices in the outpatient and physician clinic setting require a new
Einheitlicher Bewertungsmaßstab (“EBM”) code. Devices used in the home-use setting
are governed by the Hilfsmittelverzeichnis (“HMV”), a positive coverage list for home-
use medical equipment. HMV categories tend to be highly specific to indication; as a
result, ARC
EX
will likely need a new HMV category. To achieve a new product category, a
positive evaluation by Gemeinsamer Bundesausschuss (“G-BA”) will be necessary. Once
contained within the HMV, reimbursement will be negotiated through individual contracts
with statutory health insurances (“SHI”). Our preliminary analysis suggests the timeline for
ARC
EX
reimbursement would be two to four years from CE marking.
For implantable devices, Germany operates a DRG-based system to compensate
hospital inpatient admissions. Among the selected markets, Germany may offer the most
accessible pathway for inpatient add-on payment. The “NUB” innovation payment (Neue
Untersuchungs- und Behandlungsmethoden) affords locally negotiated payment for up
to four years. Following the NUB, a permanent DRG assignment or permanent add-on
payment in the form of (Zusatzentgelt, ZE) for high-cost services, may be provided.
A new Operationen- und Prozedurenschlüssel (“OPS”) code would be required to establish
NUB funding or NUB payment. NUB funding would temporarily supplement DRG payment
until it could be incorporated into the DRG system. Two neurostimulators have achieved
NUB approval in the last three years. NUB funding in Germany could be achieved for ARC
IM
within as few as 11 months from CE marking.
1
CARF International, provider search, United States (carf.org).
2
Deutsche Behandlungszentren (dmgp.de).
3
Medical Management Advice: Royal National Orthopaedic Hospital (rnoh.nhs.uk).
4
PHM50279 93..95 (insci.network).
5
American Trauma Society https://www.amtrauma.org/page/TraumaLevels, retrieved 09AUG2021.
6
MacKenzie E.J., Hoyt D.B., Sacra J.C., et al. National Inventory of Hospital Trauma Centers. JAMA. 2003;289(12):1515–1522. doi:10.1001/
jama.289.12.1515.
7
Orthopedic Trauma Association Development of trauma systems in Europe—reports from England: OTA International (lww.com)
Retrieved 09 August 2021.
8
National Health Services A4_map (www.nhs.uk) Retrieved 09AUG2021.
9
PHM50279 93..95 (insci.network).
10
France does not have official criteria for trauma center levels as the above countries do; however, Traumabase lists 23 top trauma
hospitals in France. Traumabase Registry
https://www.traumabase.eu/en_US.
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We strive to create a positive culture inspired by our ONWARD Code and our compelling
vision. We also foster a culture of continuous learning, feedback, and development,
providing the necessary tools and opportunities for our people to enhance their skills and
grow in their abilities and careers.
Our technology is highly innovative, and we seek talented people who bring boldness and
creativity to our organization. We are a diverse team, with 20 nationalities
currently represented.
We differentiate ourselves as an employer of choice by fostering a purpose-driven culture
with an entrepreneurial mindset. We offer competitive rewards, encourage learning
and development, and build leadership and change-management expertise among our
current and future leaders.
We have an employee-driven Culture Club that nurtures and reinforces our cultural norms,
builds teamwork and common understanding, and supports SCI-focused charitable
events sponsored organizations such as Wings for Life and the Christopher & Dana
Reeve Foundation.
People & Culture
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We are OPEN
We seek great ideas from any source. We are hungry for feedback.
We accept criticism with humility.
We are TRUSTING
We assume positive intent. We count on each other to deliver.
We speak truth to our leaders and teammates.
We are COLLABORATIVE
We are a team. We find ways to work well together.
We value our external partnerships.
We are PASSIONATE
We admire the courage of those we serve.
We are driven to fulfill our Vision. We will not fail.
We are EMPOWERED
We encourage ideas. We allow mistakes.
Everyone is accountable.
We are COMMITTED
We pursue a noble cause. We are never distracted nor
deterred. We are grateful for the responsibility we shoulder.
We are PRAGMATIC
We find a way. We surmount obstacles. We find
fulfillment in overcoming.
We are INNOVATIVE
We dream big. Limits do not contain us.
Our imagination defines the possible.
The ONWARD Code
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Our Code is communicated as part of employee onboarding and reconfirmed in our
monthly meetups. The Company believes it is important to cultivate an open and
transparent culture that allows employees to express, in good faith, any concern they may
have. Our employees are encouraged to raise concerns without fear of retaliation, knowing
that concerns will be treated confidentially, seriously, fairly and promptly. During the
financial year 2022, no concerns were reported.
A Great Place to Work
We strive to provide a positive employee experience, starting with the hiring process.
We have implemented improvements in our onboarding process to ensure a smooth and
positive experience for our new team members, with the support of their manager and
a buddy. We have a talent-management system to help drive a culture of performance,
accountability, and development. We use this system to track individual objectives, give
feedback to colleagues, and capture employee development and performance.
We frequently host speakers from the SCI community who help us stay connected to our
vision and to the meaning and urgency of our work. We participate in charitable events,
often supporting causes to help people with SCI.
Competitive Hiring
Software engineers and other technology-focused professionals account for about 65%
of our recent new hires. As demand for technology talent outstrips supply, attracting the
right people in this highly competitive landscape becomes essential. We endeavor to
attract the best candidates: people who are motivated by our vision and the opportunity
to work on true breakthroughs, rather than incremental gains.
By establishing in-house recruitment capacity, leveraging our professional networks, and
building partnerships with key academic institutions and other relevant organizations, we
have been able to attract great talent. Our employee referral program also incentivizes
our employees to leverage the power of their networks to recruit people who are a good
cultural and organizational fit.
We offer competitive compensation and benefits packages, key for attracting and
retaining talent. Long-term incentives are offered to our senior management and key
individuals as part of our remuneration philosophy. We encourage share ownership among
all of our employees through a stock option plan. This aligns our long-term incentives with
our long-term objectives, as grants are conditional on continued employment until the
time of vesting.
Employee Well-Being
The well-being of our employees is important to us. Hence, we continued to offer
workshops and other activities centered on mental health and well-being. In addition,
we adjusted to the current trend of offering our employees more flexible, hybrid ways of
working where possible, unless their work requires access to specialized equipment and
facilities, thereby necessitating regular presence in the office.
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Corporate Responsibility
ONWARD is committed to being a responsible organization that creates long-term value
for all our stakeholders. Environmental, social, and governance (ESG) principles are
integral to the way we do business. They are captured in our ONWARD Code, our Articles of
Association (AOA), our Code of Conduct (COC), our culture, business practices, operations
and supplier agreements.
ESG Principles
Our ESG strategy rests on five core principles:
•
Innovating for the underserved:
There is no cure for SCI. Our therapies are among the
first to offer the potential to help people with spinal cord injury regain movement and
other functions, improving quality of life for a large, underserved group of people. Our
products also have potential to benefit large populations of stroke sufferers and people
with Parkinson’s disease. Underscoring the innovative nature of our work, we have been
granted eight Breakthrough Device Designations (BDD) by the US FDA and have over
330 issued or pending patents worldwide. We continuously innovate and strive to get
such designations for other indications to be able to make a difference in the lives of
even more people.
•
Partnering with patient groups:
We enjoy excellent relationships with the world’s
leading patient advocacy groups for people with spinal cord injury. The Christopher
and Dana Reeve Foundation, the world’s largest such organization, is an investor in
ONWARD. We also collaborate with Wings for Life in Europe, the Praxis Foundation in
Canada and International Spinal Research Trust in the UK. Our collaboration with these
groups helps us innovate in ways that make the greatest difference for people with
spinal cord injury.
•
Attracting and retaining the best talent:
To deliver on our vision, we are committed
to creating an unrivaled and inclusive environment for our employees. We care deeply
about the well-being and continuous development of our staff as evidenced by the
various programs we have put in place, such as our well-being program. Having a highly
motivated and engaged workforce enables us to retain and attract top talent. We also
engage with partners with spinal cord injury as consultants, who enable our workforce
to have a better understanding of the challenges that they face. ONWARD recognizes
and welcomes the value of diversity with respect to age, gender, race, ethnicity,
nationality, sexual orientation and other important cultural differences.
•
Minimizing our environmental footprint:
In our operations, we strive to reduce our
carbon footprint, for instance by replacing air travel with videoconferencing except
for the most pressing business needs and by encouraging a hybrid workplace, thus
reducing our employees’ commute. Additionally, we work with our suppliers to minimize
waste in the manufacturing process, consume electricity generated almost exclusively
from renewable sources and implement recycling programs in our offices.
•
Maintaining high ethical standards:
At ONWARD, we are open and act with integrity.
We are committed to high ethical standards in dealing with our business partners as
outlined in our Code of Conduct, which covers anti-bribery and anti-money laundering,
government relations and political affairs and international business practices. Our
Code of Conduct ensures our people across the organization understand what is
expected of them when acting on behalf of the Company. We aim to comply with all
applicable anti-bribery laws, including the US Foreign Corrupt Practices Act. We apply
the highest quality and safety standards to everything that we do, and we ensure strong
labor practices in our supply chain. We also work hard to secure key personal data and
comply with GDPR (General Data Protection Regulations) and HIPAA. We uphold human
rights and operate in geographies with a strong track record on this topic.
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Source: 1
https://sdgs.un.org/goals
ESG Strategy
Environment
Social
Governance
Minimizing our environmental footprint
We strive to reduce our carbon footprint
and waste in our operations
Innovating for the underserved
We innovate to help people with Spinal
Cord Injury, empowered by movement, to
enjoy life in every way that matters to them
Maintaining high ethical standards
We act with integrity, respect human
rights and apply the highest quality and
safety standards
Environment
Social
Governance
Our ESG Strategy includes five principles in support
of nine UN Sustainable Development Goals
1
Partnering with patient groups
We enjoy excellent relationships with the
world’s leading patient-advocacy groups
for people with SCI
Attracting & retaining top talent
We are committed to creating a positive,
diverse and inclusive work environment
for all our employees, enhanced by
continuous development
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Social
€13.1M
R&D investment (2022 R&D expenses)
1
Weighted average of Lausanne and Eindhoven offices based on
data provided by Services industriels de Lausanne (2021 data)
and High Tech Campus Eindhoven
Environment
99%
Share of electricity consumed
generated from renewable sources
1
ESG Summary
Indications under clinical
or pre-clinical evaluation
9
Clinical trials sponsored
or supported in 2022
8
€5.7M
Spend on research and
clinical trials in 2022
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1
Defined as full-time roles within the Company’s Leadership Team (based on team composition as of 01 February 2023)
2
Supervisor or manager role defined as managing one or more reports
Share of supervisor and manager
roles
2
held by women globally
50%
41%
Share of leadership roles
1
held by women
Governance
33%
Share of Board Director and Interim
Director seats held by women
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ONWARD is committed to ensuring that data security and confidentiality are built into
our products and processes. The personal data we process in the course of our operations
— including health and medical information — cover our suppliers and business contacts,
applicants, visitors and website visitors, our employees, and our customers. We collect
patient health data with the sole purpose of continually improving the efficiency and safety
of our therapies.
We are subject to various regional, national, and state laws that protect the confidentiality
and security of patient health information, including patient medical records. We are
committed to applying the two most rigorous privacy regulations to our global operations,
namely the United States’ Health Insurance Portability and Accountability Act (HIPAA)
and the European Union’s General Data Protection Regulation ((EU) 2016/679; GDPR). This
legislation includes the right to access or amend certain records containing protected
health information or to request that its use or disclosure be restricted.
To that end, we have appointed an external Data Protection Officer. This service
is provided by DPO Consulting, which has extensive experience in Data Protection
regulations. We have established a Data Privacy Committee and a Data Protection Policy.
We have also strengthened our products’ compliance with cybersecurity and data
protection requirements under GDPR and HIPAA. We have started to create traceability
in accordance with relevant standards and built evidence that our products are compliant
with the regulations. We have evaluated our process for compliance with GDPR and HIPAA
requirements, specifically as we prepare for commercialization, and are working to close
any gaps in 2023. We are hardening our data management processes, and we regularly
train our staff on security and privacy issues.
Privacy & Data
Governance
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ONWARD made considerable progress in 2022:
Science & Intellectual Property
As the pioneer in our space, we have forged relationships and exclusively licensed important
intellectual property from many of the world’s leading neuroscience research laboratories,
such as Caltech (USA), University of California at Los Angeles (USA), University of Louisville
(USA), and University of British Columbia (Canada).
Our primary research partnership is with .NeuroRestore, a joint research initiative of
EPFL and CHUV in Lausanne, Switzerland, with whom we have an exclusive IP licensing
agreement. In 2021, we signed a framework agreement with .NeuroRestore governing future
research initiatives, as well as contracts covering existing and ongoing research. In addition,
we supported .NeuroRestore’s research on blood pressure, mobility, and incontinence.
Benefitting from these research collaborations, and combined with our own innovations,
the Company’s IP portfolio grew to more than 330 issued or pending patents in 2022.
We plan to continue to consolidate and grow our IP portfolio in 2023 and beyond — a key
ONWARD strength.
Operational Review
Research & Development
Our engineering team made advancements across several development initiatives in 2022:
•
ARC
EX
System development: Considerable progress was made on all aspects of the
system. Multiple rounds of user-centric formative studies were completed, including
software and hardware UI/UX on release candidate systems and incorporation of
learnings from the Up-LIFT study. Design inputs then were locked and development of
the most recent generation of the system is now nearing completion. Work has begun
on transferring the design to manufacturing, procuring production materials, and
initiating supply-chain activities.
•
ARC
IM
Lead development: The ARC
IM
thoracic lead development, design verification,
and validation have all been completed. The lead is now ready for submission to
regulatory bodies and will be part of near-term submissions in support of current study
updates as well as new feasibility and pivotal trials. The ARC
IM
Lumbar Lead models
are also nearing development completion, with prototyping and designs finalized. A
minimal set of design-verification testing remains, since the majority of tests can be
leveraged from those done for the Thoracic model.
•
Agile at Scale: An integration-focused, cross department, development approach
that leverages agile ceremonies and user centric design principals, was rolled out
across the development organization in 2022. Agile at Scale better enables cross-
team collaboration, feature realization, rapid feedback cycles with stakeholders and
customers, and the organization’s ability to support multiple, simultaneous product
development initiatives. Further improvements are expected as the implementation,
infrastructure, and methods mature and improve over the course of 2023.
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ARC
IM
Platform: Following the implant of multiple ARC
IM
Implantable Pulse Generators
(IPGs), several updates were made to the platform to improve features and device
performance and to incorporate learnings from proof-of-concept studies and field use.
We also continued to support and complete deliverables for the Defense Advanced
Research Projects Agency (DARPA) project Phase 2, as described below.
ONWARD is part of a research consortium of partners in the US, Canada, and Switzerland
that has been awarded research funding by DARPA to advance innovative SCI therapies.
In response to the DARPA Bridging the Gap Plus funding call, the consortium proposed
developing a new clinical intervention to modulate blood pressure and spinal cord
perfusion and oxygenation in the hours following SCI. The intervention includes spinal cord
stimulation using ARC
IM
, combined with implanted sensors for blood pressure and spinal
cord perfusion, as well as stem cells and scaffolds to be implanted in the lesion site to
promote neural regrowth across the injury.
The DARPA grant is a five-year project (October 2021 to September 2025) for a total of
USD 36M, of which ONWARD could potentially receive up to USD 6.3M.
To receive this funding in full, we must meet specific milestones at each stage:
•
Phase 1:
System design, IPG software and firmware update for spinal cord stimulation
for blood pressure control (already granted and funding received)
•
Phase 2:
System development completion (already granted and receipt of funding
ongoing), development of a dedicated lead (contingent), and clinical evaluation in 10
chronic patients in Switzerland and Canada (contingent)
•
Phase 3:
US Food and Drug Administration (FDA) Investigational Device Exemption
secured and clinical proof of concept demonstrated in at least one acute patient (to
be granted)
We believe that our involvement in the DARPA consortium will contribute to our leadership
and expertise in blood pressure management. We also expect that it will pave the way for
the introduction of next-generation systems that may follow the initial configuration of
ARC
IM
that we expect to launch for SCI.
Clinical & Regulatory
ONWARD’s clinical and regulatory team had a productive 2022, filling the indication
pipeline and advancing the core ARC
EX
and ARC
IM
therapies forward toward market
approval for the SCI population. With completion of the Up-LIFT study as well as initiation
of work necessary for the ARC
IM
pivotal study, the team is poised to deliver on several major
clinical and regulatory initiatives in 2023.
Clinical Trials of ARC
EX
Therapy
In 2022, ONWARD completed the Up-LIFT study, the first large-scale pivotal trial of
non-invasive spinal cord stimulation technology. It enrolled 65 subjects at 14 leading
SCI research sites throughout the United States, Canada, the United Kingdom, and the
Netherlands. The Up-LIFT study is a prospective, single-arm study designed to evaluate
the safety and effectiveness of non-invasive electrical spinal cord stimulation to treat
upper extremity functional deficits in people with chronic tetraplegia.
Positive topline results from the Up-LIFT study were announced on 13 September 2022,
showing that the study had met its primary effectiveness endpoint with no reported
serious device-related adverse events, as adjudicated by an independent Data Safety
Monitoring Board (DSMB). Detailed results will be made available following review by FDA.
In October 2022, ONWARD announced the successful completion of the LIFT Home study,
designed to assess the safety and performance of ARC
EX
Therapy when used in a home
setting. The study enrolled 17 subjects at five leading centers in the US who continued
treatment at home subsequent to the Up-LIFT study. Observational data demonstrated
that the use of ARC
EX
System at home resulted in no reported serious adverse events.
Participants performed training on activities of daily living three times per week over a
one-month period with approximately 97% of these treatment sessions completed, without
usability issues, supporting the feasibility of home-based therapy.
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Clinical Trials of ARC
IM
Therapy
A major company milestone was achieved in May 2022 with the first enrollment in the
HemON study designed to evaluate the safety and preliminary efficacy of ARC
IM
Therapy
to improve blood pressure management in people with SCI who suffer from orthostatic
hypotension. Orthostatic hypotension is characterized by debilitatingly low blood pressure
that may occur when people sit upright, stand, or change body position. Importantly, this
marked the first-in-human use of the Company’s ARC
IM
implantable pulse generator (IPG).
In December 2022, ONWARD reported interim clinical outcomes from the first 10
participants treated to regulate blood pressure with ARC Therapy. In addition to a
sustained increase in blood pressure levels, participants who were taking an anti-
hypotension drug prior to entering the study were able to significantly reduce or
discontinue their medication. Participants also reported improved general well-being,
including reduced dizziness and improved energy, and those prone to fainting or light-
headedness prior to implant indicated that such incidents declined dramatically following
treatment with ARC Therapy.
The company has had a highly productive year preparing for several key submissions
with the FDA and EU-MDR in 2023 and beyond. Leading into this, in 2022, the Company
was granted Breakthrough Device Designation (BDD) by the FDA for three additional
indications: (1) for ARC
EX
for improving or restoring lower extremity sensory and motor
function in people with chronic neurological deficits resulting from SCI; and (2) and (3) for
treating neurogenic bladder dysfunction in people with SCI for both ARC
IM
and ARC
EX
. In
early 2023, we were granted two additional Breakthrough Device Designation for ARC
EX
for
the alleviation of spasticity and blood pressure regulation. The Company now has a total of
eight BDDs for ARC Therapy.
BDD is an FDA program designed to help patients and their
physicians receive timely access to technologies that have the potential to provide more
effective treatment or diagnosis for debilitating conditions of great unmet need, such as
SCI. As part of this designation, the FDA will provide ONWARD with priority review and the
opportunity to interact with FDA experts throughout the premarket review phase as the
technology moves toward commercialization. The Company currently holds a total of eight
Breakthrough Device Designations for ARC Therapy.
Quality
ONWARD has a global quality system for teams based in the US, the Netherlands, and
Switzerland that complies with applicable regulations and standards related to the
medical devices industry (MDR and QSR, respectively, for EU and USA). In 2018, we
obtained the ISO 13485 certification for design and development. In 2022, the certification
scope was expanded to include clinical applications targeted by ARC
EX
Therapy and new
activities to support the upcoming manufacturing and distribution of ARC
EX
devices.
The most recent audit was conducted and passed in late 2022 by TÜV SÜD, a respected
notified body with global reach for neuromodulation devices.
A Quality Plan was established to support the growth of the organization in the coming
years and to ensure the operational excellence of the teams and delivery of safe and
effective therapy.
We have continued to strengthen our Quality function by hiring additional qualified staff
bringing competencies in medical software, suppliers’ quality management, design
control, and risk management.
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Commercial Operations
ONWARD does not currently offer any products for commercial sale. However, following the
expected successful submission of the results of the Up-LIFT trial to regulatory authorities
and regulatory clearance, we plan to commercialize ARC
EX
in the US and Europe in late
2023 to help improve strength and function of the upper extremities.
In late 2025, assuming positive clinical results and related market approvals, we aim to
launch ARC
IM
commercially in the US and select European markets to restore normal blood
pressure. In late 2025, we also expect to commercialize ARC
IM
in the US for mobility via
Humanitarian Device Exemption (HDE) from the FDA. (The European authorization process
for ARC
IM
for the mobility indication is not yet determined.)
Given the small number of centers and clinicians responsible for providing rehabilitation
training, managing SCI patients, and performing accompanying surgeries (as detailed on
p. 72), we plan to deploy our own direct sales and service organization in both the US and
Europe, using distribution partners selectively where appropriate.
Financing
To support operational goals, we will continue to invest in our our R&D activities, conduct
clinical trials, and prepare for commercialization. We have successfully raised more than
EUR 150M since the Company’s founding, with EUR 62M net cash (please refer to Non-
IFRS financial measure included in Other Information for the definition of net cash)
on the
balance sheet at the end of 2022.
We expect our current cash to propel operations through the end of 2024 and will continue
to consider opportunities in 2023 to further strengthen our cash position.
1
ISO 13485:2016 Medical devices – Quality management systems – Requirements for regulatory purposes.).
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This financial review should be read with the operational review and the Company’s
consolidated financial statements in this Annual Report, which have been prepared in
accordance with International Financial Reporting Standards (IFRS) as published by the
International Accounting Standards Board and as adopted by the European Union and
with Part 9 of Book 2 of the Dutch Civil Code.
EUR’ Million
2022
2021
Total Revenues & Other Income
2.1
1.4
Total Operating Expenses
Research & Development Expenses
Clinical & Regulatory expenses
Marketing & Market Access Expenses
Patent Fees & Related Expenses
Quality Assurance Expenses
General & Administrative Expenses
(34.2)
(13.1)
(5.7)
(2.0)
(1.5)
(1.2)
(10.6)
(30.0)
(10.6)
(4.8)
(1.5)
(1.4)
(1.0)
(10.7)
Operating Loss for the Period
Net Finance expense
Income Tax expense
(32.0)
(1.5)
0.8
(28.6)
(5.7)
(0.0)
Net loss for the period
(32.8)
(34.3)
At
EUR’ Million
31 December
2022
31 December
2021
Net cash position at the end of the period
Interest-bearing loans
Equity
61.8
(12.7)
52.6
89.4
(11.5)
82.7
Financial Review
Total Revenues & Other Income
Other income, mainly grant income, increased to EUR 2.1M (2021: EUR 1.4M), following an
increase in DARPA funding and new grants received from the European Innovation Council
and SMEs Executive Agency (EISMEA) and Eurostars. The new grants received will focus
on brain-computer interfaces to reverse upper- and lower-limb paralysis as well as closed-
loop control of blood pressure for people with SCI.
Research & Development Expenses
Research & development expenses increased by 24% from EUR 10.6M in 2021 to EUR 13.1M
in 2022 driven by advancements made on our ARC
EX
and ARC
IM
platforms, as described in
the operational review.
Research & development expenses consist of product development, engineering to develop
and support our products, testing, consulting services, and other costs directly attributable
to the ARC technology platforms and related therapies. These expenses primarily include
salaries for research and development staff and related expenses, including expenses for
share-based compensation, and outsourced development expenses. These expenses do
not meet the criteria for capitalization given the status of development activities.
Research & development expenses also include the costs of sponsored research activities
that are undertaken by universities with which ONWARD collaborates. Since its inception,
the Company has had a close working relationship with two of the founders of the
Company, Grégoire Courtine, Professor at EPFL and Jocelyne Bloch, Neurosurgeon at
CHUV, Professor at Université de Lausanne.
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Clinical & Regulatory Expenses
Clinical expenses increased by 19% from EUR 4.8M in 2021 to EUR 5.7M in 2022 due to
the support of the clinical activities. Clinical expenses in 2022 primarily relate to the
completion of the Up-LIFT pivotal and LIFT Home clinical trials. Other clinical activities
included consulting services and costs associated with first in human implant of
ONWARD’s IPG and the treatment of 10 people across different ongoing studies for the
regulation of blood pressure with ARC
IM
Therapy. These expenses include employee
salaries and related expenses, including share-based compensation, clinical trial
management and monitoring, payments to clinical investigators, data management, and
travel expenses to the various clinical trial locations.
Marketing & Market Access Expenses
Marketing and Market Access expenses increased by 33% from EUR 1.5M in 2021 to EUR
2.0M in 2022. Costs incurred related to market access investigative activities in Europe
and the US, attendance of key events to create awareness within the SCI community of
our ARC therapies and technology, salary costs including related expenses and share-
based compensation.
Patent Fees & Related Expenses
Patent Fees and Related Expenses consist primarily of costs associated to obtaining
and maintaining patents and other intellectual property included in ONWARD’s growing
portfolio. Patent fees & related expenses amounted to EUR 1.5M in 2022 and were at a
similar level as in 2021 (EUR 1.4M).
Quality Assurance Expenses
Quality Assurance expenses increased by 20% from EUR 1M in 2021 to EUR 1.2M in
2022. The efforts are used to strengthen the Company’s capability to meet quality and
regulatory requirements in support of upcoming regulatory submissions and expected
commercialization. Quality Assurance expenses include employee salaries and related
expenses, including share-based compensation, consulting, testing and travel expenses
related to quality and risk assurance activities.
General & Administrative Expenses
General and Administrative expenses decreased by 2% from EUR 10.7M in 2021 to EUR
10.6M in 2022. General and Administrative Expenses include employee-related expenses,
including salaries, benefits and stock-based compensation; professional fees for auditors
and consulting expenses not related to research and development activities; professional
fees for lawyers not related to the filing, prosecution, protection and maintenance of our
intellectual property; and the cost of facilities, communication and office expenses.
Net Finance Expense
The Net Financial expense decreased by 74% from EUR 5.7M in 2021 to EUR 1.5M in 2022.
The 2021 expense included the interest on the Company’s sources of funding from our
innovation loan from Riksdienst voor Ondernemend (RVO, a Dutch government funding
vehicle for entrepreneurial ventures), our convertible loan (CLA), and the accrued dividend
of preference A shares. Both the CLA and preference A shares converted to ordinary
shares in October 2021. The 2022 expense is related to the innovation loan from RVO NL
plus bank interest paid on our positive cash balance.
Income Tax Expense
The movement in the Income Tax expense line is mainly the result of the recognition of
a deferred tax asset relating to the net operating losses in the US entity to offset the
reversable temporary difference recognized as part of the PPA in 2019.
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Net Cash Position
The Company ended the year with a positive net cash balance of EUR 61.8M (2021:
EUR 89.4M). This comprises of Cash and cash equivalents of EUR 41.8M and fixed term
deposits of EUR 20M.
The table below summarizes the cash flows of the Company for the years 2022 and 2021.
EUR’ Million
2022
2021
Net cash generated / (used) from operating activities
Net cash generated / (used) from investing activities
Net cash generated / (used) from financing activities
Effect of exchange rates on cash and cash equivalent
(26.7)
(20.4)
(0.6)
(0.0)
(19.9)
(2.3)
105.4
(0.1)
The cash outflow from operating activities increased from EUR 19.9M in 2021 to EUR
26.7M in 2022. The increase of cash used was attributable to higher operating costs as
explained above, offset by a decrease in non-cash adjustments (relating to share-based
compensation and net finance costs) and a positive change in working capital.
Cash flow from investing activities in 2022 reflects the fixed term deposit investments as
well as the acquisition of property, plant, and equipment and the capitalization of ongoing
license fee payments to UCLA and Caltech.
The cash inflow in 2021 was the result of the proceeds from the IPO in October 2021 and the
convertible loan financing in April 2021. No financing activities occurred in 2022 and the
movement in 2022 represents the payment of the lease liability.
The effect of exchange rates did not have a material impact in 2022.
Interest-Bearing Loans
Interest-bearing loans increased from 31 December 2021 by EUR 1.2M. This is due to the
interest that accumulated on the innovation loan from RVO NL (Dutch government).
Equity
The Company’s equity at the end of 2022 remained positive at EUR 52.6M, decreasing
with EUR 30.1M from the previous year. The movement is due to the loss for period of
EUR 32.7M, adjusted for share-based compensation of EUR 1.7M and the actuarial gain
on the remeasurement of post-employment benefits EUR 0.5M and currency translation
differences EUR 0.4M.
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We expect to achieve several important milestones in 2023:
Innovation, Clinical, & Regulatory Developments
•
We plan to submit a de novo application for FDA clearance for our ARC
EX
system this
year, which we anticipate will result in marketing authorization to commercialize that
platform in the US in late 2023. We aim to obtain CE mark and European authorization
in the same period.
•
We intend to publish detailed results from our Up-LIFT Study, for which we announced
positive top line data in 2022.
•
We expect first-in-human use of our ARC
IM
Lead, a purpose-designed lead that is
optimized for placement along the spinal cord to stimulate the dorsal roots to restore
mobility and autonomic function after SCI.
•
We plan to begin implants using ARC
BCI
, our brain-computer interface platform for
restoration of movement. This program is supported by a grant from the European
Innovation Council.
2023 Outlook
Corporate
•
We anticipate our current cash position will fuel operations through the end of 2024.
In 2023, we plan to pursue opportunities to further strengthen our cash position
to support future investments in product development, clinical trials, operational
capabilities, and commercial capabilities.
•
We plan to continue to build our organizational capabilities in preparation
for expected launch of ARC
EX
late this year, recruiting field sales and service
professionals and adding operational systems that will enable us to conduct
commerce once we receive FDA clearance and CE mark for our ARC
EX
system as
anticipated later this year. We will also continue to recruit outstanding leaders with
global experience and functional expertise who can help us scale effectively and
realize our significant potential as a business.
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General
ONWARD is a public limited liability company established under the laws of the
Netherlands, with common shares listed on Euronext Brussels and Euronext Amsterdam.
The Group is composed of ONWARD Medical N.V. (incorporated as a private limited liability
company (B.V.) on 20 November 2015) and its wholly owned subsidiaries:
•
ONWARD Medical S.A. (Swiss subsidiary established on 12 December 2014)
•
ONWARD Medical Inc. (US subsidiary established on 13 September 2013)
The Company and its subsidiaries act as one company, developing both an Implantable
Neuro-stimulation System and a non-invasive system for electrical stimulation of specific
areas of the spinal cord.
ONWARD’s corporate governance is guided by the rules and principles set out in the Dutch
2016 Corporate Governance Code (the CGC), the Company’s Articles of Association (AOA)
and Dutch law. The AOA are available on the ONWARD website (onwd.com) under the
Investors/Governance tab.
Governance Framework
The Company’s overall governance framework and key governance elements at each level
are the following:
•
For shareholders: the Articles of Association and Shareholder Dialogue policy
•
For the Board: the Board Rules, the Charter of the Audit Committee, the Charter of the
Compensation Committee, and the Charter of the Nomination Committee
Governance
Board of Directors
ONWARD has a one-tier board consisting of one or more executive directors (uitvoerend
bestuurders) and one or more non-executive directors (niet-uitvoerend bestuurders), all of
whom are individuals. Our CEO, as Executive Director, with the support of the Management
Team, is charged primarily with the Company’s day-to-day business and operations and
the implementation of the Company’s strategy. The non-executive Directors are primarily
responsible for supervising the performance of the Executive Director.
Whereas, in a two-tier governance structure, supervisory and management roles are
divided between two corporate bodies, in a one-tier governance structure such as that
adopted by ONWARD, non-executive Directors and Executive Directors share responsibility
for managing the company for those tasks and duties that are not delegated to one or more
other specific Directors by virtue of Dutch law, the Articles of Association, or any other
arrangement catered for therein (e.g., the Rules of the Board). It is therefore important that
the Board ensure sufficient independent supervision by non-executive Directors.
In accordance with the CGC, the Board’s role is to provide leadership and supervision
to the Company on matters of strategy, risk management, and policies. It has overall
responsibility for the management and control of the Company and is authorized to take
all actions it deems necessary to achieve the Company’s purpose.
In performing their duties, Directors must be guided by the best interests of the Company
and its stakeholders, including business partners, employees, and shareholders. The
Board has drawn up Rules concerning its organization, decision-making, and other
internal matters. These Rules are available on the ONWARD website (onwd.com) under the
Investors/Governance tab.
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The composition of the Board aims to ensure a broad diversity of experience, knowledge,
and skills. The directors are appointed by the Company’s Annual General Meeting of
shareholders upon nomination by the Board. The general meeting may dismiss a Director
at any time by a two-thirds majority vote if less than half of the issued share capital is
represented at the General Meeting, unless the resolution for dismissal is passed at the
Board’s proposal.
Dutch law does not set a limit on the maximum number of consecutive terms that a
Director may serve. According to the CGC, non-executive Directors may be elected for a
maximum of two consecutive four-year terms and, subsequently, for a maximum of two
consecutive two-year terms.
The Board meets as often as any Director considers necessary or appropriate. Resolutions
are passed by a simple majority of votes cast. In the case of a tie in the vote of the
Board, the resolution is not passed. Any resolutions concerning a material change to the
character or identity of the Company or its business must be submitted to the Annual
General Meeting for approval.
Composition of the Board of Directors
The Company has a one-tier Board consisting of nine members.
*Interim Director (expected to be nominated for appointment as Director at our 2023 Annual General Meeting)
Name
Year of Birth
Nationality
Gender
Position
Year
Appointed
End of Term
Jan Øhrstrøm
1957
Danish
Male
Independent
Non-Executive
Director &
Chairperson
2016
Annual General
Meeting of 2024
Dave
Marver
1968
American
Male
Executive
Director & CEO
2020
Annual General
Meeting of 2025
Grégoire
Courtine
1975
French
Male
Non-Executive
Director & CSO
2016
Annual General
Meeting of 2023
Ian Curtis
1968
British
Male
Independent
Non-Executive
Director &
Vice-Chair
2019
Annual General
Meeting of 2025
Fredericus
Colen
1952
Dutch
Male
Independent
Non-Executive
Director
2017
Annual General
Meeting of 2025
Regina
Hodits
1969
Austrian
Female
Non-Executive
Director
2016
Annual General
Meeting of 2023
John
de Koning
1968
Dutch
Male
Non-Executive
Director
2016
Annual General
Meeting of 2024
Kristina
Dziekan
1968
German
Female
Independent
Non-Executive
Director
2022
Annual General
Meeting of 2026
Vivian
Riefberg
1960
American
Female
Independent
Non-Executive
Director
*
*
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Board Members’ Biographies
Jan Øhrstrøm
has more than 30 years’ experience in the medical technology and
pharmaceutical industries, with a proven track record driving successful product
approvals, private financings, and IPOs. He has held senior management roles at
NovoNordisk, ProFibrix B.V., and ZymoGenetics, among others. He is currently CEO of
VarmX B.V., a company specializing in blood clotting agents, and is chairman of Blaze
Bioscience Inc. He holds an MD from the University of Copenhagen. Jan is the Board
Chair, Chair of the Compensation Committee, and Chair of the Nominating and Corporate
Governance Committee.
Dave Marver
(CEO) is an accomplished chief executive and director with more than 25
years’ international experience in public, private, and emerging companies. He combines
expertise in medical and consumer technology, wearables, and health monitoring.
Previously, Dave spent almost 15 years with Medtronic, holding a variety of leadership
positions in the US and Europe, including vice-president roles in sales, marketing, strategy,
and business development. He then joined Nasdaq-listed Cardiac Science Corporation as
CEO before co-founding two startups. He holds a BA in psychology from Duke University
and an MBA from University of California, Los Angeles.
Grégoire Courtine
is a full-time professor of neuroscience and neurotechnology at
EPFL and Director of .NeuroRestore, a research center at EPFL and CHUV that develops
innovative therapies using neurostimulation and other approaches. His ground-breaking
research in neuroscience has been recognized by prestigious prizes including the
Rolex Award, Schellenberg Research Prize, and Chancellor’s Award of the University of
California. He holds a PhD in neurosciences from INSERM, Paris, and a PhD in medicine
from the University of Pavia, Italy. As a founding Board member, Grégoire serves as a non-
executive Director in addition to his role as CSO.
Ian Curtis
is a member of the Board of the Christopher and Dana Reeve Foundation and
the International Spinal Research Trust. As the father of a young woman living with SCI, Ian
is deeply committed to advancing research and treatment for SCI. He holds a BA in history
from Durham University, is a fellow of the Institute of Chartered Accountants in England
and Wales, former partner with PwC and Chairman of HPC plc. Ian is the Board Vice-Chair
and Chair of the Audit Committee.
Fred Colen
has more than 40 years’ experience in the medical device industry, with a
track record of building strong organizations to bring new technology to market. Fred
is President and CEO of Neovasc Inc., a Canadian publicly traded company developing
products for the cardiovascular marketplace. Previously, he held senior executive roles at
Boston Scientific and St Jude Medical. He holds Master’s degrees in Electrical Engineering
and Medical Technology from RWTH Aachen University, Germany. Fred is a Member of the
Audit Committee and the Compensation Committee.
Regina Hodits
has more than 20 years’ experience in venture capital and is a managing
partner at Wellington Partners Life Science Venture Capital Consulting GmbH, where she
focuses on early-stage and growth investments. Before joining Wellington, Regina led the
European life sciences efforts of Boston-based Atlas Venture. She was a founding investor
in Bicycle Therapeutics, F-star, and JenaValve, and currently serves on the boards of
Ayoxxa, Carisma, Sidekick, SNIPR Biome, and Stipe. Regina holds a PhD in biochemistry
from the Technical University of Vienna. She is a Member of the Nominating and Corporate
Governance Committee.
John de Koning
is a General Partner at EQT Group (formerly LSP), one of the largest
European investment firms providing financing for life sciences and health care
companies. Since joining EQT Group in 2006, John has led some of its most successful
investments and served on the board of several companies, including argenx, Merus, and
Prosensa. He holds an MS in molecular biology from the University of Utrecht and a PhD in
oncology from the Erasmus University Rotterdam. John is a Member of the Nominating and
Corporate Governance Committee.
Kristina Dziekan
is currently Head of Market Access, Government Affairs, and
Tendering for Alcon’s Surgical Division in Europe. She previously served as Senior Global
Reimbursement and Health Economics Director for Medtronic Neuromodulation and was
Health Outcomes Manager for GlaxoSmithKline in the UK and parts of Asia. She earned
an MSc in health policy, planning, and financing from the London School of Economics, an
MA in international economics and European Studies from Johns Hopkins University, a BA
in philosophy, politics, and economics from Oxford University, and a Vordiplom in business
administration and economics from Georg August University. Kristina is a Member of the
Audit Committee.
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Vivian Riefberg
is currently the David C. Walentas Jefferson Scholars Chair Professor of
Practice at the Darden School of Business at the University of Virginia and serves on the
boards of Signify Health, K Health, and Lightrock, an impact investing firm, as well as of
the Public Broadcasting System (PBS), Johns Hopkins Medicine, the Lorna Breen Heroes
Foundation, and the National Education Equity Lab. She is also an advisory board member
for the Smithsonian’s planned American Women’s History Museum. She retired from
McKinsey & Company in 2020 after 31 years. At McKinsey, she served as co-leader of the US
healthcare practice and leader of the public sector practice. She also served on McKinsey’s
global board of directors. She previously served on the US National Institutes of Health (NIH)
Clinical Center Board of Governors and the NIH Advisory Board for Clinical Research. She
also served on the Board of Directors of the Partnership for a Healthier America (PHA), a
non-profit organization created to mobilize efforts to solve the child obesity challenge as an
outgrowth of First Lady Michelle Obama’s Let’s Move campaign. She holds a BA, magna cum
laude in history from Harvard-Radcliffe College and an MBA with distinction from Harvard
Business School.
Vivian is a member of the Compensation Committee.
Director Independence
In accordance with best practice provision 2.1.7 of the CGC, the majority of the non-executive
directors must be independent and at most one non-executive Director does not have to
meet the independence criteria. A Board member is considered “not independent” if he
or she, a spouse, partner, or close family member (related by blood or marriage up to the
second degree) meet any of the conditions listed below:
•
Has been an employee or member of the management board of the Company, including
associated companies (as referred to in Section 5:48 of the Financial Supervision Act
Wet op het financieel toezicht/ Wft) in the five years prior to their appointment.
•
Receives personal financial compensation from the Company, or an associated company,
other than the compensation received for the work performed as a Board member.
•
Has had an important business relationship with the Company or an associated company
in the year prior to the appointment.
•
Is an executive of a company in which a member of the management board of the
company which he supervises is a non-executive Board member.
•
Has temporarily performed management duties during the previous twelve months in
the absence or incapacity of a member of the management board.
•
Has a shareholding in the company of at least 10%.
•
Is a member of the management board or supervisory board, or a representative in
some other way, of a legal entity that holds at least 10% of the shares in the company,
unless the entity is a group company.
At the date of this Annual Report, the Board consists of eight members and one interim
director, seven of the eight are non-executive directors. The interim director is also
considered, non-executive.
Three of these non-executive directors are deemed “not
independent” based on meeting certain of the conditions above. Prof. Courtine, one of the
Company’s founders, is considered “not independent” as he is the Chief Science Officer
of the Company and receives personal compensation for such a role. Regina Hodits and
John de Koning are considered “not independent” as they are representatives of major
shareholders holding at least 10% of the shares in the Company (Wellington and EQT Group
(formerly LSP). The requirements for independence as per best practice provision 2.1.7 of
the CGC are met.
Committees within the Board of Directors
The Board has established the following three committees:
•
the Audit Committee
•
the Compensation Committee
•
the Nomination and Corporate Governance Committee
Non-executive directors are appointed to committees by the Board. The committees
report their findings to the Board, which is ultimately responsible for all decision-making.
The role, responsibility and functioning of each committee is summarized below.
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Audit Committee
The Audit Committee comprises three members: Ian Curtis (Chair), Fred Colen and
Kristina Dziekan.
In accordance with its charter, the Audit Committee is charged with the following matters:
a.
Monitoring the Board with respect to:
•
relations with the internal audit function and the external auditor, as well as
compliance with recommendations and follow-up of comments
•
the Company’s funding
•
the application of information and communication technology by the Company,
including risks relating to cybersecurity
•
the Company’s tax policy
b.
Issuing recommendations concerning the appointment and the dismissal of the
head of the internal audit function, as relevant, and reviewing and discussing the
performance of the internal audit function.
c.
Reviewing and discussing the Company’s audit plan, including with the internal audit
function and the external auditor.
d.
Reviewing and discussing the essence of the audit results, also with the internal audit
function, including:
•
flaws in the effectiveness of the Company’s internal risk management and control
systems (“Internal Controls”)
•
findings and observations with a material impact on the Company’s risk profile
•
failings in the follow-up of recommendations made previously by the internal
audit function
e.
Monitoring the audit of the Company’s annual accounts, annual report and financial
reporting processes, and making proposals to safeguard the integrity of these processes.
f.
Reviewing and discussing the effectiveness of the design and operation of the Internal
Controls with the Board, the CEO and the CFO, including identified material failings
in the Internal Controls and material changes made to, and material improvements
planned for, the Internal Controls.
g.
Reviewing and monitoring the independence of the external auditor, also considering
any non-audit services rendered by the external auditor.
h.
Submitting proposals to the Board concerning the external auditor’s engagement
to audit the Company’s financial statements, including the scope of the audit, the
materiality standard to be applied and the external auditor’s fees.
The members of the Audit Committee are appointed and dismissed by the Board. More
than half of all its members, including the chairperson, must be independent within the
meaning of the CGC and at least one committee member must have competence in
accounting and/or auditing.
The Audit Committee shall meet as often as it determines is appropriate to carry out its
responsibilities and each meeting shall be presided over by the chairperson and, in the
absence of the chairperson, one of the other members shall be designated as the acting
chairperson of the meeting.
ONWARD has not yet established a separate internal audit function and the related
responsibilities as per the charter does not apply.
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Compensation Committee
The Compensation Committee comprises three members: Jan Øhrstrøm (Chair), Fred
Colen and Vivian Riefberg. In deviation from best practice provision 2.3.4/5.1.4 of the
CGC, the Compensation Committee is led by Jan Øhrstrøm, who is also Chairperson of
the Board. (Refer to ‘Deviations from the Best Practices Provisions of the Dutch Corporate
Governance Code’.). The Board considers that the experience and continuity of Dr.
Øhrstrøm being chair of the Compensation Committee outweighs the disadvantages of
him holding both positions.
In accordance with its charter, the Compensation Committee is charged with the
following matters:
a.
Submitting proposals to the Board concerning changes to the Company’s
compensation policy.
b.
Submitting proposals to the Board concerning the compensation of individual
directors, covering:
•
compensation structure
•
amount of the fixed and variable compensation components
•
applicable performance criteria
•
scenario analyses that have been carried out
•
pay ratios within the Company’s group
•
views of the director concerned regarding the amount and structure of his or her
own compensation
c.
The preparation of the Company’s compensation report for the Board.
Nomination and Corporate Governance Committee
The Nomination and Corporate Governance Committee comprises three directors: Jan
Øhrstrøm (Chair), John de Koning and Regina Hodits. Jan Øhrstrøm serves as Chairperson
of the Nomination and Corporate Governance Committee. In deviation from the CGC
more than half of the committee members are not “independent” within the meaning of
the Code, namely John de Koning and Regina Hodits. (Refer to Deviations from the Best
Practices Provisions of the Dutch Corporate Governance Code). The Board considers that
the experience and continuity of Dr. de Koning and Dr. Hodits outweigh the disadvantages
of these deviations from the CGC.
In accordance with its charter, the Nomination and Governance Committee is charged
with the following matters:
d.
Drawing up selection criteria and appointment procedures for the directors.
e.
Reviewing the size and composition of the Board and submitting proposals for the
composition profile of the Board.
f.
Reviewing the functioning of individual directors and reporting on such reviews to
the Board.
g.
Drawing up a plan for the succession of directors.
h.
Submitting proposals for (re)appointment of directors.
i.
Supervising the policy of the Board regarding the selection criteria and appointment
procedures for the Company’s senior management and executive officers
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Management Team*
The Management Team is responsible for running the Company in accordance with the
strategies, policies and budgets determined by the Board. It has all powers except for
those reserved for the Board and the General Meeting of shareholders by law and by the
Company’s Articles of Association.
The members of the Management Team commit to carrying out their duties in accordance
with the highest business, ethical, moral, and legal standards laid out in the Company’s
Code of Business Conduct and Ethics (see onwd.com, Investors/Governance). They strive
to lead by example by embodying the ONWARD code of values in everything they do. The
Management Team meets at least once a week.
Name
Position
Member Since
Dave Marver
Chief Executive Officer
2020
Grégoire Courtine
Chief Science Officer
2016
John Murphy
Chief Technology Officer
2020
Lara Smith Weber
Chief Financial Officer
2022**
Hendrik Lambert
VP Clinical & Regulatory
2016*
David Harari
Managing Director U.S.A
2019*
Andy Dolan
VP Marketing
2021
Rano Burkhanova
Global HR Director
2020
Zouhir Mechta
VP Operations
2022
* In Q1 2023,
Erika Ross Ellison joined as VP Global Clinical & Regulatory and Sarah Moore joined as VP Global Marketing, with Andy Dolan
moving into the VP Sales role. Hendrik Lambert and David Harari stepped down from their respective roles in Q1 2023.
** Lara Smith Weber joined as CFO on 1 June 2022, succeeding Marko Jansen who stepped down 30 June 2022.
Biographies of the Management Team
Dave Marver
(see biography p. 114).
Grégoire Courtine
(see biography p. 114).
John Murphy
has over 25 years of experience driving the development of medical implants
and neurostimulation devices at LivaNova, Abbott, and Medtronic. His leadership expertise
spans the continuum of R&D, with a focus on consumer-centric design, IP generation, and
agile processes. Prior to joining ONWARD in 2020, John was the Chief Technology Officer
of LivaNova Neuromodulation. He holds a BS in electrical engineering from the University
of North Carolina at Charlotte and a PhD in production systems and robotics from EPFL.
Lara Smith Weber
has over 20 years of experience in finance, accounting, and strategy
for publicly traded life science entities in the US and Europe. Before joining ONWARD, Lara
served as CFO for MorphoSys, Inc. and Senior VP Controlling and Corporate Finance at
MorphoSys AG in Munich, where she led a Nasdaq IPO. Previously, Lara held a variety of
finance leadership positions at Telefonica Germany and worked for the consulting firm,
Booz Allen Hamilton, in Zurich, Switzerland. Lara holds a BA in German studies, a BS, an
MSc in electrical engineering from Stanford University, and an MBA from IMD in Lausanne.
Hendrik Lambert
has over 20 years of experience leading clinical and regulatory
strategies for high-risk (Class III) medical devices in Europe and the US, from initial
design to market approval. Before joining ONWARD in 2015, Hendrik was Vice President
for Clinical and Regulatory Affairs at Endosense, a Geneva-based medtech company
developing innovative products for the cardiology market, which was acquired by St. Jude
Medical. He holds a PhD in biomedical engineering from the University of Ghent, Belgium.
David Harari
is a scientific leader with 30 years of experience in the clinical and regulatory
management of medical devices, from initial concept to commercialization. Before joining
ONWARD in 2019 to lead its US affiliate, David held senior positions in clinical affairs with
Guidant, Boston Scientific, Endosense, St. Jude Medical, and Vytronus Inc. He holds a BS in
engineering sciences and biomedical engineering from the University of Michigan.
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Andy Dolan
has 20 years of experience in marketing, business development, and
organizational leadership at medical device companies, both private and public. Before
joining ONWARD in 2021, Andy held senior roles in sales and marketing at ReWalk
Robotics, Boston Scientific, Johnson & Johnson, and Integra LifeSciences. He holds an MBA
from the University of Massachusetts and a graduate certificate in bioengineering from
Tufts University. He also serves as a United States Navy Reserve Public Affairs Officer.
Rano Burkhanova
is an accomplished talent development executive with 15 years of
experience with multinational companies in the US and the Netherlands. Before joining
ONWARD in 2020, Rano managed leadership development, talent management, gender
diversity, and engagement programs for Danone Nutrition, Elsevier, and Medtronic. She
holds an MA in human resources management from Cornell University and an MBA from
the Quantic School of Science and Technology.
Zouhir Mechta
has over 20 years of progressive experience with leading companies
such as Johnson & Johnson, Dentsply Sirona, and Nestlé. He previously served as Vice
President of Manufacturing and Supply Chain for Dentsply Sirona for the US, EMEA, and
Switzerland. He also has experience with scale-up companies and has overseen multiple
ERP system installations, established manufacturing systems, and built procurement and
customer service capabilities. He holds a Master’s degree in process management from
the University of Technology Belfort Montbéliard and a Bachelor’s degree in mechanical
engineering from the Technology Institute F. Buisson.
Diversity
The Board has adopted a diversity policy which became effective on the date of first
trading. The policy does not define specific targets. It is the ambition that both the Board
and Management Team should comprise one-third of female members, while also ensuring
diversity in terms of background, skills, and age. This policy is available on our
website
under the Investors/Governance tab.
The Company made a concerted effort to recruit directors and management members
with the skills and background to support the Company’s independence and diversity
objectives. At the date of this report, ONWARD’s Board consists of 6 male directors (1 being
an executive director) and 2 female directors (all non-executive directors). The formal
appointment of interim director, Vivian Riefberg, at the next AGM will result in a one third
female representation on the Board.
The Management team consists of 5 male members
and 4 female members.
Conflicts of Interest
According to principle 2.7.4 of the CGC, the Company must report on directors’ conflicts
of interest in transactions in its management report where the conflict of interest is of
material significance to the Company or to the relevant director. Directors and members
of management are expected to arrange their personal affairs so as to avoid conflict of
interest. Any potential conflict of interest must be brought to the attention of the Board.
Certain directors and members of the Management Team have a direct or indirect
beneficial interest in ONWARD’s share capital or serve as a representative of a legal entity
that is a major shareholder. In their capacity as non-executive directors, their primary
duty is to supervise the performance of the executive directors and the management
of the Company and its business. A conflict of interest may arise if a decision aimed at
contributing to the Company’s long-term and sustainable success negatively impacts its
share price in the short term, thereby reducing the value of the shareholding of which the
non-executive director is a representative.
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As of 31 December 2022, the potential conflicts of interests between the duties to the
Company of each of the directors and members of the Management Team and their
private interests or other professional duties were as follows:
a.
Grégoire Courtine is the Chief Science Officer and a Non-Executive Director
of the Company.
b.
John de Koning represents LSP V Coöperatieve U.A., a major shareholder of the
Company and Non-Executive Director of the Company.
c.
Regina Hodits represents Wellington Partners Life Science Venture Capital
Consulting GmbH, a major Shareholder of the Company and Non-Executive Director
of the Company.
No transactions that would result in a conflict of interest were reported to the Board in 2022.
Related Party Transactions
While ONWARD does not have a related party transaction policy, it complies with the
recommendations of the Dutch Civil Code (DCC) in this respect.
The Dutch act to implement the EU Shareholder Rights Directive II (Bevordering van de
langetermijnbetrokkenheid van aandeelhouders, “Dutch SRD Act”) which entered into
force on 1 December 2019, added new rules on related party transactions to the DCC.
These rules stipulate that “material transactions” with “related parties” that are not
entered into within the ordinary course of business or not concluded on normal market
terms must be approved by the Board and be publicly announced at the time of or before
the transaction takes place. The Board is required to establish an internal procedure to
periodically assess whether transactions with related parties are concluded in the ordinary
course of business and on normal market terms.
In particular, all transactions between ONWARD and a shareholder holding 10% or more of
issued share capital should be agreed on customary terms. Decisions to enter into such
a transaction that is of material significance to the Company and/or to the Shareholder
concerned should be approved by the Board. Any such transaction should be disclosed
in the Company’s Board report, together with an affirmative statement that these
recommendations of the Code have been complied with.
No related party transactions with a shareholder holding 10% or more of the issued share
capital were reported to the Board in 2022.
General Meeting
The main powers of the General Meeting relate to:
•
the issuance of shares or rights to shares, restriction or exclusion of pre-emptive rights
of shareholders, repurchase of shares and reduction of the issued share capital
•
the amendment of the Articles of Association
•
the appointment, suspension and dismissal of members of the Board
•
decisions of the Board involving a significant change in the Company’s identity
of character
•
the approval of the remuneration policy of the Board
•
the adoption of the Financial Statements and declaration of dividends
•
the appointment of the Company’s external auditor
The Annual General Meeting is held within six months after the end of the financial year to
discuss and, if applicable, approve, the Annual Report, the Annual Accounts and any of the
other topics mentioned above.
The Annual General Meeting and, if necessary, other General Meetings, are convened by
the Board. The agenda and explanatory notes are published on the Company website.
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The first Annual General Meeting was held on 10 June 2022. The agenda, explanatory notes
and minutes are published on the Company website. The next Annual General Meeting is
scheduled for 15 June 2023.
ONWARD’s authorized share capital
(maatschappelijk kapitaal)
amounts to EUR
12,225,000 divided into 50,937,500 Ordinary Shares and 50,937,500 Preferred Shares
with a nominal value of EUR 0.12 each. At 31 December 2022, 30,184,388 Ordinary Shares
represented all issued capital. All of the issued Ordinary Shares are fully paid-up and
represent capital in the Company. Each shareholder of the Company is entitled to cast one
vote per share in a shareholders’ meeting. No shareholders have any voting rights different
from any other shareholder.
Deviations from the Best Practices Provisions of the Dutch Corporate Governance Code
ONWARD acknowledges the importance of good governance and is committed to
adhering to the best practices of the CGC as much as possible. As of the date of this
annual report, we report the following deviations from the CGC:
•
Best practice provision 2.3.4/5.1.4.
The CGC provides that the Compensation
Committee should not be chaired by the Chairperson of the Board. In deviation from
the CGC, the Compensation Committee is chaired by the Chairperson of the Board.
The Board considered that the experience and continuity of Jan Øhrstrøm being
chairperson of the Compensation Committee outweighs the disadvantages of him also
being the Chairperson of the Board. For the reasons provided, the Company does not
intend to fully comply with this best practice provision.
•
Best practice provision 2.3.4.
The CGC provides that more than half of the members
of the Committees should be independent within the meaning of best practice
provision 2.1.8. The Nomination and Corporate Governance Committee consists of
three directors: Jan Øhrstrøm (chair), John de Koning, and Regina Hodits. In deviation
from the CGC more than half of the committee members are not “independent”
within the meaning of the Code, namely John de Koning and Regina Hodits. The Board
considered that the experience and continuity of Dr. de Koning and Dr. Hodits outweigh
the disadvantages of these deviations from the CGC. For the reasons provided, the
Company does not intend to fully comply with this best practice provision.
•
Best practice provision 3.1.2 v
recommends that variable remuneration should
be linked to measurable performance criteria determined in advance. To align the
employee’s interest with the interests of the Shareholders and to allow the participation
in the long-term growth of the Company, options were granted to the management
team (including the Executive Director). There are no specific performance conditions
associated to these options, only a service condition. However, considering that the
value of the option is linked to the share price of ONWARD it includes an inherent
performance criterion. Furthermore, the size of the stock option is linked to the position
and job grade of the individual and is contingent on the performance of the individual.
We will consider if more clear measurable performance criteria should be added to
future grants.
•
Best practice provision 3.3.2.
The CGC recommends against providing equity awards
as part of the compensation of a non-executive director. In 2022, the new Interim
Director (Vivian Riefberg) was awarded 16,000 share options under the existing long-
term incentive plan as a signing bonus. This deviation was approved by the Board on
recommendation of the Compensation Committee. The grant is considered necessary
to serve the long-term interests and sustainability of the Company and to assure
its viability since such grant is instrumental to attract and retain a highly qualified
non-executive director in particular when compared to compensation practices in
the US. Our current non-executive director compensation policy does not include an
ongoing equity award for any non-executive director and we do not intend to make
supplemental equity awards outside of the policy going forward.
•
Best practice provision 3.3.3.
The CGC recommends that shares held by a non-
executive director in the company on whose board of directors they serve should be
held as a long-term investment. The Company’s Compensation Policy does not include
such a requirement.
•
Best practice provision 3.4.1iii
The CGC recommends that scenario analyses be
taken into consideration in determining the remuneration of the Executive Director. No
scenario analysis has been taken into consideration in determining the remuneration of
the Executive Director for 2022. The Remuneration Committee will consider performing
scenario analyses in 2023.
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•
Best practice provision 4.3.3.
The CGC recommends that the General Meeting should
be capable of passing a resolution cancelling the binding nature of a nomination or
dismissal by simple majority, representing no more than one-third of the issued share
capital. Under the Articles of Association, directors can only be appointed or dismissed
by the General Meeting by simple majority of votes cast, provided that the Board
proposes the appointment or dismissal. In other cases, the General Meeting can only
pass a resolution to appoint or dismiss a director by a two-thirds majority representing
more than half of the issued share capital. The Company deems this appropriate
considering the remaining shareholdings
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Analyzing, monitoring, and managing internal and external risks is crucial to ensuring
that we meet our ambitious targets, that our financial information is reliable, and that our
activities comply with all applicable laws and regulations. Current risks mainly concern
research and development of our ARC therapies, securing regulatory approvals,
protecting our intellectual property, and maintaining equity in the Company’s
mid- to long-term financing.
The Management Team is responsible for developing, implementing, and operating
adequate risk-management and internal control systems. The Board has a control function
with respect to these systems. Our risk-management and internal control systems are
reviewed, updated, and optimized as an ongoing process based on internal evaluations,
discussions with the Board and the Audit Committee, and audits from external parties.
The Company initiated its first formalized annual risk review, post IPO, at the end of 2022.
The outcome of the review has been incorporated into this report. Although we started
engaging consultants to support our increased focus on IT, cybersecurity and formalizing
our internal control framework, there were no major changes in the risk management and
control systems in the year under review.
As ONWARD has not established a separate internal audit function, the Board annually
assesses whether adequate alternative measures have been taken. Based on the
Audit Committee’s recommendations, Directors may consider whether it is necessary
to establish an internal audit function. In 2022, no material failings in the internal risk
management and control systems were discovered.
It should be noted that these systems cannot provide absolute assurance that the
Company will realize its targets, nor can they prevent all misstatements, errors, and
non-compliances with legislation, rules, and regulations.
Risk Management
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Risk Control Matters
Due to its size and history, the Company does not yet have a fully deployed and formalized
risk detection, evaluation, and management system in place. The Board and Management
Team continuously analyze potential risks, evaluate their (financial) impact and likelihood,
and determine appropriate measures to minimize these risks. Risk assessments are
updated in line with changing internal and external circumstances.
The Board and Management Team meet regularly to review developments, set targets
and milestones, and evaluate progress towards realizing them. During these meetings,
they also review ONWARD’s financial position and present budgets/cashflow forecasts,
which are followed up and regularly adjusted to changing prospects. The Management
Team monitors risks as they arise and evolve, assesses their development, and implements
necessary countermeasures as required.
To manage our business risks, we use highly experienced staff and external consultants
for our research and clinical studies. The results of our studies are monitored constantly,
closely, and systematically. This enables us to react early to new findings, and to conduct
preclinical and clinical activities. By closely monitoring the costs associated with these
activities through our regular internal budget and monitoring processes, we can recognize
any deviations from our financial plans early on and initiate appropriate countermeasures.
We are highly dependent on third parties to enable us to meet our regulatory requirements
and our own quality standards. We therefore take special care in selecting our contractors.
Major clinical trial and component service providers are selected through a stringent
selection process driven by the Management Team, in which we assess the quality and
experience of several candidates. We constantly review and assess the operational
performance of the organizations we work with.
We work with only highly specialized consultants and attorneys to secure and monitor our
intellectual property (IP). In addition, the Management Team regularly monitors ongoing
patent protection and potential conflicts.
Our risk-management and internal control systems in relation to our financial reporting
process is designed to provide reasonable assurance that our books and records
accurately reflect the transactions necessary to permit preparation of financial
statements; that the financial reporting is consistent and compliant with legal regulations
and generally accepted accounting principles; and that published financial data do not
contain any material misstatements. The system also provides reasonable assurance that
all receipts and expenditures are only made by people authorized to do so and that assets
are safeguarded. To manage risks associated with valuation uncertainties we engage
specialists with the required skills to assist with these valuations for financial reporting
purposes. This includes but is not limited to the valuation of the defined benefit obligation
and the determination of the fair value of options granted.
As part of this system, we have adopted various internal rules and regulations, including
standard operating procedures, the dual-control principle, spot checks, automated
expenses reimbursement tooling, internal contract approval processes, and signatory rules.
Risk Appetite
Our risk appetite differs according to the various risk categories ONWARD is exposed
to, namely:
Risks related to our business, strategy and industry
include adverse, unexpected
developments resulting from internal processes, people, and systems or from our external
research partners and external events, which are linked to the operation of the business.
We are prepared to take moderate risks to achieve our ambitions and to balance risk and
long-term reward.
Risks related to legal and government regulation
relate to unanticipated failures to
comply with applicable laws and regulations. We aim to minimize these risks by aiming to
comply fully with these laws and regulations.
Risks related to intellectual property.
We aim to minimize these risks, only accepting a
low level, to ensure that intellectual property is protected.
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Risks related to our financial position, need for additional capital, and taxation
occur
in connection with funding, treasury, tax, accounting, and reporting. ONWARD is prudent
with respect to these financial risks, with the aim of maintaining long-term solvency. We
are committed to transparent and truthful accounting and reporting that allow users
of financial statements to make decisions considering these risks. We currently do not
engage in any hedging activities. Our financial risk management is set out in note 4.3 of
our consolidated financial statements.
Description of the Principal Risks Associated With the Company’s Activities
The following section describes the main risks and uncertainties that we consider the
major threats to achieving our objectives. Additional factors not listed here may also
have an adverse effect on our business, financial condition, results of operations, and
prospects, and could adversely affect our share price. All of these risks are contingencies
which may or may not occur.
Risks Related to the Company’s Business, Strategy & Industry
ONWARD wholly depends on the success of two investigational devices, the ARC
IM
and
ARC
EX
platforms. Even if the Company completes clinical development and obtains
favorable clinical results for the initial indications it is pursuing, it may not be able to
obtain regulatory clearance or approval for, or successfully commercialize, its ARC
IM
and
ARC
EX
platforms.
ONWARD currently has two investigational devices in clinical development — the ARC
IM
and ARC
EX
platforms — and our business depends almost entirely on the successful
clinical development, regulatory clearance or approval, and commercialization of these
investigational devices, which may never occur. We currently have no products available
for sale, generate no revenues from sales of products, and may never successfully develop
marketable products.
Our ARC
IM
and ARC
EX
platforms will require substantial additional clinical development,
testing, manufacturing process development, and regulatory clearance or approval
before we are permitted to commence their commercialization. For example, before
obtaining Premarket Approval Application (PMA) approval from the U.S. Food and Drug
Administration (FDA) for our ARC
IM
platform, we must show, among other things, that the
product is safe and effective for use in each target indication, a process that can take
many years.
If we opt to seek approval via the FDA’s Humanitarian Device Exemption (HDE) pathway
for the commercial sale of ARC
IM
, we must show through extensive preclinical testing and
clinical trials that the product candidate does not pose an unreasonable or significant
risk of illness or injury, and that the probable benefit to health outweighs the risk of injury
or illness from its use, considering the probable risks and benefits of currently available
devices or alternative forms of treatment.
Of the substantial number of medical devices in development in the U.S., only a small
percentage successfully complete the regulatory clearance or approval process required
by the FDA and become commercialized. Similarly, many medical devices currently
in development will ultimately not obtain the certificate of conformity required for
commercialization in the European Economic Area (EEA). Therefore, even if we obtain the
requisite capital to continue funding our development and clinical programs, we may be
unable to successfully develop or commercialize our ARC
IM
and ARC
EX
platforms or any
other product candidate.
Enrollment and retention of patients in clinical trials is an expensive and time-consuming
process and could be made more difficult, or rendered impossible, by multiple factors
outside ONWARD’s control. This could significantly delay the completion of such trials or
may cause the Company to abandon one or more clinical trials.
ONWARD may encounter delays or difficulties in enrolling — or may be unable to enroll — a
sufficient number of patients to complete any of its clinical trials on its current timelines, or
at all. Even once candidates are enrolled, the Company may be unable to retain a sufficient
number of patients to complete any of its trials.
Patient enrollment in clinical trials, and completion of patient follow-up, depend on
many factors, including the size of the patient population, the nature of the trial protocol,
the proximity of patients to clinical sites, eligibility criteria for the clinical trial, patient
compliance, competing clinical trials, and clinicians’ and patients’ perceptions as to the
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potential advantages of the product being studied in relation to other available therapies,
including any new treatments that may be cleared or approved for the indications we
are investigating.
Patients may be discouraged from enrolling in ONWARD’s clinical trials if the trial protocol
requires them to undergo extensive post-treatment procedures or follow-up to assess the
safety and effectiveness of a product candidate, or they may be persuaded to participate
in contemporaneous clinical trials of a competitor’s product candidate. Patients
participating in our clinical trials may drop out before completion of the trial or experience
adverse medical events unrelated to its products. Delays in patient enrollment, or failure
of patients to continue participating in a clinical trial, may delay commencement or
completion of the clinical trial, cause an increase in the costs of the clinical trial or result
in failure of the clinical trial.
Since some of the indications that our investigational devices are intended to treat
are limited, ONWARD expects only a subset of patients with spinal cord injury (SCI) to
be eligible for its clinical trials. The protocols for our clinical trials generally mandate
that a patient cannot be involved in more than one clinical trial for the same indication.
Therefore, subjects who participate in ongoing clinical trials for products that compete
with our investigational devices are not eligible to participate in our clinical trials.
ONWARD cannot guarantee that any of its programs will identify a sufficient number of
patients to complete clinical development, pursue regulatory clearance or approval, or
market its investigational devices, if cleared or approved.
An inability to recruit and enroll a sufficient number of patients for any of its current
or future clinical trials would result in significant project delays, or may require us to
abandon one or more clinical trials altogether, which could impact ONWARD’s ability
to develop its investigational devices and may have a material adverse effect on its
business, results of operations, and financial condition.
The Company must obtain FDA clearance or approval before it can sell any of its products
in the U.S., and CE Certification before it can sell any of its products in the European
Union (EU). Approval of similar regulatory authorities in countries outside the U.S. and
the EU is required before it can sell its products in countries that do not accept FDA
clearance or approval or CE Certification. The Company may incur additional costs or
experience delays in completing, or ultimately be unable to complete, the development and
commercialization of its products if such clearance or approval is denied or delayed.
The development, manufacture, and commercialization of our products are subject to
government regulation. In the U.S., Europe, and most other countries, ONWARD must
complete rigorous preclinical testing and extensive clinical trials that exhibit the safety
and efficacy of our devices before we can apply for regulatory clearance or approval to
market them. Regulatory bodies such as the FDA may limit approval to specific indications,
restrict the distribution of a device, or refuse to grant clearance for additional or expanded
indications, which could limit our potential revenues.
Though we believe that our preclinical and clinical data will be sufficient to support
regulatory clearance or approval, if the data we submit is not acceptable to the relevant
regulatory authorities, clearance or approval may be delayed or may not be feasible, which
could adversely impact our business, time to market, and financial condition.
If cleared or approved, the Company may not be able to successfully commercialize
its ARC
EX
and ARC
IM
platforms. Failure to gain market acceptance would impact the
Company’s revenues and may materially impair its ability to continue its business.
Even if ONWARD receives regulatory clearances or approvals for the commercial sale
of our investigational devices, the commercial success of our products will depend
on, among others, their acceptance as a therapeutic and cost-effective alternative to
competing products and treatments for people with SCI, by medical professionals working
in the rehabilitation clinic setting, such as physicians, physical therapists, occupational
therapists, neurologists, and physiatrists, as well as by functional neurosurgeons, patients,
third-party payors such as health insurance companies, and other members of the
medical community. There can be no assurance that medical professionals, hospitals,
and rehabilitation clinics will adopt the use of ARC
EX
and ARC
IM
and establish training and
procedures to implement them. Market acceptance of, and demand for, any product we
may develop and commercialize will depend on many factors, both within and outside of
our control. Payors may view new or recently launched products, or products where limited
clinical data is available, as investigational, unproven, or experimental, and on that basis
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may deny coverage of procedures involving use of these products or require additional
clinical trials and data before providing coverage. If our investigational devices fail to
gain market acceptance, ONWARD may be unable to earn sufficient revenue to continue
our business.
If ONWARD obtains clearance or approval for its products, their commercial success will
depend in part on the level of reimbursement it receives from third parties for the cost of
its products to users.
In most markets, third parties such as health insurers, government-managed health care
schemes, or managed care organizations decide which treatments they will cover and how
much of the cost they will reimburse. These reimbursement systems vary widely, meaning
that approval for reimbursement must be obtained on a country-by-country basis.
ONWARD’s business could be adversely affected if hospitals or other users are not able
to obtain and maintain coverage and adequate reimbursement for procedures using
our devices.
Additionally, third-party payers, especially in the United States, are increasingly examining
not only product safety and effectiveness but also their cost effectiveness when making
coverage and payment decisions. It is uncertain whether the Company’s current products,
or any planned or future products, will be viewed as sufficiently cost effective to warrant
coverage and adequate reimbursement levels in any given jurisdiction.
If its investigational devices are cleared or approved, the Company will need to receive
access to hospital facilities and clinics, or its sales may be negatively impacted.
In the United States, in order for physicians or clinicians to use ONWARD’s products, we
expect that the hospital facilities or clinics where these physicians or clinicians treat
patients may require us to enter into purchasing contracts. This process can be lengthy
and time-consuming and can require extensive negotiations and management time. In
Europe, certain institutions may require us to engage in a contract bidding process if
the expected purchase commitments exceed specified cost thresholds, which vary by
jurisdiction. If ONWARD does not receive access to hospital facilities or clinics via these
contracting processes or otherwise, or if we are unable to secure contracts or tender
successful bids, our sales and operating results may be negatively impacted.
The Company relies on a limited number of third-party suppliers and contract
manufacturers to produce and assembly its products. Loss or degradation in performance
of these suppliers and contract manufacturers could have a material adverse effect on
its business, financial condition, and results of operations.
Reliance on a limited number
of third-party suppliers and in some cases single-source suppliers, makes the Company
vulnerable to supply shortages and problems and price fluctuations, which could further
harm our business.
We rely on a limited number of third parties, some of whom are sole suppliers, to purchase
materials and components, and/or to manufacture and assemble our ARC
EX
and ARC
IM
platforms. Our ability to supply our products for clinical trials and, ultimately, to market
them and to develop future products, depends on the availability of sufficient quantities of
materials, components, and manufacturing services that meet regulatory requirements.
While we seek to maintain sufficient levels of inventory at all times, this may not fully
protect us from supply interruptions.
Our suppliers and contract manufacturers have generally met our demand for their
products and services on a timely basis. However, relationships with suppliers may be
disrupted due to a number of factors, such as unforeseen events that delay production or
a decision by either party to terminate the relationship.
If that occurs, we are confident that we will find alternative suppliers to meet all our
needs. However, due to the relatively low volume of orders and the bespoke nature of our
requirements, establishing new relationships would be a time-consuming and expensive
process. We would need to verify that the new supplier or third-party manufacturer
maintains their facilities, procedures, and operations in accordance with ONWARD’s
quality standards and all applicable regulatory requirements. In addition, our contract
manufacturers could require that we move production to a different facility or use
alternative materials or components. Any of these events could require us to modify
the designs or specifications of our products, and to secure new regulatory approval
before implementing the change, which could result in further delay or a refusal to
grant clearance.
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If there are quality issues, or if the performance of its products does not meet the
expectations of physicians or patients, the Company may be subject to claims and liability,
and its brand, reputation, and business could be adversely affected.
In the course of conducting our business, ONWARD must adequately address quality
issues that may arise with the ARC
EX
and ARC
IM
systems, including defects in third-
party components included in its products. Additionally, even if free of quality issues,
our products may not meet the expectations of physicians or patients with respect to
achieving desired results.
The internal procedures designed to minimize risks that may arise from quality issues may
not sufficiently eliminate or mitigate occurrences of these issues and associated liabilities.
Moreover, even in the absence of quality issues,
we may be subject to claims and liability
if our products’ performance does not meet expectation of physicians or patients in both
clinical and commercial settings.
The Company relies on relationships with academic research centers to support its
research and development activities and may not be able to enhance its product offerings
through its research and development efforts.
ONWARD’s primary research partnership is with .NeuroRestore, a joint initiative of L
’École
polytechnique fédérale de Lausanne (EPFL) and Le Centre hospitalier universitaire
vaudois (CHUV) in Lausanne, Switzerland, with whom we have an exclusive IP and
commercialization license agreement. We also have relationships with several leading
research universities around the world, including California Institute for Technology
(Caltech), the University of California at Los Angeles (UCLA), and the University of
Louisville (U.S.A) and the University of British Columbia (Canada).
.NeuroRestore’s conducts ground-breaking research ranging from basic and preclinical
research all the way to human proof-of-concept studies. ONWARD will select the most
promising projects developed by .NeuroRestore to develop and commercialize, primarily
based on clinical results and commercial viability. If our relationships with .NeuroRestore
or our other academic partners were to be terminated or otherwise modified, it could
adversely affect our ability to expand potential indications for ARC Therapy in future.
Grégoire Courtine, ONWARD’s Chief Science Officer, is a professor at EPFL. If this potential
conflict of interest is not prudently managed, it could adversely affect our ability to license
intellectual property from EPFL and commercialize therapies that rely on that IP.
ONWARD may also decide to invest in developing new partnerships and licensing
agreements to provide us with new product offerings without significant research and
development activities. However, these agreements may not give us exclusive rights to
use the intellectual property for all relevant fields of use or territories where we wish to
develop or commercialize our products. As a result, we may not be able to prevent other
companies from developing and commercializing competing products. Moreover, if these
licenses were terminated, competitors would have the freedom to develop products similar
or identical to ours.
Despite thorough market research, our products may not incorporate all the features
sought by consumers, their caregivers, or their healthcare providers. We may also
experience delays in various phases of product development that cause customers to
delay or forgo purchase of our devices. Even if we successfully develop these products,
they may not generate sales in excess of the costs of development. Finally, they may be
quickly rendered obsolete by changing consumer preferences or the arrival of competing
products with new technologies or features.
Interim, “topline”, and preliminary data from its clinical trials that the Company announces
or publishes from time to time may change as more patient data become available and are
subject to confirmation, regulatory audit, and verification procedures that could result in
material changes in the final data.
From time to time, ONWARD may publicly disclose preliminary, interim, or “topline”
data
from our preclinical studies and clinical trials, based on a preliminary analysis of the data
available at the time. Preliminary results are subject to change and should be viewed with
caution. They may differ from future results of the same studies, or they may be qualified
with different conclusions or considerations once the final data has been fully evaluated.
That is because clinical outcomes may materially change as continued patient enrolment
and treatment makes more patient data available, or as clinical trial participants continue
other treatments for their disease. Differences between preliminary or interim data and
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final data could significantly harm our business prospects. In addition, disclosure of
interim data by ONWARD or our competitors could result in volatility in our share price.
If the preliminary, interim, or topline data that we report differ from actual results, or if
third parties, including regulatory authorities, disagree with the conclusions reached,
this could adversely affect our ability to obtain approval for and commercialize our
investigational devices, and could harm our business, operating results, prospects, or
financial condition.
The Company’s operations and reputation may be impaired if its information technology
systems fail to perform adequately or if it is the subject of a data breach or cyber-attack.
Our information technology (IT) systems are essential to the business’ successful
operation. We seek to allocate and manage the necessary resources to build, maintain,
and protect our IT systems and infrastructure, as well as oversee third-party service
providers. Any failure of our IT systems to perform as anticipated could disrupt our
operations and result in transaction or reporting errors that could harm our business.
Our IT systems may be vulnerable to cyber-attacks or other security incidents,
service disruptions, or other system or process failures. Such incidents could result in
unauthorized access to vendor, consumer, or other types of confidential data, as well as
disruptions to operations. While we have experienced such incidents in the past, none has
been material to date.
We rely on third-party vendors for some of our IT processes and data management needs,
which makes our operations vulnerable to a failure by any one of these vendors to perform
adequately or to maintain effective internal controls.
To address these risks, we maintain an information security program that includes
updating technology, developing security policies and procedures, implementing and
assessing the effectiveness of controls, conducting risk assessments of third-party
service providers, and adopting business processes designed to mitigate the risk of
security breaches. However, there can be no assurance that these measures will prevent
or limit the negative impact of a future incident on our operations or business reputation.
A pandemic, epidemic, or outbreak of an infectious disease in Europe, the U.S., or
worldwide, including the outbreak of the novel strain of coronavirus disease (COVID-19),
could adversely affect its business.
In 2021, the Company’s business, financial condition, and results of operations were
negatively affected by COVID-19 pandemic and the various restrictions and measures
imposed by national, state, and local authorities in an effort to control the spread of the
disease. Among others, research and development of our ARC
IM
System was impacted
by work-from-home requirements, limiting our ability to test and debug hardware and
software systems, as these processes require access to laboratories and equipment.
We experienced delays in patient enrollment in our Up-LIFT Study from September 2020
to January 2021, and reduced productivity as a result of employees’ inability to work
due to illness.
A future wide-scale outbreak of infectious disease similar to COVID-19 could negatively
affect our business in numerous ways. Our sales representatives, clinical specialists,
and other personnel may be unable to travel and access customers for training and case
support. Our production schedule may be affected if suppliers cannot manufacture or
deliver parts and components on time. Pandemic-related restrictions could lead to,
among others, inventory shortages or obsolescence; delays in approval of our devices by
regulatory authorities; delays in decisions by insurance companies regarding coverage of
our products; delays in clinical trials; delays in growing our sales organization; adjustments
or disruptions to the business of third parties we work with, including suppliers, medical
institutions, and clinical investigators; decrease in collectability of our account receivables
due to the adverse impact of the pandemic on our clients’ cash flows; and reduced
capacity of our suppliers to advance our investigational devices through clinical trials.
While it is difficult to predict the potential economic impact and duration of a future
outbreak, the current pandemic has resulted in significant disruption of global financial
markets, reducing our ability to access capital, which could in the future negatively affect
our liquidity. In addition, a recession or market correction could have an adverse effect on
our long-term business as hospitals reduce capital spending.
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To the extent that a pandemic (like COVID-19) adversely affects our business and financial
results, it may also heighten many other risks described in this section, including those
relating to incurring future operating losses, advance of the ARC
EX
and ARC
IM
platforms
through regulatory pathways, and, if cleared or approved, successful commercialization,
supply chain, and distribution channels.
The Company’s success depends on its ability to retain its management, consultants and
other key personnel.
ONWARD depends on its senior management as well as key scientific personnel. In 2020,
Dave Marver was appointed as Chief Executive Officer. ONWARD’s Chief Scientific Officer,
Prof. Courtine, has been on the team since inception, in 2015, and currently serves as a
consultant. The loss of any members of senior management or key scientific personnel
could harm our business and significantly delay or prevent the achievement of research,
development, or business objectives.
Our future success also depends on our ability to attract, hire, train, and retain other highly
skilled scientific, technical, marketing, managerial, and financial personnel, as well as
sales personnel once commercialization begins. Although we will make every effort to hire
and retain qualified employees whose experience and abilities meet our needs, there is
no assurance that we will succeed. Competition for personnel in the medical technology
industry is intense, and any failure to attract and retain the necessary personnel would
have a material adverse effect on our business.
Risks Related to Government Regulation
The Company may not receive the necessary approvals, granted De Novo classifications,
or clearances for its ARC
EX
and ARC
IM
platforms or future devices and expanded
indications. Failure to obtain these regulatory clearances or approvals on a timely basis
would adversely affect its ability to grow its business.
ONWARD is seeking De Novo classification by the FDA to market ARC
EX
for use in clinics in
the U.S. If this is granted, we intend to pursue additional regulatory clearances, including
for at-home use. ARC
IM
is a Class III device that will require PMA approval to be marketed in
the U.S., while for at least one indication, it may pursue HDE approval. In Europe, under the
MDR, ARC
EX
is expected to be designated as a Class IIa device and ARC
IM
as Class III.
The road to regulatory approval of a new medical device is long, expensive, and uncertain.
The FDA and other regulatory authorities can delay, limit, or deny approval, grant of a De
Novo classification, or clearance of a device for many reasons, including:
•
Inability to show that the products are safe or effective for their intended uses (or, for a
510(k) device, that they are substantially equivalent to the predicate)
•
Disagreement with the design or implementation of clinical trials or the interpretation
of data
•
Serious and unexpected adverse device effects experienced by participants in
clinical trials
•
Insufficiently supportive data from preclinical studies and clinical trials
•
Inability to show that the clinical and other benefits of the device outweigh the risks
•
Manufacturing process or facilities used do not meet applicable requirements
•
Changes in policies or regulations that increase cost of compliance or render clinical
data and filings insufficient for approval or clearance
Despite the time, effort, and cost invested, our investigational devices may not pass
these stringent regulatory hurdles, which could harm our business. In addition, regulatory
authorities may place restrictions on the indicated uses of the device, limiting its market
size. If the FDA requires us to go through a longer, more rigorous process than expected
for future products, or for modifications to existing products, their introduction could be
delayed or cancelled, which could adversely affect our ability to grow our business.
In the EEA, compliance with the requirements of the Council Directive 93/42/EEC (EU
Medical Devices Directive) is a prerequisite to be able to affix the Conformité Européenne
(CE) mark to our products, without which they cannot be sold or marketed in the EEA.
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The EU Medical Devices Directive is being replaced by a new Medical Devices Regulation
(MDR) in the EEA (Regulation (EU) 2017/745). The MDR, which became fully applicable on
26 May 2021, imposes the same basic requirements as the EU Medical Devices Directive
(MDD), but is generally more stringent, especially in terms of risk classes and the oversight
provided by notified bodies that perform conformity assessments of devices.
Following its departure from the EU on 31 January 2020, the UK continued to follow the
same regulations as the EU during a transition period, which ended on 31 December 2020.
Since then, all medical devices must be registered with the Medicines and Healthcare
products Regulatory Agency (MHRA) before being sold on the UK market.
European CE marks will continue to be recognized in UK until 30 June 2023, after which a
UK Conformity Assessed (UKCA) mark will be required for a medical device to be marketed
in the UK. Since the new MDR will not automatically apply in the UK, regulation of medical
devices in the UK may diverge from EU regulations in future.
On November 28, 2022, the
Swiss Parliament reached a key decision by instructing the Swiss Federal Council to adapt
national laws to enable Switzerland to accept medical devices with FDA approval.
In general, If ONWARD fails to remain compliant with all applicable European laws and
regulations, we would be unable to continue to affix the CE mark to our products, which
would prevent us from selling them within the EEA, adversely affecting our business.
Similarly, our ability to market our products in the UK could be affected by any failure to
maintain compliance with UK regulations.
The clinical development process required to obtain regulatory clearances or approvals
is lengthy and expensive, with uncertain outcomes. Data generated in clinical trials is
subject to interpretation by EU regulators, the FDA, and foreign regulatory authorities. If
clinical trials of the current ARC
EX
platform and ARC
IM
platform and future products do
not produce the results necessary to support regulatory clearance or approval, De Novo
classification, or clearance in the U.S. or -- with respect to the Company’s current or future
products — elsewhere, it will be unable to commercialize these products. It therefore
may incur additional costs or experience delays in completing, or ultimately be unable to
complete and commercialize those products.
Significant setbacks or failure can occur at any time during the clinical development
process, adversely affecting the cost, timing, or successful completion of trials. The
following circumstances could harm our ability to complete development or commercialize
our products:
•
The FDA may reject our investigational device exemption (IDE) application and notify
us that we may not begin investigational human clinical trials
•
Regulatory authorities may disagree as to the design or implementation of our
clinical trials
•
Regulators and/or institutional review boards (IRBs) may not authorize us or our
research partner to begin or continue a clinical trial at a particular site
•
We may be unable to agree on acceptable terms with prospective contract research
organizations (CRO) and clinical trial sites, the terms of which can vary significantly
and require long negotiations
•
Clinical trials may produce negative or inconclusive results, or we may not agree with
regulatory authorities on the interpretation of these results; consequently, we may
decide, or be required by regulators, to conduct additional clinical trials or abandon the
development of a product
•
The number of subjects or patients required for clinical trials may be larger than we
anticipated, enrollment in these trials may be insufficient or slow, and/or the number
of trials being conducted at any given time may be high, resulting in fewer available
patients for our clinical trial, or patients may drop out at a higher than expected rate
•
Our third-party contractors may fail to comply with regulatory requirements or meet
their contractual obligations in a timely manner, or at all
•
We may have to suspend or terminate clinical trials for various reasons, including a
finding that the subjects are being exposed to unacceptable health risks
•
We may have to amend clinical trial protocols or conduct additional studies to reflect
changes in regulatory requirements or guidance
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•
We may be required to terminate clinical research for various reasons, including safety
issues or non-compliance with regulatory requirements
•
The cost of clinical trials may be greater than anticipated
•
Clinical sites may not adhere to the clinical protocol or may drop out of a trial
•
We may be unable to recruit a sufficient number of trial sites or trial subjects
•
Regulators, IRBs, or other reviewing bodies may fail to approve or subsequently find
fault with our manufacturing processes; the supply of devices or other materials
necessary to conduct clinical trials may be insufficient, inadequate, or not available at
an acceptable cost
•
Approval policies or regulations may change in a manner that renders our clinical data
insufficient for approval
•
Our current or future products may have undesirable side effects or other
unexpected characteristics
We depend on CROs to conduct clinical trials in a timely manner and in compliance
with good clinical practice (GCP) requirements. If a CRO fails to comply fully with GCP
standards or experiences delays in conducting the trial, this could result in increased
costs and/or program delays. In addition, conducting clinical trials in countries outside
the U.S. and Europe may entail additional delays, shipment costs, or regulatory
requirements, as well as risks associated with clinical investigators who are unknown to
the FDA, or with different standards of diagnosis, screening, and medical care. Any of
these occurrences could adversely affect the Company’s business, financial condition,
and results of operations.
We may from time to time publicly announce the date at which we expect to reach
various clinical, regulatory, or product development milestones. These could include the
submission of an IDE application to the FDA to begin a clinical trial, the enrollment of
patients in a trial, or the release of data from clinical trials. However, the actual timing of
these milestones may vary dramatically compared to our estimates, in some cases for
reasons beyond our control, potentially delaying the commercialization of our products or
causing our share price to decline.
Failure to comply with post-marketing regulatory requirements could subject the Company
to enforcement actions, including substantial penalties, and might require the Company to
recall or withdraw a product from the market.
If we successfully secure FDA approval and clearance, our investigational devices will
remain subject to oversight and regulation by the FDA throughout the manufacturing and
commercialization processes. In particular, we and our suppliers or manufacturers will be
required to comply with the FDA’s Quality System Regulations (QSR), covering the way we
conduct and document the design, testing, production, control, quality assurance, labelling,
packaging, sterilization, storage, and shipping of our products.
The FDA audits compliance with the QSR and other regulatory requirements through
periodic announced and unannounced inspections of manufacturing and other facilities.
Failure to meet these QSR requirements could delay production and lead to fines,
difficulties in obtaining regulatory clearances and approvals, withdrawal of PMAs that
have already been granted, product recalls, and various enforcement actions or sanctions.
Such compliance failures or sanctions could have a material adverse effect on our
reputation, business, results of operations, and financial condition.
Failure to comply with post-marketing regulatory requirements could subject the Company
to enforcement actions, including substantial penalties, and might require the Company to
recall or withdraw a product from the market.
If we receive regulatory clearance or approval for our investigational devices, we will be
subject to ongoing and pervasive regulatory requirements governing, among other things,
their manufacture, marketing, labeling, packaging, advertising, medical device reporting,
sale, promotion, registration, storage, distribution, and listing. For example, ONWARD must
submit periodic reports to the FDA as a condition of PMA approval. These reports include
safety and effectiveness information about the device after its approval. Failure to submit
such reports or to do so in a timely manner could result in enforcement action by the FDA.
Following its review of the periodic reports, the FDA might ask for additional information or
initiate further investigation.
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In addition, the PMA approval for ARC
IM
Therapy may be subject to several conditions of
approval, including a post-market extended follow-up of the premarket study cohort. Any
failure to comply with the conditions of approval could result in the withdrawal of PMA
approval and the inability to continue to market the device. Adverse outcomes in these
studies could also be grounds for withdrawal of approval of the PMA.
The regulations to which ONWARD is subject are complex, and have become more
stringent over time. Regulatory changes could result in restrictions on our ability
to continue or expand our operations, higher than anticipated costs, or lower than
anticipated sales. Even after the proper regulatory authorization to market a device
has been obtained, we have ongoing responsibilities under FDA and EU regulations and
applicable laws and regulations of other countries.
Any failure to comply with applicable regulatory requirements could result in enforcement
action by the FDA, state, EU or national regulatory authorities. Sanctions could include
warning letters, fines, injunctions, consent decrees or civil penalties; recalls, termination
of distribution, administrative detention, or seizure of products; suspension of one or more
clinical studies; customer notifications, repair, replacement or refunds; restriction, partial
suspension or total shutdown of production; delays in or refusal to grant requests for
future regulatory approvals of new products, uses, or modifications to existing products;
withdrawals or suspensions of current regulatory approvals; prohibitions on sales, imports,
or exports of our products; FDA refusal to issue certificates to foreign governments needed
to export our products for sale in other countries; and criminal prosecution.
Any of these sanctions could result in higher than anticipated costs or lower than
anticipated sales and have a material adverse effect on our reputation, business, financial
condition, and operating results.
In the case that the Company obtains approval for its products, it may be subject to
enforcement action if it engages in improper marketing or promotion of its products.
ONWARD is not permitted to promote or market ARC
EX
and ARC
IM
so long as they remain
investigational products. If approved, our promotional materials and training methods
must comply with FDA and other applicable laws and regulations, including the prohibition
of the promotion of unapproved, or off-label, use. Surgeons may use our products off-label,
as the FDA does not restrict or regulate a surgeon’s choice of treatment within the practice
of medicine. However, if the FDA determines that ONWARD’s promotional materials or
training methods constitutes promotion of an off-label use, it could request us to modify
them or subject us to regulatory or enforcement actions. Other federal, state, or national
enforcement authorities could also take action if they consider our promotional or training
materials to constitute promotion of an off-label use, which could result in significant
fines or penalties under other statutory authorities, such as laws prohibiting false claims
for reimbursement. In that event, our reputation could be damaged and adoption of our
products could be impaired. In addition, the off-label use of our products may increase the
risk of product liability claims, which are expensive to defend and could divert the attention
of management, result in substantial damage awards, or harm our reputation.
Even if cleared or approved by regulatory authorities, its products may cause or contribute
to adverse medical events or be subject to failures or malfunctions that the Company
is required to report to the FDA, and if it fails to do so, it would be subject to sanctions
that could harm its reputation, business, financial condition and results of operations.
The discovery of serious safety issues with its products, or a recall of its products, either
voluntarily or at the direction of the FDA or another governmental authority, could have a
negative impact on the Company.
In the event that we receive clearance or approval by regulatory authorities, we will be
subject to the FDA’s medical device reporting regulations and similar foreign regulations.
This will require us to report to the FDA when we become aware of information that
reasonably suggests that our products may have caused or contributed to a death or
serious injury or malfunctioned in a way that, if it were to recur, could cause or contribute
to a death or serious injury. The timing of this obligation to report is triggered by the date
we become aware of the adverse event, as well as the nature of the event. ONWARD may
inadvertently fail to report adverse events within the prescribed timeframe. We may also
fail to recognize that we have become aware of a reportable adverse event, especially if it
is not reported to us as such, or if the adverse event is unexpected or removed in time from
the use of our products. If we fail to comply with our reporting obligations, the FDA could
take action, including warning letters, untitled letters, administrative actions, criminal
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prosecution, civil monetary penalties, revocation of device approvals, seizure of our
products, or delay in clearance or approval of modifications to our products.
The FDA and foreign regulatory authorities have the authority to require the recall of
commercialized products in the event of material deficiencies or defects in design or
manufacture of a product or in the event that a product poses an unacceptable risk to
health. The FDA’s authority to require a recall of our products must be based on a finding
that there is reasonable probability that they may cause serious injury or death. ONWARD
may also choose to voluntarily recall products if any material deficiency is found. A
government-mandated or voluntary recall could occur as a result of an unacceptable risk
to health, component failures, malfunctions, manufacturing defects, labeling or design
deficiencies, packaging defects, or other deficiencies or failures to comply with applicable
regulations. Depending on the corrective action that we takes to redress deficiencies or
defects that may occur in the future, the FDA may require, or we may decide, that we need
to obtain new approvals for our products before marketing or distributing the corrected
device. Seeking such approvals may delay our ability to replace the recalled devices in a
timely manner. Moreover, if we fail to adequately address problems associated with our
products, we may face additional regulatory enforcement action.
Companies are required to maintain certain records of recalls and corrections, even if they
are not reportable to the FDA. In the future, ONWARD may initiate voluntary withdrawals or
corrections to our products that we may determine do not require notification of the FDA.
If the FDA disagrees with our determinations, it could require us to report those actions as
recalls and subject us to enforcement action. Such a recall announcement could harm our
reputation with customers, potentially lead to product liability claims, and negatively affect
sales. Any lawsuit or corrective action, whether voluntary or involuntary, would require the
dedication of considerable time and capital, possibly impacting our financial results.
Additionally, the identification of undesirable side effects or other previously unknown
problems caused by our products could lead to a number of negative consequences.
Among others, regulatory authorities might withdraw approvals; impose product recalls;
require us to add warnings, contraindications, or narrower indications in the product
labeling, or to issue of field alerts to physicians and pharmacies; require us to create a
guide outlining the risks of such side effects for distribution to patients; impose limitations
on how we promote our products; require us to change the way the product is administered
or modify the product; and require additional clinical trials or costly post-marketing testing
and surveillance to monitor the safety or efficacy of the product. Any of these requirements
could prevent us from achieving or maintaining market acceptance of our products,
substantially increase the costs of commercializing our products, or impacts our sales. The
demand for our products could also be negatively impacted by any adverse effects of a
competitor’s product or treatment.
Risks Related to the Company’s Intellectual Property
The Company licenses certain technology underlying the development of its
investigational devices. Loss of a license would result in a material adverse effect on
its business, financial position, and operating results and cause the market value of its
Ordinary Shares to decline.
ONWARD licenses technology from EPFL, UCLA, Caltech, University of Louisville,
University of Minnesota, University of Calgary, and University of British Columbia that is
integrated into our company portfolio under five licenses, each exclusive in the Company’s
Field of Uses. Under our different license agreements, the Company has agreed to
milestone payments and/or to meet certain reporting obligations.
Were the Company to breach any obligations under these agreements, licensors would
have the right to terminate the agreements. In addition, licensors have the right to
terminate their respective licenses upon the bankruptcy or receivership of the Company.
If the Company is unable to continue to use or license this technology on reasonable terms,
or if this technology fails to operate properly, we may not be able to secure alternatives,
negatively affecting our ability to develop our products.
It is difficult and costly to protect its IP and its proprietary technologies, and the Company
may not be able to ensure their protection.
We rely on a combination of patents and trade secrets to protect the IP related to
our proprietary technologies. Patents and other proprietary rights provide uncertain
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protections, and we may be unable to protect our IP for various reasons, including complex
factual and legal issues that create uncertainty as to the validity, scope, and enforceability
of a particular patent. As a result, we may be unsuccessful in defending our patents and
other proprietary rights against third-party challenges, which could have a material
adverse effect on our business.
Patents do not automatically provide a competitive advantage. Competitors may be able
to design around our patents and develop products that provide comparable or superior
outcomes. Any changes we make to our products, including design improvements that we
believe make them more marketable, may not be covered by previously licensed patents.
We may be required to file new applications and/or seek other forms of protection covering
these alterations.
Changes in either patent laws or their interpretation in the U.S. and other countries may
diminish our ability to stop third parties from making, using, selling, or importing products
that infringe on our intellectual property. Infringement and/or misappropriation suits are
expensive and time-consuming to prosecute, and could result in a court deciding that one
or more of our patents is invalid, unenforceable, or both. Even if the validity of our patents
is upheld, a court may refuse to stop the other party from using the technology on the
grounds that their activities are not covered by the patents.
We may in future obtain certain IP related to our technology from third parties. If that is the
case, we cannot be certain that these third parties took the necessary actions to maintain
the IP rights or that their transfer to us was proper and effective. As a result, we may be
subject to claims challenging their ownership or enforceability, which would limit our ability
to prevent competitors from making or selling duplicate or similar technologies for which,
or in countries where, we have no patent protection.
In addition to patents, we rely on trade secrets to protect our technology. We have
established policies to protect our trade secrets, but these may not be effective in
preventing misappropriation or unauthorized disclosure. Litigating a trade secret claim
is expensive and time-consuming, and the outcome may be unexpected. In addition,
courts outside the U.S. are sometimes less willing to protect trade secrets. Moreover, our
competitors may independently develop knowledge and/or methods allowing them to
create substantially similar products or services without misappropriating our trade secrets.
Patent terms may be inadequate to protect the Company’s competitive position on its
future products for an adequate amount of time.
In both the U.S. and Europe, a patent’s lifespan is generally 20 years from its earliest filing
date. Various extensions may be available, but the life of a patent, and the protection it
affords, is limited. Even if patents covering the Company’s future products are obtained,
once the patent has expired, it may be open to competition from competitive products.
ONWARD’s current patent portfolio will begin to naturally expire in 2031. However, given
the amount of time required for the development, testing, and regulatory review of new
products, certain patents protecting our future products may expire before or shortly after
commercialization begins. As a result, our patent portfolio may not provide the Company
with sufficient rights to exclude others from commercializing similar or identical products
for a sufficient amount of time.
If the Company is unable to protect the confidentiality of its trade secrets, its business or
competitive position could be harmed.
To protect our confidential and proprietary information, we rely on non-patent protection
such as trademark or trade secret protection and confidentiality agreements with
employees, consultants, vendors, and third parties. We also implement commonly accepted
physical and technological security measures to protect our confidential information.
However, these measures may not prevent an employee or consultant from
misappropriating our trade secrets and providing them to a competitor. Unauthorized
parties may also attempt to copy or reverse-engineer certain aspects of our products
that we consider proprietary. Enforcing a claim that a party illegally disclosed or
misappropriated a trade secret can be expensive and time-consuming, and the outcome
is unpredictable. The criteria for protecting trade secrets can vary among different
jurisdictions. Moreover, trade secrets may be independently developed by others in a way
that could prevent legal recourse.
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If any of our confidential or proprietary information were to be disclosed or
misappropriated, or if any such information was independently developed by a competitor,
our business and competitive position could be harmed.
The Company relies on licenses and sublicenses to certain patent rights with third parties.
If the Company fails to comply with its obligations under its patent licenses with third
parties, it could lose license rights that are important to its business. In addition, the
Company may not be able to control the prosecution or maintenance of such patent rights,
which could adversely affect its business.
ONWARD relies on licenses and sublicenses to certain patent rights and other IP from third
parties that are necessary for developing our products, including the software modules
that we expect to integrate into our ARC
EX
and ARC
IM
platforms. All of the following
circumstances related to licensing could have a material adverse effect on our competitive
position, business, financial conditions, results of operations, and prospects:
•
Future licenses we enter into may not provide exclusive rights to use the related IP
for all fields of use or territories in which we wish to develop or commercialize our
products; we therefore would not be able to prevent other companies from developing
or marketing competing products
•
As some of the underlying IP rights related to a license would not belong to us, our rights
would be subject to the continuation and compliance with the terms of the licensing
agreement; if the agreement were terminated, competitors would have the freedom to
develop and market products similar or identical to ours
•
If our licensor concludes that we have materially breached the license agreement and
terminates it, we may have to cease developing, manufacturing, or marketing any
product covered by these agreements
•
A license agreement may not grant us the right to control the preparation, filing,
prosecution, or maintenance of patents and patent applications covering our products;
if our licensing partner fails to adequately manage these rights, we may be unable to
prevent competitors from developing or commercializing similar or identical products
•
Where we have the right to control the prosecution and maintenance of relevant
patents, we may still be adversely affected by actions that took place prior to the date
in which we assumed control
•
Where we are permitted to pursue the enforcement or defense of these patents, we
cannot be certain that the licensors will provide us with the necessary cooperation, or
that they will allocate sufficient resources to defend their interests; an adverse outcome
from any legal action, even if we are not a party to it, could harm our business by
preventing us from continuing to license IP we need to operate our business
•
If other third parties, in addition to the licensor, have ownership rights to these patents,
they may be able to license them to our competitors; we may need to obtain additional
rights from them or we could be prevented from developing and commercializing the
related products
•
If we need to amend existing licenses, the licensor may impose terms that are more
favorable to them, including terms that could enable third parties (potentially including
our competitors) to receive licenses to a portion of the related IP
The Company may be required to pay certain milestones and/or royalties and fulfil other
obligations under its license agreements with third-party licensors.
ONWARD may be required to pay milestones and/or royalties related to the development
or commercialization of products using technologies that we may license or sublicense
from third parties. These payments could adversely affect our profitability related to
products that we may seek to develop or commercialize in future.
We may need to meet specified milestones or fulfill certain obligations to maintain these
licensing agreements, such as devoting a certain quantity of resources to developing our
products. Failure to satisfy such obligations could result in the termination of our rights
under such agreements.
The Company may in the future become involved in lawsuits to defend itself against
intellectual property disputes, which could be expensive and time consuming, and
ultimately unsuccessful, and could result in the diversion of significant resources, and
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hinder its ability to commercialize its existing or future products.
ONWARD’s success depends in part on not infringing the patents or violating the other
proprietary rights of others. Significant litigation regarding patent rights occurs in the
medical industry. Intellectual property disputes can be costly to defend and may cause our
business, operating results and financial condition to suffer.
Whether merited or not, it is possible that US and foreign patents and pending patent
applications controlled by third parties may be alleged to cover ONWARD’s products.
Determining whether a product infringes a patent, as well as priority of inventions and
other patent-related disputes, involves complex legal and factual issues and the outcome
is often uncertain. While we have conducted a significant search of patents issued to third
parties, this is not a guarantee that we will not face intellectual property suits in relation to
our patent portfolio.
Additionally, third-party patents containing claims covering our technology or methods
that predate our patents may exist. Because of the number of patents issued and patent
applications filed in the fields related to our products, our competitors or other third
parties may assert that our technology and the methods employed in the use of products
incorporating our technology are covered by patents they hold. In addition, because
patent applications can take many years to issue and because publication schedules
for pending applications vary by jurisdiction, there may be applications now pending, or
published but not yet granted, of which we are unaware.
As the number of competitors in the medical devices market increases, and as the
number of patents issued in this area grows, the possibility of infringement claims against
ONWARD increases. Defending against such litigation is costly and time consuming, and
the uncertainties resulting from litigation could negatively affect our ability to raise the
funds necessary to continue to operate. Moreover, any potential patent or intellectual
property litigation could force ONWARD to do one or more of the following:
•
stop selling, making, using, or exporting products that use the disputed
intellectual property;
•
obtain a license from the intellectual property owner to continue selling, making,
exporting, or using products, which may require substantial royalty payments and may
not be available on reasonable terms;
•
incur significant legal expenses;
•
pay substantial damages or royalties to the party whose intellectual property rights it
may be found to be infringing;
•
if a license is available from a third party, we may have to pay substantial royalties,
upfront fees or grant cross-licenses to intellectual property rights for our products
and services;
•
pay the attorney fees and costs of litigation to the party whose intellectual property
rights we may be found to infringe;
•
find non-infringing substitute products, which could be costly and create significant
delay due to the need for prior FDA authorization;
•
find alternative supplies for infringing products or processes, which could be costly and
create significant delay due to the need for FDA regulatory clearance or approval; and/
or
•
redesign those products or processes that infringe any third-party intellectual property,
which could be costly, disruptive, and/or infeasible.
If any of these consequences occur, we may have to withdraw existing products from the
market or may be unable to commercialize one or more of our products, which could have
a material adverse effect on our business, as we are currently only pursuing regulatory
approval in certain indications for two investigational devices, ARC
EX
and ARC
IM
. We could
also be required to indemnify customers and distributors against claims relating to the
infringement of intellectual property rights of third parties related to our products.
Similarly, interference or derivation proceedings provoked by third parties or brought
by the United States Patent and Trademark Office or any foreign patent authority may
be necessary to determine the priority of inventions or other matters of inventorship
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with respect to ONWARD’s patents or patent applications. An unfavorable outcome in
such proceedings could require us to cease using the related technology or to attempt
to license rights to it from the prevailing party. Our business could be harmed if the
prevailing party does not offer us a license on commercially reasonable terms, if any
license is offered at all.
Lastly, because of the substantial amount of discovery required in connection with
intellectual property litigation, there is a risk that some of ONWARD’s confidential
information could be compromised by disclosure during discovery. There could also be
public announcements of the results of hearings, motions or other interim proceedings
or developments, which could have a material adverse effect on the price of the Ordinary
Shares. If securities analysts or investors perceive these results to be negative, it could
have a material adverse effect on the price of the Ordinary Shares.
Risks Related to the Company’s Financial Position, Need for Additional Capital,
and Taxation
The Company has incurred significant operating losses since inception, expects to incur
operating losses in future, and it may not be able to achieve or sustain profitability.
ONWARD is a medical technology company with no commercial operating history. To
date, we have substantially invested all of our efforts in the research and development of,
and in seeking regulatory clearance or approval for, our ARC
EX
and ARC
IM
platforms. We
are not profitable, have incurred losses each year since beginning operations in 2014, and
have no commercial operating history upon which to evaluate our business and prospects.
Any predictions of future success, performance, or viability may not be as accurate as
they could be if the Company had a longer operating history or commercial revenues.
ONWARD has not yet derived sufficient revenues to support operations, as our activities
have consisted of developing our technology and conducting preclinical studies and
clinical trials. As of 31 December 2022, the loss brought forward amounted to EUR 108M.
These losses have resulted primarily from costs incurred in the development of the
ARC
EX
and ARC
IM
platforms, and from general and administrative costs associated
with operations.
The current or future clinical trials of any current or future investigational devices are, and
the manufacturing and marketing of any such investigational devices will be, subject to
extensive and rigorous review and regulation by the FDA and other government authorities
in the U.S. and in other countries where the Company intends to test and, if cleared or
approved, market such investigational devices. We expect our operating expenses to
continue to increase as we
(i) continue research and development activities for our ARC
EX
and ARC
IM
technology
platforms and related technologies;
(ii) seek FDA regulatory clearances and approvals for the ARC
EX
and ARC
IM
platforms
or other future investigational devices in the U.S., regulatory approvals in Europe, and
potentially other regulatory approvals in other jurisdictions;
(iii) build our commercial infrastructure; and
(iv) incur additional operational costs associated with being a public company.
As a result, ONWARD expects to continue to incur operating losses for the foreseeable
future. The expected future operating losses, combined with prior operating losses, may
adversely affect the market price of our Ordinary Shares and our ability to raise capital
and continue operations.
We expect sales of our ARC
EX
and ARC
IM
platforms, if cleared or approved, to account for
the majority of our future revenue. If the ARC
IM
and/or ARC
EX
platforms do not achieve
regulatory clearance or approval or if the platforms do not generate sufficient revenue, the
Company may not be able to achieve profitability.
Even if we do achieve profitability, we may not be able to sustain or increase profitability
in subsequent periods or on an ongoing basis. In this case, it will be more difficult for us to
finance our business and realize our strategic objectives, which would have a material and
adverse effect on our business, financial condition, and results of operations and would
cause the market price of our Ordinary Shares to decline.
The Company will require additional capital to finance its planned operations, which may
not be available to it on acceptable terms or at all.
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As of 31 December 2022, ONWARD had net cash of EUR 62M. Based on cash-flow
forecasts for 2023 and 2024, we believe this will be sufficient to meet our capital
requirements and fund our operations for at least 12 months as of the date of this Annual
Report. However, we have based these estimates on assumptions that may prove to be
incorrect and could spend our available financial resources much faster
than currently expected.
The Company’s expenses will also increase substantially in connection with any
potential commercialization of our products in the U.S. and Europe, including the hiring
of qualified and sales personnel. Additional expenditures will include costs associated
with manufacturing and supply, expenses related to the deployment of a direct sales
and service organization, costs and expenses incidental to being a public company, and
general operations. In addition, other unanticipated costs may arise.
The Company’s present and future funding requirements will depend on many
factors, including:
•
Continuing our research and development efforts, completing ongoing and planned
clinical trials, and applying for (i) De Novo classification granting marketing
authorization for ARC
EX
for use in clinics, and thereafter 510(k) clearance for use of
ARC
EX
in the home, and (ii) PMA approval, which will be required for ARC
IM
, though we
expect to pursue approval to legally market at least one indication via HDE
•
Conducting additional clinical trials of our ARC
EX
and ARC
IM
platforms for
future indications
•
Our ability to retain and compensate the highly qualified personnel necessary to
execute our plans
•
If cleared or approved, the costs associated with manufacturing, selling, and marketing
our products in Europe and the U.S., as well as other foreign jurisdictions, including
the cost and timing of implementing our sales and marketing plan and expanding
manufacturing capabilities
•
Our ability to effectively market and sell, and achieve sufficient market acceptance
and market share for, our products
•
The costs to maintain, expand, and defend the scope of our intellectual property
portfolio, as well as any other action required in connection with licensing, preparing,
filing, prosecuting, defending, and enforcing any patents or other IP rights
•
The emergence of competing technologies and other adverse market developments,
and the need to enhance our products and/or develop new products to maintain
market share
•
Our ability to establish and maintain strategic licensing or other arrangements and the
financial terms of such agreements
•
Our need to implement additional internal systems and infrastructure, including
financial and reporting systems, incidental to being a public company
The Company will likely need to raise additional capital. If we do so through public or
private equity offerings, the ownership interest of existing shareholders will be diluted,
and the terms of these securities may include liquidation or other preferences that
adversely affect these shareholders’ rights. If the Company raises additional capital
through debt financing, we may be subject to covenants limiting or restricting our
ability to take specific actions, such as incurring additional debt or liens, making capital
expenditures, or declaring dividends. If we raise additional capital through marketing
and distribution arrangements or other collaborations, strategic alliances, or licensing
arrangements with third parties, we may have to relinquish certain valuable rights to our
ARC
EX
and ARC
IM
platforms, technologies, future revenue streams, or research programs,
or grant licenses on terms that may not be favorable to us.
If we are unable to obtain adequate financing when needed, and on terms that
are acceptable to us, we may have to delay, reduce the scope of, or suspend the
implementation of our sales and marketing plan and our ongoing research and
development efforts, which would have a material adverse effect on our business,
financial condition, and results of operations.
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The Company’s operating results may vary significantly from period to period, which may
negatively impact the price of its Ordinary Shares in the future.
ONWARD’s financial and operating results may fluctuate from period to period due to,
among others:
•
The cost of obtaining and maintaining FDA and other regulatory clearances or
approvals for our ARC
EX
and ARC
IM
platforms, as well as any other future indication we
may seek to develop our investigational devices to address
•
Potential revenue generated by sales of our ARC
EX
and ARC
IM
platforms for cleared or
approved indications, if any
•
Expenses incurred in manufacturing and selling our ARC
EX
and ARC
IM
platforms, if
cleared or approved
•
Costs associated with scaling up and expanding our manufacturing capacity
•
Costs associated with building and expanding our sales and marketing efforts in the
U.S., Europe, and internationally
•
Costs associated with conducting research and development efforts for future
improvements to, or versions of, our ARC
EX
and ARC
IM
platforms
•
Cost of complying with regulatory requirements
•
Costs associated with capital expenditures
•
Costs associated with any future litigation
•
Costs and timing of preparing, filing, and prosecuting patent applications, maintaining
and enforcing our IP rights, and defending any IP-related claims
•
The severity, duration, and impact of a pandemic (like COVID 19), which may adversely
impact our business and planned development and future commercialization of our
ARC
EX
and ARC
IM
platforms
Due to these and other factors, it is likely that ONWARD will experience fluctuating
revenues, operating results, and cash flows. In that case, period-to-period comparisons
of financial results may not necessarily be meaningful, and results of operations in prior
periods should not be relied upon as an indication of future performance as this will not
meet investor expectations or those of public market analysts. Unanticipated or new
information may cause investors and analysts to revalue our business, which could cause a
decline in the price of our Ordinary Shares.
The Company’s ability to use its net operating losses and research and development
credit carryforwards to offset future taxable income may be subject to certain U.S. federal
income tax and Dutch tax limitations.
In general, under Sections 382 and 383 of the U.S. Internal Revenue Code of 1986, as
amended, a corporation that undergoes an “ownership change” — generally defined as
a greater than 50% change by value in its equity ownership over a three-year period —
is subject to limitations on its ability to use its pre-change net operating losses (NOL)
and its research and development credit carryforwards to offset future taxable income.
The Company’s existing NOLs and research and development credit carryforwards may
be subject to limitations arising from previous ownership changes, and if it undergoes
an ownership change, our ability to use NOLs and research and development credit
carryforwards could be further limited by Sections 382 and 383 of the Internal
Revenue Code.
In addition, our ability to deduct net interest expense may be limited if the Company has
insufficient taxable income for the year during which the interest is incurred, and any
carryovers of such disallowed interest would be subject to the limitation rules similar to
those applicable to NOLs and other attributes. Future changes in share ownership, some
of which might be beyond our control, could result in an ownership change under Section
382 of the Internal Revenue Code.
For these reasons, in the event that ONWARD experiences a change of control, we may
not be able to use a material portion of the NOLs, research and development credit
carryforwards, or disallowed interest expense carryovers, even if we attain profitability.
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We engage in and maintain open dialogue with investors and analysts through several
communication channels, including the Annual General Meeting, roadshows, investor
conferences, presentations, and webcasts.
Up-to-date financial information about ONWARD is published on our Investor Relations
website
(ir.onwd.com)
. Investors and analysts are encouraged to visit the website regularly
for detailed coverage of the share price, shareholder meetings, half-year and annual
results, press releases, presentations, webcasts, and investor relations events.
Financial Calendar 2023
•
27 March: Annual Report publication
•
8 May: Annual General Meeting
•
12 September: Interim Report publication
During a closed period before publication of the Company’s annual and half-year results,
we do not engage in discussion with analysts, investors, or financial journalists or make
presentations at investor conferences.
Closed periods based on the 2023 financial calendar are:
•
26 February – 27 March 2023
•
14 August – 12 September 2023
Investor Relations
Dividend Policy
ONWARD has not declared or paid dividends on its shares in the past and does not
currently have the intention to pay dividends. Any declaration of dividends will be based
on the Company’s earnings, financial condition, capital requirements, and other factors
considered important by the Board.
Dutch law and ONWARD’s Articles of Association do not require the Company to
declare dividends. Currently, the Board expects to retain all earnings, if any, generated
by ONWARD’s operations for the development and growth of the business and does not
anticipate paying dividends to shareholders in the near future.
Under the terms of the Innovation loan received from the RVO NL (Dutch Government),
ONWARD is not allowed to pay dividends until the Innovation loan has been repaid.
Capital Structure & Voting Rights
The authorized share capital of ONWARD comprises 50,937,500 Ordinary Shares and
50,937,500 Preferred Shares. At 31 December 2022, 30,184,188 issued Ordinary Shares are
fully paid-up and represent capital in the Company. There are no convertible securities,
exchangeable securities, or securities with warrants in the Company. No shareholders
have any voting rights different from any other shareholder, and no voting rights are limited
in any manner.
ONWARD is not aware of any agreements that may result in a limitation of the
transferability of voting rights on shares in its capital.
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Shareholder Structure
Pursuant to the Dutch Financial Supervision Act (Wet op het financieel toezicht),
substantial holdings in the Company must be disclosed to the Netherlands Authority for
Financial Markets (Stichting Autoriteit Financiële Markten, AFM). According to the register
kept by the AFM, the following shareholders disclosed that they have a direct or indirect
(potential) interest of between 3% and 25% in the Company’s total issued share capital as
of 31 December 2022:
•
NRT Holdings LLC (12.15%)
•
INKEF Capital B.V. (12.11%)
•
LSP Advisory B.V. (11.33%)
•
Gimv (Private Equity) (10.61%)
•
Wellington Partners GmbH (8.74%)
•
Invest-NL N.V. (3.6%)
•
Dave Marver (CEO) (3.16%)
Listing
Shares of ONWARD Medical N.V. trade on Euronext in Brussels (primary listing) and
Euronext Amsterdam (secondary listing) under the symbol “ONWD.”
Share Price
Analyst Coverage
ONWARD was covered by three brokers at the end of 2022.
Broker
Analysts
Degroof Petercam
David Seynnaeve, PhD
Kepler Cheuvreux
Jon Berggren
Bryan, Garnier & Co
Alex Cogut
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Below is the report of the Non-Executive Directors of the Company for the financial year 2022,
as referred to in Best Practice Provision 5.1.5 of the Corporate Governance Code (CGC).
Supervision by the Non-Executive Directors
The Non-Executive Directors supervise the policies implemented by the Executive Director
and Management Team, and the general affairs of the Company and its affiliated entities,
including the deployment of the Company’s strategy regarding long-term value creation.
With a view to maintaining supervision of the Company, the Non-Executive Directors regularly
discussed strategic matters with the Executive Director and Management Team during
Board meetings, such as annual financial reports, financial transactions, the annual budget,
and long-term business plans.
In addition, the Non-Executive Directors have examined and monitored each and all stages of
the domiciliation process and have taken all relevant decisions.
The Board has allocated certain specific responsibilities to the Audit Committee,
Compensation Committee, and Nomination and Corporate Governance Committee. Further
details on how these Committees have carried out their duties are set forth in the sections
below pertaining to each committee. The Non-Executive Directors have been regularly
informed by each committee of the results and recommendations of these meetings in
accordance with Best Practice Provision 2.3.5 of the CGC, and the conclusions of those
committees were considered when drafting this report of the Non-Executive Directors.
Report of the
Non-Executive Directors
Audit Committee
The main topics discussed by the Committee in 2022 were as follows:
•
The operation of the internal risk-management and control systems, including
supervising the enforcement of the relevant legislation and regulations and supervising
the operation of ONWARD’s Code of Conduct
•
The provision of financial information by the Company (including, but not limited to,
the choice of accounting policies, applying and assessing the effects of new rules,
information about the treatment of estimated items in the financial statements,
forecasts and external auditors)
•
Relations with the external auditor, including the audit plan and the external auditor’s
independence (also considering any non-audit services provided) and remuneration
•
The financing of the Company
•
The need for an internal audit function
•
Various updates on the application of information and communication technology,
including cybersecurity matters
In relation to the above topics, the Committee made recommendations and issued advice
to the Board for approval (where applicable). In 2022, the Audit Committee held six
meetings in total (attendance details provided in the table below).
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Compensation Committee
The main activities carried out by the Compensation Committee during 2022 were as follows:
•
Submitting proposals to the Board concerning changes to the Company’s
compensation policy
•
Submitting proposals to the Board concerning the compensation of individual Directors
and the Management Team, including the compensation structure, amount of fixed and
variable compensation components, and pay ratios within the group
•
Approving the proposal to grant stock options to the Management Team`
•
Approving adjustments to executive compensation (salary and stock options) following
the annual review of executive compensation performed by an external consultant
•
Evaluating a preliminary proposal of the employee stock ownership plan (reserved for
non-Director employees)
•
Preparing the Company’s compensation report
In relation to the above topics, the Committee made recommendations and issued advice to
the Board for approval (where applicable). In 2022, the Compensation Committee held three
meetings in total (attendance details provided in the table below).
Nomination & Corporate Governance Committee
The main activities carried out by the Nomination and Corporate Governance Committee
during 2022 were as follows:
•
Establishing selection criteria and appointment procedures for Directors
•
Reviewing the size and composition of the Board and submitting proposals for the
composition profile of the Board (where required)
•
Reviewing the functioning of individual Directors and reporting on the results of this
review to the Board
•
Submitting proposals for (re)appointment of Directors
•
Supervising the Board’s policy regarding selection criteria and appointment procedures
for the Company’s senior management and executive officers
•
Examining the corporate governance report pursuant to applicable law
In relation to the above topics, the Committee made recommendations and issued advice
to the Board for approval (where applicable). In 2022, the Nomination and Corporate
Governance Committee held two meetings in total (attendance details provided in the
table below).
The Non-Executive Directors also examined the report prepared by the Compensation
Committee and subsequently approved by the Board. The Non-Executive Directors
were able to review and evaluate the performance of the Nomination and Corporate
Governance Committee. There is no need to amend the size or composition of any of the
above committees.
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Evaluation
The Board is responsible for the quality of its own performance. Once per year, it discusses
its own performance and the performance of its individual members and committees.
In addition, the Non-Executive Directors evaluated their own performance via a self-
assessment in 2022. The self-assessment was based on a detailed questionnaire
completed by all Non-Executive Directors. The feedback from individual Directors was
summarized, subsequently evaluated, and discussed in the December 2022 Board meeting.
The questionnaire gave attention, in particular, to timely and accurate sharing of
information, the functioning of the committees, functioning and performance of the
entire Board, interaction with the Executive Director and Management Team, Board
accountability, and standards of conduct. The Non-Executive Directors concluded
that they are operating well, with all members participating in open discussions and
contributing constructively. It assessed individual members’ expertise and whether their
combined expertise is in line with the Company’s characteristics and business. Several
suggestions for further improvement were made. These included a desire to spend more
time discussing strategic matters among Board members, timely information sharing
between Board committees and the full Board, and the evolution of Board dynamics since
transitioning to a public company.
For 2022, the Board’s performance evaluation resulted in a positive assessment of the
Board and its individual members.
Internal Audit Function
As per the Audit Committee’s recommendation, the Board concluded that — due to the
size of the Company — it does not yet require an internal audit function. The Board has
assessed whether adequate alternative measures have been taken, and will reconsider
annually if it is necessary to create an internal audit department.
In reaching this conclusion, the Board took into consideration that the Company has
provided for management to support the assessment and testing of our risk-management
and control systems.
Independence of the Non-Executive Directors
Each Non-Executive Director has a duty to the Company to properly perform the duties
assigned to them and to act in the Company’s corporate interest. Under Dutch law, the
Company’s corporate interest extends to the interests of all stakeholders, including
shareholders, creditors, and employees.
The Board confirms that the Non-Executive Directors meet the independence
requirements of the CGC. For details refer to Director Independence included in the
Governance section.
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2022
Board of Directors
Audit Committee
Compensation Committee
Nomination & Corporate
Governance Committee
Member & Principal Position
Independent
According to DCGC
% of Attendance at
Meetings
Member
Attendance % at
Meetings
Member
Attendance % at
Meetings
Member
Attendance % at
Meetings
Dave Marver
Executive Director & CEO
No
100%
Jan Øhrstrøm
Non-Executive
Director & Chairperson
Yes
100%
X
a
100%
X
a
100%
Grégoire Courtine
Non-Executive Director and
CSO
No
100%
Ian Curtis
Non-Executive Director and
Vice-Chairperson
Yes
100%
X
a
100%
Fredericus Colen
Non-Executive Director
Yes
100%
X
100%
X
100%
Regina Hodits
Non-Executive Director
No
100%
X
100%
John de Koning
Non-Executive Director
No
100%
X
100%
Kristina Dziekan
b
Non-Executive Director
Yes
100%
X
100%
Vivian Riefberg
c
Non-Executive Director
Yes
100%
X
100%
Number of Meetings Held:
7
6
3
2
a: Chairperson of the respective committee.
b: Kristina has attended all Board meetings since her appointment on 10 June 2022, and all Audit Committee meetings since her appointment
on 26 September 2022.
c: As Interim Director (expected to be nominated for appointment as Director at our 2023 Annual General Meeting), Vivian has attended all
Board and Compensation Committee meetings since 26 September 2022.
Meetings of the
Board & Committees
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The Board of Directors’ Report (the Report), consisting of pages 4-171 inclusive and
such parts of the financial statements as referred to in the Report, comprise the
Bestuursverslag, as defined in Article 2:391 of the Dutch Civil Code (DCC).
In accordance with Best Practice Provision 1.4.3 of the Dutch Corporate Governance
Code (CGC), and with reference to the risk-management and control section on pages
133-167 and the financial review on pages 102-107 of this Annual Report, the Board of
Directors confirms that, to the best of its knowledge:
•
The Report provides sufficient insights on any deficiencies in the effectiveness of the
Company’s internal risk and control systems; no deficiencies in the effectiveness of
the internal risk and control systems have been identified
•
The Company’s internal risk-management and control systems provide reasonable
assurance that our financial reporting does not contain any material inaccuracies
•
There is reasonable expectation that the Company will be able to continue operations
and meet its liabilities for at least 12 months; therefore, it is appropriate to adopt the
going concern basis in preparing the financial reporting, as referred to in Note 1.4 of
the Consolidated Financial Statements
•
There are no material risks or uncertainties that could reasonably be expected to
have a material adverse effect on the continuity of the Company’s operations in the
coming 12 months
Board of Directors’
Statements
With reference to Section 5.25c, Paragraph 2c of the Financial Markets Supervision Act,
the Board states that, to the best of its knowledge:
•
The consolidated financial statements as at and for the year ended 31 December 2021
— which have been prepared in accordance with International Financial Reporting
Standards as adopted by the European Union and with Part 9 of Book 2 of the DCC
— give a true and fair view of the assets, liabilities, financial position, and loss of the
Company and the undertakings included in the consolidation taken as a whole
•
The Report provides a fair view of the situation on the balance sheet date and of
developments during the financial year of the issuer and of its affiliated companies,
whose information has been included in its financial statements, together with a
description of the main risks the issuer faces
Amsterdam, 27 March 2023 –
Board of Directors
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Remuneration
Report
This report provides an overview of the remuneration of the Board in 2022 and explains
how this relates to the Company’s policy regarding the remuneration of its Non-Executive
and Executive Directors (the Compensation Policy), which was previously adopted at the
Company’s 2021 Annual General Meeting (AGM). The adoption of the 2021 report was
through an advisory vote with 87.75% of voting in favor of adoption.
The 2022 Remuneration Report has been prepared in line with Section 2:135b of the Dutch
Civil Code (DCC) and Best Practice Provision 3.4.1 of the Corporate Governance Code
(CGC). This report will be submitted to the 2023 AGM for an advisory vote. The Company’s
2023 AGM is scheduled for 15 June.
The Compensation Policy is available on the ONWARD website
(onwd.com)
under
Investors/Governance tab.
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Executive Director Remuneration
The annual remuneration of the Executive Director comprises the following two components:
•
Fixed remuneration, comprising an annual base salary and optional benefits, such
as medical insurance, life insurance, retirement benefits, travel expenses, and/or
representation allowances
•
Variable remuneration, comprising an annual performance-based compensation
(depending on the individual’s achievement and corporate objectives as defined on an
annual basis) and share-based remuneration
Fixed Remuneration
The amount of the fixed remuneration depends on the Executive Director’s function
and responsibilities and on typical compensation levels in the industry and the market,
especially in comparison to similar listed companies in the MedTech sector. The fixed
remuneration is paid out as a monthly salary.
Variable Remuneration
Short-term variable remuneration consists of annual performance-based compensation
(a bonus) defined on a yearly basis. The company considers both corporate and individual
objectives. Corporate objectives are centered around strategic R&D deliverables, key
regulatory milestones, and financing goals. These objectives are measured via a set of
specific targets that help track progress towards their completion.
Long-term variable remuneration consists of periodic grants of stock options that
vest monthly over a four-year vesting period. For more details refer to Note 2.9 In the
Consolidated Financial Statements. Stock options create an ownership opportunity for
executives linked to the long-term performance of the Company’s share price, aligning their
interests with those of shareholders over the options’ 10-year term. If the share price does
not increase from the date of grant, no value is realized under the scheme.
Stock options are commonly leveraged as the primary equity vehicle among our industry
peer group in Europe and the U.S. Award sizes are determined at the point of grant in
relation to competitive award values and percentage of ownership delivered within our
peer group.
The Company has implemented share-based remuneration as follows:
•
Share-based remuneration takes the form of options for shares
•
These options may not be transferred, pledged, or otherwise encumbered; subject to,
among others, the applicable yearly exercise periods, they may be exercised for up to 10
years after the grant date once vested
•
In cases of termination of an Executive Director’s management agreement (other than
termination by the Executive Director for good cause) who holds share options, or if
that Executive Director is dismissed, such options are subject to reverse vesting (and as
such will be forfeited) over a period of 36 months after their grant
•
This plan is not based on the achievement of specific performance-related Key
Performance Indicators (KPI’s); however, the size of the stock option grant is linked to
the position’s job grade and is contingent on an individual’s performance in the previous
calendar year
•
The plan is based on the premise that stock options contain an inherent performance
criterion for the recipient, who is invested in the successful performance of the
Company, thereby leading to an increase in the share price
There are no specific performance conditions associated with this plan, only a service
condition. This deviates from the requirements of Best Practice Provision 3.1.2 v of the
CGC. In addition, refer to the section “Deviations from the Best Practices Provisions of the
Dutch Corporate Governance Code” of the Governance section for further information.
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An award letter was granted to the Company’s Executive Director in December 2021. The
main conditions for exercising these options are described above. No award was granted
to the Executive Director in 2022.
Executive
Director
Financial
Year
Grant
Date
Type of
Security
Options
Vested /
Unvested
Exercise
Price
Expiration
Date
Dave Marver
2021
15/12/2021
Stock
Options
Vested:
49,089
Unvested:
138,911
EUR 9.70
15/12/2031
Reduction or Claw-Back of Variable Remuneration
Pursuant to Dutch law, the variable remuneration of the Executive Director may
be reduced, or the Executive Directors may be obliged to pay part of their variable
remuneration to the Company, if certain circumstances apply as follows:
•
Test of reasonableness and fairness: According to Dutch law, the Board may adjust
any variable remuneration payable to an Executive Director to an appropriate level
if payment of the variable remuneration is deemed unacceptable according to the
criteria of reasonableness and fairness
•
Claw-back: Under Dutch law, the Board has the authority to recover from an Executive
Director any variable remuneration paid based on incorrect financial or other data
Contribution to Long-Term Performance & Value Creation
Remuneration of the Executive Director is consistent with and supports ONWARD’s
strategy. It also supports our ongoing efforts to improve our overall performance, facilitate
growth and sustainable success, and enhance our long-term value and interests.
As a result, our compensation packages are designed to enable us to compete in a
global market, including the challenging U.S. labor market. This approach enables us to
attract both the required top talent to execute our long-term strategy and the necessary
non-executive expertise to effectively supervise its execution, with the purpose of
creating long-term value and sustainable growth in the best interest of the Company and
our stakeholders.
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Executive Director’s Remuneration in 2022
A detailed breakdown of the Executive Director’s remuneration is presented in the table below:
EUR’000
Dave Marver CEO since 1 July 2020
2022
2021
Base Salary
410
b
340
Pension Benefits
44
28
Relocation & Other Benefits
109
228
Total Fixed Compensation
563
596
Annual Performance-Based Compensation
398
595
Share-Based Remuneration / Stock Options
469
2,140
a
Total Variable Compensation
867
2,735
Total Compensation
1,430
3,331
a: Share-based remuneration relates to the Employee Investment Plan (EIP) vesting on the date of the IPO (EUR 2,118,495). The expense
relating to stock options granted on 15 December 2021 amounted to EUR 21,289.
b: The increase in the base salary was to align the salary of the CEO with ONWARD’s peer group based on benchmarking performed by an
external consultant.
Scenario Analyses
No scenario analysis was taken into consideration in determining the Executive Director’s
remuneration for 2022. This deviates from the requirements of Best Practice Provision
3.4.1iii of the CGC.
Please refer to the section “Deviations from the Best Practices Provisions of the Dutch
Corporate Governance Code” of the Governance section of this report for further
information.
Performance Assessment
The Board determines the Executive Director’s variable remuneration (whereby the
Executive Director has not taken part in the discussions and decision-making by the
Board) based on an annual performance assessment and professional judgment. Variable
remuneration is linked to the individual’s performance against a set of financial and
non-financial goals that supports and is consistent with the Company’s strategy and
long-term interests.
These goals include, among other topics, performance, business development, strategy,
investor relations, and general management. Risk alignment is considered in target setting
to promote sound and effective risk management. Variable remuneration is paid out
according to how the Company’s business develops, the scope of the Executive Director’s
achievement, and the realization of the Company’s general objectives.
In early 2022, the Board approved a set of company goals for our Executive Director,
containing both financial and non-financial KPIs in the following functional areas:
•
Clinical & Development
•
Operational & Commercial
•
People
•
Strategic & Financial
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Performance Criteria
Functional Area
Criteria
Weight
On-target
Performance
Actual
Performance
Measured
Performance
Clinical & Development
Operational & Commercial
People
Strategic & Financial
40%
20%
20%
20%
100%
100%
100%
100%
87%
92%
110%
110%
35%
18%
22%
22%
Total
97%
Corresponding amount
398
Only the on-target performance and corresponding award was formalized.
After conclusion of the financial year, the Board assesses to what extent the KPIs have
been met and determines the measured performance percentage and corresponding
amount for the Executive Director. Bonus compensation is at the discretion of the
Remuneration Committee and, ultimately, the Board.
On the recommendation of the Remuneration Committee, the Board recognized the
outstanding achievements realized and in consideration of performance across the range
of KPIs, granted the CEO a 97% bonus payout relating to 2022.
Non-Executive Director Remuneration
It should be in the Non-Executive Directors’ interest to focus on the Company’s sustainable
and long-term successful development. As such, the Company believes that fixed
remuneration for the Non-Executive Directors is effective. Regardless of their remuneration,
all Non-Executive Directors are entitled to reimbursement for their travel expenses.
The fees are as follows:
EUR’000
Chairman
Member
Board of Directors
45
45
Audit Committee
12
6
Compensation Committee
10
5
Nomination and Corporate Governance
Committee
8
4
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Determination of Non-Executive Directors’ Remuneration
Non-Executive Director remuneration for 2022 amounted to:
Name
Board
Audit
Committee
Compensation
Committee
Nomination
& Corporate
Governance
Committee
Total 2021
Compensation
Jan Øhrstrøm
Chair
Chair
Chair
208,134
a
Gregoire
Courtine
300,725
b
Fred Colen
Member
Member
59,839
c
Kristina
Dziekan
Member
26,538
Vivian
Riefberg
c
Member
25,275
d
Non-Executive Director remuneration for 2021 amounted to:
Name
Board
Audit
Committee
Compensation
Committee
Nomination
& Corporate
Governance
Committee
Total 2021
Compensation
Jan Øhrstrøm
Chair
Chair
Chair
538,197
e
Gregoire
Courtine
980,918
f
Fred Colen
Member
Member
96,820
g
In 2022, the Company’s new Interim Director (Vivian Riefberg) was awarded 16,000 share
options as a signing bonus under the existing long-term incentive plan. This deviation was
approved by the Board on recommendation of the Compensation Committee.
This grant is considered necessary to serve the Company’s long-term interests and
sustainability and to ensure its viability; such a grant is instrumental to attracting
and retaining a highly qualified non-Executive Director, especially when compared to
compensation practices in the U.S. This decision deviates from Best Practice Provision
3.3.2 of the CGC, which recommends not providing equity awards as part of a non-
Executive Director’s compensation. (See “Deviations from the Best Practices Provisions of
the Dutch Corporate Governance Code.”)
Liability Insurance (D&O) & Indemnity
The Company maintains D&O insurance covering the Executive Directors and all Non-
Executive Directors.
Pursuant to Article 23 of the Articles of Association, the Directors are indemnified, held
harmless, and reimbursed by the Company for all expenses, financial effects of judgments,
fines, and amounts paid in settlement actually and reasonably incurred by them in
connection with an action, suit, proceeding, or investigation against them in their capacity
as Executive or Non-Executive Director.
a: Compensation includes cost of 2022 vesting of stock options (EUR 94,755) and the reimbursement of travel expenses (EUR 5,379).
b: Compensation includes the remuneration paid in relation to his role as CSO (EUR 146,124), as well as the vesting of stock options under
the long-term incentive plan (EUR 154,601).
c: Compensation includes the reimbursement of travel expenses (EUR 3,839).
d: Interim Director (expected to be nominated for appointment as Director at our 2023 Annual General Meeting). Compensation includes
cost of vesting of stock options awarded (EUR 6,941) and the reimbursement of travel expenses (EUR 5,291)
e: Compensation includes the vesting of the Employee Investment Plan on IPO, the 2021 expense for the one-off option award of 38,000
shares that was approved by the board and the reimbursement of travel expenses.
f: Compensation includes the remuneration paid in relation to his role as CSO (EUR 118,522), as well as the vesting of the Employee
Investment Plan on IPO (EUR 807,161) and stock options granted in December 2021 under the long-term incentive plan (EUR 7,021).
g: Compensation includes the vesting of the Employee Investment Plan on IPO.
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Historical Development
The table below provides an overview of the annual compensation of the Executive
Director and full-time equivalent (FTE) employees for the financial years 2022 and 2021.
The amounts mentioned in the table are gross amounts before the impact of social-
security or income-tax deductions.
EUR’000
2022
2021
Change %
Net loss of the period
32,772
34,314
-2%
Executive Director
1,430
3,331
-57%
a
Average FTE employees
86.6
65.85
31%
Employee costs of FTE employees
18,282
15,519
18%
Cost per FTE
212
236
-10%
Pay Ratio
7
14
-52%
Non-Executive Directors
621
1,616
-62%
Pay Ratio
Based on Best Practice Provision 3.4.1 of the CGC, the Company shall disclose the pay
ratio between the remuneration of the Executive Directors and that of a representative
reference group of Company employees and, if applicable, comment on any important
variation in pay ratios compared to the previous financial year.
The reference group includes the Company’s entire workforce expressed in the form of full-
time equivalent employees (FTE). The full-time equivalence of each employee is calculated
based on the number of hours an employee works in each period, compared to the
maximum number of hours/periods allowed, as per the local law prevalent in the country of
operation. As of 31 December 2022, there were 96.1 FTEs (2021: 76.7).
Pay ratios are calculated based on the average remuneration received by employees of
the reference group. The remuneration taken into account is that received during the year
concerned. If all or part of the remuneration was paid in a foreign currency, the exchange
rate used was the average exchange rate of the relevant currency into Euros for the year
ending 31 December 2022.
The Company used both fixed and variable remuneration components in determining the
pay ratio for a given year. The pay ratio disclosed by the Company reflects the previous
financial year. The average Executive Director-to-employee pay ratio stands at 7 in
2022, compared with 14 in 2021. The variance year-on-year is due to the successful IPO
in October 2021 that positively impacted the performance-based remuneration and
triggered the accelerated vesting of the Employee Investment Plan.
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Consolidated Statement
of Profit & Loss
For the Year Ended 31 December
All amounts in EUR ‘000
Notes
2022
2021
Grants & Other Income
2.1
2,148
1,399
Total Revenues & Other Income
2,148
1,399
Research & Development Expenses
Clinical & Regulatory Expenses
Marketing & Market Access Expenses
Patent fees & Related Expenses
Quality Assurance Expenses
General & Administrative Expenses
2.2,2.8
2.3,2.8
2.4,2.8
2.5,2.8
2.6,2.8
2.7,2.8
(13,138)
(5,747)
(1,951)
(1,549)
(1,228)
(10,563)
(10,618)
(4,775)
(1,516)
(1,361)
(993)
(10,667)
Total Operating Expenses
(34,176)
(29,931)
Operating Loss for the Period
Financial income
Financial expense
4.5
4.5
(32,028)
62
(1,572)
(28,532)
–
(5,713)
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Net Finance Expense
(1,510)
(5,713)
Loss for the Period Before Taxes
Income Tax expense
2.10
(33,538)
766
(34,245)
(69)
Net Loss for the Period
(32,772)
(34,314)
Aributable to:
Equity holders of the parent
Non-controlling interests
(32,772)
–
(34,314)
–
(32,772)
(34,314)
Earnings Per Share (EUR):
Basic earnings per share:
Diluted earnings per share:
4.1
4.1
(1.09)
(1.09)
(3.62)
(3.62)
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For the Year Ended 31 December
All amounts in EUR ‘000
Notes
2022
2021
Net Loss for the Period
Remeasurement of post-employment benefits
5.0, 2.10
(32,772)
427
(34,314)
(714)
Other comprehensive income that will not be
reclassified to profit or loss in subsequent pe-
riods (net of tax)
Currency translation differences
427
602
(714)
249
Other comprehensive income that will be
reclassified to profit or loss in subsequent
periods (net of tax)
602
249
Total Comprehensive Result for the Year, Net
of Tax
(31,743)
(34,779)
Aributable to:
Equity holders of the parent
Non-controlling interests
(31,743)
–
(34,779)
–
(31,743)
(34,779)
Consolidated Statement
of Comprehensive Income
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For the Year Ended 31 December
All amounts in EUR ‘000
Notes
2022
2021
Assets
Non-Current Assets
Intangible assets
Property, plant & equipment
Right of use assets
Deferred tax assets
3.0
3.1
3.2
2.10
10,158
415
1,681
163
10,029
190
2,190
–
12,417
12,409
Current Assets
Indirect tax receivables
Receivable from related parties
Other current assets
Fixed term deposits
Cash and cash equivalents
3.3
3.4
3.5
3.5
709
251
1,456
20,000
41,760
339
60
2,546
–
89,443
64,176
92,387
76,593
104,796
Consolidated Statement
of Financial Position
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* Other reserves include the foreign currency translation reserve that qualifies as a legal reserve under Dutch Law.
Equity & Liabilities
Equity & Reserves
Issued capital
Share premium
Other reserves*
Retained earnings
4.0
4.0
4.0
3,622
155,249
2,079
(108,319)
3,622
155,249
(214)
(75,974)
Total Equity Attributable to Shareholders
52,631
82,683
Non-Current Liabilities
Interest-bearing loans
Deferred tax liability
Lease liability
Post-employment benefits
4.2
2.10
3.2
5.0
12,656
670
1,294
1,121
11,451
1,991
1,741
1,388
15,741
16,571
Current Liabilities
Income tax liabilities
Lease liability
Trade payables
Other payables
3.2
3.6
3.7
219
427
1,909
5,666
83
473
952
4,034
8,221
5,542
76,593
104,796
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All amounts in EUR ‘000
Notes
Issued Capital
Share Premium
Other Reserves*
Retained Earnings
Total Equity
As at 1 January 2021
–
3,083
17,933
(53,111)
(32,095)
Loss for the year 2021
Other comprehensive income
–
–
–
–
–
249
(34,314)
(714)
(34,314)
(465)
Total comprehensive result
Conversion of preference A-shares
Reversed stock-split
Share based payments: EIP
Share based payments: EIP accelerated vesting
Conversion of CLA
Issue of share capital: EPFL option
Issue of share capital: IPO
Issue of share capital: Over-allotment
Capitalization of costs related to IPO and issue of new shares
Share based payments: LTIP
4.0,4.1
4.0
2.9
2.9
4.0,4.1
4.0
4.0
4.0
4.0
2.9
–
–
2,445
–
–
391
32
708
46
–
–
–
49,467
(2,445)
–
–
30,731
–
74,517
4,835
(4,939)
–
249
(14,794)
–
8,494
(12,165)
–
–
–
–
–
69
(35,028)
–
–
–
12,165
–
–
–
–
–
–
(34,779)
34,673
–
8,494
–
31,122
32
75,225
4,881
(4,939)
69
As at 31 December 2021
4.0
3,622
155,249
(214)
(75,974)
82,683
As at 1 January 2022
3,622
155,249
(214)
(75,974)
82,683
Loss for the year 2022
Other comprehensive income
–
–
–
–
–
602
(32,772)
427
(32,772)
1,029
Total comprehensive result
Share based payments: LTIP
2.9
–
–
–
–
602
1,691
(32,345)
–
(31,743)
1,691
As at 31 December 2022
4.0
3,622
155,249
2,079
(108,319)
52,631
* Other reserves include the foreign currency translation reserve that qualifies as a legal reserve under Dutch Law.
Consolidated Statement
of Changes in Equity
23
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For the Year Ended 31 December
All amounts in EUR ‘000
Notes
2022
2021
Cash Flows from Operating Activities
Loss for the Period Before Taxes
(33,538)
(34,245)
Adjusted for:
•
Depreciation and impairment of property, plant and
equipment and right-of-use assets
3.1, 3.2
735
329
•
Share based payment transaction expense
2.9
1,691
8,564
•
Post-employment benefits
154
246
•
Net finance costs
1,510
5,713
•
Net foreign exchange differences
–
(43)
•
Other non-cash items
106
(2)
Changes in working capital:
Increase (-) Decrease (+) in Trade and other receivables
140
(2,358)
Increase (+) Decrease (-) in Trade and other payables
2,813
2,097
Consolidated Statement
of Cash Flows
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Interests received
Interests paid
Income tax paid
Bank Charges paid
4.5
15
(229)
(49)
(33)
–
(146)
(14)
(17)
Net cash generated /(used) from operating activities
(26,685)
(19,874)
Cash flows from investing activities
Investments in fixed assets
Investments in intangible fixed assets
Investment in fixed term deposits
3.1
3.0
3.5
(386)
(31)
(20,000)
(91)
(2,233)
–
Net cash generated/(used) from investing activities
(20,417)
(2,324)
Cash flows from financing activities
Proceeds from interest-bearing loans
Payment of principal portion of lease liabilities
Proceeds from issuance of shares
Transaction costs on issuance of shares
4.2
3.2
4.0
–
(557)
–
–
30,000
(144)
80,106
(4,601)
Net cash generated/(used) from financing activities
(557)
105,361
Movement in cash and cash equivalents
Cash and cash equivalents at 1 January
Effect of exchange rates on cash and cash equivalents
Changes in cash and cash equivalents during the period
89,443
(24)
(47,659)
6,382
(100)
83,162
Cash and cash equivalents at 31 December
3.5
41,760
89,443
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Notes to the Consolidated
Financial Statements
1.
General Information & Basis of Preparation
1.0 Corporate Information
General
ONWARD Medical B.V. was a Dutch private company with limited liability (besloten
vennootschap met beperkte aansprakelijkheid), incorporated on 20 November 2015. On
21 October 2021 (the First Trading Date) the Company completed a corporate conversion,
converting into a public limited company under Dutch law (naamloze vennootschap). The
legal name changed to Onward Medical N.V. (“ONWARD”). The registered office is located
at Schimmelt 2, Eindhoven, the Netherlands. ONWARD Medical N.V. is registered in the
Commercial Register of the Chamber of Commerce under number 64598748.
ONWARD and its subsidiaries (the “Group”) are developing both an Implantable Neuro-
stimulation System (INS) and a non-invasive system for electrical stimulation of specific
areas of the spinal cord.
The financial statements for the year ended 31 December 2022 have been prepared by
the board of directors and were authorized for issue on 27 March 2023. The financial
statements will be submitted for adoption to the General Meeting on
8 May 20
23.
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1.1 Group Information
Information about subsidiaries
The consolidated financial statements of the Group include:
•
ONWARD Medical SA, Switzerland (holding 100%)
•
ONWARD Medical Inc, United States of America (holding 100%)
1.2 Basis of Preparation
The Consolidated financial statements of the Group have been prepared in accordance
with International Financial Reporting Standards (IFRS) and IFRIC interpretations as
adopted by the European Union and with Part 9 of Book 2 of the Dutch Civil Code.
The Consolidated financial statements have been prepared on a historical cost basis.
Income and expenses are accounted for on an accrual basis. The Consolidated financial
statements provide comparative information in respect of the previous period.
Certain
prior year amounts have been reclassified for consistency with the current year
presentation. Refer to section 1.8 below.
The Consolidated financial statements are presented in euros and all values are rounded
to the nearest thousand (EUR 000), except when otherwise indicated, and for the
number of shares and the per share amount. Due to rounding, amounts may not add up
to totals provided.
1.3 Basis of Consolidation
The Consolidated financial statements comprise the financial statements of the Group
and its subsidiaries as at 31 December 2022. Control is achieved when the Group is
exposed, or has rights, to variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the investee. Specifically, the
Group controls an investee if and only if the Group has:
•
Power over the investee (i.e. existing rights that give it the current ability to direct the
relevant activities of the investee)
•
Exposure, or rights, to variable returns from its involvement with the investee, and
•
The ability to use its power over the investee to affect its returns
The Group re-assesses whether or not it controls an investee if facts and circumstances
indicate that there are changes to one or more of the three elements of control.
Consolidation of a subsidiary begins when the Group obtains control over the subsidiary
and ceases when the Group loses control of the subsidiary. Assets, liabilities, income
and expenses of a subsidiary acquired or disposed of during the year are included in the
statement of comprehensive income from the date the Group gains control until the date
the Group ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income (OCI) are attributed to
the equity holders of the parent of the Group. When necessary, adjustments are made to
the financial statements of subsidiaries to bring their accounting policies into line with the
Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses
and cash flows relating to transactions between members of the Group are eliminated in
full on consolidation.
23
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1.4 Going Concern
In determining the appropriate basis for preparing the financial statements for the year
ended 31 December 2022, Management considered the cash flow forecasts over a time
horizon of one year after the date of these financial statements. The 2023 cash flow
forecasts, include significant expenses and cash outflows in relation to -among others- the
ongoing clinical trials, the continuation of research and development projects and FDA
submission and approval for the ARC
EX
indication. As at 31 December 2022 the Company
had cash and cash equivalents of EUR 42M and fixed term deposits with a maturity of less
than 12 months of EUR 20M. The Company believes that this cash position will be sufficient
to meet the Company’s capital requirements and fund its operations for at least 12 months
as from the date of this Annual Report.
Inherent uncertainties in these forecasts may have an impact on the Company’s cash
position. To continue development and reach commercialization as planned, the Company
will need to attract additional funding in future. The Company’s long-term success and
existence is contingent on achieving FDA approval and CE mark of its products.
In view of the above, and notwithstanding a loss brought forward of EUR 108M as of
31 December 2022 the application of the valuation rules in the assumption of a “going
concern” is justified. As a result, the consolidated financial statements have been prepared
on a going concern basis.
1.5 Summary of Other Significant Accounting Policies
a) Business Combinations
Business combinations are accounted for using the acquisition method. The cost of an
acquisition is measured as the aggregate of the consideration transferred, measured at
acquisition date fair value and the amount of any non-controlling interest in the acquiree.
For each business combination, the Group elects whether to measure the non-controlling
interest in the acquiree at fair value or at the proportionate share of the acquirer’s
identifiable net assets. Acquisition-related costs are expensed as incurred and included in
administrative expenses.
When the Group acquires a business, it assesses the financial assets and liabilities
assumed for appropriate classification and designation in accordance with the contractual
terms, economic circumstances and pertinent conditions as at the acquisition date. This
includes the separation of embedded derivatives in host contracts by the acquiree.
If the business combination is achieved in stages, any previously held equity interest is re-
measured at its acquisition date fair value and any resulting gain or loss is recognized in
profit or loss. It is then considered in the determination of goodwill.
Any contingent consideration to be transferred by the acquirer will be recognized at fair
value at the acquisition date. Contingent consideration classified as an asset or liability
that is a financial instrument and within the scope of IFRS 9 Financial Instruments, is
measured at fair value with changes in fair value recognized in the statement of profit
or loss in accordance with IFRS 9. Other contingent consideration that is not within the
scope of IFRS 9 is measured at fair value at each reporting date with changes in fair value
recognized in profit and loss.
b) Current Versus Non-Current Classification
The Group presents assets and liabilities in the statement of financial position based on
current/non-current classification. An asset is current when it is:
•
Expected to be realized or intended to be sold or consumed in normal operating cycle
•
Held primarily for the purpose of trading
•
Expected to be realized within twelve months after the reporting period, or
•
Cash or cash equivalent unless restricted from being exchanged or used to settle a
liability for at least twelve months after the reporting period
All other assets are classified as non-current.
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A liability is current when:
•
It is expected to be settled in normal operating cycle
•
It is held primarily for the purpose of trading
•
It is due to be settled within twelve months after the reporting period, or
•
There is no unconditional right to defer the settlement of the liability for at least twelve
months after the reporting period
The Group classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
c) Foreign Currencies
The Group’s consolidated financial statements are presented in euros, which is also the
parent company’s functional currency. For each entity, the Group determines the functional
currency and items included in the financial statements of each entity are measured using
that functional currency.
Transactions & Balances
Transactions in foreign currencies are initially recorded by the Group entities at their respective
functional currency spot rates at the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are retranslated at the
functional currency spot rate of exchange at the reporting date.
Differences arising on settlement or translation of monetary items are recognized in profit
or loss with the exception of monetary items that are designated as part of the hedge of the
Group’s net investment of a foreign operation. These are recognized in other comprehensive
income until the net investment is disposed of, at which time, the cumulative amount is
reclassified to profit or loss. Tax charges and credits attributable to exchange differences
on those monetary items are also recorded in other comprehensive income.
Non-monetary items that are measured in terms of historical cost in a foreign currency
are translated using the exchange rates as at the dates of the initial transactions. Non-
monetary items measured at fair value in a foreign currency are translated using the
exchange rates at the date when the fair value is determined. The gain or loss arising
on translation of non-monetary items measured at fair value is treated in line with the
recognition of gain or loss on change in fair value of the item (i.e., translation differences on
items whose fair value gain or loss is recognized in other comprehensive income or profit or
loss are also recognized in other comprehensive income or profit or loss, respectively).
Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments
to the carrying amounts of assets and liabilities arising on the acquisition are treated as
assets and liabilities of the foreign operation and translated at the spot rate of exchange at
the reporting date.
Group Companies
On consolidation, the assets and liabilities of foreign operations are translated into euros
at the rate of exchange prevailing at the reporting date and their income statements are
translated at the monthly average exchange rates.
The exchange differences arising on translation for consolidation are recognized in
other comprehensive income. On disposal of a foreign operation, the component of other
comprehensive income relating to that particular foreign operation is recognized in
profit or loss.
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1.6 Significant Accounting Judgments, Estimates & Assumptions
The preparation of the Group’s consolidated financial statements requires management
to make judgments, estimates and assumptions that affect the reported amounts of
revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the
end of the reporting period. However, uncertainty about these assumptions and estimates
could result in outcomes that require a material adjustment to the carrying amount of the
asset or liability affected in future periods.
The Group based its assumptions and estimates on parameters available when
the consolidated financial statements were prepared. Existing circumstances and
assumptions about future developments, however, may change due to market changes or
circumstances arising beyond the control of the Group. Such changes are reflected in the
assumptions when they occur.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognized in the period in which the estimate is revised if the
revision affects only that period, or in the period of revision and the future periods if the
revision affects both current and future periods.
The key assumptions concerning the future and other key sources of estimation
uncertainty at the reporting date, that are most relevant to the carrying amounts of assets
and liabilities within the next financial year, are included in each of the respective notes as
referenced below:
Research & Development
Share-Based Payments
Impairment of Intangible Assets
Post-Employment Benefits
Taxes
(Note 2.2)
(Note 2.9)
(Note 3.0)
(Note 5.0)
(Note 2.10)
1.7 New Accounting Standards & Developments
1.7.1 New and Amended Standards and Interpretations
Several amendments applied for the first time in 2022:
•
Amendments to IFRS 3: Reference to the Conceptual Framework, effective
1 January 2022
•
Amendments to IAS 16: Property, Plant and Equipment Proceeds before intended use,
effective 1 January 2022
•
Amendments to IAS 37: Onerous Contracts – Costs of Fulfilling a Contract, effective
1 January 2022
•
Annual Improvement Project IFRS 1 First-time Adoption of International Financial
Reporting Standards – Subsidiary as a first-time adopter, effective 1 January 2022
•
Annual Improvement Project IFRS 9 Financial Instruments – Fees in the ’10 per cent’
test for derecognition of financial liabilities, effective 1 January 2022
•
Annual Improvement Project IAS 41 Agriculture – Taxation in fair value measurements,
effective 1 January 2022
None of these had a material impact on the consolidated financial statements of the
Group in 2022.
1.7.2 Standards Issued But Not Yet Effective
The new and amended standards and interpretations that are issued, but not yet effective,
up to the date of issuance of the Group’s financial statements are listed below. The Group
has not early adopted any standards, interpretations or amendments that have been
issued but are not yet effective. The Group intends to adopt these new and amended
standards and interpretations, if applicable, when they become effective.
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•
Classification of Liabilities as Current or Non-current - Amendments to IAS 1, effective 1
January 2024
•
Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice Statement
2, effective 1 January 2023
•
Definition of Accounting Estimates - Amendments to IAS 8, effective 1 January 2023
•
Deferred Tax related to Assets and Liabilities arising from a Single Transaction –
Amendments to IAS 12, effective 1 January 2023
The nature and impact of each of the new standards, amendments and/or interpretations
expected to apply to the Group are described below:
Amendments to IAS 1: Classification of Liabilities as Current or Non-current
In January 2020 and October 2022, the Board issued amendments to IAS 1 Presentation
of Financial Statements to specify the requirements for classifying liabilities as current or
non-current. The amendments clarify:
•
What is meant by a right to defer settlement
•
That a right to defer must exist at the end of the reporting period
•
That classification is unaffected by the likelihood that an entity will exercise its
deferral right
•
That only if an embedded derivative in a convertible liability is itself an equity
instrument would the terms of a liability not impact its classification.
•
That disclosure should be provided when a liability arising from a loan agreement is
classified as non-current and the entity’s right to defer settlement is contingent on
compliance with future covenants within twelve months. This disclosure must include
information about the covenants and the related liabilities.
The amendments are effective for annual reporting periods beginning on or after 1 January
2024 and must be applied prospectively. The Group is currently assessing the impact the
amendments will have on current practice and whether the existing loan agreement may
require renegotiation.
Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice Statement 2
In February 2021, the IASB issued amendments to IAS 1 and IFRS Practice Statement
2 Making Materiality Judgments, in which it provides guidance and examples to help
entities apply materiality Judgments to accounting policy disclosures. The amendments
aim to help entities provide accounting policy disclosures that are more useful by
replacing the requirement for entities to disclose their ‘significant’ accounting policies
with a requirement to disclose their ‘material’ accounting policies and adding guidance
on how entities apply the concept of materiality in making decisions about accounting
policy disclosures.
The amendments to IAS 1 are applicable for annual periods beginning on or after 1 January
2023 with earlier application permitted. Since the amendments to the Practice Statement
2 provide non-mandatory guidance on the application of the definition of material to
accounting policy information, an effective date for these amendments is not necessary.
The Group is currently assessing the impact of the amendments to determine the impact
they will have on the Group’s accounting policy disclosures.
Definition of Accounting Estimates - Amendments to IAS 8
In February 2021, the IASB issued amendments to IAS 8, in which it introduces a definition
of ‘accounting estimates’. The amendments clarify the distinction between changes in
accounting estimates and changes in accounting policies and the correction of errors.
Also, they clarify how entities use measurement techniques and inputs to develop
accounting estimates.
The amendments are effective for annual reporting periods beginning on or after 1 January
2023 and apply to changes in accounting policies and changes in accounting estimates
that occur on or after the start of the effective period. Earlier application is permitted as
long as this fact is disclosed.
The Group is currently assessing the amendments to determine the impact it will have.
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Amendments to IAS 12 - Deferred Tax related to Assets and Liabilities arising from a
Single Transaction
In May 2021, the Board issued amendments to IAS 12, which narrow the scope of the initial
recognition exception under IAS 12, so that it no longer applies to transactions that give
rise to equal taxable and deductible temporary differences. The amendments clarify
that where payments that settle a liability are deductible for tax purposes, it is a matter
of judgment (having considered the applicable tax law) whether such deductions are
attributable for tax purposes to the liability recognized in the financial statements (and
interest expense) or to the related asset component (and interest expense). This judgment
is important in determining whether any temporary differences exist on initial recognition
of the asset and liability. Under the amendments, the initial recognition exception does
not apply to transactions that, on initial recognition, give rise to equal taxable and
deductible temporary differences. It only applies if the recognition of a lease asset and
lease liability (or decommissioning liability and decommissioning asset component)
give rise to taxable and deductible temporary differences that are not equal. An entity
should apply the amendments to transactions that occur on or after the beginning of the
earliest comparative period presented. Effective for annual periods beginning on or after
1 January 2023.
The Group is currently assessing the amendments to determine the impact it will have.
1.8 Changes in Accounting Policies & Disclosures
1.8.1 Change in Disclosure in the Consolidated Statement of Profit & Loss 2021
The Group has reassessed the presentation of line items in the consolidated statement
of profit and loss and decided to present the Science expenses as a component of
Research & Development expenses as opposed to a separate cost category on the face
of the Statement of Profit and Loss. Science expenses consist primarily of the costs of
sponsored research activities that are undertaken by universities with which ONWARD
collaborates. Since its inception, ONWARD has had a close working relationship with two
of the founders, Grégoire Courtine, Professor at EPFL and Jocelyne Bloch, Neurosurgeon
at CHUV, Professor at Université de Lausanne. The activities between the Company and
EPFL are formalized in research agreements which govern the activities sponsored by the
Company. In addition to these scientific research expenses also the consultancy expenses
and related shared-based payment expenses for Grégoire Courtine and Jocelyne Bloch are
included. Science expenses therefore directly relate to and support our ongoing Research
& Development efforts. This presentation is also in line with companies within the industry
and will therefore enhance comparability.
Reported:
2021
Restated:
2021
Change
Science expenses
Research & Development expenses
2,686
7,932
–
10,618
(2,686)
2,686
The following note was restated:
Reported:
2021
Restated:
2021
Change
2.3 Research & Development expenses*
Staff costs
Outsourced cost
5,218
2,715
7,773
2,846
2,555
131
7,932
10,618
2,686
And the following note has been removed:
Reported:
2021
Restated:
2021
Change
2.2 Science expenses
Staff costs
Outsourced cost
2,555
131
–
–
(2,555)
(131)
2,686
–
(2,686)
* Note 2.2 in 2022
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2.Results of the Year
2.0 Segment Reporting
Based on the organizational structure, as well as the nature of financial information
available and reviewed by the Company’s chief operating decision makers to assess
performance and make decisions about resource allocations, the Company has concluded
that its total operations represent one reportable segment and that the consolidated
disclosures address the requirements.
2022
2021
Non-current assets
Netherlands
Switzerland
United States of America
61
2,194
10,162
197
2,177
10,035
Non-current assets
12,417
12,409
2.1 Revenues & Other Income
Accounting Policy:
Government subsidies are recognized where there is reasonable
assurance that the subsidy will be received, and all attached conditions will be complied
with. When the subsidy relates to an expense item, it is recognized as income on a
systematic basis over the periods that the related costs, for which it is intended to
compensate, are expensed. Any outstanding receivables related to these subsidies are
recorded as grants receivable. The government subsidies are presented on a gross basis
except for the WBSO (“Wet Bevordering Speur & Ontwikkeling”) that is presented on a net
basis with the expensed amount for personnel expenses.
2022
2021
Government subsidies (EU)
Other income
2,044
104
1,399
–
Total revenues and other income
2,148
1,399
Government subsidies have been received for the research and development of several
development projects. There are no unfulfilled conditions or contingencies attached to
these subsidies.
Recognized
Grants
Total Grant*
2022
2021
CONFIRM
BESTABLE
SWISS LOCAL (one -offs)
PREP2GO
DARPA
ZonMW
EISMEA – Reverse Paralysis
EISMEA - NEMO BMI
Eurostars Impulse
416
100
–
348
3,172
250
1,228
1,020
500
(12)
–
85
104
1,412
83
273
85
14
139
16
41
139
981
83
–
–
–
Total**
2,044
1,399
* Please refer to the terms and conditions of the subsidies included below.
** Except for the Swiss local grant received by ONWARD Medical SA (In Switzerland), all other grants were received by ONWARD Medical
N.V. (In the Netherlands).
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Terms & Conditions
CONFIRM
This Eurostars funding agreement with the Swiss Innovation Agency Innosuisse for a
total amount of EUR 416k started in May 2019 and ended in October 2021, with follow
up reporting resulting in the additional 25.75% granting of the allocated amount. The
remainder of the grant was receivable in 2022 after submission of the final report. Due
to lesser expenses declared, the final amount was decreased. In this project, ONWARD
collaborated with Inomed A.G., Universitätsklinikum Heidelberg and EPFL to develop
an intra-operative neuromonitoring system and algorithms facilitating the surgical
implantation of ARC
IM
.
BESTABLE
This Eurobench funding agreement with PKF ATTEST INNCOME S.L. and the Spanish
National Research Council CSIC for a total amount of EUR 100k started in September
2019 and ended in December 2021. An amount equal to 85% of the grant is paid during
the grant period in tranches in 2019, 2020 and 2021. The remaining 15% of the total
grant amount is payable after evaluation of the final report. In this project, ONWARD
is collaborating with the Technical University of Delft and the University Rehabilitation
Institute to develop a benchmarking system for assessment of balance performance.
PREP2GO
This Eurostars funding agreement with the Netherlands enterprise agency RVO for a
total amount of EUR 348k started in April 2020 and ends in September 2022. An amount
equal to 90% of the grant is paid during the grant period in tranches in 2020, 2021 and
2022. The remaining 10% of the grant is payable after evaluation of the final report. In this
project, ONWARD is collaborating with Zurich Medtech A.G., IT’IS Foundation, Universitair
Medisch Centrum Utrecht and EPFL to automatize the simulation framework that was
developed in the RESTORE project, to facilitate the pre-operative planning for ARC
Therapy for clinicians.
DARPA
The DARPA grant is a five-year project that started in October 2020. The award has been
divided into 3 phases. The funding agreement for phase 1 and phase 2 was approved for a
total amount of EUR 3.172M (or USD 3.402M). The grant amounts are being charged on a
monthly basis over the period based on actual costs incurred. In this project, ONWARD is
collaborating with a large consortium of academic partners, companies, and consultants
to develop a new clinical intervention to modulate blood pressure and spinal cord perfusion
and oxygenation in the hours following SCI. This correspond to a roadmap development of
ARC
IM
to be used in the hours following SCI.
ZonMW
This Dutch funding agreement is with the Netherlands Organisation for Health Research
and development for a total amount of EUR 250k that started in January 2021 and ends in
January 2024. An amount equal to 80% of the grant is being paid during the grant period
in three equal tranches in 2021, 2022 and 2023. The remaining 20% of the grant will be
paid after submission of the final report. In this project, ONWARD is collaborating with
the University of Bordeaux, CHUV and EPFL to develop a research interface for ARC
IM
and
evaluating its use to alleviate locomotor deficits in Parkinson disease.
EISMEA – Reverse Upper- & Lower-Limb Paralysis
The European Innovation Council and SMEs Executive Agency (EISMEA) awarded a grant
to support the development of an innovative Brain-Spine Interface technology for restoring
mobility and upper limb function. The EUR 3.6M grant was awarded to ONWARD and its
research partners EPFL; CEA-Clinatec and Sint Maartenskliniek. Under the terms of the
award, ONWARD receives EUR 1.2M. The project started 1 May 2022 and has an end date
of 30 April 2025, a duration of 36 months. ONWARD has received 75% as prefinancing, an
additional 15% is receivable 90 days after the first periodic reporting and the final payment
90 days after receiving the second periodic reporting.
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EISMEA – NEMO BMI
The European Innovation Council and SMEs Executive Agency (EISMEA) awarded a grant
to support the development of Motor Brain-Machine Interfaces (BMIs). BMIs translate
brain neural signals into commands to external effectors. The NEMO BMI project will
conduct the exploration of assistance-free and easy to use portable neuroprosthetics
including wireless neuronal activity recorder, a real-time neuronal activity decoder
based on integrated technologies, and a spinal cord stimulator. The EUR 3.8M grant
was awarded to ONWARD and its research partners Ecole Polytechnique Federale de
Lausanne (EPFL), Commissariat a l Energie Atomique et aux energies alternatives (CEA)
and Institute of Information and Communication Technologies (IICT). Under the terms of
the award, ONWARD receives EUR 1M. The project started 1 October 2022 and has an
end date of 30 September 2025, a duration of 36 months. ONWARD has received 75% as
prefinancing, an additional 15% (up to 90% of the total grant) is receivable 90 days after
the first periodic reporting and the final payment is receivable 90 days after receiving the
second periodic reporting.
Eurostars – Impulse
The Eurostars Independent Evaluation Panel has provided a subsidy for a total amount of
EUR 500k that started 1 December 2022 and ends 30 November 2025, a duration of 36
months. The Impulse project focuses on closed-loop control of blood pressure for people
with spinal cord injury.
2.2 Research & Development Expenses
Accounting Policy:
Research costs are expensed as incurred. Development expenditures on
an individual project are recognized as an intangible asset when the Group can demonstrate:
•
The technical feasibility of completing the intangible asset so that it will be available
for use or sale
•
Its intention to complete and its ability to use or sell the asset
•
How the asset will generate future economic benefits
•
The availability of resources to complete the asset
•
The ability to measure reliably the expenditure during development
•
The ability to use the intangible asset generated
Significant Estimate:
The Group has evaluated the nature of the project research and
development costs and concluded that all expenses incurred were related to research
and pre-development of future products. Therefore, all costs have been expensed and are
recognized in the statement of profit and loss.
2022
2021
Staff costs
Outsourced cost
8,385
4,753
7,773
2,846
13,138
10,618
The Company’s research and development expenses consist primarily of the cost of
external suppliers and third-party contractors involved in the design and development
of the ARC
EX
and ARC
IM
systems as well as the employee related expenses for research
and development, including salaries and benefits. The increase in 2022 is driven by
advancements made on our ARC
EX
and ARC
IM
platforms.
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2.3 Clinical & Regulatory Expenses
2022
2021
Staff costs
Outsourced cost
3,204
2,543
2,905
1,871
5,747
4,775
The Company’s clinical and regulatory expenses consist of the employee related expenses
including salaries and benefits for employees working on clinical trials. Clinical expenses in
2022 primarily relate to the completion of the Up-LIFT pivotal and LIFT Home clinical trials.
2.4 Marketing & Market Access Expenses
2022
2021
Staff costs
Outsourced cost
949
1,002
916
600
1,951
1,516
The Company’s marketing and market access expenses include the investigating
activities on the future therapy reimbursement performed by third party consultants
and attendance of key events to create awareness within the SCI community of our ARC
therapies and technology.
2.5 Patent fees & Related Expenses
2022
2021
Staff costs
Outsourced cost
400
1,149
329
1,032
1,549
1,361
The Company’s patents fees and related expenses include the cost for patent prosecution
applications, consulting fees for new innovative ideas as well as annuity maintenance fees
and license fees for existing ideas as well as related employee expenses, including salary
and benefits in the area of business development.
2.6 Quality Assurance Expenses
2022
2021
Staff costs
Outsourced cost
1,045
183
960
33
1,228
993
Quality assurance expenses consist primarily of quality control, quality assurance and
regulatory expenses. These expenses include employee expenses, including salary benefits
for personnel, consulting, testing and travel expenses.
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2.7 General & Administrative Expenses
2022
2021
Staff costs
Other operating expenses
Depreciation and amortization expense
4,299
5,529
735
5,968
4,370
329
10,563
10,667
The Company’s general and administrative expenses consist of employee expenses,
including salary and benefits for personnel and contractors in executive, finance,
accounting, tax, and human resources, as well as operating expenses relating to audit,
legal and supply chain.
2.8 Employee Benefit Expenses
Accounting Policy:
Short-Term Employee Benefits
Short-term employee benefits include salaries and social security contributions, social
taxes, paid vacation and bonuses. They are recognized as expenses for the period in which
employees perform the corresponding services. Outstanding payments at the end of the
period are shown as other current liabilities.
Post-Employment Benefits
Group companies operate various pension schemes. The schemes are funded through
payments to insurance companies or trustee-administered funds, determined by periodic
actuarial calculations. The Group has both defined benefit and defined contribution plans.
Defined Contribution Plan
A defined contribution plan is a pension plan under which the Group pays fixed
contributions into a separate entity. The Group has no legal or constructive obligations
to pay further contributions if the fund does not hold sufficient assets to pay all benefits
to employees relating to employee services in the current and prior periods. For defined
contribution plans, the Group pays contributions to publicly or privately administered
pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no
further payment obligations once the contributions have been paid. The contributions are
recognized as personnel expenses in the consolidated income statement when due.
All related expenses are recognized in the consolidated statement of profit and loss.
Contributions payable or prepaid contributions as at year-end are recognized under
accruals and deferred income, and prepayments and accrued income, respectively.
Defined Benefit Plan
The Group operates a defined benefit pension plan in Switzerland, which requires
contributions to be made to a separately administered fund. The cost of providing benefits
under the defined benefit plan is determined using the projected unit credit method.
Remeasurements, comprising of actuarial gains and losses are recognised in the
statement of financial position with a corresponding debit or credit to retained earnings
through OCI in the period in which they occur. Remeasurements are not reclassified to
profit or loss in subsequent periods.
Past service costs are recognised in profit or loss on the earlier of:
•
The date of the plan amendment or curtailment, and
•
The date that the Group recognises related restructuring costs
Net interest is calculated by applying the discount rate to the net defined benefit liability
or asset. The Group recognises the changes in the net defined benefit obligation due
to service costs comprising current service costs, past-service costs, gains and losses
on curtailments and non-routine settlements as part of operating expenses and the net
interest expense or income as part of net finance costs in the consolidated statement of
profit and loss.
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Significant Estimate:
The cost of the defined benefit pension plan and the present value
of the pension obligation are determined using actuarial valuations. An actuarial valuation
involves making various assumptions that may differ from actual developments in the
future. These include the determination of the discount rate, future salary increases,
mortality rates and future pension increases. Due to the complexities involved in the
valuation and its long-term nature, a defined benefit obligation is sensitive to changes in
these assumptions. All assumptions are reviewed at each reporting date.
2022
2021
Wages and salaries
Social security costs
Pension costs – defined benefit plan
Pension costs – other
Share based benefit expenses
Other labour costs
11,653
1,275
604
82
1,691
2,977
7,203
908
445
101
8,564
1,629
18,282
18,850
As at 31 December 2022, the ONWARD Group employed 96.1 full-time equivalents,
including white-collar employees and contractors. The following table presents a
breakdown of the Company’s full-time equivalents as at 31 December 2022 and 2021:
2022
2021
Research & Development
Clinical & Regulatory
Marketing & Market Access
Patent fees & Related
Quality Assurance
General & Administrative
48.8
18.9
3.8
1.0
7.8
15.8
41.8
15.7
2.0
1.0
4.8
11.6
96.1
76.9
As of 31 December 2022, the Company had 16.3 full-time equivalents located in the
Netherlands (2021: 35.5), 68.3 full-time equivalents located in Switzerland (2021: 32.9) and
11.5 (2021: 8.5) full-time equivalents located in the United States.
2.9 Share-Based Payments
Accounting Policy:
Employees (including senior executives) of the Group receive
remuneration in the form of share-based payments, whereby employees render services
as consideration for equity instruments (equity-settled transactions).
Equity-Settled Transactions
The cost of equity-settled transactions is determined by the fair value at the date when
the grant is made using an appropriate valuation model.
That cost is recognized, together with a corresponding increase in other reserves in
equity, over the period in which the performance and/or service conditions are fulfilled
in employee benefits expense. The cumulative expense recognized for equity-settled
transactions at each reporting date until the vesting date reflects the extent to which
the vesting period has expired and the Group’s best estimate of the number of equity
instruments that will ultimately vest. The statement of profit or loss expense or credit for
a period represents the movement in cumulative expense recognized as at the beginning
and end of that period and is recognized in operating expenses.
No expense is recognized for awards that do not ultimately vest, except for equity-settled
transactions for which vesting is conditional upon a market or non-vesting condition.
These are treated as vesting irrespective of whether or not the market or non-vesting
condition is satisfied, provided that all other performance and/or service conditions
are satisfied.
When the terms of an equity-settled award are modified, the minimum expense recognized
is the expense had the terms not been modified, if the original terms of the award are met.
An additional expense is recognized for any modification that increases the total fair value
of the share-based payment transaction or is otherwise beneficial to the employee as
measured at the date of modification.
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Significant Estimate:
The Group measures the cost of equity-settled transactions with
employees by reference to the fair value of the equity instruments at the date at which
they are granted. Estimating fair value for share-based payment transactions requires
determination of the most appropriate valuation model, which is dependent on the terms
and conditions of the grant.
Employee Investment Plan (EIP)
Under the Employee Investment Plan, eligible employees had the opportunity to subscribe
for, indirectly via Stichting G-Therapeutics Participaties (“STAK”), an equity stake in
ONWARD Medical N.V..Eligible employees were granted depository receipts (DR) via the
STAK by means of a deed of issuance. In article 3.2. of the Deed of issuance of the DRs it
was determined that a trade sale of the Company or an IPO, of not less than EUR 50M at
a price per share to the public not less than EUR 5,- per share, would trigger accelerated
vesting of the DR’s. The IPO on 21 October 2021 raised EUR 80M at a share price of EUR
12.75. Taking into account the reversed stock split that was contemplated just prior to the
IPO the share price would have been EUR 5.10 per share on the outstanding shares prior
to the reversed stock split. As both conditions of the IPO event were met, all DR’s were
deemed fully vested at 21 October 2021. The vesting resulted in a share-based payment
expense of EUR 8.5M and a corresponding increase in equity.
Long-Term Incentive Plan (LTIP)
Following the IPO, and the vesting of the EIP, the Board has agreed upon a new LTIP plan
to align the Employee’s interest with the interests of the Shareholders and to allow the
employee to participate in the long-term growth of the Company. The LTIP is an omnibus
plan with the flexibility to issue different type of equity incentives.
ONWARD awarded options over its ordinary shares to participants (referred to as the
“Award” or “Grant’) on the Grant Dates as specified in the table below. Each option
represents the right to receive one ordinary share of ONWARD against payment of the
exercise price. The options expire 10 years after the Grant Date and become exercisable
on vesting. The Grant is subject to continued provision of services to the Company under
a graded vesting schedule, with 25% of the Grant vesting on the first anniversary of the
Grant Date, and the remaining 75% of the Grant vesting in equal, monthly tranches over
the 3 years following the first anniversary of the Grant Date (i.e.2.083% per month). The
number of Options that will vest and become unconditional is only subject to a continued
service condition. All options granted have the same conditions. Options do not settle
automatically and are exercised at the option of the participant.
Financial
Year
Grant
Date
Type of
Security
Number
of Options
Granted
Exercise
Price
Expiration
Date
Fair
Value
2021
15/12/2021
Stock
Options
612,000
EUR 9.70
15/12/2031
EUR 4.89
2022
1/4/2022
Stock
Options
169,800
EUR 7.64
1/4/2032
EUR4.18
2022
26/9/2022
Stock
Options
166,350
EUR 5.70
26/9/2032
EUR 3.19
This fair value per option has been applied to the granted awarded for the recognition of
the share-based payment expense recognized:
2022
2021
Share-based payment expense
1,691
69
1,691
69
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The table below summarizes the number and weighted average exercise prices (WAEP) of,
and movements in, share options during the year:
2022
Number
2022
WAEP
2021
Number
2021
WAEP
Outstanding at 1 January
Granted during the year
Forfeited during the year
Exercised during the year
612,000
336,150
(75,025)
–
EUR 9.70
EUR 6.68
EUR 9.40
–
–
612,000
–
–
–
EUR 9.70
–
–
Outstanding at 31 December
873,125
EUR 7.41
612,000
EUR 9.70
2022
Number
2022
WAEP
Exercisable at 31 December
143,089
EUR 9.70
The weighted average remaining contractual life for the share options outstanding at 31
December 2022 was 9.2 years (2021: 10 years).
The weighted average fair value of options granted during the year was EUR 3.69 (2020:
EUR 4.89).
The range of exercise prices for options outstanding at the end of the year was EUR 5.70 to
EUR 9.70 (2021: EUR 9.70).
The fair value of the awarded options was determined by applying a Binomial Option
Pricing Model that allows for exercising of the option before the end of the option’s life.
As the Options cannot be exercised between the Grant Date and the vesting date, the Hull-
White binomial formula, commonly used to value American options, was used. With the
Hull-White model the impact of a certain time-based event – such as a vesting period, or
an early exercise – can be taken into account.
Due to the different vesting dates for the different tranches in the option we have
calculated the unique option values per tranche according to each vesting date. The total
option value per employee is then derived using a weighted average overall calculated
option value for each vesting date.
The following parameters were used in the option model for the calculation of the fair value
of the options as per each grant date:
2022–09
2022–04
2021–12
Fair value on date of measurement (EUR)
3.19
4.18
4.89
Share price (EUR)
Exercise price (EUR)
Expected volatility
Term of the option
Expected dividend
Risk-free interest rate
Time to expiration
5.70
5.70
59.30%
4
a
-
2.1%
10
7.64
7.64
59.20%
4
a
–
0.55%
10
9.20
9.70
58.90%
4
a
–
-0.30%
10
a: Vesting period is 1 – 4 years and depends on the vesting date of the specific tranche.
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2.10 Income Tax
Accounting Policy:
Current Income Tax
Current income tax assets and liabilities for the current period are measured at the
amount expected to be recovered from or paid to the taxation authorities. The tax rates
and tax laws used to compute the amount are those that are enacted or substantively
enacted, at the reporting date in the countries where the Group operates and generates
taxable income.
Current income tax relating to items recognized directly in equity is recognized in equity
and not in the statement of profit or loss. Management periodically evaluates positions
taken in the tax returns with respect to situations in which applicable tax regulations are
subject to interpretation and establishes provisions where appropriate.
Deferred Tax
Deferred tax is provided using the liability method on temporary differences between
the tax basis of assets and liabilities and their carrying amounts for financial reporting
purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences, except:
•
When the deferred tax liability arises from the initial recognition of goodwill or an asset
or liability in a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss
•
In respect of taxable temporary differences associated with investments in
subsidiaries, associates and interests in joint arrangements, when the timing of the
reversal of the temporary differences can be controlled and it is probable that the
temporary differences will not reverse in the foreseeable future
Deferred tax assets are recognized for all deductible temporary differences, the carry
forward of unused tax credits and any unused tax losses. Deferred tax assets are
recognized to the extent that it is probable that taxable profit will be available against
which the deductible temporary differences and the carry forward of unused tax credits
and unused tax losses can be utilized, except:
•
When the deferred tax asset relating to the deductible temporary difference arises
from the initial recognition of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit
nor taxable profit or loss.
•
In respect of deductible temporary differences associated with investments in
subsidiaries, associates and interests in joint ventures, deferred tax assets are
recognized only to the extent that it is probable that the temporary differences will
reverse in the foreseeable future and taxable profit will be available against which the
temporary differences can be utilized.
The carrying amount of deferred tax assets is reviewed at each reporting date and
reduced to the extent that it is no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred tax asset to be utilized. Unrecognized
deferred tax assets are reassessed at each reporting date and are recognized to the
extent that it has become probable that future taxable profits will allow the deferred tax
asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply
in the year when the asset is realized or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted at the reporting date.
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Significant Estimate:
The Group has losses before tax which arose in the Netherlands
that are available to offset against future profits of the Dutch entity in which the loss
arose. However, these losses may not be used to offset taxable income elsewhere in the
Group. The Group evaluated and judged that at this moment it is not sufficiently likely that
future profits will be generated in the Dutch entity that can offset a deferred tax asset.
All Switzerland operations have a cost-plus agreement. The taxable amounts are
settled. There are no NOL
’s. Last fiscal year settled is 2020. Due to expected profits based
on the cost-plus the Swiss deferred tax assets relating to temporary differences have
been recognized.
All NOL
’s in the US entity prior to the business combination are not carried forward due
to ownership change. Losses since the transaction can be carried forward for 20 years.
These losses have not been recognized in the balance sheet to date.
All NOL
’s in the US entity prior to 2018 can be carried forward for 20 years. NOL
’s after
2018 can be carried forward indefinitely limited to 80% of taxable income. On the
acquisition of ONWARD Medical Inc. (formerly knows as NRT Technologies) a deferred tax
liability was recognised for the intangible asset (In-process R&D) identified in the PPA. At
the time of the PPA there was no certainty regarding the future potential of the technology
acquired and based on the limited available NOL
’s no deferred tax asset was recognised.
IAS 12 requires that a deferred tax asset should recognised for the carry forward of unused
tax losses when there are suitable reversing taxable temporary differences regardless
of an entity’s expectations of future tax losses. In 2022 the Company reassessed the
recoverability of the assessed losses. This resulted in the recognition of a deferred tax
asset of EUR 987k in the US entity that offsets the deferred tax liability as allowed under
IAS 12, with no impact on previously reported results.
2022
2021
Current income tax
Deferred income tax
(185)
951
(69)
–
Total corporate income tax in profit and loss
766
(69)
Current Income Tax charge at tax rate of 25.8% (2021:25%)
Tax rate differences in foreign jurisdictions
Non-deductible expenses
Non-recognized deferred tax asset on temporary differences
Net operating losses not recognised
Recognition of prior year deferred tax adjustments
8,653
139
(433)
(111)
(8,458)
976
8,561
54
(3,293)
(67)
(5,324)
–
766
(69)
The effective tax rate was 2.3% in 2022 (2021: -0.2%), which is lower than the statutory
income tax rate of 25.8% (2021:25%) in the Netherlands. The difference is primarily due to
the net operating losses and temporary differences for which no deferred tax asset can be
recognized. The uncertainty is based on insufficient evidence of future sources of income
to support the realization of a deferred tax asset due to the Company being loss-making
with limited tax planning opportunities. In addition, there are non-deductible share-
based payments in 2022 and the prior year adjustment recorded in 2022 based on the
reassessment of the recoverability of losses in the US.
The difference between 2021 and 2022 relates to one-off items in 2021 related to the IPO, the
prior year adjustment in 2022 and the difference in the amounts of non-recognised losses.
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Recognized deferred tax assets and liabilities
2022
Assets
Liabilities
Net
Intangible assets, including Goodwill
Right of use assets
Lease liability
Post-employment benefits
Losses available for offset against future
taxable income
Set-off of deferred tax
–
–
240
157
987
(1,221)
(1,656)
(235)
–
–
1,221
(1,656)
(235)
240
157
987
–
Net deferred tax liability
163
(670)
(507)
2021
Assets
Liabilities
Net
Intangible assets, including Goodwill
–
(1,991)
(1,991)
Net deferred tax liability
–
(1,991)
(1,991)
2022
2021
Opening balance at January 1
Recognized in profit & loss
Remeasurement (gain)/loss on actuarial gains and losses in OCI
Foreign currency translation difference
Addition
Reclassification
(1,991)
951
(59)
26
–
566
(1,343)
–
–
(78)
(570)
–
Net deferred tax liability at December 31
(507)
(1,991)
Of estimated amount of tax losses carried forward and available as at 31 December 2022,
a deferred tax asset of EUR 987k has been recognized to offset the reversal of temporary
differences in the US. For the remaining unused operating losses in the Netherlands of
EUR 91M (2021: EUR 63M) and in the US of EUR 11M (2021: EUR 11M) no deferred tax is
recognized. These losses can be carried forward indefinitely subject to local tax rules
except for approximately EUR 3.2M of losses in the US which can be carried forward for 20
years (ultimately by 2037).
The Company offsets tax assets and liabilities if it has a legally enforceable right to set off
current tax assets and current tax liabilities and the deferred tax assets and deferred tax
liabilities relate to income taxes levied by the same tax authority.
The deferred tax liability initially arose on the acquisition of NeuroRecovery Technolgies,
Inc (‘NRT’) (subsequently renamed to ONWARD Medical Inc.). In the current year the
deferred tax impact on the acquired intangibles was reclassified. This reclassification has
no impact on the result for the period or equity.
3. Non-Current Asset & Working Capital
3.0 Intangible Assets
2022
2021
Goodwill
In-Process R&D
License fees
1,902
5,873
2,383
1,702
6,109
2,218
Net book value at December 31
10,158
10,029
Goodwill
Accounting Policy:
Goodwill is initially measured at cost, being the excess of the
aggregate of the consideration transferred and the amount recognized for non-controlling
interests, and any previous interest held, over the net identifiable assets acquired and
liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate
consideration transferred, the Group re-assesses whether it has correctly identified all
of the assets acquired and all of the liabilities assumed and reviews the procedures used
to measure the amounts to be recognized at the acquisition date. If the re-assessment
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still results in an excess of the fair value of net assets acquired over the aggregate
consideration transferred, then the gain is recognized in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment
losses. For the purpose of impairment testing, goodwill acquired in a business combination
is, from the acquisition date, allocated to each of the Group’s cash-generating units that
are expected to benefit from the combination, irrespective of whether other assets or
liabilities of the acquiree are assigned to those units.
Where goodwill has been allocated to a cash-generating unit and part of the operation
within that unit is disposed of, the goodwill associated with the disposed operation is
included in the carrying amount of the operation when determining the gain or loss on
disposal. Goodwill disposed in these circumstances is measured based on the relative
values of the disposed operation and the portion of the cash-generating unit retained.
2022
2021
Cost
Accumulated amortization
1,702
–
1,607
–
Net book value at January 1
1,702
1,607
Additions
Foreign currency translation difference
Amortization for the year
Impairments
–
200
–
–
–
95
–
–
Net change
Cost
Accumulated amortization
200
1,902
–
95
1,702
–
Net book value at December 31
1,902
1,702
In-Process R&D
Accounting Policy:
The cost of in-process R&D acquired in a business combination is the
fair value at the date of acquisition.
Following initial recognition of the development expenditure as an asset, the asset
is carried at cost less any accumulated amortization and accumulated impairment
losses. Amortization of the asset begins when development is complete and the asset is
available for use. It is amortized over the period of expected future benefit. Amortization is
recorded in operating expenses. During the period of development, the asset is tested for
impairment annually.
2022
2021
Cost
Accumulated changes
6,261
(152)
5,370
(152)
Net book value at January 1
6,109
5,218
Foreign currency translation difference
Additions
Reclassification (refer to note 2.10)
Amortization for the year
Impairments
334
–
(570)
–
–
321
570
–
–
Net change
Cost
Accumulated changes
(236)
6,025
(152)
891
6,261
(152)
Net book value at December 31
5,873
6,109
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License Fees
Accounting Policy:
License fees for the exclusive right to certain patents, critical in
the development of the ARC Therapies, are capitalized and measured at cost on
initial recognition.
Following initial recognition of the license fees as an asset, the asset is carried at cost less
any accumulated amortization and accumulated impairment losses. Amortization of the
asset begins when development of the ARC Therapies (ONWARD R&D) is complete, and
the asset is available for use. It is amortized over the period of expected future benefit.
Amortization is recorded in operating expenses. During the period of development, the
asset is tested for impairment annually.
2022
2021
Cost
Accumulated changes
2,218
–
–
Net book value at January 1
2,218
–
Additions
Foreign currency translation difference
Amortization for the year
Impairments
31
134
–
–
2,233
(15)
–
–
Net change
Cost
Accumulated changes
165
2,383
–
2,218
2,218
–
Net book value at December 31
2,383
2,218
Impairment Assessment
The In-process R&D was acquired through the acquisition of GTX Medical SA (now
ONWARD Medical SA) and the business combination with NRT Inc.(now ONWARD Medical
Inc.). The value of the In-process R&D is contingent on the success of the FDA approval
of the NRT product. In terms of the NRT acquisition agreement ONWARD also received,
and assumed responsibility for, the exclusive license agreements with the Regents of the
University of California (“UCLA”) and the California Institute of Technology (“Caltech”). In
terms of these agreements, the occurrence of the IPO triggered the change in ownership
clauses and resulted in additional payments to be made. These payments, as well as the
annual license fee payments, are recognized as a separate class of intangible assets.
As per the accounting policies above goodwill, in-process R&D and license fees are
tested for impairment annually. ONWARD performed its annual impairment test at
year end (consistent with the prior year) based on the most recent budgets and
forecast calculations.
Significant Estimates:
Key assumptions used in the impairment test was the growth rate, and the rate for
discounting the projected cash flows.
•
Cash flows are based on the expectation of receiving FDA approval. Revenue is
expected only towards the end of 2023, starting with rehabilitation first. Home use
following in later years. Operating costs increases to support sales and marketing
efforts as well as to maintain ongoing development and clinical research. Based on
management’s best estimate EBITDA will not be positive prior to 2028.
•
Growth rate estimate: rate is based on published industry research.
•
Discount rate: Discount rates represent the current market assessment of the
risks specific to ONWARD. The discount rate calculation is based on the specific
circumstances of the Group and is derived from its weighted average cost of capital
(WACC). The WACC takes into account both debt and equity. The cost of equity is
derived from the expected return on investment by the Group’s investors. The cost of
debt is based on the interest-bearing borrowings the Group is obliged to service.
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The cash flow projections were determined using management’s internal forecasts that
cover an initial period from 2023 to 2029, after which a terminal value was calculated.
Using projected cash flows covering a period of more than five years is not considered
unusual for pre-commercial life-science companies. Due to long development timelines
and regulatory approval requirements, it is not untypical for Companies in the industry to
use a period that extends beyond five years. The values assigned to the key assumptions
represent management’s assessment of future expectations. ONWARD performed a
sensitivity analysis and noted that a reasonable change in either the discount rate (to 20%)
or terminal growth rate (to 0%), or both the discount rate (to 20%) and terminal growth
rate (to 0%), would not cause the carrying amount to exceed its recoverable amount. Also,
should the expected revenues towards the end of 2023 move out to 2024, this would still
not cause the carrying amount to exceed its recoverable amount.
2022
2021
Discount rate
Terminal value growth rate
14.3%
1.70%
9.22%
1.70%
3.1 Property, Plant & Equipment
Accounting Policy:
Property, plant and equipment is stated at cost, net of accumulated
depreciation and accumulated impairment losses, if any. Such cost includes the cost of
replacing part of the property, plant and equipment and borrowing costs for long-term
construction projects if the recognition criteria are met. When significant parts of property,
plant and equipment are required to be replaced at intervals, the Group recognizes such
parts as individual assets with specific useful lives and depreciates them accordingly.
Likewise, when a major inspection is performed, its cost is recognized in the carrying
amount of the plant and equipment as a replacement if the recognition criteria are
satisfied. All other repair and maintenance costs are recognized in profit or loss
as incurred.
Property, plant and equipment transferred from customers is initially measured at the fair
value at the date on which control is obtained.
Depreciation is calculated on a straight-line basis over the estimated useful lives of the
assets as follows:
•
Office equipment
3 years
•
Leasehold improvements
5 years
The useful life of leasehold improvements is the same or less than the lease term
An item of property, plant and equipment and any significant part initially recognized is
derecognized upon disposal or when no future economic benefits are expected from its
use or disposal. Any gain or loss arising from de-recognition of the asset (calculated as
the difference between the net disposal proceeds and the carrying amount of the asset) is
included in the income statement when the asset is derecognized.
The residual values, useful lives and methods of depreciation of property, plant and
equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
Cost
Office
Equipment
Leasehold
Improvements
Total
At January 1, 2021
Additions
711
91
–
–
711
91
At December 31, 2021
802
–
802
Additions
Disposals
121
–
265
386
–
At December 31, 2022
923
265
1,188
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Depreciation
Office
Equipment
Leasehold
Improvements
Total
At January 1, 2021
Depreciation for the year
(463)
(149)
–
–
(463)
(149)
At December 31, 2021
(612)
–
(612)
Depreciation for the year
(135)
(26)
(161)
At December 31, 2022
(747)
(26)
(773)
Net Book Value
Office
Equipment
Leasehold
Improvements
Total
At December 31, 2021
190
–
190
At December 31, 2022
176
239
415
3.2 Right of Use Assets & Lease Liabilities
Accounting Policy:
The Group assesses at contract inception whether a contract is, or
contains, a lease. That is, if the contract conveys the right to control the use of an identified
asset for a period of time in exchange for consideration.
Group as a Lessee
The Group applies a single recognition and measurement approach for all leases, except
for short-term leases and leases of low-value assets. The Group recognizes lease liabilities
to make lease payments and right-of-use assets representing the right to use the
underlying assets.
Right-of-Use Assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e., the
date the underlying asset is available for use). Right-of-use assets are measured at cost,
less any accumulated depreciation and accumulated impairment losses, and adjusted for
any remeasurement of lease liabilities. The cost of right-of-use assets includes the initial
measurement amount of lease liabilities recognised, initial direct costs incurred, and lease
payments made at or before the commencement date less any lease incentives received.
Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease
term and the estimated useful lives of the assets.
If ownership of the leased asset transfers to the Group at the end of the lease term or
the cost reflects the exercise of a purchase option, depreciation is calculated using the
estimated useful life of the asset.
Lease Liabilities
At the commencement date of the lease, the Group recognizes lease liabilities measured
at the present value of lease payments to be made over the lease term. The lease
payments include fixed payments (including in-substance fixed payments) less any lease
incentives receivable, variable lease payments that depend on an index or a rate, and
amounts expected to be paid under residual value guarantees. The lease payments also
include the exercise price of a purchase option reasonably certain to be exercised by the
Group and payments of penalties for terminating the lease, if the lease term reflects the
Group exercising the option to terminate.
Variable lease payments that do not depend on an index or a rate are recognized as
expenses (unless they are incurred to produce inventories) in the period in which the event
or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses its incremental
borrowing rate at the lease commencement date because the interest rate implicit in
the lease is not readily determinable. After the commencement date, the amount of
lease liabilities is increased to reflect the accretion of interest and reduced for the lease
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payments made. In addition, the carrying amount of lease liabilities is remeasured if there
is a modification, a change in the lease term, a change in the lease payments (e.g., changes
to future payments resulting from a change in an index or rate used to determine such
lease payments) or a change in the assessment of an option to purchase the underlying
asset. The Group’s lease liabilities are included in Lease liabilities.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases
of office space (i.e., those leases that have a lease term of 12 months or less from the
commencement date and do not contain a purchase option). It also applies the lease of
low-value assets recognition exemption to leases of office equipment that are considered
to be low value. Lease payments on short-term leases and leases of low-value assets are
recognized as expense on a straight-line basis over the lease term.
Right-of-Use Assets
The Group entered into a 5-year lease for offices in Lausanne, Switzerland in November
2021. This lease is classified as a right of use asset. The initial office lease in Eindhoven
ended in December 2022 and was classified as a right of use asset up to October 2022,
when the Group entered into a short-term office lease starting November 2022. Since
November the initial Eindhoven lease was treated as an onerous contract from 1 November
2022 to the end of the lease contract 31 December 2022.
Key movements relating to right-of-use assets are presented below:
2022
2021
Net book value at January 1
2,190
149
Additions
Depreciation for the year
Onerous lease contract
90
(575)
(24)
2,220
(179)
Net book value at December 31
1,681
2,190
The office building is leased for office space. The lease includes an extension option
exercisable up to one year before the end of the non-cancellable lease term. The option
to renew the lease is for an additional period of the same duration after the end of the
contract term and are at the option of the Group as lessee. The Group has elected not to
exercise the option and no new lease agreement has been entered into as replacement yet.
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Lease Liabilities
The maturity of the lease liability in relation to the office building is as follows:
2022
2021
Balance as at January 1
2,214
198
Less than one year
One to five years
More than five years
427
1,294
–
473
1,741
–
Total lease liability
1,721
2,214
2022
2021
Balance as at January 1
2,214
198
Additions
Onerous lease contract
Interest accretion
Repayments
90
(26)
84
(641)
2,220
–
21
(225)
Total lease liability
1,721
2,214
The incremental borrowing rate applied is 4% for the Lausanne office and was 6% for the
Eindhoven office (High Tech Campus) that ended on 31 October 2022.
On 1 November 2022 the Group entered into a short-term office lease for 12 months for
which the Group has elected not to recognise a right of use asset and lease liability.
Amount recognised in
relation to this short-term lease amounted to EUR 8.8k.
For the maturity analysis of the undiscounted cash flows, refer to note 4.3
3.3 Indirect Tax Receivables
The tax receivables consist of refundable VAT and are collectable within 12 months. The
increase in the receivable is a direct result of an increase in activities and costs for which
VAT can be claimed.
3.4 Other Current Assets
2022
2021
Advance payments
Grants and other receivable
Rental Guarantee
905
266
285
1,347
902
297
1,456
2,546
The Group has pledged EUR 285k (2021: EUR 297k) of its cash at banks to fulfil collateral
requirements relating to the Lausanne office rental agreement. Advance payments mostly
relate to D&O insurance prepaid for which the premium improved in 2022. In 2021 grants
and other receivables included amounts receivable from the DARPA grant which was
received in 2022.
3.5 Cash and Cash Equivalents and Fixed Term Deposits
Accounting Policy:
Cash and short-term deposits in the statement of financial position
comprise cash at banks and on hand and short-term deposits with a maturity of three
months or less, that are readily convertible to a known amount of cash and subject to an
insignificant risk of change in value.
For the purpose of the consolidated statement of cash flows, cash and cash equivalents
consist of cash and short-term deposits as defined above, net of outstanding bank
overdrafts as they are considered an integral part of the Group’s cash management.
2022
2021
Cash at bank
Short-term deposits
21,760
20,000
89,443
–
Cash and cash equivalents
41,760
89,443
Fixed term deposits
20,000
–
20,000
–
Cash and cash equivalents and fixed term deposits
61,760
89,443
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Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-
term deposits are made for varying periods of between one day and three months,
depending on the immediate cash requirements of the Group, and earn interest at the
respective short-term deposit rates.
Fixed term deposits represent deposits made for varying periods exceeding three months
but less than 12 months from inception.
At December 31, 2022, the Group had no bank overdrafts. All cash is freely at the disposal
of the company.
3.6 Trade Payables
Trade payables and accrued expenses are non-interest bearing and are normally settled
on 30-90 day terms. The increase is a direct result of an increase in activities and costs
and the timing of settlement.
3.7 Other Payables
The other payables can be broken down as follows:
2022
2021
Wage tax and social security
Grants received in advance
Bonus
Invoices to be received
Other
466
1,328
1,856
732
1,284
126
–
1,770
466*
1,672*
5,666
4,034
* 2021: An amount of EUR 306k has been reclassified from Other to Invoices to be received for better comparison.
The increase in Other Payables is due to Grant amounts received in advance. Other
includes an amount of EUR 801k relating to grants to be paid to subcontractors (2021: EUR
0) and accrued expenses that decreased due to timing factors.
4. Financing, Financial Risk Management & Financial Instruments
4.0 Issued Capital & Reserves
Share Capital & Share Premium
Accounting Policy:
Ordinary shares are classified as share capital. Equity instruments are
recorded at the proceeds received, net of direct issue costs.
The share premium represents the amount by which the fair value of the consideration
received exceeds the nominal value of shares issued. Incremental costs directly
attributable to the issue of new shares or options are shown in equity as a deduction, net of
tax, from the proceeds.
The authorized share capital (“maatschappelijk kapitaal”) amounts to EUR 12,225,000
divided into 50,937,500 Ordinary Shares and 50,937,500 Preferred Shares with a nominal
value of EUR 0.12 each.
At 31 December 2022, 30,184,388 Ordinary Shares were issued (31 December 2021:
30,184,388 shares). All of the issued Ordinary Shares are fully paid-up and represent
capital in the Company. No Shareholders have any voting rights different from any
other Shareholder.
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Other Reserves
Currency
Translation
Differences
Stock
Compensation
Reserve
Conversion
Option
Preference
Shares
Total
Other
Reserves
Balance at January 1, 2021
(532)
3,671
14,794
17,933
Conversion of preference share on IPO
Share based payment expense: EIP
Share based payments: EIP accelerated vesting
Share based payment expense: LTIP
Currency translation differences
–
–
–
–
249
–
8,494
(12,165)
69
–
(14,794)
–
–
–
–
(14,794)
8,494
(12,165)
69
249
Balance at December 31, 2021
(283)
69
–
(214)
Share based payment expense: LTIP
Currency translation differences
–
602
1,691
–
–
–
1,691
602
Balance at December 31, 2022
319
1,760
–
2,079
Currency Translation Reserve
Exchange gains and losses arising from the translation of the functional currency of
foreign operations to the reporting currency of the parent are accounted for in this legal
reserve. In the case of the sale of a participating interest, the associated accumulated
translation differences are transferred to the profit and loss account and presented therein
as part of the result on the sale.
The foreign currency translation reserve relates to the investment in United States.
Stock Compensation Reserve
The stock compensation reserve is used to recognize the value of equity-settled share-
based payments provided to employees, including key management personnel, as part of
their remuneration.
4.1 Earnings Per Share (EPS)
Accounting Policy:
Basic EPS is calculated by dividing the profit for the year attributable
to ordinary equity holders of the parent by the weighted average number of ordinary
shares outstanding during the year.
Diluted EPS is calculated by dividing the profit attributable to ordinary equity holders
of the parent (after adjusting for interest on the convertible preference shares) by the
weighted average number of ordinary shares outstanding during the year plus the
weighted average number of ordinary shares that would be issued on conversion of all the
dilutive potential ordinary shares into ordinary shares.
The objective of determining diluted EPS is to reflect the maximum possible dilutive
effect arising from potential ordinary shares outstanding during the period. The Group is
currently loss making and there are currently no anti-dilutive potential ordinary shares to
be considered. Therefore, diluted EPS is disregarded for 2022. The share options granted
under the LTIP (refer to Note 2.9) could have a potential dilutive effect in the future, but had
no impact in 2022.
There have been no other transactions involving ordinary shares or potential
ordinary shares between the reporting date and the date of authorization of these
financial statements.
The following tables reflect the income and share data used in the EPS calculation:
Profit (Loss) Attributable to Ordinary Shareholders
2022
2021
Profit (loss) for the year, attributable to equity holders of the parent
(32,772)
(34,314)
Weighted-Average Number of Ordinary Shares
2022
Thousands
2021
Thousands
Weighted average number of ordinary shares for basic EPS
30,184
9,485
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4.2 Financial Liabilities
Accounting Policy:
Financial Instruments – Initial Recognition & Subsequent Measurement
A financial instrument is any contract that gives rise to a financial asset of one entity and
a financial liability or equity instrument of another entity. Financial assets and financial
liabilities are initially recognized when the Company becomes a party to the contractual
provisions of the instrument.
Financial Liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value
through profit or loss, loans and borrowings, payables, or as derivatives designated as
hedging instruments in an effective hedge, as appropriate. A financial liability is classified
as FVPL if it is classified as held-for-trading, it is a derivative or it is designated as such
on initial recognition. Financial liabilities at FVPL are measured at fair value and net gains
and losses, including any interest expense, are recognized in profit or loss. Other financial
liabilities are subsequently measured at amortized cost using the effective interest
method. Interest expense and foreign exchange gains and losses are recognized in profit or
loss. Any gain or loss on derecognition is also recognized in profit or loss
All financial liabilities are recognized initially at fair value and, in the case of liabilities at
amortized cost , net of directly attributable transaction costs.
The Group’s financial liabilities include trade payables, other payables, loans and borrowings.
For purposes of subsequent measurement, financial liabilities are classified in
two categories:
•
Financial liabilities at fair value through profit and loss
•
Financial liabilities at amortized cost
Financial liabilities at fair value through profit or loss (“FVPL”)
Financial liabilities at fair value through profit or loss include financial liabilities held for
trading and financial liabilities designated upon initial recognition as at fair value through
profit or loss.
Financial liabilities are classified as held for trading if they are incurred for the purpose of
repurchasing in the near term. This category also includes derivative financial instruments
entered into by the Group that are not designated as hedging instruments in hedge
relationships as defined by IFRS 9. Separated embedded derivatives are also classified as
held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognized in the statement of profit
or loss.
Financial liabilities designated upon initial recognition at fair value through profit or
loss are designated at the initial date of recognition, and only if the criteria in IFRS 9 are
satisfied. The Group has not designated any financial liability as at fair value through
profit or loss.
Financial Liabilities at Amortized Cost
This is the category most relevant to the Group. After initial recognition, interest-bearing
loans and borrowings are subsequently measured at amortized cost using the effective
interest rate (“EIR”) method. Gains and losses are recognized in the profit or loss when the
liabilities are derecognized as well as through the EIR amortization process.
Amortized cost is calculated by taking into account any discount or premium on
acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is
included as finance costs in the statement of profit or loss.
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Derecognition
A financial liability is derecognised when the obligation under the liability is discharged
or cancelled or expires. When an existing financial liability is replaced by another from
the same lender on substantially different terms, or the terms of an existing liability are
substantially modified, such an exchange or modification is treated as the derecognition
of the original liability and the recognition of a new liability at fair value. The difference in
the respective carrying amounts is recognised in the statement of profit or loss.
Offsetting of Financial Instruments
Financial assets and financial liabilities are offset and the net amount is reported in the
consolidated statement of financial position if there is a currently enforceable legal right to
offset the recognized amounts and there is an intention to settle on a net basis, to realize
the assets and settle the liabilities simultaneously. No offsetting is currently applied.
2022
2021
Balance as at 31 December
12,565
11,451
Innovation
Loan
Convertible
Preference
A Shares
Convertible
Loan
Balance as per January 1, 2021
10,410
31,407
–
Loan amount received / preference shares issued
Interest / cumulative dividend accrued during the year
Conversion to ordinary shares - IPO
–
1,041
–
–
3,266
(34,673)
30,000
1,122
(31,122)
Balance as per December 31, 2021
11,451
–
–
Loan amount received
Interest accrued during the year
–
1,205
–
–
–
–
Balance as per December 31, 2022
12,656
–
–
Innovation Loan
On 5 February 2016, the Group was granted a loan from RVO NL (Dutch Government) of
EUR 10M payable according a set payment scheme.
The loan carries interest at 10%.
The current redemption plan for the loan is as presented below:
Date
% of Loan Amount
1 January 2026
1 April 2026
1 July 2026
1 October 2026
1 January 2027
1 April 2027
1 July 2027
15.0
15.0
17.5
17.5
17.5
17.5
All due interest
Certain Intellectual Property (patents registered), have been pledged to the RVO NL in
case of default of repayment of the loan. These patents have not been capitalized as at 31
December 2022.
Convertible Preference A Shares
The convertible preference A shares carried a dividend of 6% per annum. The dividend
rights were cumulative. The preference shares ranked ahead of the ordinary shares in the
event of a liquidation. The preference A shares could be converted into Ordinary Shares of
the company under different scenarios, where the rights and number of Ordinary Shares
received differs. In the event of an IPO, conversion is mandatory at a fixed conversion rate
of 1:1, subject to adjustments for any changes in the share capitalization of the Company.
As part of the corporate conversion (in 2021), all preference A shares were converted
to Ordinary shares at a ratio of 1:1 based on the numbers of preference A shares. The
mandatory conversion upon IPO was considered the maturity event for this instrument.
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The carrying value of the financial liability was derecognised and recognised as equity
(share premium reserve) The equity component of the conversion option (previously
recognized in other reserves) was reclassified to share premium on conversion before the
reversed stock split was affected on all ordinary shares and the nominal value increased to
EUR 0,12 per share.
Convertible Loan
On 20 April 2021 the Company entered into a Convertible Loan Agreement of EUR 30M,
received in 2 instalments. The annual interest rate was 8%. The convertible loan was
repayable within 36 months from date of signing the agreement. The repayment date was
therefore 2024. The conversion option was considered an embedded derivative which is
bifurcated and treated as a financial instrument at fair value through profit and loss. After
the corporate conversion (in 2021) but immediately before the IPO the full loan amount,
including contractual interest accrued converted into ordinary shares.
4.3 Financial Risk Management Objectives & Policies
The Group’s principal financial liabilities comprise of loans and borrowings and trade and
other payables. The main purpose of these financial liabilities is to finance the Group’s
operations and to provide guarantees to support its operations.
The Group is responsible for implementing and evaluating policies which govern the funding,
investments and any use of derivative financial instruments. The Group is exposed to
various risks. The Group monitors risk exposure on an ongoing basis, as summarized below:
Capital Management
Capital includes issued capital, convertible preference shares, share premium and all other
equity reserves attributable to the equity holders of the parent. The primary objective
of the Group’s capital management is to continue as a going concern while maximising
shareholder value. The Group manages its capital structure and will consider adjustments
in light of changes in economic conditions. To maintain or adjust the capital structure, the
Group may issue new shares.
Liquidity Risk
The Group manages liquidity risk by continuously monitoring forecast and actual cash
flows. The Group’s objective is to maintain a balance between continuity of funding
and flexibility through the use of subsidies and grants, and sufficient progress towards
regulatory approval, which is related to future financing rounds.
Cash is invested in low-risk investments such as short-term bank deposits or savings
accounts. The Group mainly makes use of liquid investment in current accounts (in Euro) or
short-term deposit accounts. The ability of the Group to maintain adequate cash reserves
to support its activities in the medium term is highly dependent on the Group’s ability to
raise additional funds.
The following table details the undiscounted remaining contractual maturity for the
Group’s financial liabilities with agreed repayment periods, including both interest and
principal cash flows:
As of 31 December 2022:
Less than
1 Year
1-3 Years
3-5 Years
More than
5 Years
Total
Innovation loan
Lease liability
Trade payables
–
512
1,909
–
1,452
–
19,298
–
–
–
–
–
19,298
1,964
1,909
Total
2,421
1,452
19,298
–
23,171
As of 31 December 2021:
Less than
1 Year
1-3 Years
3-5 Years
More than
5 Years
Total
Innovation loan
Lease liability
Trade payables*
–
490
952
–
1,470
–
6,500
408
–
12,798
–
–
19,298
2,368
952
Total
1,442
1,470
6,908
12,798
22,618
* This line has been restated from prior year to only include trade payables.
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Market Risk
Market risk is the risk that the fair value of future cash flows of a financial instrument
will fluctuate because of changes in market prices. The Group’s activities may expose it to
changes in foreign currency exchange rates and interest rates. The Group is not
exposed to any equity price risk or commodity price risk as it does not invest in these
classes of investments.
Credit Risk
Because of the absence of sales to third parties and therefore trade receivables, credit
risk arises mainly from cash and cash equivalents and deposits with banks and financial
institutions. The Group only works with international reputable commercial banks and
financial institutions when investing surplus funds. Short – and fixed term deposits are
subject to approval in line with internal policy. The Group holds accounts with ING, Belfius,
UBS, First American Bank, Deutsche Bank and Banque Cantonale Vaudoise (BCV). The
number of banks and financial institutions is to minimise concentration risk and therefore
mitigate financial loss through a counterparty’s potential failure to make payments.
Currency Risk
Currency risk is the risk that reported financial performance, or the fair value or future
cash flows of a financial instrument, will fluctuate because of changes in foreign exchange
rates. The Group is exposed to currency risk for the activities mainly in the US as the
accounting is performed in US dollars whereas the functional currency of the Group is
the euro. The risk is currently managed by replenishing the US bank account at regular
intervals to account for both the positive and negative changes.
4.4 Fair Value & Fair Value Hierarchy of the Financial Statements
Accounting Policy:
All assets and liabilities for which fair value is measured or disclosed
in the financial statements are categorized within the fair value hierarchy, described as
follows, based on the lowest level input that is significant to the fair value measurement
as a whole:
•
Level 1 — Quoted (unadjusted) market prices in active markets for identical assets
or liabilities
•
Level 2 — Valuation techniques for which the lowest level input that is significant to the
fair value measurement is directly or indirectly observable
•
Level 3 — Valuation techniques for which the lowest level input that is significant to the
fair value measurement is unobservable.
The carrying amounts and fair values of the Group’s financial instruments are as follows,
including its fair value hierarchy:
2022
Carrying
Amount
Estimated
Fair Value
Financial liabilities
Innovation credit loan (Level 2)
12,656
13,689
Total financial liabilities
12,656
13,689
2021
Carrying
Amount
Estimated
Fair Value
Financial liabilities
Innovation credit loan (Level 2)
11,451
13,218
Total financial liabilities
11,451
13,218
Management has assessed that the fair values of cash and cash equivalents, accounts
payable, taxes and social securities and other payables approximate to their carrying
amounts largely due to the short-term maturities of these instruments.
The fair values of the financial assets and liabilities are included at the amount at which
the instrument could be exchanged in a current transaction between willing parties, other
than in a forced or liquidation sale. The following methods and assumptions were used to
estimate the fair values:
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The fair value of Innovation credit loan and due interest have been calculated by
discounting the expected future cash flows using rates currently available for instruments
with similar terms, credit risk and remaining maturities.
During the period, there were no transfers of fair value measurements between Level 1 and
Level 2 and no transfers into or out of Level 3 for both financial assets and financial liabilities.
4.5 Financial Expense
Accounting Policy:
Interest income is recognized by applying the effective interest rate,
except for short-term receivables when the effect of discounting is immaterial. The
Company’s financial assets include cash and cash equivalents and other long term and
current receivables.
Borrowing costs directly attributable to the acquisition, construction or production of
an asset that necessarily takes a substantial period of time to get ready for its intended
use or sale are capitalized as part of the cost of the asset. All other borrowing costs are
expensed in the period in which they occur. Borrowing costs consist of interest and other
costs that an entity incurs in connection with the borrowing of funds.
2022
2021
Interest income from deposits
Interest on loans
Interest post-employment benefits
Interest banks
Interest on lease liabilities
Exchange losses
Bank charges
62
(1,205)
-
(226)
(84)
(24)
(33)
–
(5,430)
1
(146)
(21)
(100)
(17)
Net Finance expense
(1,510)
(5,713)
5. Other Disclosures
5.0 Post-Employment Benefits: Defined Benefit Obligation
Accounting Policy:
Group companies operate various pension schemes. The schemes
are funded through payments to insurance companies or trustee-administered funds,
determined by periodic actuarial calculations. The Group has both defined benefit and
defined contribution plans.
Defined Benefit Plan
The Group operates a defined benefit pension plan in Switzerland, which requires
contributions to be made to a separately administered fund. The cost of providing benefits
under the defined benefit plan is determined using the projected unit credit method.
Remeasurements, comprising of actuarial gains and losses are recognised in the
statement of financial position with a corresponding debit or credit to retained earnings
through OCI in the period in which they occur. Remeasurements are not reclassified to
profit or loss in subsequent periods.
Past service costs are recognised in profit or loss on the earlier of:
•
The date of the plan amendment or curtailment, and
•
The date that the Group recognises related restructuring costs
Net interest is calculated by applying the discount rate to the net defined benefit liability
or asset. The Group recognises the changes in the net defined benefit obligation due
to service costs comprising current service costs, past-service costs, gains and losses
on curtailments and non-routine settlements as part of operating expenses and the net
interest expense or income as part of net finance costs in the consolidated statement of
profit and loss.
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2022
2021
Plan assets
Obligation
3,879
(5,001)
1,756
(3,144)
Net liability
1,121
1,388
A defined benefit plan is a pension plan that is not a defined contribution plan. Typically,
defined benefit plans specify an amount of pension benefit that an employee will receive
upon retirement, typically dependent on one or more factors such as age, years of service
and compensation. The benefits paid to employees in Switzerland qualify as a defined
benefit plan.
The pension plan for Swiss employees (“the Pension Fund”) is a defined benefit plan. The
Pension Fund provides benefits for retirement, disability and surviving dependents that
meet or exceed the minimum benefits required under the Federal Law on Occupational
Retirement, Survivors’ and Disability Insurance (“BVG”), including the legal coordination
charge, which is also insured. The monthly premium to fund the Pension Fund’s benefits
is split equally between the employer and the employees. Contributions, which vary by
the age of the employees, range from 6-13% of the covered salary and are credited to the
employees’ individual retirement savings accounts. The Pension Fund is responsible for
capital investments and pursues an investment strategy with a prescribed investment
policy. The Group assumes an average retirement age of 62 (female) and 63 (male),
respectively. Upon retiring (including early and partial retirement), insured persons are
entitled to a lifelong retirement pension if employees do not choose to withdraw the entire
balance, or portion thereof, of their individual retirement savings accounts in the form of a
capital payment.
The Pension Fund is administered by Allianz Suisse, Switzerland, which is legally separate
from the Group and is governed by a foundation board. In addition, there is a pension fund
commission comprised of two employee and two employer representatives. The duties of
the foundation board, as well as the pension fund commission, are laid out in the BVG and
the specific pension fund rules. They are required by law to act in the best interest of the
participants and are responsible for setting certain policies (e.g. investment, contribution
and indexation policies) for the Pension Fund. At least four times a year, the foundation
board, as well as the pension fund commission, meet to analyze consequences and decide
on adjustments in the investment strategy.
Pursuant to the BVG, additional employer and employee contributions may be imposed
whenever a significant funding deficit arises in accordance with the BVG. In addition to
investment risk, the Pension Fund is exposed to actuarial risk, longevity risk, currency risk
and interest rate risk.
In addition to the pension plan for Swiss employees, a defined benefit plan for Swiss
management also provides retirement benefits and risk insurance for death and disability
for components of remuneration in excess of the maximum insurable amount of salary
under the plan described above.
Movement of Net Defined-Benefit Liability
2022
2021
Balance as at January 1
1,388
399
Service costs
Admin costs
Past service costs
562
43
–
167
14
264
Employee benefit expenses
Net interest costs / (income)
605
3
445
(1)
Included in statement of profit and loss
608
444
Actuarial gains / (losses)
– Financial assumptions
– Demographic assumptions
– Experience adjustment
– Return on assets excluding interest income
(1,956)
–
1,286
184
(94)
–
727
81
Exchange rate differences
(486)
65
714
30
Included in statement of comprehensive income
(421)
744
Contributions by employer
(454)
(199)
Balance as at December 31
1,121
1,388
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The principal assumptions used in determining post-employment (pension) benefit
obligations for the plan are shown below:
2022
2021
Discount rate
Salary increase
Interest credit rate
Mortality base table
Longevity improvement
2,30%
2,50%
1,00%
BVG2020
CMI2018; 1,25%
0,30%
2,50%
0,60%
BVG2020
CMI2018; 1,25%
A quantitative sensitivity analysis for significant assumptions as at 31 December is
shown below:
2022
2021
Discount rate
+ 25bps
- 25bps
Salary increase
+ 25bps
- 25bps
Interest credit rate
+ 25bps
- 25bps
Mortality base table
Life expectancy + 1 year
Life expectancy - 1 year
(190)
203
84
(80)
76
(73)
27
(26)
(147)
159
102
(62)
30
(29)
35
(33)
The sensitivity analyses have been determined based on a method that extrapolates
the impact on the defined benefit obligation as a result of reasonable changes in key
assumptions occurring at the end of the reporting period. The sensitivity analyses are
based on a change in a significant assumption, keeping all other assumptions constant.
The sensitivity analyses may not be representative of an actual change in the defined
benefit obligation as it is unlikely that changes in assumptions would occur in isolation
from one another.
The following are the expected payments or contributions to the defined benefit plan in
future years:
2022
2021
Within the next 12 months
Between 2 and 5 years
Beyond 5 years
281
1,426
2,540
123
640
1,428
Total expected payments
4,247
2,191
The average duration of the defined benefit plan obligation at the end of the reporting
period is 16 years (2021: 19 years).
Plan Assets Allocation
The asset allocation in the Swiss pension plan at December 31 was as follows:
2022
2021
Bonds
Equities
Loans
Mortgages
Real Estate
Cash, derivatives and funds
2,309
–
134
504
872
60
1,004
168
52
207
300
25
3,879
1,756
Plan assets in 2022 do not include property occupied by or financial instruments issued
by ONWARD.
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5.1 Commitments & Contingencies
Legal Claim Contingencies
As at December 31, 2022, the Group had no legal claim contingencies.
Guarantees
The Group has provided a guarantee to Wincasa for EUR 273k and EUR 8k to SPACES as
collateral for the lease of the office spaces.
Royalties
The Group has entered into three license agreements with EPFL that will pay out royalties
in case the Company is able to generate revenues in the future for products directly linked
to these licenses. The royalty scheme with EPFL is based on net sales. To date no royalties
have been paid as there is no product generating revenue.
On 27 September 2019 Neurorecovery Technologies Inc. (now ONWARD Medical Inc.)
entered into a license agreement with the Regents of the University of California acting
through Technology Development Group UCLA campus granting an exclusive license on
certain patents in certain fields of neuromodulation and spinal cord stimulation and a
non-exclusive license on certain other patent rights. Various revenue milestone payments
are due under the exclusive license and fixed royalty payments are due under the non-
exclusive license. The agreement contains various milestone and diligence obligations
ranging from USD 10k to USD 50k payable upon entering a phase III clinical trial, regulatory
approval and/or first commercial sale. To date none of the milestones triggering the
obligations have occurred.
On 8 October 2019 Neurorecovery Technologies Inc. (now ONWARD Medical Inc.) entered
into a license agreement with the California Institute of Technology (“Caltech”), the latter
on behalf of various intellectual property owners, including UCLA, University of Louisville,
DEI and USC, granting an exclusive license on certain technology in certain fields of
epidural and transcutaneous neuromodulation and a non-exclusive license of certain
other intellectual property. Various revenue milestone payments, diligence obligations and
fixed royalty payments are due under the license. These payments range from USD 20k
to USD 75k payable upon FDA approval, CE Mark and/or first commercial sale. To date no
payments are due as none of the requirements have been met.
5.2 Related Party Transactions
Note 1.2 provides the information about the Group’s structure including the details of
the subsidiaries. Transactions between the Company and its subsidiaries have been
eliminated on consolidation and are not disclosed in the notes.
The Group considers the board and the management team to be key management as
defined in IAS 24 ‘Related parties’. Full details of the remuneration of the board (CEO and
non-executives) are included in the Remuneration report.
2022
Salary,
Bonuses
& Other
(Short-Term
Employee
Benefits)
Pension
Premiums
(Post-
Employment
Eenefits)
Share-
Based
Payment
Total
Management team, excluding CEO
CEO
Non-executive directors
2,574
917
364
105
44
–
596
469
256
3,275
1,430
621
3,855
149
1,321
5,326
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Salary,
Bonuses
& Other
(Short-Term
Employee
Benefits)
Pension
Premiums
(Post-
Employment
Eenefits)
Share-
Based
Payment
Total
Management team, excluding CEO
CEO
Non-executive directors
2,073
1,163
436
78
28
–
2,164
2,140
1,180
4,315
3,331
1,616
3,672
106
5,484
9,261
5.3 Events After the Reporting Period
After 31 December 2022 the Group granted 968,250 stock options to the Management
team, including the CEO and CSO with an exercise price of EUR 6.12. The conditions of the
existing plan as explained in Note 2.9 applies to this grant.
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The notes on pages
290
to
299
are an integral part of these separate financial statements.
For the Year Ended 31 December
All amounts in EUR ‘000
Notes
2022
2021
Grants
2,076
1,219
Total operating income
General and administrative expenses
B
2,076
(31,003)
1,219
(27,254)
Total operating expenses
Operating result for the period
Net Finance expense
C
D
(31,003)
(28,927)
(1,453)
(27,254)
(26,035)
(5,662)
Result before tax
Income tax expense
Share in result from participating interests
E
(30,380)
–
(2,392)
(31,697)
–
(2,617)
Result after tax
(32,772)
(34,314)
Company Statement
of Income
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(Before appropriation on result)
For the Year Ended 31 December
All amounts in EUR ‘000
Notes
2022
2021
Assets
Non-current assets
Tangible fixed assets
Financial fixed assets
F
G
61
1,139
197
2,459
1,200
2,656
Current assets
Trade and other receivables
Fixed term deposits
Cash at bank and in hand
H
I
I
16,900
20,000
31,501
7,846
–
88,777
68,401
96,623
69,601
99,279
Company
Balance Sheet
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The notes on pages
290
to
299
are an integral part of these separate financial statements.
Equity & Liabilities
Equity and reserves
Issued capital
Share premium
Other reserves
Legal reserve: Currency translation differences
Retained earnings
Result for the year
J
3,622
155,249
1,760
319
(75,547)
(32,772)
3,622
155,249
69
(283)
(41,660)
(34,314)
Total equity
52,631
82,683
Provisions
K
256
214
Non-current liabilities
L
12,656
11,451
Current liabilities
M
4,058
4,931
69,601
99,279
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A. Presentation of Financial Statements and Recognition and Measurement Principles
The description of the activities of ONWARD Medical NV (the company) and the company
structure, as included in the notes to the consolidated financial statements, also applies to
the company financial statements.
These separate financial statements have been prepared in accordance with Title 9, Book
2 of the Dutch Civil Code. For setting the principles for the recognition and measurement of
assets and liabilities and determination of results for its separate financial statements, the
Company makes use of the option provided in section 2:362(8) of the Dutch Civil Code. This
means that the principles for the recognition and measurement of assets and liabilities
and determination of the result (hereinafter referred to as principles for recognition and
measurement) of the separate financial statements of the Company are the same as those
applied for the consolidated EU-IFRS financial statements. These principles also include
the classification and presentation of financial instruments, being equity instruments
or financial liabilities. In case no other principles are mentioned, refer to the accounting
principles as described in the consolidated financial statements. For an appropriate
interpretation of these statutory financial statements, the separate financial statements
should be read in conjunction with the consolidated financial statements.
Information on the use of financial instruments and on related risks for the group is
provided in the notes to the consolidated financial statements of the group.
Notes to the Company
Financial Statements
B. Operating Income
Operating income relates to grant and other income received. Government subsidies have
been received for the research and development of several development projects. There
are no unfulfilled conditions or contingencies attached to these subsidies.
2022
2021
Government subsidies (EU)
Other income
1,972
104
1,219
–
Total revenues and other income
2,076
1,219
Recognized
Grants
Total Grant*
2022
2021
BESTABLE
PREP2GO
DARPA
ZonMW
EISMEA – Reverse Paralysis
EISMEA - NEMO BMI
Eurostars Impulse
100
348
3,172
250
1,228
1,020
500
–
104
1,412
83
273
85
14
16
139
981
83
–
–
–
Total
1,972
1,219
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C. Operating Expenses
Operating expenses by nature are as follows:
2022
2021
Employee benefits
Other operating expenses
Depreciation
(5,277)
(25,515)
(211)
(12,122)
(14,909)
(223)
(31,003)
(27,254)
The increase in Other operating expenses is driven by Research and Development
expenses due to advancements made on our ARC
EX
and ARC
IM
platforms (mainly in
Switzerland) which increased the charge from Switzerland to the Netherlands under the
existing agreement.
Employee benefits includes share-based payment expense for all employees located
in The Netherlands, Switzerland and the United States. As of 31 December 2022, the
Company had 16.3 full-time equivalents located in the Netherlands (2021: 35.5), 68.3 full-
time equivalents located in Switzerland (2021: 32.9) and 11.5 (2021: 8.5) full-time equivalents
located in the United States. The 2021 expense includes the accelerated vesting of the
Employee Investment Plan.
D. Net Finance Expense
2022
2021
Interest income
Interest on loans
Interest banks
Interest on lease liabilities
Exchange losses
Bank charges
52
(1,434)
–
–
(48)
(23)
–
(5,430)
(146)
(7)
(65)
(14)
Net Finance expense
(1,453)
(5,662)
The decrease is the result of the conversion of the preference A shares and the convertible
loan in 2021 that no longer exist in 2022.
E. Share in Results from Participating Interests
An amount of EUR 2.392M (2021: EUR 2.617M) of share in results from participating
interests relates to group companies.
F. Tangible Fixed Assets
Cost
Office
Equipment
Total
At January 1, 2021
Additions
1,116
55
1,116
55
At December 31, 2021
1,171
1,171
Additions
Disposals
10
(465)
10
(465)
At December 31, 2022
716
716
Depreciation
Office
Equipment
Total
At January 1, 2021
Depreciation for the year
(751)
(223)
(751)
(223)
At December 31, 2021
(974)
(974)
Depreciation for the year
Disposal
(102)
421
(102)
421
At December 31, 2022
(655)
(655)
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Net Book Value
Office
Equipment
Total
At December 31, 2021
197
197
At December 31, 2022
61
61
G. Financial Fixed Assets
Financial fixed assets consist of participating interests in group companies. Financial
fixed assets are accounted for in the Company financial statements at net asset value.
They are tested for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss is recognised for the
amount by which the asset’s carrying amount exceeds its recoverable amount.
2022
2021
Cost
Accumulated impairments
2,459
–
3,102
–
Net book value at 1 January
2,459
3,102
Revaluations through OCI
Exchange differences
Share in result of participating interests
Addition: License fees paid on behalf of subsidiary
Provision: negative participating interest
858
172
(2,392)
–
42
(714)
255
(2,617)
2,219
214
Net change
Cost
Accumulated impairments
(1,320)
1,139
–
(643)
2,459
–
Net book value at 31 December
1,139
2,459
The Company has the firm intention to support its subsidiary, ONWARD Medical SA, to
meet its obligations to third parties. A provision has been recognised for the negative value
of the investment to the amount of EUR 1.199k (2021: 214k).
H. Trade & Other Receivables
Amounts due from group companies are recognized initially at fair value and subsequently
at amortized cost. Amortized cost is determined using the effective interest rate. The
company recognize a credit loss for financial assets (such as a loan) based on an expected
credit loss (ECL) which will occur in the coming twelve months or – after a significant
decrease in credit quality or when the simplified model can be used – based on the entire
remaining loan term.
For intercompany receivables the ECL would be applicable as well, however this could
cause differences between equity in the consolidated and separate financial statements.
For this reason, the company elected to eliminate these differences through the respective
receivable account in the separate financial statements.
2022
2021
Indirect tax receivable
Receivables from related parties – group companies
Receivables from related parties – other
Other
Advance payments made
458
15,174
190
257
821
290
5,492
–
820
1,244
16,900
7,846
The Company funds the operations of the subsidiaries. The increase in the receivable is a
result of the increase in operations in 2022.
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I. Cash at Bank, in Hand & Fixed Term Deposits
2022
2021
Cash at bank
Short-term deposits
21,501
10,000
88,777
–
Cash at bank and in hand
31,501
88,777
Fixed term deposits
20,000
–
20,000
–
Cash at bank, in hand and fixed term deposits
51,501
88,777
Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term
deposits are made for varying periods of between one day and three months, depending on
the immediate cash requirements of the Group, and earn interest at the respective short-
term deposit rates. Fixed term deposits are made for period exceeding three months but
less than one year and earn interest at the respective fixed term deposit rates
At December 31, 2022, the Group had no bank overdrafts. All cash is freely at the disposal of
the company.
J. Shareholders’ Equity
For the statement of changes in equity for the year ended 31 December 2022, please
refer to Consolidated statement of changes in equity in the consolidated financial
statements. Additional information on the shareholders’ equity is disclosed in note 4.0 of the
consolidated financial statements.
K. Provisions
2022
2021
Opening balance as at 1 January
Negative participating interest
214
42
–
214
Balance as at 31 December
256
214
L. Non-Current Liabilities
2022
2021
Balance as at 31 December
12,656
11,451
2022
Innovation Loan
Loan as per 1 January
11,451
Loan amount received
Interest / cumulative dividend accrued during the year
-
1,205
Net book value at 31 December
12,656
M. Current Liabilities
Amounts due to group companies recognized as financial liabilities at amortized cost as
per the policy in the consolidated financial statements.
2022
2021
Trade payables
Payables from related parties
Other payables
1,962
–
2,096
464
2,358
2,109
4,058
4,931
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N. Compensation of the Board Of Directors
The members of the Board and the Management Team are considered key management
personnel as defined in IAS 24 ‘Related party disclosures’. For details on their
remuneration, reference is made to note 5.2 of the consolidated financial statements. Full
details of the remuneration of the board (CEO and non-executives) are included in the
Remuneration report.
O. Fees for Audit & Other Services
In accordance with article 382.a of Part 9, Book 2, of the Netherlands Civil Code, the total
audit cost can be specified as follows:
Ernst & Young Accountants LLP
2022
2021
Audit of financial statements
Audit of special purpose financial statements
Other assurance services
478
–
8
180
679
39
486
898
P. Subsequent Events
For subsequent events, please refer to Note 5.3 of the Consolidated Financial Statements.
Q. Proposed Appropriation of Result
The Board of Directors proposes to deduct the net loss in full to the retained earnings.
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Independent Auditor’s Report
To: the shareholders and board of directors of ONWARD Medical N.V.
Report on the audit of the financial statements 2022 included in the annual report
Our Opinion
We have audited the financial statements 2022 of ONWARD Medical N.V. based in
Amsterdam, the Netherlands.
The financial statements comprise the consolidated and company financial statements.
In our opinion:
•
the accompanying consolidated financial statements give a true and fair view of the
financial position of ONWARD Medical N.V. as at 31 December 2022 and of its result and
its cash flows for 2022 in accordance with International Financial Reporting Standards
as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch
Civil Code
•
the accompanying company financial statements give a true and fair view of the
financial position of ONWARD Medical N.V. as at 31 December 2022 and of its result for
2022 in accordance with Part 9 of Book 2 of the Dutch Civil Code
Other Information
The consolidated financial statements comprise:
•
the consolidated statement of financial position as at 31 December 2022.
•
the following statements for 2022: the consolidated statements of profit and loss,
comprehensive income, changes in equity and cash flows
•
the notes comprising a summary of the significant accounting policies and other
explanatory information.
The company financial statements comprise:
•
the company balance sheet as at 31 December 2022
•
the company statement of income for 2022
•
the notes comprising a summary of the accounting policies and other
explanatory information.
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Basis for Our Opinion
We conducted our audit in accordance with Dutch law, including the Dutch Standards
on Auditing. Our responsibilities under those standards are further described in the Our
responsibilities for the audit of the financial statements section of our report.
We are independent of ONWARD Medical N.V. (‘the company’) in accordance with the
EU Regulation on specific requirements regarding statutory audit of public-interest
entities, the “Wet toezicht accountantsorganisaties” (Wta, Audit firms supervision
act), the “Verordening inzake de onafhankelijkheid van accountants bij assurance-
opdrachten” (ViO, Code of Ethics for Professional Accountants, a regulation with respect
to independence) and other relevant independence regulations in the Netherlands.
Furthermore we have complied with the “Verordening gedrags- en beroepsregels
accountants” (VGBA, Dutch Code of Ethics).
We believe the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Information in Support of Our Opinion
We designed our audit procedures in the context of our audit of the financial statements
as a whole and in forming our opinion thereon. The following information in support of our
opinion and any findings were addressed in this context, and we do not provide a separate
opinion or conclusion on these matters.
Our Understanding of the Business
ONWARD Medical N.V. and its subsidiaries (the ’group‘) are developing both an Implantable
Neuro-stimulation Systems (INS) and a non-invasive system for electrical stimulation of
specific areas of the spinal cord.
We determined materiality and identified and assessed the risks of material misstatement
of the financial statements, whether due to fraud or error in order to design audit
procedures responsive to those risks and to obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion.
Materiality
Materiality
€890,000 (2021: €1,100,000)
Benchmark applied
3% of operating expenses
Explanation
R&D companies such as ONWARD Medical N.V. which are
in the start-up phase, report no or modest revenues. The
stakeholders expect the entity to operate at a loss during
the R&D phase. The value that owners or others generally
attribute to these entities is primarily based on the promise
of future success of the products. Based on these factors we
deem operating expenses to be a suitable basis, as it is one of
the most important measures of the company’s performance.
We have also taken into account misstatements and/or possible misstatements that in our
opinion are material for the users of the financial statements for qualitative reasons.
We agreed with the audit committee of the board of directors that misstatements in
excess of €44,500 which are identified during the audit, would be reported to them, as well
as smaller misstatements that in our view must be reported on qualitative grounds.
Scope of the Group Audit
ONWARD Medical N.V. is at the head of a group of entities. The financial information of this
group is included in the consolidated financial statements.
Because we are ultimately responsible for the opinion, we are also responsible for directing,
supervising and performing the group audit. In this respect we have determined the nature
and extent of the audit procedures to be carried out for group entities. Decisive were the
size and/or the risk profile of the group entities or operations. On this basis, we selected
group entities for which an audit or review had to be carried out on the complete set of
financial information or specific items.
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The processes of Onward Medical are highly centralized and all transactions are initiated,
recorded, processed and reported on central level. We have applied a centralized audit
approach and all audit procedures are performed by the same team.
In total these procedures represent 100% of the group’s total assets, operating expenses
and net loss.
By performing the centralized procedures mentioned above at all components of the group,
together with additional procedures at group level, we have been able to obtain sufficient
and appropriate audit evidence about the group’s financial information to provide an
opinion on the consolidated financial statements.
Teaming & Use of Specialists
We ensured that the audit team included the appropriate skills and competences which
are needed for the audit of a listed client in the medical technology industry. We included
specialists in the areas of IT audit, forensics, share based payments, valuation of intangible
assets, actuaries and income tax.
Our Focus on Fraud and Non-Compliance With Laws and Regulations
Our Responsibility
Although we are not responsible for preventing fraud or non-compliance and we cannot
be expected to detect non-compliance with all laws and regulations, it is our responsibility
to obtain reasonable assurance that the financial statements, taken as a whole, are free
from material misstatement, whether caused by fraud or error. The risk of not detecting
a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
Our Audit Response Related to Fraud Risks
We identified and assessed the risks of material misstatements of the financial
statements due to fraud. During our audit we obtained an understanding of the company
and its environment and the components of the system of internal control, including the
risk assessment process and management’s process for responding to the risks of fraud
and monitoring the system of internal control and how the board of directors exercises
oversight, as well as the outcomes.
We refer to section “Risk Management & Control” of the management report for
management’s (fraud) risk assessment.
We evaluated the design and relevant aspects of the system of internal control and in
particular the fraud risk assessment, as well as the code of conduct. We evaluated the
design and the implementation of internal controls designed to mitigate fraud risks.
As part of our process of identifying fraud risks, we evaluated fraud risk factors with
respect to financial reporting fraud, misappropriation of assets and bribery and corruption
in close co-operation with our forensic specialists. We evaluated whether these factors
indicate that a risk of material misstatement due to fraud is present.
We incorporated elements of unpredictability in our audit. We also considered the outcome
of our other audit procedures and evaluated whether any findings were indicative of fraud
or non-compliance.
As in all of our audits, we addressed the risks related to management override of controls.
For these risks we have performed procedures among others to evaluate key accounting
estimates for management bias that may represent a risk of material misstatement due
to fraud, in particular relating to important judgment areas and significant accounting
estimates as disclosed in Note 1.6 to the financial statements including research &
development, share-based payments, impairment of intangible assets, post-employment
benefits and income taxes. We have also used data analysis to identify and address high-
risk journal entries and evaluated the business rationale (or the lack thereof) of significant
extraordinary transactions, including those with related parties. These risks did however
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not require significant auditor’s attention. Furthermore we note that we did not identify a
risk of fraud in revenue recognition.
We considered available information and made enquiries of relevant executives and directors.
Our fraud risk assessment, enquiries and other available information did not lead to specific
indications for fraud or suspected fraud potentially materially impacting the view of the
financial statements.
Our Audit Response Related to Risks of Non-Compliance With Laws and Regulations
We performed appropriate audit procedures regarding compliance with the provisions
of those laws and regulations that have a direct effect on the determination of material
amounts and disclosures in the financial statements. Furthermore, we assessed factors
related to the risks of non-compliance with laws and regulations that could reasonably be
expected to have a material effect on the financial statements from our general industry
experience, through discussions with management, reading minutes and performing
substantive tests of details of classes of transactions, account balances or disclosures.
We also inspected lawyers’ letters and we have been informed by management that
there was no correspondence with regulatory authorities . We remained alert to any
indication of (suspected) non-compliance throughout the audit. Finally we obtained written
representations that all known instances of non-compliance with laws and regulations have
been disclosed to us.
Our Audit Response Related to Going Concern
Management made a specific assessment of the company’s ability to continue as a going
concern and to continue its operations for the foreseeable future). As disclosed in Note 1.4
to the financial statements the Company believes that its cash position will be sufficient
to meet the Company’s capital requirements and fund its operations for at least 12 months
as from the date of this Annual report. Furthermore is stated that to continue development
and reach commercialization as planned the Company will need to attract additional funds
in the future and that the Company’s long term existence is contingent on achieving FDA
approval and CE mark on its products. The financial statements have been prepared on a
going concern basis.
We discussed and evaluated the specific assessment with management exercising
professional judgment and maintaining professional skepticism. We considered whether
management’s going concern assessment, based on our knowledge and understanding
obtained through our audit of the financial statements or otherwise, contains all relevant
events or conditions that may cast significant doubt on the company’s ability to continue
as a going concern.
Based on our procedures performed, we did not identify material uncertainties about going
concern at least 12 months as from the date of this Annual report. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditor’s report to the
related disclosures in the financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the
date of our auditor’s report. However, future events or conditions may cause a company to
cease to continue as a going concern.
Our Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most
significance in our audit of the financial statements. We have communicated the key audit
matters to the board of directors (including the non-executive members forming the audit
committee). The key audit matter is not a comprehensive reflection of all matters discussed.
In comparison with previous year, the nature of our key audit matter did not change.
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Valuation of intangible fixed assets
Note 3.0 intangible assets
Risk
At year-end 2022, ONWARD Medical N.V. carried an
intangible asset balance of € 10.2 million, consisting of
goodwill (€ 1.9 million), capitalized in-process R&D (€ 5.9
million) and capitalized license fees (€ 2.4 million). The
goodwill as well as the capitalized in-process R&D and
license fees relate to the acquisition of ONWARD Medical
Inc in 2019. In accordance with EU-IFRS, ONWARD Medical
N.V. is required to perform an impairment test on an annual
basis. The impairment test is significant to our audit because
the assessment process is complex, requires management
judgement, and is based on assumptions that are affected
by expected future market conditions. For these reasons, we
consider this a key audit matter.
Our audit approach
As part of our audit procedures we audited the assumptions
and methodologies used by the company, and also the
robustness of the planning process to evaluate whether the
company is able to prepare reliable estimates.
The value of the in-process R&D is contingent on the success
of the US Food and Drug Association (FDA) approval and CE
mark of the company’s products, as well as successfulness of
bringing the products to the market.
In order to assess the reasonability of input data, the valuation
model and the discount rate we have, among other procedures:
•
verified the appropriateness and consistent application of
the impairment model and related inputs;
•
compared the data with external data such as expected
inflation rate, external market growth expectations and
market capitalization of the Company;
•
analyzed the sensitivities in the company’s impairment
testing model.
We specifically focused on the risk of not achieving regulatory
approvals and whether a reasonable possible change in the
assumptions could trigger an impairment.
We also evaluated the adequacy of the company’s
disclosure in note 3.0 of the annual report, including
disclosures regarding assumptions and sensitivities as
well as consistency between the going concern forecasts
as disclosed in Note 1.4 and the inputs in the company’s
impairment testing model.
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Key observations
We have evaluated management’s key assumptions and
estimates to be within an acceptable range. We agree with
management’s conclusion that no impairment of intangible
assets is required and conclude that the disclosures in note
3.0 of the annual report are appropriate.
Report on Other Information Included in the Annual Report
The annual report contains other information in addition to the financial statements and
our auditor’s report thereon.
Based on the following procedures performed, we conclude that the other information:
•
is consistent with the financial statements and does not contain material misstatements
•
contains the information as required by Part 9 of Book 2 of the Dutch Civil Code for the
Board of Directors’ report and the other information as required by Part 9 of Book 2 of
the Dutch Civil Code and as required by Sections 2:135b and 2:145 sub section 2 of the
Dutch Civil Code for the remuneration report.
We have read the other information. Based on our knowledge and understanding obtained
through our audit of the financial statements or otherwise, we have considered whether the
other information contains material misstatements. By performing these procedures, we
comply with the requirements of Part 9 of Book 2 and Section 2:135b sub-Section 7 of the
Dutch Civil Code and the Dutch Standard 720. The scope of the procedures performed is
substantially less than the scope of those performed in our audit of the financial statements.
The board of directors is responsible for the preparation of the other information, including
the Board of Directors’ report in accordance with Part 9 of Book 2 of the Dutch Civil Code
and other information required by Part 9 of Book 2 of the Dutch Civil Code. The board of
directors is responsible for ensuring that the remuneration report is drawn up and published
in accordance with Sections 2:135b and 2:145 sub section 2 of the Dutch Civil Code.
Report on Other Legal and Regulatory Requirements and ESEF
Engagement
We were engaged by the general meeting as auditor of ONWARD Medical N.V. on 11
October 2021, as of the audit for the year 2021 and have operated as statutory auditor ever
since that date.
No Prohibited Non-Audit Services
We have not provided prohibited non-audit services as referred to in Article 5(1) of the EU
Regulation on specific requirements regarding statutory audit of public-interest entities.
European Single Electronic Reporting Format (ESEF)
ONWARD Medical N.V. has prepared the annual report in ESEF. The requirements for this
are set out in the Delegated Regulation (EU) 2019/815 with regard to regulatory technical
standards on the specification of a single electronic reporting format (hereinafter: the RTS
on ESEF).
In our opinion, the annual report prepared in the XHTML format, including the partially
marked-up consolidated financial statements as included in the reporting package by
ONWARD Medical N.V. complies in all material respects with the RTS on ESEF.
The board of directors is responsible for preparing the annual report, including the
financial statements, in accordance with the RTS on ESEF, whereby the board of directors
combines the various components into a single reporting package.
Our responsibility is to obtain reasonable assurance for our opinion whether the annual
report in this reporting package complies with the RTS on ESEF.
We performed our examination in accordance with Dutch law, including Dutch Standard
3950N ’Assurance-opdrachten inzake het voldoen aan de criteria voor het opstellen van
een digitaal verantwoordingsdocument’ (assurance engagements relating to compliance
with criteria for digital reporting). Our examination included amongst others:
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•
obtaining an understanding of the company’s financial reporting process, including the
preparation of the reporting package
•
identifying and assessing the risks that the annual report does not comply in all material
respects with the RTS on ESEF and designing and performing further assurance
procedures responsive to those risks to provide a basis for our opinion, including:
–
obtaining the reporting package and performing validations to determine whether
the reporting package containing the Inline XBRL instance document and the XBRL
extension taxonomy files, has been prepared in accordance with the technical
specifications as included in the RTS on ESEF
–
examining the information related to the consolidated financial statements in the
reporting package to determine whether all required mark-ups have been applied
and whether these are in accordance with the RTS on ESEF.
Description of Responsibilities Regarding the Financial Statements
Responsibilities of the Board of Directors for the Financial Statements
The board of directors is responsible for the preparation and fair presentation of the
financial statements in accordance with EU-IFRS and Part 9 of Book 2 of the Dutch Civil
Code. Furthermore, the board of directors is responsible for such internal control as the
board determines is necessary to enable the preparation of the financial statements that
are free from material misstatement, whether due to fraud or error.
As part of the preparation of the financial statements, the board of directors is responsible
for assessing the company’s ability to continue as a going concern. Based on the financial
reporting framework mentioned, the board of directors should prepare the financial
statements using the going concern basis of accounting unless the board either intends to
liquidate the company or to cease operations, or has no realistic alternative but to do so.
The board of directors should disclose events and circumstances that may cast significant
doubt on the company’s ability to continue as a going concern in the financial statements.
The non-executive board members of the board of directors are responsible for overseeing
the company’s financial reporting process.
Our Responsibilities for the Audit of the Financial Statements
Our objective is to plan and perform the audit engagement in a manner that allows us to
obtain sufficient and appropriate audit evidence for our opinion.
Our audit has been performed with a high, but not absolute, level of assurance, which
means we may not detect all material errors and fraud during our audit.
Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of these financial statements. The materiality affects the
nature, timing and extent of our audit procedures and the evaluation of the effect of
identified misstatements on our opinion.
We have exercised professional judgment and have maintained professional skepticism
throughout the audit, in accordance with Dutch Standards on Auditing, ethical
requirements and independence requirements. The ‘Information in support of our opinion’
section above includes an informative summary of our responsibilities and the work
performed as the basis for our opinion.
Our audit further included among others:
•
Performing audit procedures responsive to the risks identified, and obtaining audit
evidence that is sufficient and appropriate to provide a basis for our opinion
•
Obtaining an understanding of internal control relevant to the audit in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the company’s internal control
•
Evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by management
•
Evaluating the overall presentation, structure and content of the financial statements,
including the disclosures
•
Evaluating whether the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation
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Communication
We communicate with the audit committee of the board of directors regarding, among
other matters, the planned scope and timing of the audit and significant audit findings,
including any significant findings in internal control that we identify during our audit.
In this respect we also submit an additional report to the audit committee of the board
of directors in accordance with Article 11 of the EU Regulation on specific requirements
regarding statutory audit of public-interest entities. The information included in this
additional report is consistent with our audit opinion in this auditor’s report.
We provide the audit committee of the board of directors with a statement that we have
complied with relevant ethical requirements regarding independence, and to communicate
with them all relationships and other matters that may reasonably be thought to bear on
our independence, and where applicable, related safeguards.
From the matters communicated with the audit committee of the board of directors, we
determine the key audit matters: those matters that were of most significance in the
audit of the financial statements. We describe these matters in our auditor’s report unless
law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, not communicating the matter is in the public interest.
Eindhoven, 27 March 2023
Ernst & Young Accountants LLP
J.C.F. Lemmens
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Civil Code, Part 9 of Book 2, Sections 379 and 414), forms part of the notes to the
consolidated financial statements.
Non-IFRS Financial Measure
This Annual Report contains a financial measure that is not a measure of liquidity under
IFRS. This is commonly referred to as non-IFRS financial measure.
Although the non-IFRS financial measure presented is not a measure of liquidity under
IFRS, the company uses this measure to monitor the underlying performance of its
business and operations. This measure has not been audited or reviewed by the company’s
external auditor. Furthermore, the measures may not be indicative of the company’s
historical operating results, nor is this measure meant to be predictive of the company’s
future results. This measure is presented in this Annual Report because the company
considers it an important supplemental measure for evaluating the company’s liquidity.
Net Cash
Net cash is defined as the sum of cash and cash equivalents and fixed term deposits
included in the current assets as included in consolidated statement of financial position
in the Financial Statements.
The company discloses the following as net cash for the measurement and explanation
of liquidity:
2022
2021
Cash at bank
Short-term deposits
21,760
20,000
89,443
–
Cash and cash equivalents
41,760
89,443
Fixed term deposits
20,000
–
20,000
–
Net cash
61,760
89,443
Profit Appropriation
Pursuant to the Articles of Association, the profits shown in the Company’s annual
accounts in respect of a financial year shall be appropriated as follows, and in the following
order of priority:
•
to the extent that any preferred shares have been cancelled without full repayment
as described in the articles of association and without any such deficit subsequently
having been paid in full, an amount equal to any such (remaining) deficit shall
be distributed to those who held those preferred shares at the moment of such
cancellation becoming effective;
•
to the extent that any Preferred Distribution (or part thereof) in relation to previous
financial years has not yet been paid in full as described in the articles of association, an
amount equal to any such (remaining) deficit shall be distributed on the preferred shares;
•
the Preferred Distribution shall be distributed on the preferred shares in respect of the
financial year to which the annual accounts pertain;
•
the Board shall determine which part of the remaining profits shall be added to the
Company’s reserves; and
•
subject to a proposal by the board of directors to that effect, the remaining profits shall
be at the disposal of the General Meeting for distribution on the ordinary shares.
Special Statutory Voting Rights
There are no special statutory voting rights.
Shares Carrying Limited Economic Entitlement
The preferred shares in the Company’s capital carry a limited entitlement to the
Company’s profit and reserves. At 31 December 2022, no preferred shares in the
Company’s capital were issued.
Branches
The Company has no branches. The statutory list of all subsidiaries and affiliated
companies, prepared in accordance with the relevant legal requirements (Netherlands
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Definitions & Abbreviations
The following definitions are used in this report:
510(k)
Clearance under Section 510(k) of the FDCA
AIS
ASIA impairment scale
ASIA
American Spinal Injury Association
BDD
Breakthrough Device Designation -
Designation given by the FDA to allow a
timely access to devices providing a more
effective treatment or diagnosis of life-
threatening diseases by speeding-up their
development, assessment and review
Brain Spine Interface
Electrical signal produced by the brain
is recorded and translated into a signal
allowing the stimulation of the spine in a
timely manner
Caltech
California Institute for Technology
Cardiovascular
Relating to the heart and blood vessels
CARF
Commission of Accredited Rehabilitation
Facilities
CE
Conformité Européene
Cervical
Relating to the neck or located around the
neck area
CGC
The Dutch corporate governance code
issued on 8 December 2016
Chairperson
The Chairperson of the Board
CHUV
Centre Hospitalier Universitaire Vaudois
CRO
Contract research organisations
CSO
Chief Scientific Officer
DARPA
The US Department of Defense Advanced
Research Projects Agency
DSMB
Data Safety Monitoring Board
EBITDA
Earnings before interest, tax, depreciation
and amortization
EEA
European Economic Area
EPFL
École Polytechnique Fédérale de Lausanne
Epidural
Placed or administered outside the
dura mater
Eurostar Grants
A grant from the Eurostars Programme
of EUREKA together with the European
Community, named Prep2Go
FDA
U.S. Food and Drug Administration
FDCA
U.S. Federal Food, Drug, and Cosmetic Act
FTE
Full time equivalent personnel
GCP
Good Clinical Practice
HDE
Humanitarian Device Exemption
Hemodynamics
Forces involved in blood circulation in
the body
HIPAA
Health Insurance Portability and
Accountability
HUD
Humanitarian use device
Hypertension
Higher blood pressure than normal range
Hypotension
Lower blood pressure than normal range
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IPG
ONWARD implantable pulse generator
Lesion
A damaged region in the body
LTIP
Long-Term Incentive Plan
Lumbar
Relating to the lumbar region of the back
MDR
Medical Device Regulation
Medical Devices Regulation
Regulation (EU) 2017/745
MHRA
Medicines and Healthcare products
Regulatory Agency
Neurodegenerative
Characterized by the degeneration of the
nervous system
Neuromodulation
Field of bioengineering implicating
technologies impacting neural interfaces
Neuroprosthetic
Device used to restore function in the body
via the interface of electrodes and the
nervous system.
Neurostimulation
Application of an electrical stimulation
inducing modulation or activation of the
nervous system for a therapeutic effect
Neurorehabilitation
Supervised program of training to restore
function to patients who suffered from a
neurological disorder.
NHS
National Health Service – in the United
Kingdom: refers to the publicly funded
healthcare systems
Orthostatic hypotension
Hypotension caused by transition to an
upright position
Paraplegic
Someone affected by paralysis (partial or
complete) of the lower half of the body due
to an injury or disease of the spinal cord.
Perfusion
Passage of a fluid (blood, water) through
blood vessels, tissue or organ
PMA
Pre-market approval
QSR
Quality System Regulations
Reeve Foundation
Christopher and Dana Reeve Foundation
RVO
Rijksdienst voor Ondernemend Nederland
Scaffold (cellular)
Scaffolds engineered to induce cellular
interactions contributing to the formation
of new functional tissues
SCI
Spinal Cord Injury – damage to the nerves
in the spine that circulate signals from
the brain to and from the body. It can
be caused by a trauma or a disease.
This damage can lead to temporary or
permanent dysfunctions.
Sensorimotor paralysis
Condition that decreases the ability of
a person to feel and move due to a
nerve damage
Spasticity
Abnormal increase in muscle tone usually
caused by nerve damage and can be
associated with pain
STIMO
STImulation Movement Overground (title of
clinical study)
Tetraplegic (Quadraplegic)
Someone affected by paralysis (partial or
complete) of upper and lower limbs due to
injury or disease of the spinal cord.
Thoracic
Related to the thoracic region of the back
Transcutaneous
Penetrating through the skin. For example:
transcutaneous stimulation is stimulation
delivered through the skin via electrodes
placed on the skin
UCLA
University of California, Los Angeles
Up-LIFT
Pivotal study to evaluate the Company’s
ARC
EX
Therapy
Vascular
Relating to blood vessels
ZonMw grant
A grant from ZonMw
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2023