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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 20-F


(Mark One)

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

OR
☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report__________

Commission file number 001-39822

Pharming Group N.V.
(Exact name of registrant as specified in its charter)

The Netherlands
2834
Not applicable
(Jurisdiction of incorporation or organization)
(Primary Standard Industrial Classification Code Number)
(Translation of Registrant’s
name into English)

Pharming Group N.V.
Darwinweg 24
2333 CR Leiden
The Netherlands
Tel: +31 (0)71 5247 400
(Address of principal executive offices)

Dr. Sijmen de Vries, CEO
+31 71 5247 400
E: investor@pharming.com
Pharming Group N.V.
Darwinweg 24
2333 CR Leiden
The Netherlands

(Name, telephone, e-mail and/or facsimile number, and address of company contact person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
American Depositary Shares, each representing ten ordinary shares, nominal value EUR 0.01 per share
Ordinary shares, nominal value EUR 0.01 per share*
PHAR
The Nasdaq Stock Market LLC

The Nasdaq Stock Market LLC*
Securities registered or to be registered pursuant to Section 12(g) of the Act. None



1






Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

656,348,225 ordinary shares, nominal value €0.01 per share, as of December 31, 2022.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☒ Yes ☐ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ☐ Yes ☒ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No


Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Emerging growth company ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the
registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP ☐
International Financial Reporting Standards as issued by the International Accounting Standards Board ☒
Other ☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. ☐ Item 17 ☐ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

* listed not for trading or quotation purposes, but only in connection with the registration of American Depository Shares representing such ordinary shares pursuant to the requirements of the Securities and Exchange Commission. The American Depository Shares are registered under the Securities Act of 1933, as amended, pursuant to a separate registration statement on Form F-6 (File No. 333-251421).







2














TABLE OF CONTENTS
PAGE
Part I
Item 1.
Item 2.
Item 3.
A. [RESERVED]
Item 4.
Item 4 A.
Item 5.
E. CRITICAL ACCOUNTING ESTIMATES
Item 6.
Item 7.
Item 8.
3

Item 9.
Item 10.
B. MEMORANDUM AND ARTICLES OF ASSOCIATION
Item 11.
Item 12.
Part II
Item 13.
Item 14.
Item 15.
Item 16.[RESERVED]
Item 16A.AUDIT COMMITTEE FINANCIAL EXPERT
Item 16B.CODE OF ETHICS
Item 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES
Item 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Item 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Item 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Item 16G.CORPORATE GOVERNANCE
Item 16H.MINE SAFETY DISCLOSURE128
Item 16I.DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTION
Part III
Item 17.
Item 18.
Item 19.
4

GENERAL INFORMATION
In this Annual Report on Form 20-F, or Annual Report, the terms “Pharming”, “Pharming Group”, “Pharming Group N.V.”, “Pharming Healthcare Inc.”, “the Group”, “the Company”, “we”, “us” and “our” refer to Pharming Group N.V. together with its subsidiaries, except where the context otherwise requires.
“Joenja®” - is the global registered trademark for leniolisib. When discussing the U.S. market or the commercialized product in the U.S. we use the trademarked name Joenja® instead of leniolisib.
“leniolisib” - when discussing clinical trials or studies- prior to U.S. approval - or when discussing the product as related to markets outside of U.S. approval, we use the term leniolisib.
TRADEMARKS, TRADE NAMES AND SERVICE MARKS
We own or have rights to trademarks, service marks and trade names that we use in connection with the operation of our business, including our corporate name, logos and website names. We own the trademarks RUCONEST® and Joenja® among others, as well as the graphic trademark found on our website. There are trademarks, service marks and trade names appearing in this Annual Report that are the property of their respective owners. Solely for convenience, some of the trademarks, service marks and trade names referred to in this Annual Report are listed without the ® symbol, but we will assert, to the fullest extent under applicable law, our rights to our trademarks, service marks and trade names.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report contains forward-looking statements that involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements by the words “may”, “might”, “will”, “could”, “would”, “should”, “expect”, “intend”, “plan”, “objective”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “continue” and “ongoing”, or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. The forward-looking statements and opinions contained in this Annual Report are based upon information available to us as of the date of this Annual Report and, while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. Forward-looking statements include, but are not limited to, statements about:

•the development of our product candidates, including statements regarding the timing of initiation, completion and the outcome of clinical trials and related preparatory work, the period during which the results of the trials will become available and our research and development programs;
•our ability to obtain and maintain regulatory approval of our product candidates in the indications for which we plan to develop them, and any related restrictions, limitations or warnings in the label of an approved drug or therapy;
•our plans to collaborate, or statements regarding the ongoing collaborations, with third parties;
•our plans to research, develop, manufacture and commercialize our product candidates;
•the timing of our regulatory filings for our product candidates;
•the size and growth potential of the markets for our product candidates;
•our ability to raise additional capital;
•our commercialization, marketing and manufacturing capabilities and strategy;
•our expectations regarding our ability to obtain and maintain intellectual property protection;
•our ability to attract and retain qualified employees and key personnel;
•our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;
•our estimates regarding future revenues, expenses and needs for additional financing;
•our belief that our existing cash, cash equivalents and term deposits will be sufficient to fund our operating expenses and capital expenditure requirements as we currently expect; and
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•regulatory developments in the United States, The Netherlands, other European Union, or EU Member States and other jurisdictions including tax matters.
You should refer to the section of this Annual Report titled “Item 3.D—Risk Factors” for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Annual Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances or to reflect the occurrence of unanticipated events.
You should read this Annual Report and the documents that we reference in this Annual Report and have filed as exhibits to this Annual Report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

This Annual Report contains estimates, projections and other information concerning our industry, our business and the markets for our product candidates. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from our own internal estimates and research as well as from reports, research surveys, studies and similar data prepared by market research firms and other third parties such as investment banking analysts, industry, medical and general publications, government data and similar sources. Although we believe these sources are reliable, we do not guarantee the accuracy or completeness of this information and we have not independently verified this information. In addition, assumptions and estimates of our and our industry’s future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled “Item 3.D—Risk Factors.” These and other factors could cause our future performance to differ materially from our assumptions and estimates.

APPLICATION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS
We adopted International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board. Unless otherwise stated, all information presented herein has been prepared in accordance with IFRS and all prior period amounts have been prepared in accordance with IFRS.

CURRENCY
Unless otherwise stated, “$”, when used in this Annual Report, refers to U.S. dollars and “€” refers to Euros.

Item 1. Identity of Directors, Senior Management and Advisers
Not applicable.

Item 2. Offer Statistics and Expected Timetable
Not applicable.

Item 3. Key Information

A. [Reserved]

B. Capitalization and Indebtedness
Not applicable.

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C. Reasons for the Offer and Use of Proceeds
Not applicable.

D. Risk Factors
Our businesses face significant risks and uncertainties. You should carefully consider all of the information set forth in this Annual Report and in other documents we file with or furnish to the Securities and Exchange Commission, or SEC, including the following risk factors, before deciding to invest in or to maintain an investment in our securities. Our business, as well as our reputation, financial condition, results of operations, and share price, could be materially adversely affected by any of these risks, as well as other risks and uncertainties not currently known to us or not currently considered material.

Summary of Selected Risks Associated with Our Business

•The development and commercialization of pharmaceuticals and biologics is highly competitive. In particular, RUCONEST® faces competition from other products (acute and prophylactic) used to treat Hereditary Angioedema, or HAE, including products to prevent and treat HAE attacks. Several products have been approved in the U.S. and Europe for the treatment of HAE attacks. Consequently, we may not obtain sufficient market penetration with RUCONEST® or a sufficient level of sales of the product to remain profitable.
•We are heavily dependent on sales of RUCONEST® in the United States and Europe. If we are unable to continue to commercialize RUCONEST®, our business could be materially harmed. In addition, our development pipeline remains dependent on the C1INH, franchise in the near term.
•The commercial success of any current or future product candidate will depend upon the degree of market acceptance by physicians, patients, payors and others in the medical community.
•If we are unable to maintain and grow our sales and marketing capabilities, particularly outside of the United States, or enter into agreements with third parties to market and sell our products outside of the United States and Europe, our business will be adversely affected.
•We rely on named patient sales of RUCONEST® in certain territories where it has not yet been approved; however, there are no assurances that named patient sales of our products will continue at current levels, or at all.
•The successful commercialization of our product candidates will depend in part on the extent to which governmental authorities and health insurers establish adequate coverage, reimbursement levels and pricing policies. Failure to obtain or maintain coverage and adequate reimbursement for our product candidates, if approved, could limit our ability to market those products and decrease revenue generating ability.
•Since many of our product candidates are at an early stage of development, we may forego or delay pursuit of opportunities with certain programs or product candidates or for indications that later prove to have greater commercial potential than our product candidates due to limited resources available.
•The costs and timing of potential clinical trials, filings and approvals, and the potential therapeutic scope of the development and commercialization of our products involve a high degree of uncertainty and risk which make it difficult to predict the time and costs of product development of novel approaches.
•We rely on third parties for the conduct of significant aspects of our preclinical studies and clinical trials and intend to rely on third parties in the future. If these third parties do not successfully carry out their contractual duties, our business may be adversely impacted.
•We conduct clinical trials for certain of our product candidates at sites outside the United States. The U.S. Food and Drug Administration, or the FDA, may not accept data from trials conducted in such locations.
•We may not be able to obtain or maintain orphan drug exclusivity for our products or product candidates. If our competitors are able to obtain orphan drug exclusivity for their products, we may not be able to have competing products approved by the applicable regulatory authority for a significant period of time.
•The results from our clinical trials may not be sufficiently robust to support the submission of marketing approval for our product candidates. Before we submit our product candidates for marketing approval, the FDA and/or the European Medicines Agency, or the EMA, may require us to conduct additional clinical trials or evaluate patients for an additional follow-up period.
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•Any contamination in the manufacturing process for our recombinant products, shortages of raw materials or failure of any of our key suppliers to deliver necessary components could result in delays in our clinical development or marketing schedules and significantly impact commercially available goods.
•We are dependent on a limited number of suppliers for some of our components and materials used in our product candidates and product. Any disruption in the supply of these materials could adversely affect our ability to deliver product or complete clinical trials. Other studies of product candidates, regulatory applications or commercializing product candidates in a timely and commercially valuable manner, may be adversely affected, should supply be disrupted.
•We depend on third-party manufacturers for the production of recombinant C1-inhibitor, or rhC1INH, for commercial supply and for use in clinical trials of RUCONEST®, as well as our other product candidates for clinical trials. Interruption in supply could materially and adversely affect sales.
•We experience significant customer concentration, with a limited number of customers accounting for a significant portion of our revenues.
•Adverse developments affecting financial institutions, companies in the financial services industry or the financial services industry generally, such as actual events or concerns involving liquidity, defaults or non-performance, could adversely affect our operations and liquidity.
•Our success is dependent on our ability to obtain and protect rights to proprietary technology and to develop our technology and products without infringing the proprietary rights of third parties.
•Our patents may be challenged, deemed unenforceable, invalidated or circumvented, and if we do not obtain or maintain patent protection for the products, our business may be materially harmed.
•The laws, regulations, ethical standards and international pharmaceutical codes in the areas of sales and marketing of pharmaceutical products, and interacting with government officials, healthcare stakeholders and third-party intermediaries, are very complex, and require a robust compliance program. Failure to comply with these laws and regulations could have a material adverse effect on our business, financial condition and results of operations.
•If we are unable to remediate material weaknesses in our internal control over financial reporting, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business and stock price.
•Our business and operations may be negatively impacted by the failure, or perceived failure, of achieving environmental, social and governance objectives.

Risks Related to Our Business
The development and commercialization of pharmaceuticals and biologics is highly competitive. In particular, RUCONEST® faces intense competition from other products used to treat Hereditary Angioedema, or HAE. Several products have been approved in the U.S. and Europe for the treatment of HAE attacks. Consequently, we may not obtain sufficient market penetration with RUCONEST® or a sufficient level of sales of the product to remain profitable.
The development and commercialization of pharmaceuticals and biologics is highly competitive. In particular, RUCONEST® faces intense competition from other products used to treat HAE. We face the risk that RUCONEST® may no longer be competitive and accepted by physicians, patients, payors and others in the medical community within acute HAE market. Prophylactic therapies are increasingly used, which may result in HAE patients requiring less acute rescue medicine. RUCONEST® is not approved for prophylactic use.
Several products have been approved in the U.S. and Europe for the treatment of HAE attacks, including human blood plasma derived C1INH products. Oral products for the prevention of HAE attacks are also being developed. Orladeyo® (berotralstat) is an oral prophylactic product which was approved in the fourth quarter of 2020. In the acute market, we face pricing competition as a result of the 2019 market entry of generic equivalents to the acute treatment Firayzr® (icatibant injection). Consequently, we may not obtain sufficient market penetration with RUCONEST® or a sufficient level of sales of the product to allow it to remain profitable. New technologies from competitors may make RUCONEST®, one or more of our product candidates or our technology obsolete.
Our competitors include major international pharmaceutical companies as well as smaller or regional specialty pharmaceutical and biotechnology companies. Many of our competitors are larger and have greater financial
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resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals, prosecuting intellectual property rights and marketing approved products than we do. Such competitors may be better equipped to withstand changes in economic and industry conditions. Smaller or early stage companies may also be significant competitors, particularly through collaborative arrangements with large, established companies. Key competitive factors affecting the commercial success of our products and any other products that we develop or acquire are likely to be safety, efficacy, tolerability profile, reliability, convenience of dosing, price and reimbursement. We may also face future competition from companies selling generic alternatives to our products in countries where we do not have patent coverage, Orphan Drug status or another form of data or marketing exclusivity or where patent coverage or data or marketing exclusivity has expired, is not enforced, or may, in the future, be challenged.
We are heavily dependent on sales of RUCONEST® in the United States and Europe. If we are unable to continue to commercialize RUCONEST®, our business could be materially harmed. In addition, our development pipeline remains dependent on the C1-inhibitor, or C1INH, franchise in the near term.
We have, to date, been substantially focused on the development and commercialization of RUCONEST®, and we expect to continue to be dependent primarily on revenues from RUCONEST® sales in the near term. Any adverse events or findings regarding the properties, efficacy or safety of RUCONEST®, or material constraints on the manufacturing of RUCONEST®, may have a material impact on our financial results and operations.
Our ability to meet expectations with respect to sales of RUCONEST®, generate revenues from such sales, and attain and maintain positive cash flow from operations, in the time periods anticipated, or at all, will depend on a number of factors, including, among others:

•the ability to continue to maintain and grow market acceptance for RUCONEST® among healthcare professionals and patients in the United States, EU, and other key markets for the treatment of approved indications;
•our ability to maintain regulatory approvals without onerous restrictions or limitations in key markets;
•our ability to secure regulatory approvals in additional markets on a timely basis and with commercially feasible labels;
•our ability to obtain pricing and reimbursement approvals at adequate levels, where required, on a timely basis;
•presence of side effects or other safety issues associated with the use of RUCONEST® that could require us or our distributors to modify or halt commercialization;
•whether we will be required by regulatory agencies to conduct additional studies regarding the safety and efficacy of RUCONEST®, which we have not planned or anticipated;
•increased competition from competitors;
•obtaining and maintaining commercial distribution agreements with third-party distributors outside the United States and Europe;
•obtaining and maintaining patent protection and regulatory exclusivity; and
•adequately investing in the manufacturing, sales, marketing, market access, medical affairs and other functions that are supportive of our commercialization efforts.
The commercial success of any current or future product candidate will depend upon the degree of market acceptance by physicians, patients, payors and others in the medical community.
The commercial success of our products and product candidates will depend in part on the medical community, patients, and payors accepting our product candidates as effective, safe and cost-effective. Notwithstanding the level of revenues historically generated from the sale of RUCONEST®, if RUCONEST® or our product candidates do not achieve an adequate level of acceptance, we may struggle to continue to generate significant product revenues and may not in the future generate any profits from operations. The degree of market acceptance of RUCONEST®, or our product candidates, if approved for commercial sale, will depend on a number of factors, including:
•the potential efficacy and potential advantages over alternative treatments;
•the frequency and severity of any side effects, including any limitations or warnings contained in a product’s approved labeling;
•the frequency and severity of any side effects resulting from the conditioning regimen or follow-up requirements for the administration of our product candidates;
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•the relative convenience and ease of administration;
•the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
•the strength of marketing and distribution support and timing of market introduction of competitive products;
•publicity concerning our products or competing products and treatments;
•continued demand from two U.S. specialty wholesale companies that in 2022 represented 87% of our revenues; and
•sufficient third-party insurance coverage or reimbursement.
Even if a product candidate displays a favorable efficacy and safety profile in preclinical studies and clinical trials, market acceptance of the product, if approved for commercial sale, will not be known until after it is launched. Our efforts to educate the medical community and payors on the benefits of our products and product candidates may require significant resources and may never be successful. Such efforts to educate the marketplace may require more resources than are required by the conventional technologies marketed by our competitors.
If we are unable to maintain and grow our sales and marketing capabilities, particularly outside of the United States, or enter into agreements with third parties to market and sell our products outside of the United States and Europe, our business will be adversely affected.
We reacquired commercial rights to distribute RUCONEST® in Europe from Swedish Orphan Biovitrum AB (publ.), or Sobi, as of January 2020. There are risks involved with both establishing and maintaining our own sales and marketing capabilities. For example, recruiting and training a commercial organization is expensive and time consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.
Factors that may inhibit our efforts to commercialize our product candidates on our own include:
•the inability to recruit, train and retain adequate numbers of effective sales and marketing personnel;
•the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe any future product that we may develop;
•the lack of complementary treatments to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and
•unforeseen costs and expenses associated with creating an independent sales and marketing organization.
We enter into arrangements with third parties to perform sales, marketing and distribution services outside the United States and Europe. In addition, we have granted the China State Institute of Pharmaceutical Industry, or the CSIPI, and the Chengdu Institute of Biological Products, or the CDIBP, an exclusive license to commercialize RUCONEST® in China, and we are solely dependent on their efforts to commercialize RUCONEST® in that territory. We may receive certain regulatory and manufacturing-associated milestones, and we are eligible to receive low to mid-single digit royalties from sales in China by the CSIPI, the CDIBP or other affiliates of the China National Pharmaceutical Group Corporation. Dependence on distribution arrangements and marketing alliances to commercialize our products in certain jurisdictions subjects us to a number of risks. We don’t have control over such third parties and any of them may fail to devote the necessary resources and attention to sell and market our products effectively. In addition, such third parties may experience compliance related issues and associated government investigations. If such third party arrangements are terminated or allowed to expire, the marketing and sales of a product in that jurisdiction may be interrupted, which could adversely affect our revenues. In addition, we may not be successful in entering into arrangements with third parties to sell and market our product candidates or may be unable to do so on terms that are favorable to us. See “We are subject to U.S. and certain foreign export and import controls, sanctions, embargoes, anti-corruption laws, and anti-money laundering laws and regulations. Compliance with these legal standards could impair our ability to compete in domestic markets. We can face criminal liability and other serious consequences for violations, which can harm our business.”
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We rely on named patient sales of RUCONEST® in certain territories where it has not yet been approved; however, there are no assurances that named patient sales of our products will continue at current levels, or at all.
RUCONEST® is currently available on a named patient basis in certain countries where it is not yet approved. Named patient basis means physician-requested treatment for patients in territories where marketing authorization has not yet been obtained. There is no assurance that named patient sales will continue to be authorized in any particular country. Many territories have restrictions on the length of time named patient sales can be conducted until a marketing authorization is required, and have other restrictions on named patient program scope. When permitted, the programs may be subject to regulatory approvals and price controls, and have strict limitations on proactive selling activities. Consequently, named patient sales are much less predictable than traditional sales, and are susceptible to unexpected decreases.
The successful commercialization of our product candidates will depend in part on the extent to which governmental authorities and health insurers establish adequate coverage, reimbursement levels and pricing policies. Failure to obtain or maintain coverage and adequate reimbursement for our product candidates, if approved, could limit our ability to market those products and decrease revenue generating ability.
The availability and adequacy of coverage and reimbursement by governmental healthcare programs such as Medicare and Medicaid, private health insurers and other third-party payers is essential for many patients to be able to afford prescription medications such as RUCONEST® and potential product candidates, assuming regulatory approval is obtained. Our ability to achieve acceptable levels of coverage and reimbursement for products by governmental authorities, private health insurers and other organizations fundamentally impacts the potential success of RUCONEST® and product candidates. Assuming we obtain coverage for our product candidates by third-party payers, the resulting reimbursement payment rates may not be adequate or may require co-payments that patients find unacceptably high. We cannot be sure that coverage and reimbursement in the United States, the EU Member States, or elsewhere will be available for the product candidates or any product that we may develop, and any reimbursement that may become available may be decreased or eliminated in the future. There is an increasing tendency of health insurers to reduce healthcare costs by limiting both the coverage and the level of reimbursement for new therapeutic products and in some cases by refusing to provide coverage altogether.
Because coverage and reimbursement determinations are made on a payor-by-payor basis, obtaining coverage and adequate reimbursement from a third party payor does not guarantee that we will obtain similar coverage or reimbursement from another third party payor. Reimbursement may impact the demand for, or the price of, any product candidate for which we obtain marketing approval. If reimbursement is not available or is available only to limited levels, we may not be able to successfully commercialize any products for which we obtain marketing approval. Failure to secure or retain adequate coverage or reimbursement for our products by third-party payors, or delays in processing approvals by those payors, could result in the loss of sales, loss of customers, or reputational damage, which could have a material adverse effect on our business, financial condition and operating profit.
Further, it is possible that a third-party payer may consider our product candidates as substitutes and only offer to reimburse patients for a less expensive product. In some cases this can involve a requirement that patients try the less expensive product first, only approving other therapies after the patient does poorly on the less expensive product. Even if we show improved efficacy or convenience of administration with our product candidates compared to products marketed by our competitors and the prevailing standard of care, the pricing of existing therapies may still limit the amount we could charge. Third-party payers may deny or revoke the reimbursement status of any given product or establish new prices for existing marketed products that inhibit us from realizing an appropriate return on our investment in the product candidates. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize our product candidates, and may not be able to obtain a satisfactory financial return on them.
Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe, Canada, and other countries has and will continue to put pressure on the pricing and usage of our products. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems. Other countries allow companies to set their own prices for medical products, but monitor and control company profits. Additional foreign price controls or other changes in pricing
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regulation could restrict the amount that we are able to charge for our product candidates. Accordingly, in markets outside the United States, the reimbursement for our products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenues and profits.
Since many of our product candidates are at an early stage of development, we may forego or delay pursuit of opportunities with certain programs or product candidates or for indications that later prove to have greater commercial potential than our product candidates due to limited resources available.
Other than Joenja®, which was approved by the FDA on March 24, 2023, our rhC1INH projects and our non-rhC1INH product candidates are all in the early stages of clinical and preclinical development. For example, our gene therapy product candidate, and our next generation enzyme replacement therapy, or ERT for Pompe disease are in preclinical development. Our spending on current and future research and development programs may not yield any commercially viable product candidates. If we do not accurately evaluate the commercial potential for a particular product candidate, we may relinquish valuable rights to that product candidate through strategic collaborations, licensing or other arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate. If any of these events occur, we may be forced to abandon our development efforts with respect to a particular product candidate or fail to develop a potentially successful product candidate.
Through the addition of new late stage assets through acquisition and/or in-license, such as we did with leniolisib for the treatment of activated PI3K delta syndrome, or APDS, we are looking to reduce our in-house product development timelines.
The costs and timing of potential clinical trials, filings and approvals, and the potential therapeutic scope of the development and commercialization of our products involve a high degree of uncertainty and risk which make it difficult to predict the time and costs of product development of novel approaches.
New product development and indication expansions of existing products is very expensive and involves a high degree of uncertainty and risk. Only a small number of research and development programs result in the commercialization of a new product. Furthermore, the development of novel approaches for the treatment of diseases, including development efforts in new and innovative modalities present additional challenges and risks. Clinical trial data and results are subject to differing interpretations by regulatory authorities.We may view data as sufficient to support the safety, effectiveness, or approval of an investigational therapy, while regulatory authorities may disagree and may require additional data, may limit the scope of an approval or may deny approval altogether. There can be difficulty in predicting the time and cost of product development of novel approaches for the treatment of diseases across regulatory approval authorities.
Success in preclinical work or early-stage clinical trials does not ensure that later stage or larger scale clinical trials will be successful. The results of clinical trials may indicate that our product candidates lack efficacy, have harmful side effects, result in unexpected adverse events or raise other concerns that may significantly reduce the likelihood of regulatory approval. This may result in terminated programs, significant restrictions on use and safety warnings in an approved label, adverse placement within the treatment paradigm or significant reduction in the commercial potential of the product candidate.
Even if we could successfully develop new products or indications, we may make a strategic decision to discontinue development of a product candidate or indication if, for example, we believe commercialization will be difficult relative to the standard of care or other opportunities in our pipeline.
We rely on third parties for the conduct of significant aspects of our preclinical studies and clinical trials and intend to rely on third parties in the future. If these third parties do not successfully carry out their contractual duties, our business may be adversely impacted.
We rely on third parties for the conduct of significant aspects of our preclinical studies and clinical trials. These third parties include contact research organizations, or CROs, medical institutions, clinical investigators and contract laboratories. Although we design the clinical trials for our product candidates, we depend on these third parties for aspects of performing the trials. Our reliance on these third parties for research and development activities will reduce our control over these activities but will not relieve us of our regulatory or contractual
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responsibilities. For example, we will remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial.
The third parties we rely upon may fail to successfully carry out their contractual duties or meet expected deadlines, which may cause delays in the conduct of our preclinical and clinical studies.
If the CROs do not perform preclinical studies and clinical trials in a satisfactory manner, breach their obligations to us or fail to comply with regulatory requirements and other compliance obligations, the development, regulatory approval and commercialization of our product candidates may be delayed, we may not be able to obtain regulatory approval and commercialize our product candidates, or our development programs may be materially and irreversibly harmed. If we are unable to rely on preclinical and clinical data collected by our CROs, we could be required to repeat, extend the duration of, or increase the size of any clinical trials we conduct and this could significantly delay commercialization and require significantly greater expenditures. See “We are subject to U.S. and certain foreign export and import controls, sanctions, embargoes, anti-corruption laws, and anti-money laundering laws and regulations. Compliance with these legal standards could impair our ability to compete in domestic markets. We can face criminal liability and other serious consequences for violations, which can harm our business.”
We conduct clinical trials for certain of our product candidates at sites outside the United States. The FDA may not accept data from trials conducted in such locations.
We and the investigators conducting clinical trials for certain of our product candidates study our product candidates outside the United States. Although the FDA may accept data from clinical trials conducted outside the United States, acceptance of these data is subject to conditions imposed by the FDA. For example, the clinical trial must be well designed and conducted and performed by qualified investigators in accordance with ethical principles. The trial population must also adequately represent the U.S. population, and the data must be applicable to the U.S. population and U.S. medical practice in ways that the FDA deems clinically meaningful.
In addition, while these clinical trials are subject to the applicable local laws, FDA acceptance of the data will depend on its determination that the trials also complied with all applicable U.S. laws and regulations. If the FDA does not accept the data from any trial that we conduct outside the United States, it would likely result in the need for additional trials, which would be costly and time-consuming and would delay or permanently halt our development of the applicable product candidates or indications. In addition, in order to commence a clinical trial in the United States, we are required to seek FDA acceptance of an Investigational New Drug application, or IND, for each of our product candidates. We cannot be certain that any IND we submit to the FDA, or any similar Clinical Trial Application, or CTA, we submit in other countries, will be accepted. We may also be required to conduct additional preclinical testing prior to submitting an IND for any of our product candidates, and the results of any such testing may not be positive. Consequently, we may be unable to successfully and efficiently execute and complete necessary clinical trials in a way that leads to a New Drug Application, or NDA, or BLA, submission and approval of our product candidates. We may require more time and incur greater costs than our competitors and may not succeed in obtaining regulatory approvals of product candidates that we develop. Failure to commence or complete, or delays in, our planned clinical trials, could prevent us from or delay us in commercializing our product candidates.
We may not be able to obtain or maintain orphan drug exclusivity for our products or product candidates. If our competitors are able to obtain orphan drug exclusivity for their products, we may not be able to have competing products approved by the applicable regulatory authority for a significant period of time.
Regulatory authorities in some jurisdictions, including the United States, the EU and the United Kingdom, may designate drugs for relatively small patient populations as orphan drugs. We obtained orphan drug designation for RUCONEST® from the FDA for the treatment of acute HAE attacks. Leniolisib has also received this designation from the FDA and the EMA. Generally, if a product with an orphan drug designation subsequently receives the first marketing approval for the indication for which it has such designation, the product is entitled to a period of market exclusivity, which, subject to certain exceptions, precludes the EMA from approving another marketing application for a similar medicinal product or the FDA from approving another marketing application for the same drug for the same indication for that time period. The FDA defines “same drug” as a drug or biologic that contains the same active moiety and is intended for the same use. The applicable market exclusivity period for orphan drugs is ten years in the EU and the United Kingdom and seven years in the
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United States. The EU and United Kingdom exclusivity period can be reduced to six years if a drug no longer meets the criteria for orphan drug designation, including if the drug is sufficiently profitable so that market exclusivity is no longer justified.
In the EU and the United Kingdom, a “similar medicinal product” is a medicinal product containing a similar active substance or substances as contained in a currently authorized orphan medicinal product, and which is intended for the same therapeutic indication. A “similar active substance” is “an identical active substance, or an active substance with the same principal molecular structural features (but not necessarily all of the same molecular structural features) and which acts via the same mechanism. However, in the case of advanced therapy medicinal products, for which the principal molecular structural features cannot be fully defined, the similarity between two active substances shall be assessed on the basis of the biological and functional characteristics.” Obtaining orphan drug exclusivity for our product candidates is important to the product candidate’s success. If a competitor obtains orphan drug exclusivity for, and approval of, a product with the same indications as our product candidates before we do and if the competitor’s product is the same drug or a similar medicinal product as ours, we could be excluded from the market for a certain period of time. If another product has obtained a marketing authorization for the same indication, we would have to prepare a similarity report (addressing the possible similarity between the authorized product and our product), which will take additional time.
Even if we obtain orphan drug exclusivity, we may not be able to maintain it. For example, if a competitive product that is the same drug or a similar medicinal product as our product or product candidate is shown to be clinically superior to our product or product candidate, as applicable, any orphan drug exclusivity we have obtained will not block the approval of such competitive product. In addition, orphan drug exclusivity will not prevent the approval of a product that is the same drug as our product or product candidate if the FDA, EMA or United Kingdom’s Medicines and Healthcare products Regulatory Agency, or MHRA, finds that we cannot assure the availability of sufficient quantities of the drug to meet the needs of the persons with the disease or condition for which the drug was designated in the relevant jurisdiction.
The FDA Reauthorization Act of 2017 authorizes the FDA to impose additional clinical trial requirements on manufacturers seeking orphan drug designation and/or pediatric indications. Additionally, it should be noted that the European Commission is currently reviewing the EU general pharmaceutical legislation. While any revisions to the legislation will not be applicable for a number of years, the European Commission intends to make changes to the rules on orphan medicinal products including potentially reducing the duration of data and market exclusivity available.
The results from our clinical trials may not be sufficiently robust to support the submission of marketing approval for our product candidates. Before we submit our product candidates for marketing approval, the FDA, the EMA, or any other regulatory body may require us to conduct additional clinical trials or evaluate patients for an additional follow-up period.

The results from our clinical trials may not be sufficiently robust to support the submission for marketing approval for our product candidates. The FDA normally requires two registrational trials to approve a drug or biologic product, and thus the FDA may require that we conduct additional clinical trials of our product candidates prior to a BLA or NDA submission. The FDA typically does not consider a single clinical trial to be adequate to serve as a registrational trial unless among other things, it is well-controlled and demonstrates a clinically meaningful effect on mortality, irreversible morbidity, or prevention of a disease with potentially serious outcome, and a confirmatory study would be practically or ethically impossible. Additionally, while the FDA recognizes the potential for natural history models to augment the need for placebo arms in trials for drugs that target very rare disease, where trial recruitment can be especially challenging, the FDA has found the use of natural history data as a historical comparator to be unsuitable for adequate and well-controlled trials in many circumstances. The FDA generally finds trials using historical controls to be credible only when the observed effect is large in comparison to variability in disease course. Like the FDA, the EMA and MHRA also expect applicants to submit sufficient clinical data, which is usually generated from clinical studies, to demonstrate the safety and efficacy of the medicinal product.
Due to the nature of the indications our product candidates are designed to treat, and the limited number of patients with these conditions, a placebo-controlled and blinded study may not be practicable for ethical and other reasons. It is possible the FDA, EMA and/or MHRA will not consider our comparisons to natural history data and, where available, historical transplant data, to provide clinically meaningful results. Additionally, even
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though a product candidate may have achieved the primary endpoints in a registrational clinical trial, it is possible that the FDA, EMA and/or MHRA may require us to conduct additional registrational trials, possibly involving a larger sample size or a different clinical trial design, especially if the FDA, EMA and/or MHRA do not find the results from these trials to be sufficiently persuasive to support a BLA/NDA or Marketing Authorization Application, or MAA, submission, as applicable. The FDA, EMA and/or MHRA may also require that we conduct a longer follow-up period of post-market surveillance of patients treated with our product candidates prior to accepting our BLA/NDA or MAA submission, as applicable.
In addition, data obtained from preclinical and clinical activities are subject to varying interpretations, which may delay, limit or prevent regulatory approval. There can be no assurance that the FDA, EMA or other regulatory bodies will find the efficacy endpoints in our registrational trials or any efficacy endpoint we propose in future registrational trials to be sufficiently validated and clinically meaningful, or that our product candidates will achieve the pre-specified endpoints in current or future registrational trials to a degree of statistical significance, and with acceptable safety profiles. We also may experience regulatory delays or rejections as a result of many factors, including serious adverse events involving our product candidates, changes in regulatory policy or changes in requirements during the period of our product candidate development. Any such delays could materially and adversely affect our business, financial condition, results of operations and prospects.
We expect that the FDA, EMA and/or MHRA will assess the totality of the safety and efficacy data from our product candidates in reviewing any future BLA, NDA, or MAA, submissions. Based on this assessment, the FDA, EMA and/or MHRA may require that we conduct additional preclinical studies or clinical trials prior to submitting or approving a BLA, NDA, or MAA, for our target indications.
If the FDA, EMA and/or MHRA requires additional trials, we would incur increased costs and delays in the marketing approval process, which may require us to expend more resources than we have available. In addition, it is possible that the FDA, EMA and/or MHRA may have divergent opinions on the elements necessary for a successful BLA/NDA and MAA, respectively, which may cause us to alter our development, regulatory and/or commercialization strategies.
Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets, including inflation and supply disruption.
A domestic or global financial crisis can cause extreme volatility and disruptions in the capital and credit markets. A severe or prolonged economic downturn could result in a variety of risks to our business, including weakened demand for our product candidates or an inability to purchase necessary supplies on acceptable terms, if at all. A weak or declining economy could strain our suppliers, possibly resulting in supply disruption, or cause delays in payments for our services by third-party payors or our collaborators. In addition, recent geopolitical tensions and conflicts, including the conflict in Ukraine, has had significant ramifications on global financial markets, which may adversely impact our ability to raise capital on favorable terms or at all. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.
Any future acquisitions we make may expose us to risks that could adversely affect our business, and we may not achieve the anticipated benefits of acquisitions of businesses or technologies.
As a part of our growth strategy, we may make additional acquisitions of complementary businesses, products or research. Any future acquisition will involve numerous risks and operational, financial and managerial challenges, including the following, any of which could adversely affect our business, financial condition or results of operations:
•limited support and user knowledge for legacy systems of acquired companies;
•problems maintaining uniform procedures, controls and policies with respect to our financial accounting systems;
•difficulties in managing geographically dispersed operations, including risks associated with entering foreign markets in which we have no or limited prior experience;
•underperformance of any acquired technology, product or business relative to our expectations and the price we paid;
•negative near-term impacts on financial results after an acquisition, including acquisition-related earnings charges;
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•the potential loss of key employees, customers and strategic partners of acquired companies;
•claims by terminated employees and shareholders of acquired companies or other third parties related to the transaction;
•the assumption or incurrence of additional debt obligations or expenses, or use of substantial portions of our cash;
•the issuance of equity securities to finance or as consideration for any acquisitions that dilute the ownership of our shareholders;
•any collaboration, strategic alliance and licensing arrangement may require us to relinquish valuable rights to our technologies or product candidates, or grant licenses on terms that are not favorable to us;
•risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing products or product candidates and regulatory approvals;
•diversion of management’s attention and company resources from existing operations of the business;
•inconsistencies in standards, controls, procedures and policies;
•the impairment of intangible assets as a result of technological advancements, or worse-than-expected performance of acquired companies;
•assumption of, or exposure to, historical liabilities of the acquired business, including unknown contingent or similar liabilities that are difficult to identify or accurately quantify;
•our inability to generate revenues from acquired technology or products sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs; and
•risks associated with acquiring intellectual property, including potential disputes regarding acquired companies’ intellectual property.
There can be no assurance that any of the acquisitions we may make will be successful or will be, or will remain, profitable. Our failure to successfully address the foregoing risks may prevent us from achieving the anticipated benefits from any acquisition in a reasonable time frame, or at all.
Negative public opinion and increased regulatory scrutiny of transgenic manufacturing techniques, or activism regarding the ethical treatment of livestock, may damage public perception of RUCONEST® and our product candidates, which may adversely affect sales of our products and our ability to obtain marketing approvals for our product candidates.
Public perception may be influenced by negative public statements regarding our transgenic manufacturing technology. Our transgenic manufacturing technology platform involves the genetic engineering of animals for the production of recombinant proteins. Genetic modification of food and livestock are a common subject of debate and negative publicity. In addition, animal rights activists commonly engage in campaigns to reduce or eliminate the use of animals in the commercialization of pharmaceutical products.
Negative publicity regarding genetic modification in general, and our transgenic manufacturing techniques in particular, or activism regarding the treatment of our livestock could result in reduced market acceptance for our products, increased governmental regulation, unfavorable public perception, potential regulatory delays in the testing or approval of our potential product candidates, stricter labeling requirements for those product candidates that are approved and a decrease in demand for any such product candidates. If any such adverse events occur, commercialization of RUCONEST® or further advancement of our clinical trials could be halted or delayed, which would have a material adverse effect on our business and operations.
Our assumptions and estimates regarding prevalence and the addressable markets for our products and product candidates may be inaccurate, which could have a material adverse effect on our revenues and cash position.
If there are fewer actual patients than estimated, or if any product approval is based on narrower definitions of patient populations, our revenues and cash position could be materially and adversely affected. The patient population for the diseases that our products treat is very small, and networking, data gathering and support channels are not as established as those for more prevalent and researched disease indications. There are limited patient registries and other methods of establishing with precision the actual number of patients of our existing and potential future indications in any geography. Estimating the prevalence of a rare disease is difficult and we therefore must rely on assumptions, beliefs and an amalgam of information from multiple sources, resulting in potential under or over-reporting. There is no guarantee that our assumptions and beliefs are correct, or that the
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methodologies used and data collected have generated or will continue to generate accurate estimates. There is therefore uncertainty around the estimated total potential addressable patient population for treatment with RUCONEST® worldwide. In addition, the potential market opportunity for our product candidates that we may develop is difficult to estimate precisely, particularly given that the orphan drug markets which are targeted are, by their nature, relatively unknown. Our estimates of the potential market opportunity for each of these product candidates are predicated on several key assumptions, such as industry knowledge and publications, third-party research reports and other surveys. If any of our assumptions prove to be inaccurate, then the actual market for RUCONEST®, or our other or future product candidates, could be smaller than our estimates of the potential market opportunity. If that turns out to be the case, our product revenue may be limited, and we may be unable to achieve or maintain profitability, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
We depend on our information technology systems and due to increased global interconnectedness through digital technology, we run the risk of being exposed to cyberattacks, breaches to data privacy, or lack of governance which could compromise the privacy, security, integrity or confidentiality of sensitive information related to our business or prevent us from accessing critical information and expose us to liability and reputational harm, which could adversely affect our business, results of operations and financial condition.
We collect and maintain data and information that is necessary to conduct our business, and we are increasingly dependent on information technology systems and infrastructure to operate our business, including systems infrastructure operated and maintained by our third-party suppliers or providers. In the ordinary course of our business, we collect, store and transmit large amounts of confidential information, including intellectual property, proprietary business information and personal information. It is critical that we do so in a secure manner to maintain the privacy, security, confidentiality and integrity of such confidential information. We have established physical, electronic and organizational measures to safeguard and secure our systems and facilities to prevent an information compromise, and rely on commercially available systems, software, tools and monitoring to provide security for our information technology systems and the processing, transmission and storage of digital information. We have also outsourced elements of our information technology infrastructure, and as a result, a number of third-party vendors may or could have access to our confidential information. Our internal information technology systems and infrastructure, and those of our current and any future collaborators, contractors and consultants and other third parties on which we rely, are vulnerable to damage or unauthorized access or use resulting from computer viruses, malware, natural disasters, terrorism, war, telecommunication and electrical failures, denial-of-service attacks, cyber-attacks or cyber-intrusions over the Internet, hacking, phishing and other social engineering attacks, attachments to emails, persons inside our organization (including employees or contractors), lost or stolen devices, or persons with access to systems inside our organization.
Cybercrime is a growing threat to companies in general and to the financial system in particular, especially at a time when many employees are working from home. The global lockdowns due to the pandemic also presented opportunities for criminals to continue to target customers with phishing attacks, identity theft and online fraud.
In addition, a breach may require notification to governmental agencies, supervisory bodies, credit reporting agencies, the media or individuals pursuant to various federal, state and foreign data protection, privacy and security laws, regulations and guidelines, if applicable. These may include state breach notification laws, and the General Data Protection Regulation, or GDPR. Accordingly, a data security breach or privacy violation that leads to unauthorized access to, disclosure or modification of personal information (including protected health information), that prevents access to personal information or materially compromises the privacy, security, or confidentiality of the personal information, could result in fines, increased costs or loss of revenue and we could incur liability, our competitive position could be harmed and the further development and commercialization of our product candidates could be delayed. Furthermore, federal, state and international laws and regulations, such as the GDPR, can expose us to enforcement actions and investigations by regulatory authorities, and potentially result in regulatory penalties and significant legal liability, if our information technology security efforts fail.
We rely on third parties for all quality control procedures.
The release of finished product to the market is dependent on the satisfaction of a set of quality control procedures. Some of these procedures, although validated, are very sensitive and complex (specifically for the protein platform). While ensuring and maintaining Good Manufacturing Practice, or GMP, activities at our
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partnered contract manufacturing organization, or CMO sites, we do not have our own GMP certified analytical laboratory capable of performing the quality control procedures needed for the release of product, and we rely on third parties for this task. We have started a program to challenge and reassess all currently used quality control procedures with the aim to improve or replace those by more robust, and easier to perform analyses and where possible create a more robust external partnership management process.
Any contamination in the manufacturing process for our recombinant products, shortages of raw materials or failure of any of our key suppliers to deliver necessary components could result in delays in our clinical development or marketing schedules and significantly impact commercially available goods.
We use living mammals as the source for our recombinant proteins. Our transgenic manufacturing platform bears the risk of failure due to contamination of the produced milk, diseases of the producing livestock, or a breakdown of the facilities. Any contamination could adversely affect our ability to produce, release, or administer our recombinant products on schedule and could, therefore, harm our results of operations and cause reputational damage. Additionally, although our recombinant products are tested for contamination prior to release, if a contaminated product was administered to a patient, it could result in harm to the patient. A raw material shortage, contamination, recall or restriction on the goods we use in the manufacture of our products could adversely impact or disrupt the commercial manufacturing or the production of clinical material, which could adversely affect our clinical development timelines and availability of finished goods for commercial use, impacting patient access, our business, financial condition, results of operations, and prospects.
We are dependent on a limited number of suppliers for some of our components and materials used in our product candidates and product. Any disruption in the supply of these materials could adversely affect our ability to deliver product or complete clinical trials. Other studies of product candidates, regulatory applications or commercializing product candidates in a timely and commercially valuable manner, may be adversely affected, should supply be disrupted.
We rely on a limited number of suppliers for certain essential materials incorporated into, or used in the manufacture of, products and product candidates. Since RUCONEST® is authorized for use in rare and ultra-rare diseases, it might be difficult to find suppliers that can or are willing to handle small-scale quantities, which may also limit our negotiation power with these suppliers.
Many component suppliers are based in Europe, while a significant percentage of RUCONEST® sales are conducted in the U.S. If international shipping is disrupted, we may not be able to supply sufficient quantities of RUCONEST® for sale in the U.S. Any disruption in the supply of these materials could adversely affect our ability to deliver product or complete clinical trials. Other studies of product candidates, regulatory applications or commercializing product candidates in a timely and commercially valuable manner, may be adversely affected, should supply be disrupted.
We cannot be sure that these suppliers will remain in business, or that they will not be purchased by one of our competitors or another company that is not interested in continuing to produce these materials for our intended purpose. Our use of a limited number of suppliers of raw materials, components and finished goods exposes us to several risks, including disruptions in supply, price increases, late deliveries and an inability to meet customer demand. There are, in general, relatively few alternative sources of supply for these components. These vendors may be unable or unwilling to meet our future demands for our clinical trials or commercial sale. Establishing additional or replacement suppliers for these components could take a substantial amount of time and it may be difficult to establish replacement suppliers who meet regulatory requirements. Any disruption in supply from any supplier or manufacturing location could lead to supply delays or interruptions which would damage our business, financial condition, results of operations and prospects.
If we are required to switch to a replacement supplier, the manufacture and delivery of our product and product candidates could be interrupted for an extended period, adversely affecting our business. Establishing additional or replacement suppliers may not be accomplished quickly. If we are able to find a replacement supplier, the replacement supplier would need to be qualified and may require additional regulatory authority approval, which could result in further delay. For example, the FDA or EMA could require additional supplemental data, manufacturing data and comparability data if we rely upon a new supplier. While we seek to maintain adequate inventory of the components and materials used in our product candidates, any interruption or delay in the supply of components or materials, or our inability to obtain components or materials from alternate sources at
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acceptable prices in a timely manner, could impair our ability to conduct our clinical trials and, if our product candidates are approved, to meet the demand of our customers and cause them to cancel orders.
In addition, as part of the FDA’s approval of our product candidates, the FDA must review and approve the individual components of our production process, which includes raw materials, the manufacturing processes and facilities of our suppliers. Our reliance on these suppliers subjects us to a number of risks that could harm our reputation, business, and financial condition, including, among other things:
•the interruption of supply resulting from modifications to or discontinuation of a supplier’s operations;
•delays in product shipments resulting from defects, reliability issues, or a supplier’s variation in a component;
•a lack of long-term supply arrangements for key components with our suppliers;
•the inability to obtain adequate supply in a timely manner, or to obtain adequate supply on commercially reasonable terms;
•difficulty and cost associated with locating and qualifying alternative suppliers for our components in a timely manner;
•production delays related to the evaluation and testing of products from alternative suppliers, and corresponding regulatory qualifications;
•a delay in delivery due to our suppliers prioritizing other customer orders over ours;
•damage to our reputation caused by defective components produced by our suppliers; and
•fluctuation in delivery by our suppliers due to changes in demand from us or their other customers.
If any of these risks materialize, costs could significantly increase and our ability to conduct our clinical trials and meet demand for our products could be impacted.
We depend on third-party manufacturers for the production of rhC1INH for commercial supply and for use in clinical trials of RUCONEST®, as well as our other product candidates for clinical trials. Interruption in supply could materially and adversely affect sales.
We have entered into (downstream) manufacturing and supply agreements for RUCONEST® with, among others, Sanofi S.A., or Sanofi, and BioConnection Investments B.V. (formerly BioConnection B.V.), or BioConnection, since we do not have a GMP-certified lab capable of performing the quality control procedures necessary for the release of product. A failure of these suppliers to supply our needs would be difficult to overcome as contracting additional manufacturing capacity on a timely basis could be difficult or impossible and have significant adverse effect on our business.
We experience significant customer concentration, with a limited number of customers accounting for a significant portion of our revenues.
Two U.S. customers (namely specialty pharmacies) accounted for $173.6 million, or 84%, of our revenues for the year ended December 31, 2022 and $156.6 million, or 79%, of our revenues for the year ended December 31, 2021. Inherent risks exist when a large percentage of total revenues is concentrated with a limited number of specialty pharmacies. With specialty products, the pharmacies provide patient support services that are more than are provided by retail pharmacies, and effective communication and relations between our hub and these pharmacies are important in maintaining timely and consistent filling of prescriptions for RUCONEST.
It is not possible for us to predict the future level of demand for our products that will be handled by these specialty pharmacies or the level of service they will provide to patients and healthcare practitioners. In addition, revenues from these large customers may fluctuate from time to time based on market demand for our products among prescribing physicians, patients and payors, the level which may be affected by market conditions or other factors, some of which may be outside of our control. Further, our contracts with these large specialty pharmacies do not contain purchase commitments or otherwise obligate them to buy a minimum or fixed volume of products from us (and allow these specialty pharmacies to return product to us for a variety of reasons). If either of our major customers experience declining or delayed sales of our products to consumers due to market, economic or competitive conditions, we could be pressured to reduce the prices we charge for our products, reduce the volume of products we supply to such customers, we could lose the customer or have a substantial amount of product returned to us. Additionally, although historically, our reserves for doubtful accounts have not been material, if either of our large customers were to suffer financial instability, they could
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refuse or delay payment of outstanding receivables. Any such development may have a material adverse effect on our business, results of operations and financial condition.
Adverse developments affecting financial institutions, companies in the financial services industry or the financial services industry generally, such as actual events or concerns involving liquidity, defaults or non-performance, could adversely affect our operations and liquidity.
As of March 10, 2023, we held $26 million in deposits at Silicon Valley Bank, or SVB U.S., and another $19 million in deposits at Silicon Valley Bank UK Limited, or SVB UK. On March 10, 2023, SVB was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation, or the FDIC, as receiver. That same day, the Bank of England, or the BoE, announced that, absent any meaningful further information, it intended to put SVB UK into insolvency. On March 12, 2023, U.S. regulators issued a joint announcement that actions had been approved enabling the FDIC to complete its resolution of SVB U.S. in a manner that fully protected all depositors. On March 13, 2023, the BoE announced that SVB UK had been sold to HSBC UK Bank Plc. Since these events, we have been able to access all funds at SVB U.S. and SVB UK. Although we did not lose any deposits in connection with the events at SVB U.S. and SVB UK, we cannot make any assurances regarding the safety of our deposits in the future. Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds, may continue to create market-wide liquidity problems. Despite the actions of the FDIC and BoE, uncertainty and liquidity concerns in the broader financial services industry remain. Inflation and rapid increases in interest rates have led to a decline in the trading value of previously issued government securities with interest rates below current market interest rates. U.S. regulators have announced a program to provide up to $25 billion of loans to financial institutions secured by such government securities held by financial institutions to mitigate the risk of potential losses on the sale of such instruments. However, widespread demands for customer withdrawals or other needs of financial institutions for immediate liquidity may exceed the capacity of such program. In the event of the closure or insolvency of other banks or financial institutions in the future, there can be no assurances that regulators, buyers or others will intervene to ensure access to uninsured or unprotected funds.
Our access to our cash and cash equivalents in amounts adequate to finance our operations could be significantly impaired by the financial institutions with which we have arrangements directly facing liquidity constraints or failures. In addition, investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on acceptable terms or at all. Any material decline in available funding or our ability to access our cash and cash equivalents could adversely impact our ability to meet our operating expenses, result in breaches of our contractual obligations or result in violations of federal or state wage and hour laws, any of which could have material adverse impacts on our operations and liquidity.
Our future success depends on our ability to hire and retain key executives and to attract, retain and motivate qualified personnel.
Our future success depends on our ability to attract and retain key management personnel and scientific and technical personnel. Experienced employees in the biopharmaceutical and biotechnology industries are in high demand and competition for their talents can be intense, especially in The Netherlands, where we maintain our principal operations. We have entered into employment agreements with executive officers and other key employees, but any employee may terminate his or her employment at any time or may be unable to continue in his or her role. The loss of any executive or key employee, or an inability to recruit desirable candidates or find adequate third parties to perform such services on reasonable terms and on a timely basis, could have a material adverse effect on our business, financial condition, results of operations and prospects. If we are not able to attract, retain and motivate necessary personnel to accomplish our business objectives, we may experience constraints that could significantly impede our ability to achieve our development and commercial objectives, our ability to raise additional capital and our ability to implement our business strategy.
Our business, products or product pricing could be subject to negative publicity, which could have a material adverse effect on our reputation, business, financial position, results of operations, liquidity and cash flows.
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In recent years, the pharmaceutical industry has been the subject of public complaints and significant publicity regarding the pricing of pharmaceutical products, including publicity and pressure resulting from prices charged by competitors and peer companies for new products as well as price increases by competitors and peer companies on older products that the public has deemed excessive. We may experience downward pricing pressure on the price of RUCONEST® and any other future approved products due to social or political pressure to lower the cost of drugs, which could reduce our revenue and future profitability. Orphan drugs in particular have received recent negative publicity for the perceived high prices charged for them by their manufacturers, and as a result orphan drug developers such as us may be negatively impacted by such publicity and any U.S. or other government regulatory response. Due to these factors, we may suffer public criticism and negative publicity in media coverage, by industry trade associations and legislators.
Any of the events or developments described above could result in reputational harm and reduced market acceptance and demand for our products, could harm our ability to market our products in the future, could cause us to incur significant expense, could cause our senior management to be distracted from execution of our business strategy, and could have a material adverse effect on our business, reputation, financial condition, results of operations, liquidity, cash flows, and/or share price.
Future legislation regarding energy consumption and waste regulations might hamper efficiency of our operations.
Our facilities consume a significant amount of electricity in connection with the operation of our business and our production processes have a high consumption of consumables and liquid process waste. While we proactively improve processes where feasible with the aim to reduce use of energy and reduce the consumption of materials, our efforts to reduce energy consumption may not be successful. Additionally, we process waste such as chemicals from buffers and caustic for cleaning equipment (which need to be neutralized before disposing), milk waste, fluid containing heavy metals. Legislation related to waste regulations or legislation requiring our facilities to reduce our energy consumption may have a material impact on our business.

Risks Related to Intellectual Property
Our success is dependent on our ability to obtain and protect rights to proprietary technology and to develop our technology and products without infringing the proprietary rights of third parties.
We rely, and will continue to rely, on a combination of patents, trademarks and confidentiality agreements with employees, consultants, collaborators, advisors and other third parties to protect the intellectual property related to our current and future product candidates. We use patents and licensing to protect our products and technology. We are also careful to develop products that don’t infringe on the proprietary rights of third parties. Currently, we have several patent applications granted and pending in countries including the U.S., Europe and Japan. The patent positions of pharmaceutical companies can be uncertain and may involve complex legal and factual questions.
The patents that we own and have license rights to now or the patents and patent applications that we may own or in-license in the future may not have patentable claims that protect our current and future product candidates in the relevant jurisdictions where we intend to commercialize such products. There is no assurance that we are aware of all potentially relevant prior art relating to current patents or current or future patent applications. As such, patent examiners may find prior art that can prevent a patent from issuing from a pending patent application. During the patent examination process, we may be required to narrow the pending claims to overcome prior art, a process that may limit the scope of patent protection. Even if patents do successfully issue based on our future patent applications, and even if the issued patents cover our current and future product candidates, including their compositions formulation, method of manufacture, and method of use, third parties may challenge our issued patents’ validity, enforceability or scope, which may result in such patents being narrowed, invalidated or held unenforceable. Any successful opposition to these patents or any other patents owned by or licensed to us in the future could deprive us of rights necessary for the successful commercialization of any of our current or future product candidates, if approved. Further, if we encounter delays in regulatory approvals, the period of time during which we could market a product candidate under patent protection could be reduced.
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If the patent applications we may own or in-license with respect to our current and future product candidates fail to issue, if their breadth or strength of protection is threatened, or if they fail to provide meaningful exclusivity for any of our current or future product candidates, it could dissuade other companies from collaborating with us to develop future product candidates, and threaten our ability to commercialize our current and future product candidates. Notably, pending patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless and until a patent issues from such applications. Any such outcome could have an adverse effect on our business.
Moreover, our technologies and products may infringe on third party intellectual property rights. As a result, we may face litigation or other legal proceedings concerning such intellectual property. These processes can be time-consuming and costly. In the event of an unfavorable ruling in patent or intellectual property litigation, we could be subject to significant liabilities to third parties, or be required to cease developing, manufacturing or selling the affected products or technology. Each of these outcomes may adversely affect our financial position. We may also be confronted with claims which are raised with the main aim of exploiting the nuisance value of publicly raised claims. In order to prevent the infringement of third-party intellectual property rights, we may need to acquire licenses for patents held by third parties to re-establish or maintain its freedom to operate, possibly on unfavorable terms. A failure to obtain licenses for patents held by third parties, or failure to obtain them on favorable terms, may have a material adverse effect on our financial and operational position.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions, and has in recent years been the subject of much litigation. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States. For example, European patent law restricts the patentability of methods of treatment of the human body more than U.S. law does. Publications of discoveries in scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot know with certainty whether we were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we were the first to file for patent protection of such inventions. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our future patent applications may not result in patents being issued which protect our technology or products, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection.
In addition, if the breadth or strength of protection provided by our patents and patent applications, whether owned or in-licensed now or in the future, is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.
The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our licensed patents may be challenged in the courts or patent offices in the United States. Such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and products. Moreover, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after the filing of the earliest non-provisional application to which the patent claims priority. Various extensions may be available; however, the life of a patent, and the protection it affords, is limited. We may be required to disclaim a portion of patent term in order to overcome double patenting rejections from the patent office, thus potentially shortening our exclusivity period. Without patent protection for our current or future product candidates, we may be open to competition from generic versions of such products. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
We may become involved in lawsuits to protect or enforce our patents, the patents of our licensors or our other intellectual property rights, which could be expensive, time consuming and unsuccessful.
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Competitors may infringe or otherwise violate our patents, the patents of our licensors or our other intellectual property rights. To counter infringement or unauthorized use, we may be required to file legal claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that an asserted patent is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that the asserted patent does not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of asserted patents at risk of being invalidated or interpreted narrowly and could put a related patent application at risk of not issuing. The initiation of a claim against a third party may also cause the third party to bring counter claims against us such as claims asserting that our patents are invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, non-enablement or lack of statutory subject matter. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant material information from the U.S. Patent and Trademark Office, or the USPTO, or made a materially misleading statement, during prosecution. Third parties may also raise similar validity claims before the USPTO in post-grant proceedings such as ex parte re-examinations, inter partes review, or post-grant review, or oppositions or similar proceedings outside the United States, in parallel with litigation or even outside the context of litigation. The outcome following legal assertions of invalidity and unenforceability is unpredictable. We cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. For the patents and patent applications that we may license in the future, we may have limited or no right to participate in the defense of any licensed patents against challenge by a third party. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of any future patent protection on our current or future product candidates. Such a loss of patent protection could harm our business.
We may not be able to detect or prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States. Our business could be harmed if in litigation the prevailing party does not offer us a license on commercially reasonable terms. Any litigation or other proceedings to enforce our intellectual property rights may fail, and even if successful, may result in substantial costs and distract our management and other employees.
Even if we establish infringement, the court may decide not to grant an injunction against further infringing activity and instead award only monetary damages, which may or may not be an adequate remedy. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have an adverse effect on the price of our ordinary shares.
We may infringe or be alleged to infringe the intellectual property rights of others, which may prevent or delay product development and commercialization efforts, requiring us to expend resources on litigation or other resolutions, which may materially and adversely affect our business.
Our success will depend in part on our ability to operate without infringing the intellectual property rights and other proprietary rights of third parties. Identification of third-party patent rights that may be relevant to our products and proprietary technology is difficult because patent searching is imperfect due to differences in terminology among patents, incomplete databases and the difficulty and uncertainty in assessing the meaning or scope of protection of patent claims. There could be issued patents of which we are or were not aware that our products infringe. There also could be patents that we believe we do not infringe, but that we may ultimately be found to infringe. Moreover, patent applications are in some cases maintained in secrecy until patents are issued. The publication of discoveries in the scientific or patent literature frequently occurs substantially later than the date on which the underlying discoveries were made and patent applications were filed. Because patents can take many years to issue, there may be currently pending applications of which we are unaware that may later result in issued patents that our products infringe. For example, pending applications may exist that provide support or can be amended to provide support for a claim that results in an issued patent that our product infringes. We may also be confronted with claims which are raised with the main aim of exploiting the nuisance value of publicly raised claims.
Proceedings involving our patents or patent applications or those of others could:
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•put one or more of our patents at risk of being invalidated, rendered unenforceable or interpreted narrowly;
•adversely impact the patentability of our inventions relating to our products;
•result in monetary damages, injunctive relief or otherwise harm our competitive position, including by limiting marketing and selling activities, increasing the risk for generic competition, limiting development and commercialization activities or requiring us to obtain licenses to use the relevant technology (which licenses may not be available on commercially reasonable terms, if at all); and
•otherwise negatively impact the enforceability, validity or scope of protection offered by the patents relating to the products.
We may not have the resources to adequately defend such claims, and even if successful in any such proceedings, we would incur substantial costs and divert management’s time and attention in pursuing these proceedings, putting further strain on our resources, which could have a material adverse effect on our business, financial condition, results of operations and prospects. If we are unable to avoid infringing the patent rights of others, we may be required to seek a license, defend an infringement action or challenge the validity of the patents in court or other venue. Patent litigation is costly and time consuming. We may not have sufficient resources to bring these actions to a successful conclusion.
In addition, if we do not obtain a license, develop or obtain non-infringing technology, fail to defend an infringement action successfully or have infringed patents declared invalid, we may:
•incur substantial monetary damages;
•encounter significant delays in expanding the market of our products; and
•be precluded from manufacturing or selling any products; which, in each case, could have a material adverse effect on our business, financial condition, results of operations and prospects.
Our patents may be challenged, deemed unenforceable, invalidated or circumvented, and if we do not obtain or maintain patent protection for the products, our business may be materially harmed.
The patent positions of biotechnology and pharmaceutical companies involve complex legal and factual questions and, therefore, validity and enforceability cannot be predicted with certainty. U.S. patents and patent applications also may be subject to interference proceedings, ex parte reexamination, inter partes review, or IPR, and post-grant review proceedings, derivation proceedings and supplemental examination and may be challenged in district courts. Patents granted in certain other countries may be subjected to opposition or comparable proceedings lodged in various national and regional patent offices. These proceedings could result in either loss of the patent or denial of the patent application or loss or reduction in the scope of one or more of the claims of the patent or patent application. In addition, such interference, re-examination, opposition, post-grant review, IPR, derivation proceedings, supplemental examination or revocation proceedings may be costly. We will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our proprietary technologies are covered by valid and enforceable patents or are effectively maintained as trade secrets. The degree of future protection for our products and proprietary rights is uncertain, and it cannot be guaranteed that:
•we will be able to successfully develop or commercialize our product before some or all of the relevant patents or regulatory exclusivity expire, or in countries where we do not have patent protection or exclusivity;
•we or our licensors were the first to make the inventions covered by each of the pending patent applications and patents;
•we or our licensors were the first to file patent applications for these inventions;
•others will not independently develop similar or alternative technologies or duplicate any of our technologies;
•any of our pending patent applications or those that we have licensed will result in issued patents;
•any of our patents or those we have licensed will be valid or enforceable;
•we will be able to license the patents or pending patent applications necessary or desirable to enforce or protect our patent rights on commercially reasonable terms or at all;
•any patents issued to us or our licensors or collaborators will provide a basis for any additional commercially viable products, will provide us with any competitive advantages or will not be challenged by third parties;
•we will be able to develop additional proprietary technologies that are patentable; or
•the patents of others will not have an adverse effect on our business.
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Changes in U.S. patent law or the patent law of other countries or jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our products.
Patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. The Leahy-Smith America Invents Act, or the Leahy-Smith Act, Leahy-Smith Act of 2011 made a number of significant changes to United States patent laws. These include provisions that affect the way patent applications are prosecuted and challenged at the USPTO and may also affect patent litigation. The USPTO has developed and continues to develop new regulations and procedures to govern administration of the Leahy-Smith Act. Accordingly, it remains unclear what impact the Leahy-Smith Act, subsequent rule-making, and judicial interpretation of the Leahy-Smith Act and regulations will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have an adverse effect on our business and financial condition. Moreover, future changes to the patent laws of the United States and foreign jurisdictions may adversely affect the term, scope, validity and enforceability of our or our licensor’s patent rights. For example, a 2019 bill (Terminating the Extension of Rights Misappropriated Act, or TERM Act, H.R. 3199) in the United States Congress aimed to reduce the term of certain drug patents in order to ease generic entry and increase competition. Changing political priorities could potentially drive more such initiatives. The inventorship and ownership rights for patents that we in-license or may own or in-license in the future may be challenged by third parties. Such challenges could result in loss of exclusive rights to such patents, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or require us to obtain a license from such third parties on commercially reasonable terms to secure exclusive rights. If any such challenges to inventorship or ownership were asserted, there is no assurance that a court would find in our favor or that, if we choose to seek a license, such license would be available to us on acceptable terms or at all. Moreover, we may be subject to a third-party pre-issuance submission of prior art to the USPTO or become involved in pre- and post-issuance opposition, derivation, re-examination, IPR, post-grant review or interference proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights. The United States has recently enacted and implemented wide-ranging patent reform legislation. The U.S. Supreme Court and the U.S. Court of Appeals for the Federal Circuit have issued numerous precedential opinions in recent years narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on actions by the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce patents that we have licensed or that we might obtain in the future. Similarly, changes in patent law and regulations in other countries or jurisdictions or changes in the governmental bodies that enforce them or changes in how the relevant governmental authority enforces patent laws or regulations may weaken our ability to obtain new patents or to enforce patents that we have licensed or that we may obtain in the future. The U.S. federal government retains certain rights in inventions produced with its financial assistance under the Bayh-Dole Act. The federal government retains a “nonexclusive, non-transferable, irrevocable, paid-up license” for its own benefit. The Bayh-Dole Act also provides federal agencies with “march-in rights.” March-in rights allow the government, in specified circumstances, to require the contractor or successors in title to the patent to grant a “nonexclusive, partially exclusive, or exclusive license” to a “responsible applicant or applicants.” If the patent owner refuses to do so, the government may grant the license itself.
We enjoy only limited geographical protection with respect to certain patents.
Filing and prosecuting patent applications and defending patents covering product candidates in all countries throughout the world would be prohibitively expensive. Competitors may use our and our licensors’ technologies in jurisdictions where patent protection has not yet been obtained to develop their own products or may export infringing products to territories where enforcement rights are not as strong as in the United States or EU. These products may compete with our product candidates, and our intellectual property rights may not be effective or sufficient to prevent such products from competing. Patent applications may be issued in some non-U.S. jurisdictions with different scope or they may be refused in certain jurisdictions, such as in China, which has different requirements for patentability.
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Proceedings to enforce our patent rights in other jurisdictions, whether or not successful, could result in substantial costs and divert efforts and attention from other aspects of the business. They could also put our patents and patent applications at risk of being invalidated, denied or interpreted narrowly, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits or have damages or other remedies awarded to us, or such damages or other remedies may not be commercially meaningful. Accordingly, our intellectual property rights as enforced may be inadequate to obtain a significant commercial advantage and our efforts to protect our intellectual property rights may be unsuccessful or inadequate, which may adversely affect our ability to successfully commercialize our product candidates, which may have a material adverse effect on our business, financial condition, results of operations and prospects. Furthermore, while we intend to protect our intellectual property rights in our expected significant markets, we cannot ensure that we will be able to initiate or maintain similar efforts in all jurisdictions in which we may wish to market our product candidates. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate, which may have an adverse effect on our ability to successfully commercialize our drug candidates in all of our expected, significant international markets.
Some countries also have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties or laws limiting the enforceability of patents against government agencies or government contractors. In those countries, a patent owner may have limited recourse, which could materially diminish the value of such patents. If we or any of our licensors are forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be adversely affected.

Risks Related to Government Regulation Compliance, Legal Matters, and Reputation
The laws, regulations, ethical standards and international pharmaceutical codes in the areas of sales and marketing of pharmaceutical products, and interacting with government officials, healthcare stakeholders and third-party intermediaries, are very complex, and require a robust compliance program. Failure to comply with these laws and regulations could have a material adverse effect on our business, financial condition and results of operations.
The laws and regulations in the area of sales and marketing of pharmaceutical products, and in interacting with healthcare professionals and patients, are complex and often involve subjective assessments. We must comply with such laws in each jurisdiction in which we operate. These regulations are subject to change. We may not be able to meet such standards as they evolve and are implemented. In addition to changing regulatory requirements, our failure to comply with applicable regulatory requirements could result in, among other things, injunctions, product recalls, product seizures, removal from governmental programs, declines in our share price, management distractions, reputational damage, loss of stakeholder trust, loss of employee engagement, difficulties in recruitment, fines and criminal prosecution.
We must comply with a variety of laws and regulations, including regulatory, health and safety, license requirements, tax and corporate governance regulations. We may be required to pay penalties for non- compliance with the laws and regulations of local, regional, national, U.S. and EU authorities to which we are subject. A material change in the applicable laws and regulations, or in their interpretation or enforcement, could force us to alter our business strategy or operations, leading to additional costs or reductions of revenues, which may adversely affect our business.
We interact with government officials, healthcare stakeholders, including healthcare professionals, patients, patient organizations and payers, as well as third party intermediaries, including distributors, wholesalers and co-promotion partners. These interactions generate a potential corruption risk in relation to transfers of values.
We are subject to U.S. and certain foreign export and import controls, sanctions, embargoes, anti-corruption laws, and anti-money laundering laws and regulations. Non-compliance with these legal standards could impair our ability to compete in domestic markets. We can face criminal liability and other serious consequences for violations, which can harm our business.
We are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations, antitrust and competition laws, various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls, the U.S. Foreign Corrupt Practices Act of 1977, or the FCPA, the United States domestic bribery statute contained in 18 U.S.C. §
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201, the United States Travel Act, the USA PATRIOT Act, certain prohibitions under the Dutch Criminal Code (Wetboek van Strafrecht), under the Dutch Economic Offences Act (Wet op Economische Delicten), the U.K. Bribery Act, and other state and national anti-bribery and anti-money laundering laws in the countries in which we conduct activities or countries that are otherwise relevant for our activities. Anti- corruption laws are interpreted broadly and prohibit companies and their employees, agents, contractors and other partners from authorizing, promising, offering, or providing, directly or indirectly, payments, or anything else of value to recipients in the public or private sector (in relation to an act or omission (to be or having been) by the recipient). We may have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities, and other organizations. We can be held liable for the corrupt or other illegal activities of our employees, agents, contractors, and other partners, even if we do not explicitly authorize or have actual knowledge of such activities, and we may participate in collaborations and relationships with third parties whose actions could potentially subject us to liability under the FCPA, the U.K. Bribery Act or local anti-corruption laws. We are also subject to other laws and regulations governing our international operations, including regulations administered by the governments of the United States and authorities in the EU, including applicable export control regulations, economic sanctions and embargoes on certain countries and persons, anti-money laundering laws, import and customs requirements, and currency exchange regulations.
Any violations of the laws and regulations described above may result in substantial civil and criminal fines and penalties, imprisonment, disgorgement, the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm, and other consequences.
If we fail to comply with United Kingdom, EU or U.S. privacy and data security laws and regulations, we may be subject to civil and criminal penalties and other liability.
We are also subject to laws and regulations covering data privacy and the protection of health-related and other personal information. The legislative and regulatory landscape for privacy and data protection continues to evolve, and there has been an increasing focus on privacy and data protection issues which may affect our business, including recently enacted laws in many jurisdictions where we operate. The collection and use of personal health data in the EU is governed by the provisions of the GDPR. This regulation, which is wide-ranging in scope and includes extraterritoriality provisions that apply to certain entities located outside of the EU, imposes several requirements relating to the consent of the individuals to whom the personal data relates, the information provided to the individuals, notification of data processing obligations to the competent national data protection authorities and the security and confidentiality of the personal data, and substantial fines for breaches of the data protection rules. The GDPR also imposes strict rules on the transfer of personal data out of the EU to other countries (including the United States). Failure to comply with the requirements of the GDPR and the related national data protection laws of the EU Member States and the United Kingdom may result in large fines and other administrative penalties: a failure to comply could result in fines up to the greater of 4% of annual worldwide turnover for the preceding financial year or €20 million, with infringements being grouped into tiers which trigger different maximum fine levels. Turnover in this context may include not only the entity in breach but also other group entities. Recent enforcement actions against multinational companies have resulted in significant fines.
Following the United Kingdom’s formal departure from the EU on January 31, 2020, the United Kingdom adapted and implemented the GDPR into its national law, thanks to the United Kingdom’s Data Protection Act 2018, or DPA 2018. Since the United Kingdom left the EU and the transition period has expired, the United Kingdom became a “third country” for the purposes of data protection law.
A “third country” is a country other than the EU Member States and the three additional European Economic Area countries (Norway, Iceland and Liechtenstein) that have adopted a national law implementing the GDPR. Under the GDPR, personal data can only be transferred to third countries in compliance with specific conditions for cross-border data transfers. Appropriate safeguards are required to enable transfers of personal data from the EU and EEA Member States. However, on June 28, 2021, the European Commission adopted an adequacy decision in relation to the United Kingdom. With this decision, the European Commission considers that personal data benefits from an essentially equivalent level of protection under UK law to that guaranteed under EU law, and thus allows personal data to flow freely from the EEA to the United Kingdom. This adequacy decision is however limited in time, and its renewal will depend on whether the United Kingdom continues to ensure an adequate level of data protection. As the United Kingdom is currently looking to reform its data protection regime, there is uncertainty as to whether the United Kingdom will be able to maintain its adequacy status in the future. In the United Kingdom, the DPA, supplements the GDPR, and in particular sets out specific
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requirements related to the processing of “special categories of personal data”, including personal data related to health, genetic information and personal data related to criminal offenses or convictions. The DPA also creates a number of criminal offenses (punishable by uncapped fines) for organizations and in certain cases their directors and officers.
Under the GDPR regulations, we are considered a controller of data processing and are subject to several legal obligations. In particular, we are obligated to place importance on collection and processing of special categories of personal data which, for our purposes, is data that reveals genetic data or data concerning health. While we have taken steps to comply with the GDPR and the DPA, we cannot assure you that our efforts to achieve and remain in compliance have been or will continue to be fully successful. The GDPR regulations and the DPA may impose additional responsibility and liability in relation to personal data that we process and we may be required to put in place additional mechanisms ensuring compliance with these or new data protection rules. This may be onerous and adversely affect our business, financial condition, results of operations and prospects.
In addition, we obtain patient health information from most healthcare providers that prescribe our products and research institutions with which we collaborate, and they are subject to privacy and security requirements under the Health Insurance Portability and Accountability Act of 1996, or HIPAA, in the United States. Although we are not directly subject to HIPAA other than with respect to providing certain employee benefits, we could potentially be subject to criminal penalties if we knowingly obtain or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA. There are also state laws on patient health information, such as the California Confidentiality of Medical Information Act, which we are more directly subject to. As more states consider implementing such laws, we may face an ever-expanding patchwork of data privacy regulations.
Failure to comply with healthcare laws and laws and regulations covering data privacy and the protection of health-related and other personal information could result in government enforcement actions, which could include civil or criminal penalties, private litigation and adverse publicity and could negatively affect our business, financial condition, results of operations and prospects.
Our current and future relationships with healthcare professionals, customers and third-party payors are subject to applicable anti-kickback, fraud and abuse, privacy and security, transparency, and other healthcare laws and regulations, which could expose us to significant penalties, including criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.
We are subject to additional healthcare statutory and regulatory requirements and enforcement by the U.S. federal government and the states and foreign governments in the jurisdictions in which we conduct our business. Third-party payors play a primary role in the approval of prescriptions for RUCONEST®, and will do so for any product candidates for which we obtain marketing approval. Our current and future arrangements with third-party payors, healthcare practitioners and patients may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we research as well as market, sell and distribute any products for which we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations include the following:
•the federal Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or paying remuneration, directly or indirectly, in cash or in-kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid; a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;
•the federal false claims laws, including the civil False Claims Act, impose criminal and civil penalties, including civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government; in addition, the government may assert that a claim including items and services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act;
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•HIPAA imposes criminal and civil liability for, among other things, executing a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services; similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;
•the federal physician payment transparency requirements, sometimes referred to as the “Sunshine Act” under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or, collectively, the ACA, require certain manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program to report to Centers for Medicare & Medicaid Services, or CMS, information related to payments and other transfers of value to physicians, as defined by such law, and teaching hospitals and the ownership and investment interests of physicians and their immediate family members in such manufacturers. Beginning in 2022, applicable manufacturers also will be required to report such information regarding its relationships with physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists and certified nurse midwives during the previous year;
•HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, which also imposes obligations on certain covered entity healthcare providers, health plans, and healthcare clearinghouses as well as their business associates, and their subcontractors, that perform certain services involving the use or disclosure of individually identifiable health information, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;
•ACA, analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers;
•some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and may require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures;
•state and local laws that require the registration of pharmaceutical sales representatives;
•state and foreign laws also govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts;
•competition laws in the U.S. and globally that may govern our interactions with competitors, customers, distributors, and suppliers; and
•the FCPA prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business.
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations may involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to it, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid, integrity oversight and reporting obligations, contractual damages, reputational harm, diminished profits and future earnings, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations. If any of the physicians or other healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to significant criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

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If we fail to comply with our reporting and payment obligations under the Medicaid Drug Rebate Program or other governmental pricing programs that we participate in, we could be subject to additional reimbursement requirements, penalties, sanctions and fines, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
We have certain price reporting obligations to the Medicaid Drug Rebate Program. Under the Medicaid Drug Rebate Program, we are required to pay a rebate to each state Medicaid program for RUCONEST®, and expect to do so for any new approved products. Those rebates are based on pricing data we have to report on a monthly and quarterly basis to CMS, the federal agency that administers the Medicaid Drug Rebate Program. These data include, among other things, the Average Manufacturing Price, or AMP, and the Best Price, or BP, which, in general, represents the lowest price available from the manufacturer to any entity in the U.S. in any pricing structure, calculated to include all sales and associated rebates, discounts and other price concessions. On June 17, 2020, CMS issued a proposed rule that, among other things, would change the methodology for calculating and reporting of AMP and BP in order to encourage manufacturers and states to enter into value-based purchasing arrangements. Although the public comment period has closed, we cannot provide any assurance that the proposed rule will be adopted or adopted in the form published. We are liable for errors associated with our submission of pricing data and for any overcharging of government payors. For example, failure to submit monthly/quarterly AMP and BP data on a timely basis could result in a civil monetary penalty for each day the submission is late beyond the due date. Failure to make necessary disclosures and/or to identify overpayments could result in allegations against us under the Federal False Claims Act and other laws and regulations. Any required refunds to the U.S. government or responding to a government investigation or enforcement action would be expensive and time consuming and could have a material adverse effect on our business, results of operations and financial condition.
Federal law requires that any company that participates in the Medicaid Drug Rebate Program also participate in the 340B program in order for federal funds to be available for the manufacturer’s drugs under Medicaid and Medicare Part B. The 340B program requires participating manufacturers to agree to charge statutorily defined covered entities no more than the 340B “ceiling price” for the manufacturer’s covered outpatient drugs. These 340B covered entities include a variety of community health clinics and other entities that receive health services grants from the Public Health Service, as well as hospitals that serve a disproportionate share of low- income patients. The ACA expanded the list of covered entities to include certain free-standing cancer hospitals, critical access hospitals, rural referral centers and sole community hospitals, but exempts “orphan drugs” from the ceiling price requirements for these covered entities. The 340B ceiling price is calculated using a statutory formula based on the AMP and rebate amount for the covered outpatient drug as calculated under the Medicaid Drug Rebate Program, and in general, products subject to Medicaid price reporting and rebate liability are also subject to the 340B ceiling price calculation and discount requirement. Any additional future changes to the definition of AMP and the Medicaid rebate amount under the ACA or other legislation or regulation could affect our 340B ceiling price calculations and negatively impact our results. In addition, legislation may be introduced that, if passed, would further expand the 340B program to additional covered entities or would require participating manufacturers to agree to provide 340B discounted pricing on drugs used in an inpatient setting.
RUCONEST® has been approved by the FDA, the EMA and certain other regulatory authorities for the treatment of HAE attacks. Regulatory approval is limited to the specific indication for which approval has been granted and, unless we seek regulatory approval for additional indications, we will be prohibited from marketing RUCONEST® for other indications. We may be subject to significant fines, penalties or injunctions if we are determined to have promoted or be promoting the use of RUCONEST® for unapproved or “off-label” uses, resulting in damage to our reputation and business.
RUCONEST® is approved by the FDA, the EMA and certain other regulatory authorities for the treatment of HAE attacks, but is not currently approved for the treatment of other indications. Regulatory authorities strictly regulate the promotional claims that may be made about prescription products, and RUCONEST® may not be promoted for uses that are not approved, as reflected in its approved labeling. If we are not able to obtain regulatory approval for any desired future indications for our products and product candidates, our ability to effectively market and sell our products may be reduced and our business may be adversely affected.
While physicians may choose, in their independent medical judgment, to prescribe products for uses that are not described in the product’s labeling and for uses that differ from those tested in clinical trials and approved by the regulatory authorities, we are prohibited from marketing and promoting the products for indications that are not specifically approved by the regulatory authorities. These “off-label” uses are common across medical
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specialties and may constitute an appropriate treatment for some patients in varied circumstances. Regulatory authorities in the United States and in other jurisdictions generally do not restrict or regulate the behavior of physicians in their choice of treatment within the practice of medicine. Regulatory authorities do, however, restrict communications by biotechnology or pharmaceutical companies on off-label use. If the FDA or another regulator determines that our promotional activities constitute promotion of an off-label use, it could request that we modify our promotional materials and subject us to regulatory or enforcement actions as well as actions by other agencies, including issuance of warning letters or untitled letters, suspension or withdrawal of an approved product from the market, mandatory or voluntary recalls, and could result in the imposition of significant criminal, civil, and administrative penalties such as civil fines, disgorgement of money, imprisonment, exclusion from participation in federal health care programs (e.g. Medicare and Medicaid), operating restrictions, additional reporting requirements and/or oversight if we become subject to a corporate integrity agreement or similar agreement, injunctions or criminal prosecution, any of which could significantly harm our business.
Current and future healthcare legislative reform measures may have a material adverse effect on our business and results of operations.
In the United States and in some foreign jurisdictions, there have been, and likely will continue to be, a number of legislative and regulatory changes and proposed changes intended to broaden access to healthcare, improve the quality of healthcare and contain or lower the cost of healthcare. For example, the ACA substantially changed the way healthcare is financed by both governmental and private insurers, and significantly impacted the U.S. pharmaceutical industry. The ACA, among other things, subjects biological products to potential competition by lower-cost biosimilars, expands the types of entities eligible for the 340B drug discount program, addresses a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected, increases rebates owed by manufacturers under the Medicaid Drug Rebate Program and extends the rebate program to individuals enrolled in Medicaid managed care organizations, establishes annual fees and taxes on manufacturers of certain branded prescription drugs and creates a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% (increased to 70% pursuant to the Bipartisan Budget Act of 2018, or BBA, effective as of January 2019) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D.
Since its enactment, there have been numerous judicial, administrative, executive and legislative challenges to certain aspects of the ACA, and we expect there will be additional challenges and amendments to the ACA in the future. Various portions of the ACA are currently undergoing legal and constitutional challenges in the United States Supreme Court and members of Congress have introduced several pieces of legislation aimed at significantly revising or repealing the ACA. The United States Supreme Court is currently reviewing a legal challenge to the constitutionality of the ACA. It is unclear when or how the United States Supreme Court will rule. On February 10, 2021, the Biden administration withdrew the federal government’s support for overturning the ACA. Although the Supreme Court has not yet ruled on the constitutionality of the ACA, on January 28, 2021, President Biden issued an executive order to initiate a special enrollment period for purposes of obtaining health insurance coverage through the ACA marketplace, which began on February 15, 2021 and remained open through August 15, 2021. The implementation of the ACA is ongoing, and the law appears likely to continue the downward pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs. Litigation and legislation related to the ACA are likely to continue, with unpredictable and uncertain results.
In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted. For example, in August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. Specifically, the Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers of up to 2% per fiscal year, which went into effect in April 2013, and, due to subsequent legislative amendments, will remain in effect through 2030 unless additional Congressional action is taken. However, COVID-19 relief legislation suspended the 2% Medicare sequester from May 1, 2020 through December 31, 2021. On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. The BBA
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also amended the ACA, effective January 1, 2019, by increasing the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D and closing the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole.”
Furthermore, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several congressional inquiries and proposed legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient assistance programs and reform government program reimbursement methodologies for pharmaceutical and biological products. At the federal level, the previous administration used several means to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives. For example, on July 24, 2020 and September 13, 2020, the former Trump administration announced several executive orders related to prescription drug pricing that attempted to implement several of the administration’s proposals. As a result, the FDA released a final rule on September 24, 2020, effective November 30, 2020, providing guidance for states to build and submit importation plans for drugs from Canada. Further, on November 20, 2020, the U.S. Department of Health and Human Services, or HHS, finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Medicare Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The implementation of the rule has been delayed by the Inflation Reduction Act of 2022, or IRA, until 2032.
The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a new safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers, the implementation of which has also been delayed by the IRA until January 1, 2032. On November 20, 2020, CMS issued an interim final rule implementing the Most Favored Nation, or MFN, Model under which Medicare Part B payments will be calculated for certain physician-administered drugs and biologics based on the lowest price drug manufacturers receive in Organization for Economic Cooperation and Development countries with a similar gross domestic product per capita. The MFN Model regulations mandate participation by identified Part B providers and would have applied to all U.S. states and territories for a seven-year period beginning January 1, 2021 and ending December 31, 2027. However, on December 28, 2020, the United States District Court in Northern California issued a nationwide preliminary injunction against implementation of the interim final rule.
On January 13, 2021, in a separate lawsuit brought by industry groups in the U.S. District of Maryland, the government defendants entered a joint motion to stay litigation on the condition that the government would not appeal the preliminary injunction granted in the U.S. District Court for the Northern District of California and that performance for any final regulation stemming from the MFN Interim Final Rule shall not commence earlier than 60 days after publication of that regulation in the Federal Register. Further, authorities in Canada have passed rules designed to safeguard the Canadian drug supply from shortages. If implemented, importation of drugs from Canada and the MFN Model may materially and adversely affect the price we receive for any of our product candidates. It is unclear whether the Biden administration will work to reverse these measures or pursue similar policy initiatives. Additionally, on July 9, 2021, President Biden issued an executive order directing the FDA to, among other things, continue to clarify and improve the approval framework for generic drugs and identify and address any efforts to impede generic drug competition.
Additionally, on August 16, 2022, President Biden signed the IRA into law. The IRA, among other things, (i) directs HHS to negotiate the price of certain high-expenditure, single-source drugs and biologics covered under Medicare, and subject drug manufacturers to civil monetary penalties and a potential excise tax by offering a price that is not equal to or less than the negotiated “maximum fair price” under the law, and (ii) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation. The IRA permits HHS to implement many of these provisions through guidance, as opposed to regulation, for the initial years. These provisions will take effect progressively starting in fiscal year 2023, although they may be subject to legal challenges. It is currently unclear how the IRA will be effectuated but it is likely to have a significant impact on the pharmaceutical industry.
At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional health care authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription
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drug and other health care programs. These measures could reduce the ultimate demand for our products, once approved, or put pressure on our product pricing.
We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our services by our partners or for our current or future drug candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action in the United States. If we or any third parties we may engage are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or such third parties are not able to maintain regulatory compliance, our drug candidates may lose any regulatory approval that may have been obtained and we may not achieve or sustain profitability.
Our product and future product candidates may become subject to unfavorable pricing regulations, third- party reimbursement practices or healthcare reform initiatives, which would harm our business.
Our ability to commercialize RUCONEST® or any other product candidate successfully also will depend in part on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations. Government authorities and other third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels. A primary trend in the U.S. and EU healthcare industries and elsewhere is cost containment. Government authorities and other third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. We cannot be certain that coverage and reimbursement will continue to be available for RUCONEST® or any other product that we commercialize and, if coverage and reimbursement is available, the level of reimbursement. Reimbursement may impact the demand for, or the price of, any product candidate for which we obtain marketing approval. In addition, third-party payors are likely to impose strict requirements for reimbursement of a higher priced drug, and any launch of a competitive product is likely to create downward pressure on the price initially charged. If reimbursement is not available or is available only to a limited degree, we may not be able to successfully commercialize any product candidate for which we obtain marketing approval.
There may be significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which the drug is approved by the applicable regulatory authority. Moreover, eligibility for coverage and reimbursement does not imply that any drug will be paid for in all cases or at a rate that covers our costs, including research, development, intellectual property, manufacturing, sale and distribution expenses. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs, and may be incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. In the United States, third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies. In the EU, reference pricing systems and other measures may lead to cost containment and reduced prices. Our inability to promptly obtain coverage and adequate reimbursement rates from both government-funded and private payors for any approved products that we develop could have a material adverse effect on our operating profit, our ability to raise capital needed to develop product candidates and commercialize products and our overall financial condition.
We are exposed to the risk that our employees and independent contractors, including principal investigators, consultants, any future commercial collaborators, service providers, and other vendors may engage in misconduct or other illegal activity.
Our employees and independent contractors, including principal investigators, consultants, commercial collaborators, service providers and other vendors may also engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have an adverse effect on our results of operations. We are exposed to the risk that our employees and independent contractors, including
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principal investigators, consultants, any future commercial collaborators, service providers and other vendors may engage in misconduct or other illegal activity.
Misconduct by these parties could include intentional, reckless and/or negligent conduct or other unauthorized activities that violate the laws and regulations of the FDA and other similar regulatory bodies, including those laws that require the reporting of true, complete and accurate information to such regulatory bodies; manufacturing standards; U.S. federal and state healthcare fraud and abuse laws, data privacy and security laws and other similar non-U.S. laws; or laws that require the true, complete and accurate reporting of financial information or data. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs, and other business arrangements. Such misconduct also could involve the improper use or misrepresentation of individually identifiable information, including, without limitation, information obtained in the course of clinical trials, the creation of fraudulent data in our preclinical studies or clinical trials, or illegal misappropriation of product, which could result in regulatory sanctions and cause serious harm to our reputation.
It is not always possible to identify and deter misconduct by employees and other third-parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. In addition, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and financial results, including, without limitation, the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgement, possible exclusion from participation in Medicare, Medicaid, and other U.S. federal healthcare programs or healthcare programs in other jurisdictions, integrity oversight and reporting obligations to resolve allegations of non-compliance, imprisonment, other sanctions, contractual damages, reputational harm, diminished profits and future earnings and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
As a “foreign private issuer,” we are exempt from a number of rules under the U.S. securities laws and the Nasdaq Stock Market LLC, or Nasdaq, rules, and we are permitted to file less information with the SEC than are U.S. companies. In addition, we are permitted and follow certain home country corporate governance practices in lieu of certain Nasdaq requirements applicable to domestic issuers. This may make our American Depositary Shares, or ADSs, and ordinary shares less attractive to investors.
We are a “foreign private issuer,” as defined in the rules and regulations of the SEC, and, consequently, we are not subject to all of the disclosure and governance requirements applicable to companies organized within the United States. For example, we are exempt from certain rules under the Securities Exchange Act of 1934, as amended, or the Exchange Act, that regulate disclosure obligations and procedural requirements related to the solicitation of proxies, consents or authorizations applicable to a security registered under the Exchange Act. In addition, our officers and directors are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and related rules with respect to their purchases and sales of our securities. Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. public companies. Accordingly, there may be less publicly available information concerning our Company than there is for U.S. public companies.
As a foreign private issuer traded on Euronext Amsterdam, we are permitted to follow certain home country corporate governance practices in lieu of certain requirements of the Nasdaq. The rights of holders of ordinary shares and, therefore, certain of the rights of holders of the ADSs, are governed by Dutch law, including the provisions of the Dutch Corporate Governance Code, and by our Amended and Restated Articles of Association, which may provide less protection than is afforded to investors under Nasdaq rules applicable to domestic issuers.
In particular, we follow Dutch law instead of Nasdaq practice in the following ways:
•We do not follow Nasdaq Rule 5620(c) regarding quorum requirements applicable to meetings of shareholders as long as we are not a domestic issuer and absent another mandatory obligation to such
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effect. Such quorum requirements are not required under Dutch law. In accordance with generally accepted business practice, our Articles of Association provide alternative quorum requirements that are generally applicable to meetings of shareholders.
•We do not follow Nasdaq Rule 5605(b)(2), which requires that independent directors regularly meet in an executive session, where only independent directors are present. The independent directors may choose to meet in an executive session at their discretion.
Although we may rely on certain home country corporate governance practices, we must comply with Nasdaq Rule 5625, Notification of Noncompliance and Rule 5640, Voting Rights. Further, we must have an Audit Committee that satisfies Rule 5605(c)(3), which addresses Audit Committee responsibilities and authority, and that consists of committee members who meet the independence requirements of Rule 5605(c)(2)(A)(ii).
We intend to take all actions necessary to maintain compliance as a foreign private issuer under the applicable corporate governance requirements of the Sarbanes-Oxley Act, the rules adopted by the SEC and the Nasdaq corporate governance rules and listing standards.
If we are unable to remediate material weaknesses in our internal control over financial reporting, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business and stock price.
We have identified material weaknesses in our internal control over financial reporting across the principles for each component of the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, framework at the entity level and accordingly, across the business and IT processes of the Company. Although the Company does have oversight and compliance processes in place, these processes are currently not sufficiently formalized as controls to identify and address the risks of material misstatements and risks arising from IT. In addition, where control activities are dependent on information that control performers use to execute the control, we do not perform or document controls to determine the completeness and accuracy of such information. We also did not have controls in place to monitor control activities and identified control deficiencies. If we are unable to remediate these material weaknesses, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business and stock price. We are in the process of remediating the material weaknesses identified including further developing and implementing formal policies, processes, internal controls and documentation relating to our financial reporting. We have finalized a risk assessment framework and scoping to identify key processes and controls that are in process of being implemented.
We are required, pursuant to Section 404(a) of the Sarbanes-Oxley Act, or Section 404(a), to furnish a report by management on, among other things the effectiveness of our internal control over financial reporting on an annual basis. This assessment includes disclosure of any material weaknesses identified by our management in our internal control over financial reporting. Our Management’s Annual Report on Internal Control over Financial Reporting included in this Annual Report describes these material weaknesses and includes our conclusion that our internal controls were not effective as of the end of the period covered by this Annual Report. While we have established certain procedures and control over our financial reporting processes, including initiating remediation efforts with respect to the material weaknesses, we cannot assure you that these efforts will prevent restatements of our financial statements in the future. Additionally, an adverse opinion from our independent registered public accounting firm on our internal control over financial reporting is included in this Annual Report for the year ended December 31, 2022.
The presence of material weaknesses could result in financial errors or delays in our financial reporting, which could require us to restate our operating results, and our auditors may be required to issue a qualified audit report, as included in this Annual Report. We might not identify one or more material weaknesses in our internal controls in connection with evaluating our compliance with Section 404 of the Sarbanes-Oxley Act, or Section 404. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we will need to expend significant resources and provide significant management oversight. Implementing any appropriate changes to our internal control may require specific compliance training of our directors and employees, entail substantial costs in order to modify our existing accounting systems, take a significant period of time to complete and divert management’s attention from other
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business concerns. These changes may not, however, be effective in maintaining the adequacy of our internal control.
If either we are unable to conclude that we have effective internal control over financial reporting, as is the case currently, or, at the appropriate time, our independent auditors are unable to provide us with an unqualified report on the effectiveness of our internal control over financial reporting as required by Section 404, investors may lose confidence in the accuracy or completeness of our financial reports, the price of our ADSs or ordinary shares could decline and we may be subject to litigation, sanctions or investigations by regulatory authorities, including the SEC and Nasdaq. Failure to remediate any material weakness in our internal control over financial reporting, or to maintain other effective control systems required of public companies, could also restrict our future access to the capital markets. In addition, if we are unable to meet the requirements of Section 404, we may not be able to remain listed on Nasdaq.
Our business and operations may be negatively impacted by the failure, or perceived failure, of achieving environmental, social and governance, or ESG, objectives.
We continue to work towards operating our business in an environmentally responsible and socially inclusive manner. Stakeholders, including our stockholders and our employees, have increasingly focused on our ESG practices. If our ESG practices fail to meet these stakeholders’ expectations and standards, there could be a material adverse effect on our reputation, business and, ultimately, our stock price.
Achieving our ESG goals requires long-term investments and broad, coordinated collaboration which may require us to incur additional costs or allocate additional resources towards monitoring, reporting, and implementing our ESG practices. Furthermore, we may fail to accurately assess our stakeholders’ ESG priorities, as such priorities have evolved and will continue to evolve. Any failure or perceived failure to meet our ESG program priorities could result in a material adverse effect on our reputation, business, and stock price.

Risks Related to Financial Conditions, Market Environment and General Economic Trends
Due to the international scope of our operations, fluctuations in exchange rates, particularly between the Euro and the U.S. dollar, may adversely affect us.
While we are headquartered in The Netherlands, we source materials, products and services from several countries outside the EU that are paid in local currencies. As a result of the commercialization of RUCONEST® in the United States and in other countries outside the EU, we will also receive payments and generate costs in U.S. dollars and other currencies. As a result, our business may be affected by fluctuations in foreign exchange rates between the Euro and the U.S. dollar, as well as other currencies.
Since the majority of our sales are invoiced and paid in U.S. dollars, and the majority of our costs and liabilities are valued in Euros, any change in the relevant exchange rate means a corresponding change in the Euro value of sales and a corresponding change in the loan balance in Euros. While we maintain U.S. dollar cash deposits, the functional currency of the Dutch Pharming entities is the Euro, so any change in the U.S. dollar-Euro exchange rate means a corresponding change in the Euro value of U.S. dollar cash deposits.
Adverse capital and credit market conditions may significantly affect the ability to meet liquidity needs, access to capital and cost of capital.
We utilize cash flow from operations to invest in our future projects. However, prolonged exposure to liquidity risk or inability to generate enough income for the currently contemplated projects, could lead to the inability to meet our financial obligations, which could increase the risk of insolvency.
Additionally, adverse developments in the capital and credit markets, for example as the result of rising interest rates globally, would affect our ability to finance our operations and could materially impact our results of operations.


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Risks Related to the ADSs
If securities or industry analysts do not publish research or reports about our business, or if they change their recommendations regarding the ADSs adversely, the price and/or trading volume of the ADSs could be affected.
The trading market for the ADSs representing our ordinary shares may be influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of the analysts who cover us or our industry downgrade the shares in a research report, the market price of the shares may decline and if one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, we could lose visibility in the financial markets, which could cause the market price and/or trading volume of the shares to decline.
If intangible assets and goodwill that we record in connection with our acquisitions become impaired, we may have to take significant charges against earnings.
In connection with the accounting for our acquisitions, a significant value may be recognized in respect of intangible assets, including developed technology and customer relationships relating to the acquired product lines, and goodwill. Under IFRS, we must assess, at least annually and potentially more frequently, whether the value of intangible assets and goodwill has been impaired. We expect to assess intangible assets and goodwill for impairment in the event of an impairment indicator. Any reduction or impairment of the value of intangible assets and goodwill will result in a charge against earnings, which could materially adversely affect our results of operations and shareholders’ equity in future periods.
Our global operations subject us to significant tax risks.
We are subject to tax rules in the jurisdictions in which we operate. Changes in tax rates, tax relief and tax laws, changes in practice or interpretation of the law by the relevant tax authorities, increasing challenges by relevant tax authorities or any failure to manage tax risks adequately could result in increased charges, financial loss, penalties and reputational damage. Tax authorities may actively pursue additional taxes based on retroactive changes to tax laws which could result in a material restatement to its tax position. Any of these factors could have a negative impact on our business, financial condition, results of operations and prospects.
The price and trading volume of the ADSs and ordinary shares may be volatile, and purchasers of the ADSs or ordinary shares could incur substantial losses.
The market price of the ADSs is likely to be volatile and could decline significantly. The stock market in general, and the market for biotechnology and emerging pharmaceutical companies in particular, have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. The market price for the ADSs and ordinary shares may be influenced by a variety of factors, including:
•actual or anticipated variations in our financial condition and operating profit;
•actual or anticipated changes in our growth rate relative to our competitors;
•announcements of technological partnerships, innovations or new products by us or our competitors;
•the success of competitive products or technologies;
•changes in management and members of our board of directors;
•changes in financial estimates or recommendations by securities analysts;
•changes in the trading volume of the ADSs on the Nasdaq and of our ordinary shares on Euronext Amsterdam;
•sales of the ADSs or our ordinary shares by executive officers or future holders of our equity securities;
•announcements or expectations of additional debt or equity financing efforts;
•unanticipated losses or gains due to unexpected events, including events related to the success of our clinical trials or regulatory approvals;
•significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving us or our competitors;
•changes in our accounting policies or practices;
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•disputes or other developments related to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;
•changes in government regulations, including any changes that may affect pricing or reimbursement; and
•conditions in the financial markets or changes in general economic conditions.
These and other market and industry factors may cause the market price and demand for the ADSs and ordinary shares to fluctuate substantially.
Moreover, securities of life science companies, and stock markets in general, have from time to time experienced extreme price and volume fluctuations that may be unrelated or disproportional to the operational performance of any particular companies.
We will incur increased costs as a result of simultaneously having the ADSs listed in the United States and our ordinary shares admitted to trading on Euronext Amsterdam in The Netherlands, and our senior management will be required to devote substantial time to new compliance initiatives and corporate governance practices.
As a company whose securities are publicly listed in the United States, we will incur significant legal, accounting and other expenses that we did not incur previously, even though our ordinary shares are admitting to trading on Euronext Amsterdam. Our senior management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, which in turn could make it more difficult for us to attract and retain qualified senior management personnel or members for our board of directors.
However, these rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.
Further, being a U.S. listed company and a Dutch public company with ordinary shares admitted to trading on Euronext Amsterdam impacts the disclosure of information and requires compliance with two sets of applicable rules. From time to time, this may result in uncertainty regarding compliance matters and result in higher costs necessitated by legal analysis of dual legal regimes, ongoing revisions to disclosure and adherence to heightened governance practices. As a result of the enhanced disclosure requirements of the U.S. securities laws, business and financial information that we report is broadly disseminated and highly visible to investors, which we believe may increase the likelihood of threatened or actual litigation, including by competitors and other third parties, which could, even if unsuccessful, divert financial resources and the attention of our management and key employees from our operations.
Future sales of our ordinary shares or ADSs, or the perception that such sales may occur, could depress the prices of such ordinary shares or ADSs.
Sales of a substantial number of the ADSs in the public market, or the perception that these sales might occur, could depress the market price of the ADSs and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that such sales may have on the prevailing market price of our ADSs.
We are a Dutch public company with limited liability. The rights of our shareholders and ADS holders may be different from the rights of shareholders in companies governed by the laws of U.S. jurisdictions and may not protect investors in a similar fashion afforded by incorporation in a U.S. jurisdiction.
We are a public company (naamloze vennootschap) organized under the laws of The Netherlands. Our corporate affairs are governed by our Articles of Association, the rules of our board of directors and by the laws governing companies incorporated in The Netherlands. However, there can be no assurance that Dutch law will not change
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in the future or that it will serve to protect investors in a similar fashion afforded under corporate law principles in the United States, which could adversely affect the rights of investors.
The rights of shareholders and ADS holders and the responsibilities of directors may be different from the rights and obligations of shareholders, ADS holders and directors in companies governed by the laws of U.S. jurisdictions. In the performance of their duties, our directors are required by Dutch law to consider the interests of our Company, its shareholders, its employees and other stakeholders, in all cases with due observation of the principles of reasonableness and fairness. It is possible that some of these parties will have interests that are different from, or in addition to, your interests as an ADS holder.
For more information on relevant provisions of Dutch corporation law and of our Articles of Association, see “Description of Securities” filed as Exhibit 2.1 to this Annual Report.
Provisions of our Amended and Restated Articles of Association or Dutch corporate law might deter acquisition bids for us that might be considered favorable and prevent, delay or frustrate any attempt to replace or remove the members of our board of directors.
Under Dutch law, various protective measures are possible and permissible within the boundaries set by Dutch law and Dutch case law.
Certain provisions of our Amended and Restated Articles of Association may make it more difficult or less attractive for a third party to acquire control of us or to effect a change in our board of directors. These provisions include: a provision that our directors are appointed on the basis of a binding nomination prepared by our board of directors which can only be overruled by a simple majority of votes cast representing at least one third of our issued share capital; a provision that our directors may only be removed by the general meeting of shareholders by a simple majority of votes cast representing at least one third of our issued share capital; and a requirement that certain matters, including an amendment of our Amended and Restated Articles of Association, may only be brought to our shareholders for a vote upon a proposal by our board of directors. Currently we have no such protective measures in place.
Shareholders and ADS holders may not be able to exercise preemptive rights and, as a result, may experience substantial dilution upon future issuances of ordinary shares.
In the event of an issuance of ordinary shares, subject to certain exceptions, each shareholder will have a pro rata preemptive right in proportion to the aggregate nominal value of the ordinary shares held by such holder. These preemptive rights may be restricted or excluded by a resolution of the general meeting or by another corporate body designated by the general meeting. For example, at our 2022 Annual General Meeting, our shareholders approved a proposal to exclude preemptive rights for up to 10% of our issued share capital for general corporate purposes and for up to 10% of our issued share capital for financing of mergers, acquisitions, and strategic alliances, each for a period of eighteen months. The issuance of additional equity securities in the absence of preemptive rights would cause existing shareholders to experience dilution of their interest in us.
We are not obligated to, and do not, comply with all best practice provisions of the Dutch Corporate Governance Code.
We are subject to the Dutch Corporate Governance Code, or the DCGC. The DCGC contains both principles and best practice provisions for boards of directors, shareholders and general meetings, auditors, disclosure, compliance and enforcement standards. As a Dutch company listed on a stock exchange, we are subject to the DCGC and are required to disclose in our annual board report to what we extent comply with the principles and best practice provisions of the DCGC, and where we do not (for example, because of a conflicting Nasdaq requirement or otherwise), we must state why and to what extent we deviate in our Annual Report. We do not comply with all best practice provisions of the DCGC. See “Description of Securities” filed as Exhibit 2.1 to this Annual Report. This may affect your rights as a shareholder or ADS holder and you may not have the same level of protection as a shareholder or ADS holder in a Dutch company that fully complies with the DCGC.
We have never declared or paid dividends on our ordinary shares since our ordinary shares were listed on Euronext Amsterdam, and we do not anticipate paying dividends in the foreseeable future.
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We have never declared or paid cash dividends on our ordinary shares since our ordinary shares were listed on Euronext Amsterdam. We intend to retain any earnings for use in our business and do not currently intend to pay dividends on our ordinary shares. Subject to restrictions under applicable law, any future determination to pay dividends or other distribution will be at the discretion of our board of directors and will depend upon a number of factors, including our results of operations, cash requirements, financial condition, future prospects, contractual restrictions, any future debt agreements, restrictions under applicable laws and other factors that our board of directors may deem relevant. We do not anticipate paying any cash dividends or other distributions on our ordinary shares in the foreseeable future. As a result, a return on any investment will only occur if the price of our ordinary shares or the ADSs increases.
ADS holders may not receive distributions on the ordinary shares represented by the ADSs or any value for such distribution if it is illegal or impractical to make them available to ADS holders.
While we do not anticipate paying any dividends or other distributions on our ordinary shares in the foreseeable future, if such a dividend or distribution is declared, the depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on our ordinary shares or other deposited securities after deducting its fees and expenses, including withholding taxes. You will receive these distributions in proportion to the number of ordinary shares your ADSs represent. However, in accordance with the limitations set forth in the deposit agreement, it may be unlawful or impractical to make a distribution available to ADS holders. We have no obligation to take any other action to permit the distribution of the ADSs, ordinary shares, rights or anything else to holders of the ADSs. This means that you may not receive the distributions we make on our ordinary shares or any value from them if it is unlawful or impractical to make them available to you. These restrictions may have a material adverse effect on the value of your ADSs.
Dividends distributed by us on the ordinary shares or ADSs to certain related parties in low-taxed jurisdictions might in the future become subject to an additional Dutch withholding tax on dividends.
Under current Dutch tax law, dividends paid on ordinary shares or ADSs are in principle subject to Dutch dividend withholding tax at a rate of 15% under the Dutch Dividend Withholding Tax Act 1965 (Wet op de dividendbelasting 1965), unless a domestic or treaty exemption or reduction applies. In a letter to the Dutch parliament dated May 29, 2020, the Dutch State Secretary for Finance announced that the Dutch government intends to introduce an additional withholding tax on dividends paid to related entities in jurisdictions that have a corporate tax rate below 9% or to jurisdictions included on the EU’s blacklist of non-cooperative jurisdictions and in certain abusive situations, effective January 1, 2024. The legislative proposal has been published by the Dutch government on March 24, 2021. Pursuant to the proposal, the conditional withholding tax on dividend payments will be an addition to the conditional withholding tax on interest and royalty payments pursuant to the Dutch Withholding Tax Act 2021 (Wet bronbelasting 2021). The rate will be as high as the highest Dutch corporate income tax rate (currently 25%) at the time of the dividend payment, which will be the statutory rate applicable to interest and royalty payments to related entities in jurisdictions that have a corporate tax rate below 9% or to jurisdictions included on the EU’s blacklist of non-cooperative jurisdictions, to hybrid entities and in certain abusive situations. At the same time, the current Dutch dividend withholding tax regime is anticipated to remain in place. However, if the dividend withholding tax and the conditional withholding tax on dividends cumulate, the conditional withholding tax will be reduced by the dividend withholding tax levied. As a result, if the shareholder being a related entity is established in a jurisdiction that has a corporate tax rate below 9% or in a jurisdiction included on the EU’s blacklist of non-cooperative jurisdictions, the tax rate on dividends may rise from 15% to 25%.
ADS holders must act through the depositary to exercise their voting rights and, as a result, may be unable to exercise their voting rights on a timely basis.
We will not treat holders of the ADSs (rather than the ordinary shares underlying the ADSs) as shareholders, and they will not be able to exercise shareholder rights, except through our depositary and except that the ADS holders will have meeting rights to attend our general meetings. The depositary will be the holder of the ordinary shares underlying the ADSs, and ADS holders will be able to exercise voting rights with respect to the ordinary shares represented by the ADSs only in accordance with the deposit agreement relating to the ADSs. There are practical limitations on the ability of ADS holders to exercise their voting rights due to the additional procedural steps involved in communicating with these holders. For example, holders of our ordinary shares will
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be able to exercise their voting rights by either attending the shareholders meeting in person or voting by proxy. ADS holders, by comparison, will not receive any notice directly from us. Instead, in accordance with the deposit agreement, we will use commercially reasonable endeavors to provide at least 30 days’ notice to the depositary of any such shareholders’ meeting and details concerning the matters to be voted on in advance of the meeting date. If we so instruct, the depositary will distribute to ADS holders the notice of the meeting and a statement as to the manner in which voting instructions may be given, or deemed given in accordance with the deposit agreement by holders as soon as practicable after receiving notice from us of any such meeting. To exercise their voting rights, ADS holders must then instruct the depositary as to voting the ordinary shares represented by their ADSs. Due to these procedural steps involving the depositary, the process for exercising voting rights may take longer for ADS holders than for holders of ordinary shares. The ordinary shares represented by ADSs for which the depositary fails to receive timely voting instructions will not be voted.
The trading of our ordinary shares on Euronext Amsterdam and of our ADSs on the Nasdaq may adversely affect the liquidity and value of our ADSs.
Our ordinary shares are traded on Euronext Amsterdam, our ADSs have been approved for listing on the Nasdaq. We cannot predict the effect of this listing on the value of our ordinary shares and ADSs. However, these arrangements may dilute the liquidity of these securities in one or more markets and may adversely affect the development of an active trading market for the ADSs in the United States or the ordinary shares on Euronext Amsterdam. The price of our ADSs could also be adversely affected by trading in our ordinary shares on Euronext Amsterdam and the price of our ordinary shares traded on Euronext Amsterdam could be adversely affected by trading in ADSs on the Nasdaq. The speed by which ADSs can be exchanged for ordinary shares and subsequently traded on Euronext Amsterdam and vice versa might cause differences between the market price for an ADS and the market price for an ordinary share. Additionally, our ordinary shares are quoted in Euros on Euronext Amsterdam, and the ADSs are quoted in U.S. dollars on Nasdaq. Movements in the Euro-U.S. dollar exchange rate may adversely affect the U.S. dollar price of the ADSs on Nasdaq or the Euro price on Euronext Amsterdam. For example, if the Euro weakens against the U.S. dollar, the U.S. dollar price of the ADSs could decline, even if the price of our ordinary shares in Euros increases or remains unchanged. Investors might arbitrate between stock exchanges to exploit such differences, exacerbating potential volatility in our market price.
ADS holders may have difficulty in effecting service of process on our Company and certain directors or officers in the United States in enforcing U.S. judgments in The Netherlands or in enforcing U.S. securities laws in Dutch courts.
We are incorporated and located outside the United States and certain of our directors and officers are located outside of the United States. As a result, it may not be possible for ADS holders to effect service of process within the United States upon all such persons or our Company, or to obtain discovery of relevant documents and/or the testimony of witnesses. ADS holders based in the United States may also have difficulty enforcing in courts outside the United States judgments obtained in U.S. courts against our Company or our directors (including actions under the civil liability provisions of the U.S. securities laws). ADS holders may also have difficulty enforcing liabilities under the U.S. securities laws in legal actions originally brought in jurisdictions located outside the United States.
ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable results to the plaintiff(s) in any such action.
The deposit agreement governing our ADSs provides that owners and holders of ADSs irrevocably waive the right to a trial by jury in any legal proceeding arising out of or relating to the deposit agreement or the ADSs, including claims under U.S. federal securities laws, against us or the depositary to the fullest extent permitted by applicable law. As the waiver relates to claims arising as a matter of contract in relation to the ADSs, we believe that, as a matter of construction of the clause, the waiver would likely to continue to apply to ADS holders who withdraw the ordinary shares represented by the ADSs from the ADS facility with respect to claims arising before the withdrawal, and the waiver would most likely not apply to ADS holders who subsequently withdraw the ordinary shares represented by ADSs from the ADS facility with respect to claims arising after the withdrawal. However, to our knowledge, the enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by the United
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States Supreme Court. If this jury trial waiver provision is prohibited by applicable law, an action could nevertheless proceed under the terms of the deposit agreement with a jury trial. Although we are not aware of a specific federal decision that addresses the enforceability of a jury trial waiver in the context of U.S. federal securities laws, it is our understanding that jury trial waivers are generally enforceable. Moreover, insofar as the deposit agreement is governed by the laws of the State of New York, New York laws similarly recognize the validity of jury trial waivers in appropriate circumstances. In determining whether to enforce a jury trial waiver provision, New York courts and federal courts will consider whether the visibility of the jury trial waiver provision within the agreement is sufficiently prominent such that a party has knowingly waived any right to trial by jury. We believe that this is the case with respect to the deposit agreement and the ADSs.
In addition, New York courts will not enforce a jury trial waiver provision in order to bar a viable set off or counterclaim of fraud or one which is based upon a creditor’s negligence in failing to liquidate collateral upon a guarantor’s demand, or in the case of an intentional tort claim (as opposed to a contract dispute). No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the depositary of compliance with any provision of U.S. federal securities laws and the rules and regulations promulgated thereunder.
If any owner or holder of the ADSs, including purchasers of ADSs in secondary market transactions, brings a claim against us or the depositary in connection with matters arising under the deposit agreement or the ADSs, including claims under U.S. federal securities laws, such owner or holder may incur increased costs of bringing a claim and may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us or the depositary. Any legal suit, action or proceeding against or involving us brought by the depositary or any holder or beneficial owner of ADSs, arising out of or based upon the deposit agreement, the ADSs, the American Depositary Receipts, or ADRs, or the transactions contemplated therein or thereby, may be instituted only in any state or federal court in New York, New York. Any legal suit, action or proceeding against or involving the Depositary brought by us, arising out of or based upon the deposit agreement, the ADSs, the ADRs or the transactions contemplated therein or thereby, may only be instituted in a state or federal court in New York, New York.
ADS holders may be subject to limitations on transfer of the ADSs.
The ADSs are only transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deem it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.
We cannot assure you that we will not be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for any taxable year, which could result in adverse U.S. federal income tax consequences to holders of our ordinary shares.
A non-U.S. corporation will be a Passive Foreign Investment Company, or PFIC, for any taxable year if either (i) at least 75% of its gross income for such year consists of certain types of “passive” income or (ii) at least 50% of the value of its assets (generally based on an average of the quarterly values of the assets) during such year is attributable to assets that produce passive income or are held for the production of passive income. If we are a PFIC for any taxable year during which a U.S. Holder (as defined in “Material Income Tax Considerations - Material U.S. Federal Income Tax Considerations”) holds our ordinary shares, the U.S. Holder may be subject to adverse tax consequences, including (1) the treatment of all or a portion of any gain on disposition as ordinary income, (2) the application of an interest charge with respect to such gain and certain dividends and (3) compliance with certain reporting requirements. Based on our estimated income, assets and market capitalization for 2020, we anticipate we will not likely be a PFIC for 2020. Whether we are treated as a PFIC is a factual determination that must be made on an annual basis after the close of each taxable year. This determination will depend on, among other things, the ownership and the composition of our income and assets, as well as the value of our assets (which may fluctuate with our market capitalization) and our subsidiaries’ assets from time to time. The United States Internal Revenue Service, or IRS, or a court may disagree with our expectations. Therefore, we cannot assure you that we will not be a PFIC for the current taxable year or for any future taxable year.
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If a United States person is treated as owning at least 10% of the value or voting power of our ordinary shares, such holder may be subject to adverse U.S. federal income tax consequences.
Depending upon the aggregate value and voting power of our ordinary shares that United States persons are treated as owning (directly, indirectly or constructively), we could be treated as a controlled foreign corporation, or CFC. Additionally, because our group includes one or more U.S. subsidiaries, certain of our non-U.S. subsidiaries could be treated as CFCs, regardless of whether or not we are treated as a CFC. If a United States person (as defined in the United States Internal Revenue Code of 1986, as amended) is treated as owning (directly, indirectly or constructively) at least 10% of the value or voting power of our shares, such person may be treated as a “United States shareholder” with respect to each CFC in our group (if any), which may subject such person to adverse U.S. federal income tax consequences. Specifically, a United States shareholder of a CFC may be required to report annually and include in its U.S. taxable income its pro rata share of each CFC’s “Subpart F income,” “global intangible low-taxed income” and investments of earnings in “United States property” by CFCs, whether or not we make any distributions of profits or income of a CFC to such United States shareholder. If you are treated as a United States shareholder of a CFC, failure to comply with these reporting obligations may subject you to significant monetary penalties and may prevent the statute of limitations with respect to your U.S. federal income tax return for the year for which reporting was due from starting. Additionally, a non-corporate U.S. shareholder would generally be denied certain tax deductions or foreign tax credits in respect of its income that may otherwise be allowable to a United States shareholder that is a U.S. corporation. We cannot provide any assurances that we will assist holders of our ordinary shares in determining whether we or any of our non-U.S. subsidiaries are treated as CFCs or whether any holder of our ordinary shares is treated as a United States shareholder with respect to any such CFC, nor do we expect to furnish to any United States shareholders information that may be necessary to comply with the aforementioned reporting and tax paying obligations. The Internal Revenue Service, or IRS, has provided limited guidance on situations in which investors may rely on publicly available information to comply with their reporting and taxpaying obligations with respect to foreign-controlled CFCs. U.S. holders of our ordinary shares should consult their advisors regarding the potential application of these rules to their investment in our ordinary shares.


Item 4. Information on the Company.

A. History and Development of the Company
We were incorporated as a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) under the laws of The Netherlands on November 11, 1988 under the name GENFARM B.V. On May 29, 1997, the Company was converted from a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) into a public company (naamloze vennootschap) named Pharming Holding N.V. Effective July 2, 1998, Pharming Holding N.V. was renamed Pharming Group N.V.
We are registered with the Dutch Chamber of Commerce under number 28048592. Our ordinary shares are traded on Euronext Amsterdam under the symbol “PHARM”. As of December 22, 2020, our ADSs were admitted for listing on the Nasdaq under the symbol “PHAR” and began trading on Nasdaq Global Market. The address of our registered office is Darwinweg 24, 2333 CR Leiden, The Netherlands. The telephone number of the registered office is +31 (0)71 5247 400. Our agent for service of process in the United States is Pharming Healthcare Inc. The Pharming Healthcare Inc. office is located at 10 Independence Blvd, Suite 401, Warren, New Jersey 07059. The telephone number is +1 908 524 0888.
Our actual capital expenditures for the years ended December 31, 2022, 2021 and 2020 amounted to $1.4 million, $10.7 million and $4.7 million, respectively. Our capital expenditures primarily consist of property, plant and equipment, such as investments in new machinery and equipment in The Netherlands.
We maintain a website at www.pharming.com. The reference to our website is an inactive textual reference only and the information contained in, or that can be accessed through, our website is not a part of this Annual Report. The SEC maintains an Internet site that contains reports and other information that we file electronically with the SEC at http://www.sec.gov.


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B. Business Overview

Overview
We are a global biopharmaceutical company developing and commercializing innovative protein replacement therapies and precision medicines to serve the underserved rare disease patient. We have one commercialized product RUCONEST® which is a plasma-free rhC1INH protein replacement therapy. It is approved for the treatment of acute HAE attacks. RUCONEST® is commercialized in the United States, the European Economic Area, and the United Kingdom through our own sales and marketing organization, and in the rest of the world through our distribution network. The product is available on a named-patient basis in other territories where it has not yet obtained marketing authorization.
Joenja® (leniolisib), licensed from Novartis International Pharmaceutical AG, or Novartis, in 2019 for the treatment of APDS in adults and adolescents aged 12 and older, was approved by the FDA on March 24, 2023. In the European Economic Area, we now anticipate an opinion from the Committee for Human Medicinal Products, or CHMP, in the second half of 2023 following a shift by CHMP our MAA from an accelerated assessment to a standard review timetable. In addition, we plan to develop new indications for leniolisib and expect to discuss these plans further in 2023.
Looking at our pre-clinical pipeline, OTL-105 an investigational ex vivo autologous hematopoietic stem cell, or HSC gene therapy for the treatment of HAE, has made progress in the development of the lentiviral vector to enhance C1INH expression and is now testing in preclinical HAE disease models. We anticipate providing further updates as we move towards preparing an IND filing. Finally, we have an early stage program in Pompe disease, which is in the preclinical stage and utilizes our transgenic manufacturing technology.
To further build out our pipeline, we continue to explore in-licensing as well as M&A opportunities.

Our Portfolio
The following chart summarizes the status of our product and our main product candidate portfolio:
pharm-20221231_g1.jpg

RUCONEST® approved for the treatment of acute HAE attacks
Our lead product, RUCONEST® is the first and only rhC1INH protein replacement therapy that is approved for the treatment of acute HAE attacks.
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In its most common forms, HAE is caused by a functional deficiency of a plasma protein called C1INH. The patients’ C1INH deficiency leads to the uncontrolled activation of the complement cascade, resulting in the over-production of some mediators, leading to the leaking of fluid from blood vessels to the tissue space. The most common symptoms of an HAE attack are caused by overproduction of the bradykinin initiator protein, kallikrein, and thus excessive leakage of fluid into tissue spaces (edema or swelling). Patients may suffer bouts of excruciating abdominal pain, nausea and vomiting that is exacerbated by swelling in the intestinal wall. Airway, or laryngeal, swelling is particularly dangerous and can lead to death by asphyxiation. Untreated, attacks can last for several days.
The approach to treatment has been initially focused on replacing the missing protein with exogenous C1INH, either collected from pooled plasma or derived recombinantly. More recently, with greater understanding of the pathogenesis, treatments have been developed to block the patients’ contact system.
RUCONEST® has been shown to normalize C1INH activity levels to normal and has been shown to be clinically relevant in HAE attack treatment. The standard posology for the treatment of HAE attacks is 50 units per kilogram of the reconstituted product. RUCONEST® is administered through a slow intravenous (IV) injection. One vial contains 2100 U of lyophilized product to be reconstituted with 14ml of water for injection. RUCONEST® irreversibly binds to several target molecules, including, importantly the coagulation factor FXII and the protease kallikrein, which (when unbound) cleaves a plasma protein into bradykinin and other products. By binding to and chemically deactivating these molecules, RUCONEST® stops the production of bradykinin and all other mediators and thereby stops the HAE attack.
We currently market RUCONEST® in the United States, the United Kingdom and the European Economic Area through our own sales force. For a breakdown of total revenues by categories of geographic market for each of the last three financial years, see “Item 5—Results of Operation.”

Joenja®(leniolisib) - for the treatment of Activated Phosphoinositide 3-kinase Delta Syndrome (APDS)
Pharming announced the FDA approval of Joenja® (leniolisib) on March 24, 2023 as the first and only treatment indicated for the treatment of adults and adolescents aged 12 years and older with activated phosphoinositide 3-kinase delta syndrome (APDS), a rare primary immunodeficiency.
Discovered in 2013, APDS is a rare, genetic condition which affects approximately 1-2 people per million (https://primaryimmune.org/news/new-diagnostic-code-ultrarare-primary-immunodeficiency-promises-multiple-benefits). It is a clinically heterogenous disease that can lead to end-organ damage and early mortality. APDS is a progressive primary immunodeficiency and regulatory disorder characterized by severe, recurrent sinopulmonary infections; persistent, severe, or recurrent herpesvirus infections, particularly Epstein-Barr virus (EBV) and Cytomegalovirus (CMV); lymphadenopathy, hepatomegaly, splenomegaly, and/or nodular lymphoid hyperplasia; autoimmune cytopenias; enteropathy; bronchiectasis; possible malignancy; and dysregulated B and T cell function.
Although awareness of APDS has increased since its discovery in 2013, the disease may still be misdiagnosed in patients not seen by a specialist. Increased education among physicians is needed to aid early diagnosis and accurate treatment. Untreated APDS may be associated with significantly increased morbidity and mortality. Diagnostic delay may lead to an accumulation of damage over time, including bronchiectasis. APDS patients also have a significant risk of developing lymphoma due to the unchecked lymphoproliferation. Management of APDS frequently includes treatment such as prophylactic antibiotics, immunoglobulin replacement, immunosuppression, chemotherapy for lymphoma, or stem cell transplantation. Many of these drugs can cause serious side effects and transplant has significant morbidity and mortality.
Joenja® (leniolisib) is an oral small molecule phosphoinositide 3-kinase delta (PI3Kẟ) inhibitor approved in the U.S. as the first and only targeted treatment of activated phosphoinositide 3-kinase delta (PI3Kδ) syndrome (APDS) in adult and pediatric patients 12 years of age and older. Joenja® inhibits the production of phosphatidylinositol-3-4-5-trisphosphate, which serves as an important cellular messenger and regulates a multitude of cell functions such as proliferation, differentiation, cytokine production, cell survival, angiogenesis, and metabolism. Results from a randomized, placebo-controlled Phase II/III clinical trial demonstrated clinical efficacy of Joenja® in the coprimary endpoints; demonstrating statistically significant impact on immune dysregulation and normalization of immunophenotype within these patients, and interim open label extension
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data has supported the safety and tolerability of long-term Joenja® administration (RAO VK, et al Blood. 2023 Mar 2;141(9):971-983. ). Leniolisib is currently under regulatory review by the European Medicines Agency, with plans to pursue further regulatory approvals in the UK, Canada, Australia and Japan. Leniolisib is also being evaluated in a Phase III clinical trial in children aged 4 to 11 with APDS, with a further trial planned in children aged 1 to 6 years with APDS.

Studies
In partnership with Novartis, we studied leniolisib to assess the efficacy and safety of leniolisib in patients with APDS. The study, a phase 2/3 potentially registration enabling study is composed of two sequential parts. The first part included 6 patients in an open-label dose escalation study designed to assess the safety, tolerability, pharmacodynamics and pharmacokinetics of leniolisib; this dose-finding study has been completed.
The first part of the study showed that oral leniolisib led to a dose-dependent reduction in PI3K/AKT pathway activity assessed ex-vivo and improved immune dysregulation. We observed normalization of circulating transitional and naive B-cells, reduction in PD-11CD41 and senescent CD571CD42 T cells and decreases in elevated serum immunoglobulin M and inflammatory markers including interferon g, tumor necrosis factor, CXCL13, and CXCL10. After 12 weeks of treatment, all patients showed amelioration of lymphoproliferation with lymph node sizes and spleen volumes reduced by 39% (mean; range, 26%-57%) and 40% (mean; range, 13%- 65%), respectively. Leniolisib was well tolerated and improved laboratory and clinical parameters in APDS, supporting the specific inhibition of PI3Kδ as a potential therapy in APDS and other diseases characterized by over-activation of the PI3Kδ pathway. (Blood. 2017;130(21):2307-2316.)
The second part was a randomized, blinded, placebo-controlled study, which enrolled 31 patients with APDS who were 12 years of age or older. Patients were randomized 2:1 to receive either leniolisib 70mg twice daily or placebo for 12 weeks. Following this, patients were permitted to rollover to an open-label extension study to evaluate long-term safety, tolerability, and efficacy. Co-primary endpoints were differences from baseline in lymph node size and in percentage of naïve B cells in peripheral blood, assessed as proxies for immune dysregulation and deficiency.
The primary efficacy results demonstrated clinical efficacy of leniolisib over placebo with a statistically significant reduction in the size of the lymph nodes (p=0.0006) and normalization of immune dysfunction, as evidenced by increased proportion of naïve B cells (p=0.0002). These Key secondary evaluations were supportive, including patient and physician global assessment tools which showed increased well-being and less disease activity, respectively, of patients randomized to leniolisib as compared to placebo.
In the study, leniolisib was generally safe and well-tolerated. The majority of reported adverse events in both treatment groups were classified as mild. There were no adverse events that led to discontinuation of study treatment, there were no deaths, and the incidence of serious adverse events (SAEs) was lower in the leniolisib group than the placebo group. None of the SAEs were suspected related to study treatment. (Blood. 2022 Nov 18:blood.2022018546. doi: 10.1182/blood.2022018546. Online ahead of print).
In December 2022, Principal investigator V. Koneti Rao, M.D., a staff physician in the Primary Immune Deficiency Clinic at the National Institutes of Health in Bethesda, Maryland, U.S., shared the positive findings in an oral presentation at the 2022 Annual Meeting of the American Society of Hematology (ASH) from an interim analysis of its open-label extension study evaluating the investigational drug leniolisib.
The ongoing extension study includes 37 patients with APDS aged 12 years or older who, at the time of data cutoff for the interim analysis, had received 70 mg of the selective PI3Kδ inhibitor leniolisib twice a day for up to six years and three months, with a median duration on study therapy of 102 weeks. The study was primarily designed to assess the safety and tolerability of long-term leniolisib treatment in adolescent and adult patients with APDS who previously participated in a Phase II/III leniolisib study. The extension study’s secondary endpoints are intended to evaluate the efficacy and pharmacokinetics of long-term leniolisib treatment in these patients.
The interim analysis found that leniolisib was well tolerated to this point in the study. It also indicated the durability of the efficacy results seen in the randomized, controlled trial, which showed significant improvement over placebo in the co-primary endpoints of reduction in lymph node size and increase in naïve B cells. The
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interim results indicate a favorable long-term impact on the immune dysregulation and deficiency often seen in patients with APDS, with clinical manifestations including infections, lymphoproliferation, autoimmunity, enteropathy, bronchiectasis, increased risk of lymphoma, and early mortality.
The majority of adverse events (AEs) reported in the interim analysis were grades 1 and 2, and included upper respiratory tract infection, headache and pyrexia. Grade 1 AEs are the least severe and grade 5 the most severe. Overall, 13.5% of AEs were study drug-related; these affected five patients and included weight gain, arthralgia, hyperglycemia, and decreased neutrophil count. Of all AEs assessed in the analysis, 16.2% were classified as serious, but none of these were identified as related to study treatment. There was one death among study participants which was identified as not related to study treatment.
Among study participants, some experienced reductions in APDS disease markers, with levels of response varying between individuals. Responses included:
• reduced lymphadenopathy, splenomegaly, and IgM levels;
• improved or resolved anemia, thrombocytopenia, and lymphopenia; and
• resolved neutropenia in all affected patients.
Importantly, 37% of participants who were on immunoglobulin replacement therapy (IRT) were able to reduce their IRT use while taking leniolisib. Six patients became IRT-independent, with four of those patients having been IRT-independent for 1 to 2.5 years at the data cutoff. As of the data cut-off for the interim analysis, among three patients who had a history of lymphoma prior to the trial, none had a recurrence or new lymphoma while participating in the study.

Regulatory milestones

United States
On March 24, 2023 the FDA approved Pharming’s NDA of Joenja® (leniolisib). The FDA evaluated the Joenja® application for APDS under Priority Review, which is granted to therapies that have the potential to provide significant improvements in the treatment, diagnosis or prevention of serious conditions. Joenja® is expected to launch in the U.S. in early April 2023 and will be available for shipment in mid-April 2023.
Leniolisib was previously granted Orphan Drug Designation by the U.S. Food and Drug Administration (FDA) in January 2018 for the treatment of Activated PI3Kδ Syndrome (APDS) or p110δ-activating mutation causing senescent T cells, lymphadenopathy and immunodeficiency (PASLI).
On July 29, 2022, a New Drug Application (NDA) was submitted to the U.S. FDA for leniolisib, for the treatment of activated phosphoinositide 3-kinase delta (PI3Kδ) syndrome (APDS) in adults and adolescents aged 12 or older. Our dossier was accepted and received Priority Review in September with the FDA assigning a Prescription Drug User Fee Act (PDUFA) goal date for leniolisib of March 29, 2023.
Finally, the ICD-10-CM code for APDS took effect on October 1, 2022. The assignment of the ICD10-CM code enables physicians and payors in the U.S. to add a diagnosis of APDS to patients’ health records, which will help connect these individuals with researchers studying the prevalence and course of the disease. In addition, by allocating a specific diagnosis, the new ICD-10-CM code may help confirm medical necessity in individual patients, thus improving their access to relevant care options through U.S. health insurance plans.

Market access
As of March 24, 2023, the FDA in the United States approved Joenja® (leniolisib) for the treatment of APDS in adults and adolescents 12 years of age and older in the United States.

Identifying future patients
On March 2, 2021, we announced the launch of a sponsored genetic testing program, “navigateAPDS”, designed to assist clinicians in identifying patients and their family members with activated PI3Kδ syndrome (APDS), which may lead to earlier diagnosis. A genetic test enables a clinician to confirm their clinical suspicions and definitively diagnose APDS.
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Pharming’s support of the navigateAPDS program will continue to facilitate genetic testing and counselling for eligible individuals in the United States and Canada at no charge. The navigateAPDS program offers testing with the choice of either the Invitae Primary Immunodeficiency Panel or the Invitae Inborn Errors of Immunity and Cytopenias Panel, which analyzes 429 and 574 genes, respectively, that are associated with inherited disorders of the immune system. In addition to providing genetic testing to individuals who may present with a clinical picture known to be associated with APDS, navigateAPDS will offer pre-test and post-test genetic counseling through a third party, and all blood relatives of patients found to have variants for APDS are qualified to be tested through the program. By offering access to these panels, physicians and patients are more likely to identify the underlying cause and potential diagnosis without the need for additional expanded patient testing.
In Europe, we are intensifying our patient identification efforts together with leading immunology centers of excellence treating patients with APDS and other rare immune deficiencies.
As of December 2022, Pharming has found more than 500 APDS patients in the U.S., Europe, U.K., Australia, Canada and Japan.
Patent protection
Pharming expects to have patent protection for leniolisib in APDS under the Novartis composition of matter patent (U.S. Patent No. 8,653,092, EU patent EP259097B1) and applicable patent term adjustments, extensions, and pediatric extension through early 2037 in the U.S. and EU.

Additional Pipeline development

Leniolisib regulatory milestones- European Economic Area and the United Kingdom

European Economic Area
In October 2020, we announced that the European Commission had granted orphan drug designation for leniolisib for the treatment of activated phosphoinositide 3-kinase delta syndrome (APDS), based on a positive opinion from the Committee for Orphan Medicinal Products (COMP) of the European Medicine Agency (EMA).
In January 2022, a positive decision was made by the European Medicines Agency (EMA) on the Pediatric Investigation Plan (PIP) for leniolisib. For the registration of new medicines in Europe, biopharmaceutical companies are required to provide a PIP which outlines the strategy for investigation of a new medicinal product in the pediatric population. The positive PIP opinion from the Pediatric Committee (PDCO) is an endorsement of the clinical program to evaluate the safety and efficacy of leniolisib in patients from 1 year of age to less than 18 years of age with APDS.
In August 2022, Pharming announced the leniolisib MAA was granted accelerated assessment by EMA’s CHMP. The accelerated assessment reduces the review timeframe from 210 days to 150 days. Upon request, EMA will grant an accelerated assessment of an MAA if they decide the product is of major interest for public health, and in particular, from the viewpoint of therapeutic innovation.
The MAA is supported by positive data from a Phase II/III study of leniolisib, announced on February 2, 2022, which met its co-primary endpoints of reduction in lymph node size and increase in percentage of naïve B cells in patients with APDS. Furthermore, safety data from the study showed that leniolisib was well tolerated by participants. Also submitted as part of the MAA were data from a long-term, open-label extension clinical trial in patients with APDS treated with leniolisib.
On October 28, 2022, Pharming announced that its Marketing Authorisation Application (MAA) for leniolisib has been validated for scientific evaluation under an accelerated assessment by the European Medicines Agency's (EMA) Committee for Medicinal Products for Human Use (CHMP).
In February 2023, Pharming Group announced that the EMA’s Committee for Human Medicinal Products (CHMP) decided to shift its assessment of the MAA for leniolisib to a standard review timetable. The list of questions received by Pharming from EMA included a request to submit updated data from the ongoing long-
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term extension study collected after the interim analysis included in the original MAA. We anticipate that the CHMP will issue its opinion on the leniolisib MAA in the second half of 2023 and expect European marketing authorisation approximately two months later.
Additionally, Pharming announced that the first patient had been enrolled in its Phase III clinical trial evaluating the investigational drug leniolisib in children with activated phosphoinositide 3-kinase delta syndrome (APDS), at sites in the United States, Europe, and Japan. The single-arm, open-label, multinational clinical trial will evaluate the safety, tolerability, and efficacy of leniolisib in approximately 15 children aged 4 to 11 years who have a confirmed APDS diagnosis.

United Kingdom
In April 2022, the Medicines and Healthcare products Regulatory Agency (MHRA) granted Promising Innovative Medicine (PIM) designation to leniolisib for the treatment of APDS. A PIM designation is an early indication that leniolisib is a candidate for the MHRA’s Early Access to Medicines Scheme. This scheme provides an opportunity for treatment options to be used in clinical practice in parallel with the later stages of the regulatory process.
Finally, on September 30, 2022, the U.K. government took the decision to extend the European Commission Decision Reliance Procedure (ECDRP) by 12 months, until December 31, 2023. The ECDRP allows a company to submit a product that has received approval from EMA to the U.K.’s MHRA. The MHRA can grant a license relying on the EMA’s decision, thereby ensuring a less time consuming in-country review.
The extension of the ECDRP has several benefits including aligned EU and U.K. dossiers, consistent labeling across the EU and U.K., and the potential for an earlier Marketing Authorisation Approval. As such, Pharming has decided that the ECDRP procedure will be used for the application of leniolisib to the MHRA. Under ECDRP, if the submission of an application is made within five days of an EMA CHMP positive opinion, the MHRA will aim to determine a decision within a 67-day timeline. Pharming intends to file the leniolisib dossier to the U.K.’s Medicines and Healthcare products Regulatory Agency (MHRA) within five days of a positive CHMP opinion; expected in the second half of 2023.

Pediatric clinical trial
Pharming has developed a clinical plan to include children as young as one year of age. During the first half of 2022, positive decisions were received from EMA and MHRA on the Pediatric Investigation Plan (PIP) for leniolisib as a treatment for APDS in children. The leniolisib PIP includes two planned, global clinical trials in pediatric patients with APDS aged 4 to 11 with a second study in patients aged 1 to 6. These two studies will support regulatory filings worldwide.
In February 2023, Pharming announced that the first patient had been enrolled in its Phase III clinical trial evaluating the investigational drug leniolisib in children with activated phosphoinositide 3-kinase delta syndrome (APDS), at sites in the United States, Europe, and Japan. The single-arm, open-label, multinational clinical trial will evaluate the safety, tolerability, and efficacy of leniolisib in approximately 15 children aged 4 to 11 years who have a confirmed APDS diagnosis.
The second clinical trial, for pediatric patients aged 1 to 6 is anticipated to enroll its first patient in the second half of 2023.

Patent protection
In the European Economic Area, upon successful completion of the agreed PIP, leniolisib would be eligible for up to an additional two years of marketing exclusivity in the EU, on top of the ten-year EU market exclusivity after market approval as result of its EU Orphan Drug Designation.

PI3Kδ technology platform
As we continue to work towards regulatory approvals of leniolisib for APDS in Europe and the United Kingdom and pediatric indications in the U.S., we have also commenced working towards prioritizing other indications
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where leniolisib has the potential to deliver value for patients. PI3Kδ has been identified as an important player in a variety of disease states, and leniolisib has demonstrated an attractive, long-term efficacy, safety and tolerability profile in clinical trials conducted in both healthy volunteers and patients. This provides a solid basis for our plans for the investigation and investment in further leniolisib indications.

Discontinued non-rare disease assets

Acute Kidney Injury (AKI)
As announced at our half year results in August 2022, following an internal review of our pipeline, we have made the strategic decision to discontinue further development of the rhC1INH therapy for AKI. Two further announcements regarding this platform were made at our full year financial results. Those included the discontinuation of the cattle herd program and the Phase IIb clinical trial.

Pre-eclampsia (PE)
As announced at our half year results in August 2022, following an internal review of our pipeline, a decision was made to discontinue further developments and investment in PE.

Pre-Clinical Pipeline

OTL-105
In 2021, we entered into a license agreement with Orchard Therapeutics (Europe) Limited, or Orchard, for OTL-105, an ex-vivo autologous gene therapy for the treatment of patients with HAE due to a deficiency of C1INH. This novel approach has the potential of being curative, allowing HAE patients to live a normal life, without being dependent on acute or prophylactic use of HAE medication.
OTL-105 is based on Orchard’s platform of ex-vivo autologous gene therapy approach which is designed to use the HAE patients’ own blood stem cells and insert those cells into a working copy of the gene that is reduced in HAE. Specifically, CD34+ stem cells are isolated from the patients’ blood and transduced with a lentiviral vector encoding the human SERPING1 gene. Once these gene-corrected stem cells are returned to the patient, the stem-cell derived leukocytes start producing the corrected gene product. In pre-clinical proof of concept studies, OTL-105 expressed the SERPING-1 gene and the gene-corrected stem cells produced relevant active C1INH.
Other gene therapy approaches for the treatment of HAE target liver cells using adeno-associated viral, or AAV, vectors. Due to the continuous, slow self-renewal of liver cells and immune responses to the viral capsids, the percentage of transduced liver cells slowly decreases. Hence, it is expected that liver-directed gene therapy for HAE will not provide a permanent cure, unless the vector DNA is stably integrated into that of the liver cells. Although the liver is known to produce much of the natural C1INH, production of C1INH has also been demonstrated in other cells, including leukocytes. Ex-vivo autologous gene therapy therefore potentially provides a way to reach stable, increased production of C1INH in leukocytes to treat HAE.
Pre-clinical HAE animal studies of OTL-105 are ongoing. If the data from such studies meets scientific requirements, we expect to start IND-enabling studies in 2023.
Next-Generation Enzyme Replacement Therapies: Alpha-Glucosidase, for the treatment of Pompe Disease
We are developing a next-generation alpha-glucosidase replacement therapy for the treatment of Pompe disease. Pompe disease, also known as Acid Maltase Deficiency or Glycogen Storage Disease type II, is an inherited muscular myopathy disorder caused by the build-up of a polymer sugar called glycogen in the body’s cells. The disease affects around 1 in 40,000 people around the world, varying within different ethnic groups. Pompe disease is a rare multisystem genetic disorder that is characterized by absence or deficiency of the lysosomal enzyme alpha-glucosidase, or GAA. This enzyme is required to break down, or metabolize, the complex carbohydrate glycogen and convert it into the simple sugar glucose. Failure to achieve its proper breakdown results in massive accumulation of lysosomal glycogen in cells, particularly in cardiac, smooth, and skeletal muscle cells.
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Pompe disease is a single-disease continuum with variable rates of disease progression and different ages of onset. The infantile form is characterized by severe muscle weakness and abnormally diminished muscle tone, or hypotonia, without muscle wasting, and usually manifests within the first few months of life. Additional abnormalities may include enlargement of the heart (cardiomegaly), the liver (hepatomegaly) and/or the tongue (macroglossia). Without treatment, progressive cardiac failure usually causes life-threatening complications by the age of 12 to 18 months. Pompe disease can also present in childhood, adolescence or adulthood, collectively known as late-onset Pompe disease. The extent of organ involvement may vary among affected individuals, but skeletal muscle weakness is usually present with minimal cardiac involvement. Initial symptoms of late-onset Pompe disease may be subtle and may go unrecognized for years.
We are currently studying our alpha-glucosidase therapy in IND-enabling studies.

Manufacturing
Our Transgenic Production Technology Platform
Our proprietary transgenic manufacturing technology platform is the foundation upon which we have built our Company. We have developed a unique, scalable, reproducible, current Good Manufacturing Practices, or cGMP, validated methodology for the production of high-quality recombinant human proteins. Our manufacturing process utilizes transgenic animals to produce human recombinant proteins in their milk. This process enables the production of the protein in the milk of the animals without the animals suffering or being altered in other aspects of their biology.
Our Manufacturing Facilities
Once the rabbit lines are produced, we raise them at specialized facilities that incorporate protections against contamination of their environment, high standards of animal husbandry, and security. In these facilities, the consistent and regulated handling of animals is carefully monitored. The resulting milk goes through several stage of cGMP processes. The “downstream” processes include the purification, involving standard technologies such as various chromatography and filtration steps, followed by formulation and sterile filling into lyophilized powder product in vials ready for reconstitution. We have multiple “upstream” manufacturing facilities of our own. We have renewed, at the end of 2021 the downstream manufacturing and supply agreement with Sanofi for the production of rhC1INH, the drug substance of RUCONEST® and have an agreement with BioConnection for the production of the drug product of RUCONEST®.
In 2019 we licensed Joenja® (leniolisib) from Novartis. Part of the agreement was that we had to manufacture both the drug substance as well as the drug product via our own Contract Manufacturing Organizations (CMOs). For the drug substance, Ardena has been chosen as the CMO. For the film coated tablets, Skyepharma has been chosen as the CMO. The 70 mg film coated tablet will be launched first for patients 12 years of age and older. In addition, two pediatric formulations are also being developed; the first, lower strengths tablets that also will be manufactured at Skyepharma, and the second, film coated granules that are being developed by Almac. All three CMOs are fully compliant with cGMP. The commercial product will be manufactured and tested according to validated processes and with validated methods.
As we continue to expand the capacity and range of products, it is uncertain whether and to what extent we will be able to enter into such partnerships or agreements on a timely basis and on acceptable terms. We have established a contract and supplier relationship management process to facilitate the timely onboarding of new contractors or the expansion of contracts at current contractors. Even if a partnership or agreement has been concluded, the possibility exists that these partners will fail to live up to the agreements made with them or that we are unable to maintain such agreements. A failure to develop and/or sufficiently contract additional manufacturing capacity on a timely basis could have significant, detrimental consequences for our business, to our financial position, results of operations, prospects and as result may also have a negative effect on the market price of our shares.


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Our Strategy
Our vision is to be a global biopharmaceutical company, with a focus on transformative medicines in rare and ultra-rare disease spaces. Our mission is to offer innovative treatment options for patients with unmet medical needs through our fully integrated and sustainable drug development and commercialization.
We intend to create long-term value by leveraging our core strengths, clinical development and rare-disease drug commercialization. To sustain longer-term additional growth, it is our objective to transform our pipeline from sole dependency on our rhC1INH technology platform to include a broader range of various acquired and in- licensed technologies.
Our strategy is to implement our mission and, accordingly, to create long-term value for the Company and its stakeholders; to leverage our core strengths of clinical development and rare-disease drug commercialization by successfully launching innovative products obtained from our own R&D efforts; and by in-licensing/acquiring products for rare and ultra-rare diseases. In doing so, we apply high ethical, environmental and animal welfare standards, as applicable.
Our Key 2022 Objectives:
•Single digit growth in Group revenues from RUCONEST® sales. Quarterly fluctuations are expected.
•Subject to a positive outcome from the FDA review, we anticipate marketing authorization in the US for leniolisib at the end of Q1 2023, with an anticipated launch and commercialization in Q2 2023.
•Subject to a positive outcome from the EMA review, we anticipate a positive opinion from the CHMP for leniolisib, followed by the issuance of an MAA by the European Commission towards the end of H1 2023. Initial commercial launches in EU markets are planned for H2 2023.
•Following an anticipated positive CHMP opinion, we intend to submit an ECDRP filing for leniolisib with the MHRA in the UK in H2 2023.
•Pharming will continue to allocate resources towards the anticipated launch and commercialization of leniolisib with the view of accelerating future growth. Investments in launch preparations and focused clinical development for leniolisib will continue to impact profit for the remainder of 2022 and throughout 2023. However, no additional financing to support the current business is expected with the continued cash flow from RUCONEST® funding these investments.
•Investment and continued focus on potential acquisitions and in-licensing of new, late-stage development opportunities and assets in rare diseases. Financing, if required, would come via a combination of our strong balance sheet and access to capital markets.

*Size based on population and available literature (1-2 patients per million) [Begg M. Pulm Pharmacol Ther 2023 Apr;79:1022001

Competition
The life sciences industry is characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. We face potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions, governmental agencies and public and private research institutions. Any product candidates that we successfully develop and commercialize will compete with existing products and new products that may become available in the future. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical study sites and patient registration for clinical studies, as well as in acquiring technologies complementary to, or necessary for, our programs.
Companies that complete clinical trials, obtain required Health Authority approvals and commence commercial sale of their drugs before their competitors may achieve a significant competitive advantage, and our commercial opportunity could be reduced or eliminated if competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop and commercialize. Our competitors may also obtain FDA, European Commission, or other regulatory approval for their products more rapidly than we obtain approval, which could result in our competitors establishing a strong market position for either the product or a specific indication before we are able to enter the market. Drugs resulting from our research and development efforts or from our
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joint efforts with collaboration partners therefore may not be commercially competitive with our competitors’ existing products or products under development.
We anticipate that we will face increasing competition as new products and therapies enter the market and advanced technologies become available in both the HAE space and relating to upcoming pipeline projects. We expect any treatments that we develop and commercialize to compete on the basis of, among other things, efficacy, safety, delivery, patient convenience, price and the availability of reimbursement from government and other third-party payors.

Global competition in HAE treatment
There are four therapies available to treat HAE attacks worldwide and an additional four to prevent attacks in the United States. These therapies have transformed the lives of HAE patients. The early years of treatment focused on limiting the consequences of attacks, and very few patients used prophylactic medications. With the improvement of prophylactic therapy, many patients now use it and have had significant benefit.
Nevertheless, patients taking prophylactic medications still experience breakthrough attacks and immediate access to an acute treatment medication is required and recommended in all HAE treatment guidelines. With two of the prophylactic medications (HAEGARDA® and TAKHZYRO®), published data reports that approximately 50% of patients still had breakthrough attacks. Furthermore, according to published data, with the oral prophylactic medication ORLADEYO® 90% of patients had breakthrough attacks. Lastly, many patients need to re-dose acute therapies that do not address the underlying C1INH deficiency.
RUCONEST®, a rhC1INH that blocks production of bradykinin, is an option for patients who continue to experience breakthrough attacks while on prophylaxis or for patients who need to re-dose other acute therapies due to relapse of their attacks. As RUCONEST® is intravenously delivered it is immediately and completely bioavailable to stop the progression of an HAE attack.
We consider several companies to be our current and future competitors in the HAE space, including, but not limited to, BioCryst, BioMarin, CSL Behring, Intellia, Ionis, Kalvista, Pharvaris and Takeda. To the extent these companies develop treatments that are more efficacious, less expensive, more convenient or produce fewer side effects, our market opportunity would be reduced.

Leniolisib competition
With regards to competition for leniolisib, we are currently not aware of any ongoing APDS development programs. However, as several programs were halted in early stage of development, these could be re-started at any time and may deliver products that, if efficacious and safe, could compete successfully against leniolisib and may significantly reduce our future market opportunity.

Intellectual Property
Patents
Patents, know-how, trade secrets and other intellectual property rights are important to the success of our business. We use patents and licensing to protect our products and technology and are careful to develop products that don’t infringe on the intellectual property rights of third parties. Currently, we have several patent applications granted and pending in jurisdictions including the United States, Europe and Japan. The patent positions of pharmaceutical companies can be uncertain and may involve complex legal and factual questions.
It is uncertain whether pending patent applications will be successful, that these patents will afford adequate protection and that the existing patents will not be challenged. Failure to obtain patents may result in expensive and protracted proceedings to defend our proprietary rights. The success of our Company also depends, in part, on the ability of our licensors to obtain, maintain and enforce their intellectual property rights to the extent required for us to develop and commercialize our products.
We actively seek to protect the intellectual property and proprietary technology that we believe is important to our business, including seeking, maintaining, enforcing and defending patent rights and protecting know-how
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for our technology platform and related therapeutics and processes, whether developed internally or licensed to or from third parties. Our success will depend on our ability to obtain and maintain patent and other protections including data/market exclusivity for our product candidates and platform technology, preserve the confidentiality of our know-how and operate without infringing the valid and enforceable patents and proprietary rights of third parties. See the “Risk Factors – Risks Related to Intellectual Property” section of this Annual Report.
Our policy is to seek to protect our proprietary position early, generally by filing an initial priority filing in the European Patent Office. This is followed by the filing of an international patent application under the Patent Cooperation Treaty, or PCT, claiming priority from the initial application(s) and then filing regional and national applications for patent grant in territories including, for example, the United States and Europe. In each case, we determine the strategy and territories required after discussion with our patent attorneys, and, where applicable, collaboration partners so that we obtain relevant coverage in territories that are commercially important to our technologies and product candidates. With respect to our product candidates and related methods that we intend to develop and commercialize in the normal course of business, we will seek patent protection covering formulation, the indicated use, and the method of administration. We may also pursue patent protection with respect to manufacturing and drug development processes when possible. We intend to additionally rely on data exclusivity, market exclusivity, other regulatory exclusivities and patent term extensions when available. We also rely on trade secrets and know-how relating to our underlying platform technology and product candidates. In each case, we seek to balance the value of patent protection against the advantage of keeping know-how confidential.
Issued patents can provide exclusivity on claimed subject matter for varying periods of time, typically starting on the date of patent grant and expiring at the end of the legal term of a patent in the country in which it is granted. From the date of filing, provisional protection is present to the scope of the later granted claims. In general, patents provide exclusionary rights for 20 years from the filing date of a non-provisional patent application in a particular country, or for a PCT international patent application, from the international filing date, assuming all maintenance fees are paid. In some instances, patent terms may be increased or decreased, depending on the laws and regulations of the country or jurisdiction that grants the patent. In the United States, a patent term may be shortened if a patent is terminally disclaimed over another patent or as a result of delays in patent prosecution by the patentee. A U.S. patent’s term may be lengthened by a patent term adjustment which compensates a patentee for administrative delays by the USPTO in granting a patent. The patent term of a European patent is 20 years from its filing date, which is not subject to patent term adjustments in the same way as U.S. patents. When using a priority filing, the priority year can be added to the patent term of 20 years from the filing; the patent term may thus be 21 years from the priority date.
The level of protection afforded by a patent may vary and depends upon many factors, including the type of patent, the scope of its claim coverage, claim interpretation and patent law in the country or region that granted the patent, the validity and enforceability of the patent under such laws, and the availability of legal remedies in each particular country.
In certain regions or countries, regulatory-related patent extensions may be available to extend the term of a patent that claims an regulatorily approved product or method. Regulatory-based patent term extensions allow patentee to recapture a portion of patent term effectively lost as a result of the regulatory review period for a product candidate. The term of a United States patent that covers an FDA-approved drug or biologic, for example, may be eligible for patent term extension, which permits patent term restoration as compensation for the patent term lost during the FDA regulatory review process. The Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Act, permits a patent term extension of up to five years beyond the expiration of the patent. Patent extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval and only one patent applicable to an approved drug may be extended. Similar provisions are available in Europe, Japan and other jurisdictions to extend the term of a patent that covers an approved drug, for example Supplementary Protection Certificates in Europe. In particular, a maximum of five and a half years of supplementary protection can be achieved in Europe for an active ingredient or combinations of active ingredients of a medicinal product protected by a basic patent, if a valid marketing authorization exists (which must be the first authorization to place the product on the market as a medicinal product) and if the product has not already been the subject of supplementary protection. In the future, if and when our additional products receive FDA approval, we expect to apply for regulatory patent term extensions on patents covering those products. We anticipate that some of our issued patents may be eligible for
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patent term extensions in certain jurisdictions based on an approved product or method, but such extensions may not be available and therefore its commercial monopoly may be restricted solely to patent term.
RUCONEST® has patent protection in the U.S. and E.U. until October 7, 2026, as well as biologics reference product exclusivity in the United States expiring July 16, 2026.
As of December 31, 2022, we solely owned 145 granted patents, of which 8 are U.S.-issued, and 32 pending patent applications, of which 2 are U.S. pending patent applications. Commercially or strategically important non-U.S. jurisdictions in which we hold issued or pending patent applications include (in addition to Europe): the United Kingdom, China, Japan, Canada, Israel, Australia and New Zealand. We also have exclusive license to 144 patents and patent applications from Novartis related to leniolisib.
Our granted patents and pending patent applications include the making of C1INH in the milk of transgenic mammals. In addition, our pending patent applications also include claims for the use of C1INH in PE.
Pharming expects to have patent protection for leniolisib in APDS under the Novartis composition of matter patent (U.S. Patent No. 8,653,092, EU patent EP259097B1) and applicable patent term adjustments and extensions through July 2026 in the U.S. and EU, which we anticipate may be extended to January 2037 if we obtain a pediatric extension.
In the European Economic Area, upon successful completion of the agreed PIP, leniolisib would be eligible for up to an additional two years of marketing exclusivity in the EU, on top of the ten-year EU market exclusivity after market approval as result of its EU Orphan Drug Designation. Thus, we anticipate that the patent protection will extend beyond the marketing exclusivity.
Trademarks
We currently have registered trademarks in the EU, the United States and key international markets we intend to focus on for our Company name “Pharming” with the associated logo, “RUCONEST®” with its associated logo, as well as for Joenja® and its associated logo. We have obtained trademark protection for other marks, including ones for patient support services associated with our products. With the assistance of outside counsel we regularly assess which marks we should register and where, and we have effective systems to ensure that renewals are timely filed. We also maintain watch services and ensure that our marks are not being infringed internationally.

Government Regulation and Product Approval

United States
In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, and its implementing regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and non-U.S. statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable United States requirements at any time during the drug development process, approval process or after approval, may subject an applicant to a variety of administrative or judicial sanctions, such as the FDA’s refusal to approve a pending NDA or BLA, withdrawal of an approval, imposition of a clinical hold, issuance of warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties.
The process required by the FDA before a drug may be marketed in the United States generally involves:
•completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA’s good laboratory practice, or GLP, regulations;
•submission to the FDA of an IND, which must become effective before human clinical trials may begin;
•approval by an independent institutional review board, or IRB, at each clinical site before each trial may be initiated;
•performance of adequate and well-controlled clinical trials, in accordance with good clinical practice, or GCP, requirements to establish the safety and efficacy of the proposed drug for each indication;
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•payment of user fees,if applicable;
•submission to the FDA of an registration filing (i.e., NDA or BLA);
•satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with cGMP requirements, and to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity;
•satisfactory completion of an FDA inspection of selected clinical sites to assure compliance with GCPs and the integrity of the clinical data;
•satisfactory completion of an FDA advisory committee review; if applicable, and
•FDA review and approval of the registration filing.
Preclinical Studies
Preclinical studies include laboratory evaluation of product chemistry, toxicity and formulation, as well as animal studies to assess potential safety and efficacy. An IND Sponsor must submit the results of the nonclinical tests, together with manufacturing information, analytical data and any available clinical data or literature, among other things, to the FDA as part of an IND. Some nonclinical testing may continue even after the IND is submitted. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to one or more proposed clinical trials and places the clinical trial on a clinical hold. In such a case, the IND Sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may not result in the FDA allowing clinical trials to commence.
Clinical Trials
Clinical trials involve the administration of the investigational new drug or biologic to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include the requirement that all research subjects provide their informed consent in writing for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. In addition, an IRB at each institution participating in the clinical trial must review and approve the plan for any clinical trial before it commences at that institution, and the IRB must continue to oversee the clinical trial while it is being conducted. Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined. In Phase 1, the drug or biologic is initially introduced into healthy human subjects or patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an initial indication of its effectiveness. In Phase 2, the drug or biologic is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage. In Phase 3, the drug or biologic is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the safety and efficacy of the product for registration approval, to establish the overall risk-benefit profile of the product and to provide adequate information for the labeling of the product.
Progress reports detailing the results of the clinical trials must be submitted, at least annually, to the FDA, and more frequently if SAEs occur. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, or at all. Furthermore, the FDA or the Sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements, or if the drug has been associated with unexpected serious harm to patients.
Drugs or biologics used in clinical trials must be manufactured in accordance with cGMP.
During the development of a product, the FDA provides the opportunity for dialogue and guidance on the development program. There are several categories of formal meetings which are dependent upon the stage of development, and the product type. Advice from the FDA is typically provided based on questions concerning, for example, quality (chemistry, manufacturing and controls testing), nonclinical testing and clinical studies.
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Such advice is not legally binding with regard to any future registration applications of the product concerned however is helpful in product development and understanding FDA expectations.
Marketing Approval
Assuming successful completion of the required clinical testing, the results of the preclinical studies and clinical trials, together with detailed information relating to the product’s chemistry, manufacture and controls, and proposed labeling, among other things, are submitted to the FDA as part of an NDA or BLA requesting approval to market the product for one or more indications. In most cases, the submission of an NDA or BLA is subject to a substantial application user fee. Under the PDUFA, guidelines that are currently in effect, the FDA has a goal of ten months from the date of “filing” of a standard NDA or BLA for a new molecular entity or biological entity, respectively, and to review and act on the submission of such. This review typically takes twelve months from the date the NDA or BLA is submitted to the FDA because the FDA has approximately two months to make a “filing” decision.
The FDA also may require submission of a risk evaluation and mitigation strategy, or REMS, plan to ensure that the benefits of the drug outweigh its risks. The REMS plan could include medication guides, physician communication plans, assessment plans, and/or elements to assure safe use, such as restricted distribution methods, patient registries or other risk minimization tools.
The FDA conducts a preliminary filing review of all NDAs or BLAs within the first 60 days after submission, before accepting them, to determine whether they are sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an NDA or BLA for filing. In this event, the application must be resubmitted with the additional information. The resubmitted application is also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA reviews an NDA or BLA to determine, among other things, whether the drug is safe and effective and whether the facility in which it is manufactured, processed, packaged or held meets standards designed to assure the product’s continued safety, quality and purity.
The FDA may refer an application to an advisory committee. An advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.
Before approving an NDA or BLA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and are adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA or BLA, the FDA will typically inspect one or more clinical trial sites to assure compliance with GCP requirements.
The testing and data acquisition process for an approvable NDA or BLA requires substantial time, effort and financial resources, and takes several years to complete. Data obtained from preclinical and clinical testing are not always conclusive and may be susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. The FDA may not grant approval of an NDA or BLA on a timely basis, or at all.
After evaluating the NDA or BLA and all related information, including the advisory committee recommendation, if any, and inspection reports regarding the manufacturing facilities and clinical trial sites, the FDA may issue an approval letter, or, in some cases, a complete response letter. A complete response letter generally contains a statement of specific conditions that must be met in order to secure final approval of the NDA or BLA and may require additional clinical or preclinical testing in order for FDA to reconsider the application. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. If and when those conditions have been met to the FDA’s satisfaction, the FDA will typically issue an approval letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications.
Even if the FDA approves a product, it may limit the approved indications for use of the product, require that contraindications, warnings or precautions be included in the product labeling, require that post-approval
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studies, including Phase 4 clinical trials, be conducted to further assess a drug’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution and use restrictions or other risk management mechanisms under a REMS, which can materially affect the potential market and profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of post-marketing studies or surveillance programs. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes, and additional labeling claims, are subject to further testing requirements and additional FDA review and approval procedures.
Orphan Drug Designation
Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition, which is a disease or condition that affects fewer than 200,000 individuals in the United States, or if it affects more than 200,000 individuals, there is no reasonable expectation that sales of the drug in the United States will be sufficient to offset the costs of developing and making the drug available in the United States. Orphan drug designation must be requested before submitting an NDA or BLA. Orphan drug designation does not convey any advantage in or shorten the duration of, the regulatory review and approval process. If the FDA approves a Sponsor’s marketing application for a designated orphan drug for use in the rare disease or condition for which it was designated, the Sponsor is eligible for a seven-year period of marketing exclusivity, during which the FDA may not approve another Sponsor’s marketing application for a drug with the same active moiety and intended for the same use or indication as the approved orphan drug, except in limited circumstances, such as if a subsequent Sponsor demonstrates its product is clinically superior. During a Sponsor’s orphan drug exclusivity period, competitors, however, may receive approval for drugs with different active moieties for the same indication as the approved orphan drug, or for drugs with the same active moiety as the approved orphan drug, but for different indications. Orphan drug exclusivity could block the approval of one of our products for seven years if a competitor obtains approval for a drug with the same active moiety intended for the same indication, unless we are able to demonstrate that grounds for withdrawal of the orphan drug exclusivity exist, or that our product is clinically superior. Further, if a designated orphan drug receives marketing approval for an indication broader than the rare disease or condition for which it received orphan drug designation, it may not be entitled to exclusivity.
Pediatric Development
Under the Pediatric Research Equity Act, certain NDAs, BLAs or supplements to an NDA or BLA must contain data that are adequate to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements. Unless otherwise required by regulation, the pediatric data requirements do not apply to products with orphan designation.
Data Exclusivity
In the U.S., applications for generic small molecule medicinal products may not need to include the results of preclinical and clinical trials, but instead can refer to the data included in the marketing authorization of a reference product for which regulatory data exclusivity has expired.
In the U.S., the Abbreviated New Drug Application, or ANDA, contains data which is submitted to FDA for the review and potential approval of a small molecule generic drug product. Once approved, an applicant may manufacture and market the generic drug product to provide a safe, effective, lower cost alternative to the brand-name drug it references.
Post-approval Requirements
Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product.
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After approval, changes to the approved product, such as adding new indications, manufacturing changes or other labeling claims, are subject to further testing requirements and in many cases prior FDA review and approval. There also are continuing annual user fee requirements for marketed products and the establishments at which such products are manufactured, as well as application fees for supplemental applications with clinical data. Even if the FDA approves a product, it may limit the approved indications for use of the product, require that contraindications, warnings or precautions be included in the product labeling, including a boxed warning, require that post-approval studies, including Phase 4 clinical trials, be conducted to further assess a drug’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms under a REMS, which can materially affect the potential market and profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of post-marketing studies or surveillance programs. In addition, manufacturers and other entities involved in the manufacture and distribution of approved drugs or biologics are subject to periodic unannounced inspections by the FDA for compliance with cGMP requirements. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance.
Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market.
Later discovery of previously unknown problems with a product, including AEs of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in mandatory revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things:
•restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;
•fines, warning letters or holds on post-approval clinical trials;
•refusal of the FDA to approve pending NDAs, BLAs or supplements to approved NDAs, BLAs, or suspension or revocation of product approvals;
•product seizure or detention, or refusal to permit the import or export of products; or
•injunctions or the imposition of civil or criminal penalties.
The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs or biologics may be promoted only for the approved indications and in accordance with the provisions of the approved label, although physicians, in the practice of medicine, may prescribe approved products for unapproved indications. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability.
In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or PDMA, which regulates the distribution of drugs and drug samples at the federal level, and sets minimum standards for the registration and regulation of drug distributors by the states. Both the PDMA and state laws limit the distribution of prescription pharmaceutical product samples and impose requirements to ensure accountability in distribution.
Federal and State Fraud and Abuse, Data Privacy and Security, and Transparency Laws and Regulations
In addition to FDA restrictions on marketing of pharmaceutical products, federal and state healthcare laws and regulations restrict business practices in the biopharmaceutical industry. These laws may impact, among other things, our current and future business operations, including our clinical research activities, and sales, marketing and education programs and constrain the business or financial arrangements and relationships with healthcare providers and other parties through which we market, sell and distribute RUCONEST® and other products for which we obtain marketing approval. These laws include anti-kickback and false claims laws and regulations, data privacy and security, and transparency laws and regulations, including, without limitation, those laws described below.
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The federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing, leasing, ordering or arranging for or recommending the purchase, lease or order of any item or service reimbursable under Medicare, Medicaid or other federal healthcare programs. The term “remuneration” has been broadly interpreted to include anything of value. The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the other. Although there are a number of statutory exemptions and regulatory safe harbors protecting some common activities from prosecution, the exemptions and safe harbors are drawn narrowly. Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor. Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the statute has been violated.
A person or entity does not need to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act or the civil monetary penalties statute, which imposes penalties against any person who is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.
Federal false claims laws, including the federal civil False Claims Act, prohibits any person or entity from knowingly presenting, or causing to be presented, a false claim for payment to the federal government or knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government. A claim includes “any request or demand” for money or property presented to the U.S. government. Pharmaceutical and other healthcare companies have been prosecuted under these laws for, among other things, allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. Additionally, pharmaceutical and other companies also have been prosecuted for causing false claims to be submitted because of the companies’ marketing of products for unapproved, and thus non-reimbursable, uses.
The HIPAA, created additional federal criminal statutes that prohibit, among other things, knowingly and willfully executing, or attempting to execute a scheme to defraud any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Also, many states have similar fraud and abuse statutes or regulations that apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor.
In addition, we may be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their respective implementing regulations, imposes specified requirements on certain types of individuals and entities, including covered entities (health plans, health clearinghouses, and certain healthcare providers) and their business associates and their subcontractors relating to the privacy, security and transmission of individually identifiable health information. Among other things, HITECH makes HIPAA’s security standards directly applicable to “business associates”, defined as independent contractors or agents of covered entities that create, receive, maintain or transmit protected health information in connection with providing a service for or on behalf of a covered entity. HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in certain circumstances, many of which are not pre-empted by HIPAA, differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
The federal Physician Payments Sunshine Act requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with specific exceptions) to report annually to the Centers for Medicare & Medicaid Services, or
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CMS, information related to payments or other transfers of value made to physicians (as defined by such law) and other healthcare professionals (such as physicians assistants and nurse practitioners), teaching hospitals, and applicable manufacturers and applicable group purchasing organizations to report annually to CMS, as well as ownership and investment interests held by the physicians and their immediate family members.
We may also be subject to state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, as well as state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures. Additionally, certain state and local laws require the registration of pharmaceutical sales representatives.
Because of the breadth of these laws and the narrowness of available statutory and regulatory exemptions, it is possible that some of our business activities could be subject to challenge under one or more of such laws. If our operations are found to be in violation of any of the federal and state laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including criminal and significant civil monetary penalties, damages, fines, imprisonment, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, contractual damages, reputational harm, diminished profits and future earnings, disgorgement, exclusion from participation in government healthcare programs and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations. To the extent that any of our products are sold in a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws and implementation of corporate compliance programs and reporting of payments or transfers of value to healthcare professionals.
The FCPA, Dutch Anti- Bribery Laws and Other Laws
The FCPA prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring the Company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations. Activities that violate the FCPA, even if they occur wholly outside the United States, can result in criminal and civil fines, imprisonment, disgorgement, oversight, and debarment from government contracts.
Our operations are also subject to non-U.S. anti-corruption laws such as Dutch anti-bribery laws as contained in the Dutch Criminal Code (Wetboek van Strafrecht). These laws generally prohibit companies and persons (including us and our employees) and intermediaries from offering, providing, requesting or accepting, directly or indirectly, a gift promise or service, or anything else of value, to or from domestic or foreign government officials or to or from other persons employed or acting as an agent in relation to an act or omission to be committed or having been committed in the official’s office or, as it concerns other persons employed or agents, in violation of the other person’s duty.
We are also subject to other laws and regulations governing our international operations, including regulations administered by the governments of The Netherlands and the United States and authorities in the EU, including, for example, applicable export control regulations, trade and economic sanctions and embargoes on certain countries, persons, groups, entities, projects or activities, anti-money laundering laws, import and customs requirements and currency exchange regulations, collectively referred to as trade control laws.
Failure to comply with the FCPA, Dutch anti-bribery laws and other anti-corruption laws and trade control laws could subject us and others involved to criminal and civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses.


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European Union
The process required by the EMA and EC before a medicinal product may be marketed, is similar to that described for the FDA, and it generally involves:
•completion of preclinical laboratory tests, animal studies and formulation studies in compliance with good laboratory practice, or GLP;
•CTA submissions, which must be approved by each Member State concerned before human clinical trials may begin;
•a positive opinion by an independent Ethics Committee in each Member State concerned;
•performance of adequate and well-controlled clinical trials, in accordance with good clinical practice, or GCP, requirements to establish the efficacy of the proposed drug for each indication;
•submission of a MAA;
•satisfactory completion of an inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with GMP requirements, and to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity;
•satisfactory completion of an inspection of selected clinical sites to assure compliance with GCP and the integrity of the clinical data;
•EMA evaluation and opinion on the MAA; and
•granting of the Marketing Authorization, or MA, by the EC based on EMA recommendation.
Additionally, medicinal products, including advanced therapy medicinal products, or ATMPs, are subject to extensive pre- and post-market regulation by regulatory authorities at both the EU and national levels. ATMPs comprise gene therapy products, somatic-cell therapy products and tissue engineered products. Tissue engineered products are engineered cells and tissues (i.e., cells/tissues that have undergone substantial manipulation, so that biological characteristics, physiological functions or structural properties relevant for the intended regeneration, repair or replacement are achieved) that are presented has having properties for, or is used in or administered to human beings with a view to regenerating, repairing or replacing a human tissue. RUCONEST® is regulated as an ATMP in the EU.
There is, furthermore, legislation at a EU level relating to the standards of quality and safety for the collection and testing of human blood and blood components for use in human cell-based therapies, which is applicable to the manufacturing of our human blood and/or cell based products. There is national legislation in various EU Member States, which may be more restrictive than the EU legislation. Differing national requirements of the EU Member States may make setting up compliant cross border supply chains challenging.
Pharmaceutical and Preclinical Tests
Applicants that submit full applications (i.e., they are not biolosimilars or generics), must submit the results of pharmaceutical and pre-clinical tests. The pharmaceutical tests evaluate physico-chemical, biological and microbiological characteristics of the product. The pre-clinical tests consider the pharmacological and toxicological characteristics. These provide important information on the quality, safety and efficacy of the product. Such non-clinical data will form part of the MA application. Additionally, a Sponsor must submit the results of the non-clinical tests, together with manufacturing information, analytical data and any available clinical data or literature, among other things, in the CTA. Some non-clinical testing may continue even after the CTA has been granted. As discussed further below, before a clinical trial can commence, the competent authorities of the Member States in which clinical trials are performed will review the CTA and determine whether to approve the clinical trial. As such, issues with non-clinical test results may lead to competent authorities refusing to approve the clinical trials.
Clinical Trials
Clinical trials of medicinal products in the EU must be conducted in accordance with EU and national regulations and the International Conference on Harmonization, or ICH, guidelines on Good Clinical Practices, or GCP. Additional GCP guidelines from the EC, focusing in particular on traceability, apply to clinical trials of ATMPs. The sponsor must take out a clinical trial insurance policy, and in most EU Member States, the sponsor is liable to provide “no fault” compensation to any study subject injured in the clinical trial.
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Prior to commencing a clinical trial, the Sponsor must obtain a clinical trial authorization from the competent authority, and a positive opinion from an independent Ethics Committee in each Member State in which the trial is conducted. The Sponsor of the clinical trial must submit an application dossier, which must include, among other things, a copy of the trial protocol, an investigator’s brochure, documentation relating to compliance with GMP and an investigational medicinal product dossier containing information about the manufacture and quality of the medicinal product under investigation.
Ongoing clinical trials may continue to be governed by the previous Clinical Trial Directive. However, as of January 31, 2023 all new applications for clinical trials are governed in accordance with the Clinical Trial Regulation. The EU CTR allows Sponsors to submit one combined CTA to the Competent Authorities, or CAs, and Ethics Committees for all trial sites in EU countries intended to participate in a given trial via a centralized system. The application entails a two-part assessment process where Part 1 is the scientific assessment coordinated by a reporting member state, or RMS, and Part 2 is the member state specific ethical assessment. Clinical trial approvals for all Member States will be released as a decision following both, competent authority and Ethics Committee assessment per country (under the Directive, applications and approvals/opinions were given on a country-by-country basis. Optimally, this efficiency will condense milestones for site activations in the EU.
Medicinal products used in clinical trials must be manufactured in accordance with GMP. Other national and EU-wide regulatory requirements also apply.
During the development of a medicinal product, the EMA and national medicinal products competent authorities within the EU provide the opportunity for dialogue and guidance on the development program. At the EMA level, this is usually done in the form of scientific advice, which is given by the Scientific Advice Working Party of the CHMP. A fee is incurred with each scientific advice procedure. Advice from the EMA is typically provided based on questions concerning, for example, quality (chemistry, manufacturing and controls testing), nonclinical testing and clinical studies, and pharmacovigilance (also known as drugs safety) plans and risk-management programs. Such scientific advice, in accordance with EMA policy, is not legally binding with regard to any future MAA of the product concerned however it is helpful in product development and understanding EMA expectations.
Orphan Drug Designation and Exclusivity
Regulation (EC) No. 141/2000 as implemented by Regulation (EC) No. 847/2000 provides that a product can be designated as an orphan medicinal drug by the European Commission if its sponsor can establish: that the product is intended for the diagnosis, prevention or treatment of (1) a life-threatening or chronically debilitating condition affecting not more than five in ten thousand persons in the EU when the application is made, or (2) a life-threatening, seriously debilitating or serious and chronic condition in the EU and that without incentives it is unlikely that the marketing of the drug in the EU would generate sufficient return to justify the necessary investment. For either of these conditions, the applicant must demonstrate that there exists no satisfactory method of diagnosis, prevention, or treatment of the condition in question that has been authorized in the EU or, if such method exists, the applicant’s medicinal product has to be of significant benefit compared to products available for the condition.
In the EU, an application for designation as an orphan product can be made any time prior to the filing of the MAA. Orphan medicinal product designation entitles an applicant to incentives such as fee reductions or fee waivers, protocol assistance, and access to the centralized MA procedure. Upon grant of an MA, orphan medicinal products are entitled to a ten-year period of market exclusivity for the approved therapeutic indication, which means that the EMA cannot accept another MAA, or grant an MA, or accept an application to extend an MA for a similar product for the same indication for a period of ten years. The period of market exclusivity is extended by two years for orphan medicinal products that have also complied with an agreed Pediatric Investigation Plan, or PIP. No extension to any supplementary protection certificate can be granted on the basis of pediatric studies for orphan indications. Orphan medicinal product designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.
The period of market exclusivity may, however, be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria on the basis of which it received orphan medicinal product destination, including where it can be demonstrated on the basis of available evidence that the original
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orphan medicinal product is sufficiently profitable not to justify maintenance of market exclusivity or where the prevalence of the condition has increased above the threshold. Additionally, an MA may be granted to a similar medicinal product with the same orphan indication during the ten-year period if: (i) the MA holder of the authorized product consents to a second original orphan medicinal product application, (ii) the manufacturer of the original orphan medicinal product is unable to supply sufficient quantities; or (iii) the second applicant can establish that its product, although similar, is safer, more effective or otherwise clinically superior to the authorized orphan medicinal product. A company may voluntarily remove a product from the register of orphan products. A “similar medicinal product” is defined as a medicinal product containing a similar active substance or substances as contained in an authorized orphan medicinal product, and which is intended for the same therapeutic indication. A “similar active substance” is “an identical active substance, or an active substance with the same principal molecular structural features (but not necessarily all of the same molecular structural features) and which acts via the same mechanism. However, in the case of advanced therapy medicinal products, for which the principal molecular structural features cannot be fully defined, the similarity between two active substances shall be assessed on the basis of the biological and functional characteristics.”
Marketing Authorizations
To obtain a MA, for a product in the EU, an applicant must submit a MAA, either under a centralized procedure administered by the EMA, or one of the procedures administered by competent authorities in the EU Member States (decentralized procedure, national procedure or mutual recognition procedure). An MA may be granted only to an applicant established in the EU.
The centralized procedure provides for the grant of a single MA by the European Commission that is valid for all EU and European Economic Area, or EEA, Member States. Pursuant to Regulation (EC) No 726/2004, the centralized procedure is compulsory for specific products, including for (i) medicinal products derived from biotechnological processes, (ii) products designated as orphan medicinal products, (iii) ATMPs, and (iv) products with a new active substance indicated for the treatment of HIV/AIDS, cancer, neurodegenerative diseases, diabetes, auto-immune and other immune dysfunctions and viral diseases. For products with a new active substance indicated for the treatment of other diseases and products that are highly innovative or for which a centralized process is in the interest of patients authorization through, the centralized procedure is optional on related approval.
Under the centralized procedure, the EMA’s CHMP is responsible for conducting the initial assessment of a product. The CHMP is also responsible for several post-authorization and maintenance activities, such as the assessment of modifications or extensions to an existing MA.
Under the centralized procedure in the EU, the maximum timeframe for the evaluation of an MAA is 210 days, excluding clock stops when additional information or written or oral explanation is to be provided by the applicant in response to questions of the CHMP. Accelerated assessment may be granted by the CHMP in exceptional cases, when a medicinal product targeting an unmet medical need is expected to be of major interest from the point of view of public health and, in particular, from the viewpoint of therapeutic innovation. If the CHMP accepts a request for accelerated assessment, the time limit of 210 days will be reduced to 150 days (not including clock stops). The CHMP can, however, revert to the standard time limit for the centralized procedure if it considers that it is no longer appropriate to conduct an accelerated assessment.
For the evaluation of ATMPs such as RUCONEST®, the Committee for Advanced Therapies, or CAT, is responsible in conjunction with the CHMP for their evaluation. The CAT is primarily responsible for the scientific evaluation of ATMPs and prepares a draft opinion on the quality, safety and efficacy of each ATMP for which a MAA is submitted. The CAT’s opinion is then taken into account by the CHMP when giving its final opinion regarding the authorization of a product in view of the balance of benefits and risks identified. The CAT’s opinion is submitted to the CHMP for final approval, as such the CHMP may depart from the opinion, if it provides detailed scientific justification. The CHMP and CAT are also responsible for providing guidelines on ATMPs and have published numerous guidelines, including specific guidelines on gene therapies and cell therapies. These guidelines provide additional guidance on the factors that the EMA will consider in relation to the development and evaluation of ATMPs and include, among other things, the preclinical studies required to characterize ATMPs; the manufacturing and control information that should be submitted in an MAA; and post-approval measures required to monitor patients and evaluate the long-term efficacy and potential adverse reactions of ATMPs.
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Unlike the centralized authorization procedure, the decentralized MA procedure requires a separate application to, and leads to separate approval by, the competent authorities of each EU Member State in which the product is to be marketed. This application is identical to the application that would be submitted to the EMA for authorization through the centralized procedure. The reference EU Member State prepares a draft assessment and drafts of the related materials within 120 days after receipt of a valid application. The resulting assessment report is submitted to the concerned EU Member States who, within 90 days of receipt, must decide whether to approve the assessment report and related materials. If a concerned EU Member State cannot approve the assessment report and related materials due to concerns relating to a potential serious risk to public health, disputed elements may be referred to the Heads of Medicines Agencies’ Coordination Group for Mutual Recognition and Decentralized Procedures – Human, or CMDh. If the CMDh cannot reach an agreement within 60 days, the matter is brought to the attention of the CHMP. The CHMP will forward its opinion to the European Commission, who will then make a final decision. The subsequent decision of the European Commission is binding on all EU Member States.
The mutual recognition procedure allows companies that have a medicinal product already authorized in one EU Member State to apply for this authorization to be recognized by the competent authorities in other EU Member States. Like the decentralized procedure, the mutual recognition procedure is based on the acceptance by the competent authorities of the EU Member States of the MA of a medicinal product by the competent authorities of other EU Member States. The holder of a national MA may submit an application to the competent authority of an EU Member State requesting that this authority recognize the MA delivered by the competent authority of another EU Member State.
An MA granted by any route has an initial validity of five years in principle. The MA may be renewed after five years on the basis of a re-evaluation of the risk-benefit balance by the EMA or by the competent national authority of the EU Member State in which the original MA was granted. To support the application, the MA holder must provide the EMA or the competent national authority with a consolidated version of the eCTD, or Common Technical Document, providing up-to-date data concerning the quality, safety and efficacy of the product, including all variations introduced since the MA was granted, at least nine months before the MA ceases to be valid. The European Commission or the competent authorities of the EU Member States may decide, on justified grounds relating to pharmacovigilance, to proceed with one further five year renewal period for the MA. Once subsequently definitively renewed, the MA shall be valid for an unlimited period. However, any authorization which is not followed by the actual placing of the medicinal product on the EU market (for a centralized MA) or on the market of the authorizing EU Member State within three years after authorization ceases to be valid (the so-called sunset clause).
Innovative products that target an unmet medical need and are expected to be of major public health interest may be eligible for a number of expedited development and review programs, such as the Priority Medicines, or PRIME, scheme, which provides incentives similar to the breakthrough therapy designation in the U.S. PRIME is a voluntary scheme aimed at enhancing the EMA’s support for the development of medicinal products that target unmet medical needs. Eligible products must target conditions for which there is an unmet medical need (there is no satisfactory method of diagnosis, prevention or treatment in the EU or, if there is, the new medicinal product will bring a major therapeutic advantage) and they must demonstrate the potential to address the unmet medical need by introducing new methods of therapy or improving existing ones. Benefits accrue to sponsors of product candidates with PRIME designation, including but not limited to, early and proactive regulatory dialogue with the EMA, frequent discussions on clinical trial designs and other development program elements, and potentially accelerated MAA assessment once a dossier has been submitted.
In the EU, a “conditional” MA may be granted in cases where all the required safety and efficacy data are not yet available. The European Commission may grant a conditional MA to medicinal products intended for treating, preventing or diagnosing seriously debilitating or life-threatening diseases. A conditional MA can be granted if it is demonstrated that all of the following criteria are met: (i) the benefit-risk balance of the medicinal product is positive; (ii) it is likely that the applicant will be able to provide comprehensive data post-authorization; (iii) the medicinal product fulfills an unmet medical need; and (iv) the benefit of the immediate availability to patients of the medicinal product is greater than the risk inherent in the fact that additional data are still required. The conditional MA is subject to conditions to be fulfilled for generating the missing data or ensuring increased safety measures. It is valid for one year and must be renewed annually until all related conditions have been fulfilled. Once any pending studies are provided, the conditional MA can be converted
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into a standard MA. However, if the conditions are not fulfilled within the timeframe set by the EMA and approved by the European Commission, the MA will cease to be renewed.
An MA may also be granted “under exceptional circumstances” where the applicant can show that it is unable to provide comprehensive data on efficacy and safety under normal conditions of use even after the product has been authorized and subject to specific procedures being introduced. These circumstances may arise in particular when the intended indications are very rare and, in the state of scientific knowledge at that time, it is not possible to provide comprehensive information, or when generating data may be contrary to generally accepted ethical principles. Like a conditional MA, an MA granted in exceptional circumstances is reserved to medicinal products intended to be authorized for treatment of rare diseases or unmet medical needs for which the applicant does not hold a complete data set that is required for the grant of a standard MA. However, unlike the conditional MA, an applicant for authorization in exceptional circumstances is not subsequently required to provide the missing data. Although the MA “under exceptional circumstances” is granted definitively, the risk-benefit balance of the medicinal product is reviewed annually and the MA will be withdrawn if the risk-benefit ratio is no longer favorable.
In addition to an MA, various other requirements apply to the manufacturing and placing on the EU market of medicinal products. Manufacture of medicinal products in the EU requires a manufacturing authorization, and import of medicinal products into the EU requires a manufacturing authorization allowing for import, collectively known as MIAs. The manufacturing authorization holder must comply with various requirements set out in the applicable EU laws, regulations and guidance. These requirements include compliance with EU GMP standards when manufacturing medicinal products and APIs, including the manufacture of APIs outside of the EU with the intention to import the APIs into the EU. Similarly, the distribution of medicinal products within the EU is subject to compliance with the applicable EU laws, regulations and guidelines, including the requirement to hold appropriate authorizations for distribution granted by the competent authorities of the EU Member States. MA holders and/or manufacturing and import authorization, or MIA holders and/or distribution authorization holders may be subject to civil, criminal or administrative sanctions, including suspension of manufacturing authorization, in cases of non-compliance with the EU or EU Member States’ requirements applicable to the manufacturing of medicinal products.
EU Member States may adopt national legislation prohibiting or restricting the sale, supply or use of any medicinal product containing, consisting of or derived from a specific type of human or animal cell, such as embryonic stem cells. While the products we have in development do not make use of embryonic stem cells, it is possible that the national laws in certain EU Member States may prohibit or restrict us from commercializing our products, even if they have been granted an EU marketing authorization.
Pediatric Development
In the EU, companies developing a new medicinal product must agree to a Pediatric Investigation Plan, or PIP, covering all subsets of pediatric population, and must conduct pediatric clinical trials in accordance with that PIP, unless a deferral or waiver applies, (for example, because the relevant disease or condition occurs only in adults). The MAA for the product must include the results of pediatric clinical trials conducted in accordance with the PIP, unless a waiver applies (in which case pediatric clinical trials need not be performed), or a deferral has been granted (in which case the pediatric clinical trials must be completed at a later date). Products that are granted a marketing authorization on the basis of the pediatric clinical trials conducted in accordance with the PIP are eligible for a six month extension of the protection under a supplementary protection certificate (if any is in effect at the time of approval) or, in the case of orphan medicinal products, a two year extension of the orphan market exclusivity. This pediatric reward is subject to specific conditions and is not automatically available when data in compliance with the PIP are developed and submitted.
Data and Market Exclusivity
The EU provides opportunities for data and market exclusivity related to MAs. Innovative medicinal products are generally entitled to benefit from eight years of data exclusivity and and a further two years of market exclusivity (providing a total of 10 years of regulatory data protection). Data exclusivity prevents regulatory authorities in the EU from referencing the innovator’s data to assess a generic application or biosimilar application for eight years from the date of authorization of the innovative product. After this period has expired a MAA for a generic or biosimilar may be submitted, and the innovator’s data may be referenced. The market
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exclusivity period prevents a successful generic or biosimilar applicant from commercializing its product (i.e., until 10 years have elapsed from the initial MA for the reference product in the EU). The market exclusivity period may be extended for a further year to a maximum of 11 years from the initial MA if, during the first eight years of those ten years, the MA holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies. However, there is no guarantee that a product will be considered by the EU’s regulatory authorities to be a new chemical/biological entity, and products may not qualify for data exclusivity.
Post-approval Requirements
Similar to the post-approval process in the United States, drugs or biologics manufactured or distributed pursuant to marketing authorizations in the EU are subject to continuing regulation, including, among other things, requirements relating to periodic safety reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product. After authorization, changes to the approved product, such as adding new indications, manufacturing changes or other labeling claims, are subject to further testing requirements and prior EMA review and/or EC approval.
Additionally, the holder of a marketing authorization must establish and maintain a pharmacovigilance system and appoint an individual qualified person for pharmacovigilance, or QPPV, who is responsible for oversight of that system. Key obligations include expedited reporting of suspected serious adverse reactions and submission of periodic safety update reports, or PSURs.
All new MAAs must include a risk management plan, or RMP, describing the risk management system that the Company will put in place and documenting measures to prevent or minimize the risks associated with the product. The regulatory authorities may also impose specific obligations as a condition of the marketing authorization. Such risk-minimization measures or post-authorization obligations may include additional safety monitoring, more frequent submission of PSURs, or the conduct of additional clinical trials or post-authorization safety studies. RMPs and PSURs are routinely available to third parties requesting access, subject to limited redactions.
Advertising Regulation
In the EU, the advertising and promotion of medicinal products are subject to both EU and EU Member States’ laws (as well as codes of conduct that can be enforced on members of those codes) governing promotion of medicinal products, interactions with physicians and other healthcare professionals, misleading and comparative advertising and unfair commercial practices. Although general requirements for advertising and promotion of medicinal products are established under EU directives, the details are governed by regulations in individual EU Member States and can differ from one country to another. For example, applicable laws require that promotional materials and advertising in relation to medicinal products comply with the product’s Summary of Product Characteristics, or SmPC, as approved by the competent authorities in connection with an MA. The SmPC is the document that provides information to physicians concerning the safe and effective use of the product. Promotional activity that does not comply with the SmPC is considered off-label and is prohibited in the EU. Direct-to-consumer advertising of prescription medicinal products is also prohibited in the EU.
EU Pharmaceutical Legislation Review
The European Commission is in the process of amending the EU’s general pharmaceutical legislation. Although, the updated legislation will not enter into force for a number of years, it should be noted that there will be wide ranging changes to the laws as set out above. Notably, the Commission intends to change rules on data protection/market exclusivity, orphan medicinal products and pediatric development.
Regulatory Approval in the United Kingdom
On January 31, 2020, the United Kingdom left the EU (commonly referred to as Brexit) and accordingly is no longer an EU Member State. A transition period began on February 1, 2020, during which EU pharmaceutical law remained applicable to the United Kingdom, however this period ended on December 31, 2020. After this
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date, EU law no longer applied. On December 24, 2020, the United Kingdom and the EU announced that they had reached agreement on the terms of their future relationship as set out in the Trade and Cooperation Agreement, or the TCA. The EU and the United Kingdom had agreed to provisionally apply the terms of the TCA, while the formal execution was still ongoing. The TCA formally entered into force on May 1, 2021. While the TCA governs tariff and quota free trade between the United Kingdom and the EU markets, it does not provide for regulatory alignment. The regulatory framework for medicinal products in the United Kingdom is predominantly derived from EU law.
As the United Kingdom is no longer an EU Member State, the United Kingdom’s participation in the European Medicines Regulatory Network has ceased and the MHRA has assumed the functions that were previously undertaken by the EU institutions for human medicines on the United Kingdom market. This is, with the exception of Northern Ireland, which, pursuant to the Protocol on Ireland/Northern Ireland has remained aligned with EU regulations; however, following the UK Government and European Commission’s political agreement in principle on the Windsor Framework, the MHRA will be responsible for all medicinal products placed on the market anywhere in the United Kingdom.. The MHRA has published detailed guidance for industry and organizations that is updated as the United Kingdom’s regulatory position on medicinal products evolves over time.
Currently, the EU centralized MAs do not apply in Great Britain but do apply in Northern Ireland. However, the Windsor Framework provides that in future all MAs in the United Kingdom (including those for Northern Ireland) will require the MHRA to grant a UK MA. As such, in addition to the pre-existing standard 210 day assessment route for national MA in the United Kingdom, at the moment the United Kingdom offers new assessment procedures to obtain marketing authorization in the United Kingdom. The procedures can lead to a marketing authorization in Great Britain (England, Scotland, and Wales), the United Kingdom, or Northern Ireland, depending on the procedure and pre-existing authorizations, as further explained below. The new assessments include:
•The European Commission Decision Reliance Procedure will be in place until December 31, 2023. It is available to MAs approved under the EU’s centralized procedure. The MHRA will review the application, CHMP assessment report, and applicant responses to the CHMP over a period of 67 days, leading to the grant of a marketing authorization in Great Britain as soon as possible after European Commission authorization. The centralized marketing authorization in the EU will currently permit the marketing of the relevant product in Northern Ireland but this will change following the Windsor Framework;
•A full assessment as a national authorization, that industry can choose for new active substances, with high-quality new MAAswith a timeline of no more than 150 days (excluding clock-off periods where further information is requested) which can lead to the grant of a marketing authorization in Great Britain, the United Kingdom, or Northern Ireland. If the application includes Northern Ireland then it must comply with the relevant EU requirements;
•The Unfettered Access Procedure for medicines already approved in Northern Ireland via the EU procedures or via the Northern Ireland national route which if successful will lead to a Great Britain marketing authorization. This procedure means that the MHRA will recognize such MAs in Great Britain within 67 days of MAA validation, unless a major objection is identified;
•The decentralized and mutual recognition reliance procedure for marketing authorizations, where the MHRA has the power to have regard to marketing authorizations previously granted nationally in a country within the EEA through the decentralized or mutual recognition procedures. Acceptable marketing authorizations are intended to be granted within 67 days of the MAA being validated by the MHRA and which will, if successful, lead to a Great Britain or United Kingdom Marketing Authorization; and
•A “rolling review”, for new active substances and biosimilars, which would allow companies to make an application in stages, throughout the product’s development, to better manage development risk which can lead to the grant of a marketing authorization in Great Britain, the United Kingdom, or Northern Ireland. If the application includes Northern Ireland then it must comply with the relevant EU requirements.
However, these may change in future due, for example, to the Windsor Framework and the changes to the EU’s general pharmaceutical legislation.

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Currently, domestic UK law provides that all existing EU law in force on December 31, 2020 is retained in UK national law, subject to certain revisions that have become necessary as a result of Brexit. However, the UK Government has introduced the Retained EU Law (Revocation and Reform) Bill into Parliament, which proposes that all retained EU law will expire on December 31, 2023 (or at the latest June 23, 2026). The Bill proposes to grant certain powers to Government Ministers to make regulations in the affected areas. Since the regulatory framework in the United Kingdom covering the quality, safety and efficacy of medicinal products, clinical trials, marketing authorization, commercial sales and distribution of medicinal products is derived from EU regulations, Brexit has materially impacted, and could further materially impact, the regulatory regime which applies to products and the approval of product candidates in the United Kingdom, as United Kingdom legislation has started to diverge and has the potential to diverge further from EU legislation (particularly in light of the EU’s review of its general pharmaceutical legislation). It remains to be seen how Brexit will impact regulatory requirements for product candidates and products in the United Kingdom in the long-term.

Rest of World, or ROW, Regulatory Pathways
Similar to that in the U.S. and in Europe, countries around the globe have their own Health Authority(ies), legal basis of regulation of medicinal products, and independent clinical trial and registration procedures and processes. Conformance and compliance with International Council for Harmonization of Technical Requirements for Pharmaceuticals for Human Use, or ICH, is typically acceptable in countries worldwide with additional local particulars.
In general, from a clinical trial perspective, requirements for conduct of a trial are similar to that of the U.S. and EU and consist of a CTA and Ethics Committee review.
In both the United States and the EU, there are dedicated regulatory pathways for biosimilars, or biological medicinal products that are highly similar to a reference medicinal product but that do not meet the definition of a generic medicinal product, for example, because of inherent biological differences present in such biological systems. For such products, the results of appropriate preclinical or clinical trials must be provided, and guidelines from FDA or EMA detail the type of quantity of additional nonclinical, clinical and CMC data to be provided for submission of a highly similar biological product. Given the complexity of the requirements in the biosimilar route when compared to the generic drug pathway(s), there have been limited biosimilar approvals globally, however this pathway appears to be gaining momentum as innovator companies leverage the process to develop and market their own biosimilars of their own biologic product.
EU and UK Data Privacy
In May 2018, the EU General Data Protection Regulation (EU) 2016/679, or GDPR, went into effect in the EEA. The GDPR imposes stringent data protection requirements for processing the information of individuals in the EEA. In the United Kingdom, the GDPR continues to form part of law in the United Kingdom following the United Kingdom’s withdrawal from the EU, as the UK GDPR, (by virtue of Section 3 of the EU (Withdrawal) Act 2018, as amended (including by the various Data Protection, Privacy and Electronic Communications (Amendments etc.) (EU Exit) Regulations)), thus imposing similarly stringent data protection requirements in the United Kingdom, as in the EEA. To date, the GDPR and UK GDPR have increased compliance burdens on us, such as requiring the following: processing personal data only for specified, explicit and legitimate purposes for which personal data were collected; establishing a legal basis for processing personal data; creating obligations for controllers and processors to appoint data protection officers in certain circumstances; increasing transparency obligations to data subjects for controllers (including presentation of certain information in a concise, intelligible and easily accessible form about how their personal data is used and their rights vis-à-vis that data and its use); introducing the obligation to carry out so-called data protection impact assessments in certain circumstances; establishing limitations on collection and retention of personal data through “data minimization” and “storage limitation” principles; establishing obligations to implement “privacy by design”; introducing obligations to honor increased rights for data subjects (such as rights for individuals to be “forgotten,” rights to data portability, rights to object etc. in certain circumstances); formalizing a heightened and codified standard of data subject consent; establishing obligations to implement certain technical and organizational safeguards to protect the security and confidentiality of personal data; introducing obligations to agree to certain specific contractual terms and to take certain measures when engaging third party processors and joint controllers; introducing the obligation to provide notice of certain significant personal data breaches to the relevant supervisory authority or authorities and affected individuals; and mandating the appointment
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representatives in the United Kingdom and/or EU in certain circumstances. The processing of sensitive personal data, such as health information, may impose heightened compliance burdens under the GDPR/UK GDPR and is a topic of active interest among foreign regulators. The GDPR/UK GDPR increases our obligations with respect to clinical trials conducted in Europe (including the EEA and United Kingdom) by expressly expanding the definition of personal data to include “pseudonymized” or key-coded data and requiring changes to informed consent practices and more detailed notices for clinical trial subjects and investigators.
The GDPR/UK GDPR also provides for more robust regulatory enforcement and greater penalties for non-compliance than previous data protection laws, including fines of up to €20 million or 4% of global annual revenue of any non-compliant company for the preceding financial year, whichever is higher. In addition to administrative fines, a wide variety of other potential enforcement powers are available to competent supervisory authorities in respect of potential and suspected violations of the GDPR, including extensive audit and inspection rights, and powers to order temporary or permanent bans on all or some processing of personal data carried out by non-compliant actors. The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR.
European data protection laws, including the GDPR/UK GDPR, generally restrict the transfer of personal data from Europe, including the EEA, United Kingdom and Switzerland, to the United States and most other countries unless the parties to the transfer have implemented specific safeguards to protect the transferred personal data. One of the primary safeguards allowing U.S. companies to import personal data from Europe had been certification to the EU-U.S. Privacy Shield and Swiss-U.S. Privacy Shield frameworks administered by the U.S. Department of Commerce. However, the EU-U.S. Privacy Shield was invalidated in July 2020 by the Court of Justice of the European Union, or CJEU, in a case known colloquially as “Schrems II.” Following this decision, the Swiss Federal Data Protection and Information Commissioner, or the FDPIC, announced that the Swiss-U.S. Privacy Shield does not provide adequate safeguards for the purposes of personal data transfers from Switzerland to the United States. As a result, the Swiss-U.S. Privacy Shield is no longer considered an appropriate compliance mechanism for Swiss-U.S. data transfers. The CJEU’s decision in Schrems II also raised questions about whether one of the primary alternatives to the EU-U.S. Privacy Shield, namely, the European Commission’s Standard Contractual Clauses, can lawfully be used for personal data transfers from Europe to the United States or other third countries that are not the subject of an adequacy decision of the European Commission. While the CJEU upheld the adequacy of the Standard Contractual Clauses in principle in Schrems II, it made clear that reliance on those Clauses alone may not necessarily be sufficient in all circumstances.
Use of the Standard Contractual Clauses must now be assessed on a case-by-case basis taking into account the legal regime applicable in the destination country, in particular regarding applicable surveillance laws and relevant rights of individuals with respect to the transferred data. In the context of any given transfer, where the legal regime applicable in the destination country may or does conflict with the intended operation of the Standard Contractual Clauses and/or applicable European law, the decision in Schrems II and subsequent draft guidance from the European Data Protection Board, or EDPB, would require the parties to that transfer to implement certain supplementary technical, organizational and/or contractual measures to rely on the Standard Contractual Clauses as a compliant “transfer mechanism.” However, the EDPB recommendations 01/2020 on measures that supplement transfer tools to ensure compliance with the EU level of protection of personal data, as last adopted on June 18, 2021 conclude that no combination of such measures could be sufficient to allow effective reliance on the Standard Contractual Clauses in the context of transfers of personal data “in the clear” to recipients in countries where the power granted to public authorities to access the transferred data goes beyond that which is “necessary and proportionate in a democratic society” – which may, following the CJEU’s conclusions in Schrems II on relevant powers of United States public authorities and commentary in that draft EDPB guidance, include the United States in certain circumstances (e.g., where Section 702 of the U.S. Foreign Intelligence Surveillance Act applies).
The decision in Schrems II also affects transfers from the United Kingdom to the United States. As such, if we are unable to implement a valid solution for personal data transfers from Europe, including, for example, obtaining individuals’ explicit consent to transfer their personal data from Europe to the United States or other countries, we will face increased exposure to regulatory actions, substantial fines and injunctions against processing personal data from Europe. Inability to import personal data from the EEA, United Kingdom or Switzerland may also restrict our clinical trials activities in Europe; limit our ability to collaborate with contract research organizations as well as other service providers, contractors and other companies subject to European
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data protection laws; and require us to increase our data processing capabilities in Europe at significant expense. Additionally, other countries outside of Europe have enacted or are considering enacting similar cross-border data transfer restrictions and laws requiring local data residency, which could increase the cost and complexity of delivering our services and operating our business. The type of challenges we face in Europe will likely also arise in other jurisdictions that adopt laws similar in construction to the GDPR or regulatory frameworks of equivalent complexity.
The GDPR applies across the EEA and, by virtue of the UK GDPR in the United Kingdom, in a broadly uniform manner. However, the GDPR provides that EEA countries may make their own further laws and regulations to introduce specific requirements related to the processing of “special categories of personal data,” including personal data related to health, biometric data used for unique identification purposes and genetic information; as well as personal data related to criminal offences or convictions – in the United Kingdom, the United Kingdom Data Protection Act 2018 complements the UK GDPR in this regard, and a draft data protection bill has recently been introduced to Parliament to reform the UK data protection legal framework.. This fact may lead to greater divergence on the law that applies to the processing of such data types across the EEA and/or United Kingdom, compliance with which, as and where applicable, may increase our costs and could increase our overall compliance risk. Such country-specific regulations could also limit our ability to collect, use and share data in the context of our EEA and/or United Kingdom establishments (regardless of where any processing in question occurs), and/or could cause our compliance costs to increase, ultimately having an adverse impact on our business, and harming our business and financial condition.
Further, the United Kingdom’s vote in favor of exiting the EU and ongoing developments in the United Kingdom have created uncertainty with regard to data protection regulation in the United Kingdom. Following the United Kingdom’s withdrawal from the EU on January 31, 2020, pursuant to the transitional arrangements agreed to between the United Kingdom and EU, the GDPR continued to have effect in law in the United Kingdom, and continued to do so until December 31, 2020 as if the United Kingdom remained an EU Member State for such purposes. After December 31, 2020, and the expiry of those transitional arrangements, the data protection obligations of the GDPR continue to apply to United Kingdom related to processing of personal data in substantially unvaried form and fashion under the UK GDPR. In the future, however, there will be increasing scope for divergence in application, interpretation and enforcement of the data protection law as between the United Kingdom and the EEA. Furthermore, the relationship between the United Kingdom and the EEA in relation to certain aspects of data protection law remains unclear. However, on June 28, 2021, the European Commission adopted an adequacy decision in relation to the United Kingdom. This decision permits personal data to flow freely from the EEA to the United Kingdom where it benefits from an essentially equivalent level of protection to that guaranteed under EU law. This adequacy decision has, however, a limited duration of four years, meaning that the decision will automatically expiry after this period. After expiry of the period, the adequacy decision will be renewed only if the United Kingdom continues to ensure an adequate level of data protection. The reform of the UK data protection regime that is currently considered will likely be decisive as to whether or not the United Kingdom can maintain its adequacy status in the future. Additionally, as noted above, the United Kingdom has transposed the GDPR into United Kingdom domestic law by way of the UK GDPR with effect from in January 2021, and is further looking into reforming its data protection framework, which could expose us to two parallel regimes, each of which potentially authorizes similar fines and other potentially divergent enforcement actions for certain violations.
Additionally, other countries outside of Europe have enacted or are considering enacting similar cross-border data transfer restrictions and laws requiring local data residency, which could increase the cost and complexity of delivering our services and operating our business.
It is possible that the GDPR or other laws and regulations relating to privacy and data protection may be interpreted and applied in a manner that is inconsistent from jurisdiction to jurisdiction or inconsistent with our current policies and practices and compliance with such laws and regulations could require us to change our business practices and compliance procedures in a manner adverse to our business. We cannot guarantee that we are in compliance with all such applicable data protection laws and regulations and we cannot be sure how these regulations will be interpreted, enforced or applied to our operations. Furthermore, other jurisdictions outside the EEA are similarly introducing or enhancing privacy and data security laws, rules, and regulations, which could increase our compliance costs and the risks associated with non-compliance. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our practices and our efforts to comply with the evolving data protection rules may be unsuccessful. We cannot guarantee that we, our third-party
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collaborators, or our vendors are in compliance with all applicable data protection and privacy laws and regulations as they are enforced now or as they evolve. Further, for example, our privacy policies may be insufficient to protect any personal information we collect, or may not comply with applicable laws. Our non-compliance could result in government-imposed fines or orders requiring that we change our practices, which could adversely affect our business. In addition to the risks associated with enforcement activities and potential contractual liabilities, our ongoing efforts to comply with evolving laws and regulations at the federal and state level may be costly and require ongoing modifications to our policies, procedures and systems. In addition, if we are unable to properly protect the privacy and security of protected health information, we could be found to have breached our contracts.
Our actual or perceived failure to adequately comply with applicable laws and regulations relating to privacy and data protection, or to protect personal data and other data we process or maintain, could result in regulatory enforcement actions against us, including fines, penalties, orders that require a change in our practices, additional reporting requirements and/or oversight, imprisonment of company officials and public censure, claims for damages by affected individuals, other lawsuits or reputational and damage, all of which could materially affect our business, financial condition, results of operations and growth prospects.
Pricing and Reimbursement

United States
The future commercial success of RUCONEST®, Joenja® and our product candidates or any of our collaborators’ ability to commercialize any approved product candidates successfully will depend in part on the extent to which governmental payor programs at the federal and state levels, including Medicare and Medicaid, private health insurers and other third-party payors provide coverage for and establish adequate reimbursement levels for our product candidates. Government health administration authorities, private health insurers and other organizations generally decide which drugs they will pay for and establish reimbursement levels for healthcare. In particular, in the United States, private health insurers and other third-party payors often provide reimbursement for products and services based on the level at which the government, through the Medicare or Medicaid programs, provides reimbursement for such treatments. In the United States, the EU, and other potentially significant markets for our product candidates, government authorities and third-party payors are increasingly attempting to limit or regulate the price of medical products and services, particularly for new and innovative products and therapies, which often has resulted in average selling prices lower than they would otherwise be. Further, the increased emphasis on managed healthcare in the United States will put additional pressure on product pricing, reimbursement and usage, which may adversely affect our future product sales and results of operations. These pressures can arise from rules and practices of managed care groups, judicial decisions and laws and regulations related to Medicare, Medicaid and healthcare reform, pharmaceutical coverage and reimbursement policies and pricing in general.
Third-party payors are increasingly imposing additional requirements and restrictions on coverage and limiting reimbursement levels for medical products. For example, federal and state governments reimburse covered prescription drugs at varying rates generally below average wholesale price. These restrictions and limitations influence the purchase of healthcare services and products. Third-party payors may limit coverage to specific products on an approved list, or formulary, which might not include all of the FDA-approved products for a particular indication. Third-party payors are increasingly challenging the price and examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy. We may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of our products, in addition to the costs required to obtain the FDA approvals. Our product candidates may not be considered medically necessary or cost-effective. A payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a drug product does not assure that other payors will also provide coverage for the drug product. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in drug development. Additionally, coverage policies and third-party reimbursement rates may change at any time. Therefore, even if favorable coverage and reimbursement status is attained, less favorable coverage policies and reimbursement rates may be implemented in the future. Legislative proposals to reform healthcare or reduce costs under government insurance programs may result in lower reimbursement for RUCONEST® and product candidates or exclusion of RUCONEST® or our product candidates from coverage. The cost containment measures that healthcare payors and providers are instituting and any healthcare reform could significantly reduce our revenues from the sale of any approved product candidates. We cannot provide any assurances that we will be
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able to obtain and maintain third-party coverage or adequate reimbursement for RUCONEST® and our product candidates in whole or in part.
There have been several U.S. government initiatives over the past few years to fund and incentivize certain comparative effectiveness research, including creation of the Patient-Centered Outcomes Research Institute under the ACA. It is also possible that comparative effectiveness research demonstrating benefits in a competitor’s product could adversely affect the sales of our product candidates. If third-party payors do not consider RUCONEST® or our product candidates, once approved, to be cost-effective compared to other available therapies, they may not cover such products as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow us to sell our product on a profitable basis.
In addition, there have been and continue to be a number of initiatives at the United States federal and state levels that seek to reduce healthcare costs. Furthermore, there has been heightened governmental scrutiny over specialty drug pricing practices, which has resulted in several congressional inquiries and executive orders designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs.
At the both the federal and state level, legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower-cost generic and biosimilar drugs are pervasive and a continuing theme subject to review and re-review for alignment with changes in administration(s), as well as with key stakeholders.
These and other healthcare reform initiatives within the U.S. may result in additional reductions in Medicare or other healthcare funding which may impact our ability to achieve the desired pricing for newly developed indications and/or products.

European Union
In the EU, pricing and reimbursement schemes vary widely from country to country. Some countries provide that products may be marketed only after a reimbursement price has been agreed. Some countries may require the completion of additional studies that compare the cost effectiveness of a particular product candidate to currently available therapies (so-called health technology assessments) in order to obtain reimbursement or pricing approval. In general, governments influence the price of medicinal products in the EU through their pricing and reimbursement rules and control of national healthcare systems that fund a large part of the cost of those products to consumers. Some jurisdictions operate positive and negative list systems under which products may only be marketed once a reimbursement price has been agreed. To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical trials that compare the cost-effectiveness of a particular product candidate to currently available therapies. Other EU Member States allow companies to fix their own prices for medicinal products, but monitor and control company profits. The downward pressure on healthcare costs in general, particularly prescription medicines, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products.
In various EU Member States, continuous cost-cutting measures, such as lower maximum prices, lower or lack of reimbursement coverage and incentives to use cheaper products as an alternative apply. Health Technology Assessment, or HTA, of medicinal products is becoming an increasingly common part of the pricing and reimbursement procedures in some EU Member States, including countries representing major markets. The HTA process, which is currently governed by the national laws of these countries, is the procedure according to which the assessment of the public health impact, therapeutic impact and the economic and societal impact of use of a given medicinal product in the national healthcare systems of the individual country is conducted. The outcome of HTA regarding specific medicinal products will often influence the pricing and reimbursement status granted to these medicinal products by the competent authorities of individual EU Member States. On January 31, 2018, the European Commission adopted a proposal for a regulation on health technologies assessment, or the HTA Regulation. In December 2021, the HTA Regulation was adopted and entered into force on 11 January 2022. It will apply from 2025. The Regulation is intended to boost cooperation among EU Member States in assessing health technologies, including new medicinal products, and providing the basis for cooperation at the EU level for joint clinical assessments in these areas. Entry into application of the Regulation
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could impose stricter and more detailed procedures to be followed by MAHs concerning conduct of HTA in relation to their products which may influence related pricing and reimbursement decisions.

Outside of the United States and EU
Middle East & Africa (MENA)
Pharming creates access to RUCONEST® in MENA via a mixture of direct sales and marketing, local partners, commercial partners and the ongoing utilization of the HAEi GAP program in certain territories. In Israel, our existing partner Kamada, has consolidated its RUCONEST® activities. In addition in 2021, we entered into an exclusive license agreement with Newbridge Pharmaceuticals for the distribution of RUCONEST® in the Middle East and North Africa (MENA).
China
Our collaboration with China State Institute of Pharmaceutical Industry (CSIPI) and the Chengdu Institute of Biological Products (CDIBP), both Sinopharm companies, continues to progress. This collaboration includes development and commercialization rights for RUCONEST® in China. The RUCONEST® manufacturing process and quality system has been transferred to Sinopharm, enabling future manufacture for China. The arrangement provides for Pharming to receive certain regulatory and manufacturing-associated milestones, and low to mid-single digit royalties from sales in China by CDIBP or other affiliates of Sinopharm.
Other markets
RUCONEST® continues to be commercialized in Colombia, Costa Rica, the Dominican Republic and Panama through our partner, Cytobioteck. We continue to assess the viability of opportunities within the Asia Pacific Region outside of China.
HAEi global access program (“HAEi GAP”)
RUCONEST® is the first therapy available under the “HAEi Global Access Program” (HAEi GAP). This program ensures that in countries where no HAE therapies are approved or otherwise available, all eligible HAE patients can have access to safe and effective treatment through their treating physician. As part of this program, several requests have been received and treatments were started in countries such as South Africa and the Democratic Republic of the Congo. It is the only known program of this type which has been initiated through a patient group (HAEi).

C. Organizational Structure
Pharming Group N.V. is a limited liability public company. Pharming Group N.V. is the ultimate parent company of Pharming Group. A list of our significant subsidiaries at December 31, 2022 is provided in the table below:
EntityRegistered officeOwnership percentage
Pharming B.V.The Netherlands100 %
Pharming Americas B.V.The Netherlands100 %
Pharming Intellectual Property B.V.The Netherlands100 %
Pharming Technologies B.V.The Netherlands100 %
  Pharming Research & Development B.V. The Netherlands100 %
Broekman Instituut B.V.The Netherlands100 %
Pharming Healthcare, Inc.The United States100 %
ProBio, Inc.The United States100 %


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D. Property, Plant and Equipment
Our Facilities
In Leiden, The Netherlands, we have our administrative offices (including laboratories) and offices for executive management located on Darwinweg 24, 2333 CR, Leiden and Vondellaan 47, 2332 AA, Leiden, respectively. In the Leiden facilities, we occupy:
•Approximately 1,877 square meters (equivalent to approximately 20,204 square feet) of office space under a lease that has an initial term that expires on June 1, 2029 and can be extended for a period of 5 years.
•Approximately 1,295 square meters (equivalent to approximately 13,939 square feet) of laboratory space under a lease which will expire on June 30, 2026 and will automatically be renewed for an additional period of 5 years.
•Approximately 76 square meters (equivalent to approximately 818 square feet) of storage space under a lease which will expire on June 30, 2026 and will automatically be renewed for an additional period of 5 years.
In addition, in the province of Noord Brabant, The Netherlands, we occupy approximately 3,459 square meters (equivalent to approximately 37,232 square feet), of which 2405 square meters (equivalent to approximately 25,887 square feet) is production space, 926 square meters (equivalent to approximately 9,967 square feet) is office space and 128 square meters (equivalent to approximately 1,378 square feet) is used for support purposes.
At our other production facility in the province of Noord Brabant, The Netherlands, we own approximately 950 square meters (equivalent to approximately 10,226 square feet) of production, warehouse and office space.

At the (cattle) facility in the province of Zuid Holland, The Netherlands, we occupy approximately 150 square meters (equivalent to approximately 1,615 square feet) of storage space under a lease that has an expiry date of September 1, 2026. With the discontinuation of the cattle program, we are reviewing the strategic options available to the Company.
At our research and development facility near Paris, France, we occupy approximately 884 square meters (equivalent to approximately 9,515 square feet) of office space under a lease which has an expiry date of February 28, 2026. We also occupy approximately 214 square meters of laboratory space (equivalent to approximately 2,303 square feet) under a lease that expires on August 31, 2027.
In New Jersey, United States, we occupy approximately 1,732.64 square meters (equivalent to approximately 18,650 square feet) of office space under a lease that runs until 2025.
The Company invested $1.4 million and $10.7 million in 2022 and 2021 respectively, mainly in new machinery and laboratory equipment. The Company decided to have the construction of the new building at Pivot Park in Oss completed, but will no longer pursue the realization of its own downstream production capacity. We will continue to use the building for alternative purposes.

Item 4A. Unresolved Staff Comments
Not applicable.

Item 5. Operating and Financial Review and Prospects
You should read the following “Operating and Financial Review and Prospects” together with our financial statements and Notes included elsewhere in this Annual Report. The following discussion is based on our financial information prepared in accordance with IFRS, as issued by the International Accounting Standards Board, or IASB.
The statements in this discussion with respect to our plans and strategy for our business, including expectations regarding our future liquidity and capital resources and other non-historical statements, are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including the
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risks and uncertainties described in the section of this Annual Report titled “Risk Factors.” Our actual results may differ materially from those contained in or implied by any forward-looking statements.

A. Operating Results

Overview
In 2022, we kept investing in the United States, its key market, as well as outside of the United States. There was growth in the number of doctors prescribing RUCONEST® and the number of patients using it. RUCONEST® was sold in more than 25 countries in 2022 and revenues grew inside and outside the U.S.
The Company also intensified its business development activities in 2022. Ongoing systematic search and evaluation activities for licensing or acquisition of additional late-stage assets in rare or ultra-rare diseases led to various ongoing discussions with several potential partners or M&A targets.
Preparation and investment for the launch of leniolisib were significantly intensified, as we saw an increased commercial potential for leniolisib emerging. We believe that these investments will provide a commercial transformation of the Company following the launch of leniolisib when it occurs. Research and clinical development activities were further focused as the programs related to AKI, the cattle platform, PE and COVID-19 were discontinued.

Components of our Results of Operations
Revenues
We generate revenues primarily from the sale of vials of RUCONEST®. Most of our contracts for revenues with customers are subject to chargebacks, discounts and/or rebates relating to customers or to reimbursement claims from government or insurance payers.
Costs of Sales
Costs of sales consist of cost of product sales, relating to actual product sales, and inventory impairments. The impairment stems from the valuation of the inventories against lower net realizable value.
Other income
Other income is comprised of grants in the form of annual payroll-tax reimbursement granted by the Dutch and French governments for research and development activities that we conduct in those countries and the proceeds from a sale of shares in BioConnection, the contract development and manufacturing organization of which we own a minority stake.
Cost of research and development
Research and development costs relate to the preparation and initiation of our product candidates lifecycle. Development expenditures that meet the capitalization criteria are capitalized. Expenditures which do not meet these criteria are recorded as expenses through the income statement.
Cost of general and administrative activities
Consists of costs related to administration resources, service fees, legal and due diligence costs and impairment and depreciation costs for property, plant and equipment and intangible assets.
Cost of marketing and sales activities
These costs relate to all expenses incurred to commercialize a product.

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Other finance expense
Other finance expense comprise primarily interest paid on our convertible bonds due 2025 and our lease liabilities and foreign currency results.
Share of net profits in associates using the equity method
Share of net profits in associates comprises the profit resulting from our investment in BioConnection. During the second quarter of 2022, Pharming entered into a share purchase agreement, following receipt of an offer for all shares in BioConnection B.V. by Gimv, a European investment company listed on Euronext Brussels. The existing shareholders (including Pharming) reached agreement with Gimv on the sale of all issued and outstanding shares to a new holding company (BioConnection Investments B.V.) incorporated by Gimv, followed by a partial re-investment by existing shareholders of the purchase price in the share capital of BioConnection Investments B.V. The re-investment relates to the purchase of ordinary shares and a preference share. The transaction diluted Pharming’s stake in BioConnection from 43.85% in 2021 to 22.98% in 2022. We account for our investment in BioConnection by the equity method and do not consolidate the entity as a subsidiary.
Income tax credit (expense)
Income tax credit reflects credit/(expenses) of income tax. The income tax expense or credit for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. The realization of deferred tax assets is dependent upon the generation of future taxable income, the amount and timing of which are subject to uncertainties. Considering ongoing profits during the year it is probable that going forward we will be able to use all our remaining net operating tax losses from previous years. During the years ended December 31, 2022, 2021 and 2020, we incurred state and federal income taxes in the United States, in which jurisdiction we have no remaining tax losses available, while in The Netherlands we continue to use up our accumulated tax losses. The tax shielding effect of those remaining tax losses is shown on the balance sheet as a deferred tax asset. The deferred tax asset is utilized by being written down by the amount of the tax charge each reporting period, instead of paying the tax due from cash. Once all the tax losses are used up, the deferred tax asset relating to these losses will be completely extinguished and the tax due thereafter will be paid.

Results of Operations
The following table sets forth our results of operations for the periods presented.


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CONSOLIDATED STATEMENT OF INCOME
Years ended December 31,
Amounts in $ ‘000202220212020
Revenues205,622 198,871 212,174 
Costs of sales(17,562)(21,142)(23,539)
Gross profit188,060 177,729 188,635 
Other income14,523 2,620 1,829 
Research and development(52,531)(70,369)(38,519)
General and administrative(46,016)(36,974)(24,085)
Marketing and sales(85,803)(59,445)(51,604)
Other Operating Costs(184,350)(166,788)(114,208)
Operating profit18,233 13,561 76,256 
Fair value gain (loss) on revaluation (1,185)114 69 
Other finance income4,485 14,894 715 
Other finance expenses(5,463)(6,185)(33,308)
Finance result, net(2,163)8,823 (32,524)
Share of net profits (loss) in associates using the equity method(1,083)694 362 
Profit before tax14,987 23,078 44,094 
Income tax expense(1,313)(7,082)(6,348)
Profit for the year13,674 15,996 37,746 
Basic earnings per share ($)0.0210.0250.058
Diluted earnings per share ($)0.0190.0230.055
Comparison of the Year Ended December 31, 2022 and 2021
Revenues
Revenues increased by $6.8 million, or 3.4%, from $198.9 million for the year ended December 31, 2021 to $205.6 million for the year ended December 31, 2022. The increase in revenues was primarily a result of higher sales of RUCONEST® in the U.S. market ($200.1 million and $193.4 million in 2022 and 2021 respectively). From the second quarter onwards, we experienced quarter-on-quarter growth in 2022, both in volumes and revenues, with a growing number of patients using RUCONEST®.
Revenues in Europe remained stable at $4.9 million in 2022 from $4.9 million in 2021 in spite of facing strong prophylactic and generic competition. The Company continues to build its EU commercial infrastructure and expand into new territories. In 2022, revenue in ROW (excluding Europe) increased slightly to $0.6 million from $0.5 million in 2021.
Two U.S. customers (namely specialty wholesale companies) represent $173.6 million, or 84%, of our revenues in 2022. In 2021, the two U.S. customers represented $156.6 million, or 79%, of our revenues. These wholesale companies are specialized in distribution of pharmaceuticals in distribution of pharmaceuticals in the HAE disease.
Years ended December 31,
Amounts in $ ‘00020222021
U.S.200,082 193,419 
Europe4,924 4,933 
RoW616 519 
Total revenues205,622 198,871 

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Cost of sales
Cost of sales decreased by $3.6 million, or 16.9%, from $21.1 million for the year ended December 31, 2021 to $17.6 million for the year ended December 31, 2022. Costs of sales in 2022 and 2021 amounted to $17.4 million and $19.1 million. The remainder of costs in 2022 ($0.2 million) stems from obsolescence of inventory impairment charges on inventory designated for commercial activities. These impairment charges amounted to $2.0 million in 2021.
The following table summarizes the cost of sales for the years ended December 31, 2022 and 2021.

Years ended December 31,
Amounts in $ ‘00020222021
Costs of sales (17,398)(19,107)
Obsolescence inventory impairments(164)(2,035)
Total(17,562)(21,142)
Gross profit
Gross profit increased $10.3 million, or 5.8%, from $177.7 million for the year ended December 31, 2021 to $188.1 million for the year ended December 31, 2022. The main reasons for this increase were the increase in sales prices, a favorable currency translation effect and favorable production results.
The following table summarizes the geographical breakdown of our gross profit for the years ended December 31, 2022 and 2021.

Years ended December 31,
Amounts in $ ‘00020222021
U.S.186,263 176,266 
Europe1,378 1,049 
RoW419 414 
Total gross profit188,060 177,729 
Other Income
Other income increased significantly by $11.9 million, or 454.3%, from $2.6 million for the year ended December 31, 2021 to $14.5 million for the year ended December 31, 2022 as Pharming reduced its minority stake in BioConnection from 43.85% to 22.98% in April 2022. As a result of this transaction, Pharming has recognized a gain of $12.2 million. This is partly offset by a decrease in government grants on R&D projects, caused by Pharming’s renewed strategy and pipeline.
Cost of research and development
Operating expenses for research and development decreased $17.8 million, or 25.3%, from $70.4 million for the year ended December 31, 2021 to $52.5 million for the year ended December 31, 2022. The decrease in costs relates mainly to reduced share-based compensation cost and the impact of the U.S. dollar-EUR FX rate on payroll cost. Current year’s spend in leniolisib, for the treatment of activated Phosphoinositide 3-kinase Delta syndrome were higher compared to 2021. AKI and cattle costs were also higher in 2022 because of additional incurred costs associated with the discontinuation of the program. This was offset by the investment to in-license OTL-105 and impairment losses of $5.0 million on intangible assets related to the development of RUCONEST® in a more convenient form for patients in 2021.
Cost of general and administrative activities
Cost of general and administrative activities increased $9.0 million, or 24.5% from $37.0 million for the year ended December 31, 2021 to $46.0 million for the year ended December 31, 2022. The increased costs are mainly related to the increased employee costs resulting from more staff employed, higher cost for audit,
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consultancy and tax advisers, and higher IT operating spend for our newly implemented ERP system, offset by lower impairment losses in relation to the cancellation of our downstream production capacity at Pivot Park in Oss.
Cost of marketing and sales activities
Cost of marketing and sales activities increased $26.4 million, or 44.3% from $59.4 million for the year ended December 31, 2021 to $85.8 million for the year ended December 31, 2022. The increased costs are mainly related to the further expansion of the commercial organization and infrastructure in both the U.S.A. and Europe, in view of the anticipated launch of leniolisib in APDS upon approval by regulatory authorities.
Employee benefits
Employee benefits are included in research and development costs, general and administrative costs, and marketing and sales costs based on the nature of the services provided by each employee. Hence, the employee benefits are not presented in the Consolidated Statement of Income as a separate line-item but are separately disclosed in the Notes to the Annual Financial Statements.
Employee benefits increased by $7.6 million, or 12.5%, from $60.8 million for the year ended December 31, 2021 to $68.3 million for the year ended December 31, 2022. The increase was primarily driven by total salary expense as a result of total number of full time employees increased to 332 in 2022 from 285 in 2021 .
The following table summarizes employee benefits for the years ended December 31, 2022 and 2021.

Amounts in $ ‘00020222021
Salaries(53,328)(44,202)
Social security costs(6,317)(5,318)
Pension costs(2,284)(2,179)
Share-based compensation(6,392)(9,055)
Total(68,321)(60,754)
Fair value gain (loss) on revaluation
Fair value losses on revaluation increased by $1.3 million or 1139.5%. In 2022 the fair value loss of $1.2 million relates the investment in debt instruments designated as FVTPL while in 2021 the gain of $0.1 million is associated with derivatives designated as financial instruments at FVTPL.
Other finance income
Other finance income decreased by $10.4 million, or 69.9%, from $14.9 million for the year ended December 31, 2021 to $4.5 million for the year ended December 31, 2022. This decrease was primarily caused by fluctuations in the U.S. dollar versus Euro during 2022 and 2021. This had a particular impact on the bank balances in U.S. dollars, incorporated in our Dutch entities where the functional currency is Euro.
The following table summarizes our other finance income for the years ended December 31, 2022 and 2021.

Amounts in $ ‘00020222021
Interest income85 53 
Foreign currency results4,400 14,841 
Other financial income4,485 14,894 

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Other finance expenses
Other finance expenses decreased by $0.7 million, or 11.7%, from $6.2 million for the year ended December 31, 2021 to $5.5 million for the year ended December 31, 2022. This decrease is caused by currency translation effects of $0.7 million on the interest expense on the convertible bond and leases.
The following table summarizes our other finance expenses for the years ended December 31, 2022 and 2021.

Amounts in $ ‘00020222021
Interest loans and borrowings(4,736)(5,296)
Interest leases(622)(795)
Other financial expenses(105)(94)
Other financial expenses(5,463)(6,185)
Share of net profits (loss) in associates using the equity method
Share of net profits (loss) in associates using the equity method decreased $1.8 million, or 256.1%, from $0.7 million gain for the year ended December 31, 2021 to a $1.1 million loss for the year ended December 31, 2022. This is the result of decreased profits from BioConnection B.V.
Income tax expense
Income tax expense decreased by $5.8 million, or 81.5%, from $7.1 million for the year ended December 31, 2021 to $1.3 million for the year ended December 31, 2022. A lower profit before tax decreased income tax expenses by $1.9 million. The remaining decrease is mainly caused by an increase in non-taxable income of $2.3 million.
The following table summarizes Pharming’s income tax expense for the years ended December 31, 2022 and 2021.

Amounts in $ ‘00020222021
Total current tax expense(3,770)(1)
Total deferred tax expense2,457 (7,081)
Income tax expense(1,313)(7,082)
Comparison of the Year Ended December 31, 2021 and 2020
Revenues
Revenues decreased $13.3 million, or 6.3%, from $212.2 million for the year ended December 31, 2020 to $198.9 million for the year ended December 31, 2021. The decrease in revenues was primarily a result of lower sales of RUCONEST® in the U.S. market ($193.4 million and $202.7 million in 2021 and 2020 respectively). As previously announced, the progression of the COVID-19 pandemic has resulted in quarterly fluctuations in revenue due to limited access to customers and phasing of ordering patterns. In the U.S., there was a surge in COVID-19 cases at the end of 2020 and into 2021, which led to some patients pre-filling of RUCONEST® prescriptions in Q4 2020. It also resulted in the temporary closure of the majority of physician offices, causing a reduction in routine and diagnostic patient visits and a slowdown of annual renewals of prescriptions. The combination of these factors led to lower prescription refill rates by patients still using their additional RUCONEST® stock from Q4 2020 and a reduction in new patient enrollments in the first part of Q1 2021. During the remainder of the year, these trends were reversed, with a significant increase in new patient enrollments.
Revenues in Europe decreased to $4.9 million in 2021 (from $8.2 million in 2020). This decrease was mainly caused by phasing of ordering. The Company continues to build its EU commercial infrastructure and expand
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into new territories. In 2021, revenue in ROW (excluding Europe) decreased to $0.5 million (from $1.3 million in 2020).
Two U.S. customers (namely specialty wholesale companies) represent $156.6 million (79%) of our revenues in 2021. In 2021 the two U.S. customers represented $161.7 million (76%) of our revenues. These wholesale companies are specialized in distribution of pharmaceuticals in the HAE disease area.

Years ended December 31,
Amounts in $ ‘00020212020
U.S.193,419 202,684 
Europe4,933 8,232 
RoW519 1,258 
Total revenues198,871 212,174 
Cost of sales
Cost of sales decreased $2.4 million, or 10.2%, from $23.5 million for the year ended December 31, 2020 to $21.1 million for the year ended December 31, 2021. Costs of sales related to product sales in 2021 and 2020 amounted to $19.1 million and $23.5 million, respectively. The remainder of costs in 2021 ($2.0 million) stems from impairment charges on inventory designated for commercial activities. No such impairment charges were applicable for 2020.
The following table summarizes the cost of sales for the years ended December 31, 2021 and 2020.

Years ended December 31,
Amounts in $ ‘00020212020
Costs of sales (19,107)(23,539)
Obsolescence inventory impairments(2,035)— 
Total(21,142)(23,539)

Gross profit
Gross profit decreased $10.9 million, or 5.8%, from $188.6 million for the year ended December 31, 2020 to $177.7 million for the year ended December 31, 2021. This was primarily the result of a reduction in sales in the U.S. and EU and the accompanying decrease in cost of sales.
The following table summarizes the geographical breakdown of our gross profit for the years ended December 31, 2021 and 2020.

Years ended December 31,
Amounts in $ ‘00020212020
U.S.176,266 184,024 
Europe1,049 3,534 
RoW414 1,077 
Total gross profit177,729 188,635 
Other Income
Other income related to grants increased $0.8 million, or 43.2%, from $1.8 million for the year ended December 31, 2020 to $2.6 million for the year ended December 31, 2021. The grants are annual payroll-tax reimbursement granted by the Dutch and French governments for research and development activities actually conducted by us in those countries.
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Cost of research and development
Operating expenses for research and development increased $31.9 million, or 82.7%, from $38.5 million for the year ended December 31, 2020 to $70.4 million for the year ended December 31, 2021. The costs mainly relate to investments to in-license OTL-105, preparing for and initiating the clinical studies of rhC1INH in PE and AKI, phase 2/3 study for the treatment of activated Phosphoinositide 3-kinase Delta syndrome and clinical trials on COVID-19 using the Pharming technology. The increase in costs is primarily due to costs incurred for OTL-105 of $13.1 million, impairment losses of $4.7 million on intangible assets related to the development of RUCONEST® in a more convenient form for patients (refer to Note 9 to the consolidated Annual Financial Statements included elsewhere in this document). The remainder of the increase relates to increased payroll expenses and expenses for the clinical studies of rhC1INH in PE and AKIy, phase 2/3 study leniolisib.
Cost of general and administrative activities
Cost of general and administrative activities increased $12.9 million, or 53.5% from $24.1 million for the year ended December 31, 2020 to $37.0 million for the year ended December 31, 2021. The increased costs of general and administrative activities are mainly related to impairment losses of $5.4 million due to the cancellation of our downstream production capacity at Pivot park in Oss (refer to Note 10) and additional administration resources to support the growing commercial and operations activities of the Company and increased compliance and control costs relating to the recent U.S. Nasdaq listing.
Cost of marketing and sales activities
Cost of marketing and sales activities increased $7.8 million, or 15.2% from $51.6 million for the year ended December 31, 2020 to $59.4 million for the year ended December 31, 2021. The increased costs are mainly related to the further expansion of the commercial organization and infrastructure in both the U.S. and Europe.
Employee benefits
Employee benefits are included in research and development costs, general and administrative costs, and marketing and sales costs based on the nature of the services provided by each employee. Hence, the employee benefits are not presented in the Consolidated Statement of Income as a separate line-item but are separately disclosed in the Notes to the Consolidated Financial Statements below.
Employee benefits increased by $9.4 million, or 18.3%, from $51.4 million for the year ended December 31, 2020 to $60.8 million for the year ended December 31, 2021. The increase was primarily a result of the overall business growth across the Company.
The following table summarizes employee benefits for the years ended December 31, 2020 and 2021.

Amounts in $ ‘00020212020
Salaries(44,202)(36,811)
Social security costs(5,318)(4,302)
Pension costs(2,179)(1,844)
Share-based compensation(9,055)(8,405)
Total(60,754)(51,362)
Other finance income
Other finance income increased by $14.2 million, or 1983.1%, from $0.7 million for the year ended December 31, 2020 to $14.9 million for the year ended December 31, 2021. This increase was primarily due to the significant increase in the exchange rate of the U.S. dollar versus the Euro during 2021. Significant favorable currency effects ($14.8 million) were incurred on the cash balances in U.S. dollars.
The following table summarizes our other finance income for the years ended December 31, 2021 and 2020.

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Amounts in $ ‘00020212020
Interest income53715 
Foreign currency results14,841
Other financial income14,894715 
Other finance expenses
Other finance expenses decreased by $27.1 million, or 81.4%, from $33.3 million for the year ended December 31, 2020 to $6.2 million for the year ended December 31, 2021. This decrease was primarily due to the significant increase in the exchange rate of the U.S. dollar versus the Euro during 2021, as mentioned above in the section titled “Other finance income”. Furthermore, in 2020 settlement fees and expenses of $4.3 million were paid back and extinguished the loan from Orbimed Advisors completely. In 2021, no settlement fees were paid. Finally, the final milestone of the contingent consideration which formed part of the re-acquisition transaction for North American commercial rights for RUCONEST® was triggered in Q4 2020 and paid in the second quarter of 2021 with the relating finance expenses for 2021 decreasing by $3.7 million.
The following table summarizes our other finance expenses for the years ended December 31, 2021 and 2020.

Amounts in $ ‘00020212020
Loan settlement— (4,313)
Foreign currency results— (19,233)
Interest loans and borrowings(5,296)(5,178)
Interest leases(795)(766)
Contingent consideration— (3,744)
Other financial expenses(94)(74)
Other financial expenses(6,185)(33,308)
Share of net profits (loss) in associates using the equity method
Share of net profits (loss) in associates using the equity method increased $0.3 million, or 91.7%, from $0.4 million for the year ended December 31, 2020 to $0.7 million for the year ended December 31, 2021. This is the result of increased profits from BioConnection B.V.
Income tax expense
Income tax expense increased by $0.7 million, or 11.6%, from $6.3 million for the year ended December 31, 2020 to $7.1 million for the year ended December 31, 2021, despite a lower profit before tax for the year 2021 compared to 2020. The increase was caused by increased foreign tax rate differential of $— million, increased changes in non-taxable income of $3.1 million, increased changes in statutory applicable tax rate affecting the deferred tax expense of $2.3 million and other smaller differences of $0.6 million. These increases are offset by a lower taxable income of $5.3 million.
The following table summarizes Pharming’s income tax expense for the years ended December 31, 2021 and 2021.

Amounts in $ ‘00020212020
Total current tax expense(1)(1,208)
Total deferred tax (expense) benefit(7,081)(5,140)
Income tax credit (expense)(7,082)(6,348)


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Key Business and Non-GAAP Financial Measures
The success of Pharming is reflected in its operating and financial track record to date. We use EBIT, EBITDA, Adjusted EBITDA, Net Debt, and Operating Profit as measures to evaluate and manage our business on an ongoing basis. We believe these measures to be useful for investors to compare key financial data both within and across reporting periods. Specifically, we believe that EBIT, EBITDA, and Adjusted EBITDA provide investors with a supplemental measure of our operating performance and highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. Moreover, we believe that inclusion of Net Debt is appropriate to provide investors information on our ability to meet debt obligations by using cash and cash equivalents.
Some of these measures are not calculated in accordance with IFRS and we collectively refer to these as non-GAAP financial measures. These are defined as follows:
•EBIT – Earnings before interest and tax. Defined as profit for the year adjusted to exclude income tax (expense) and financial cost, net.
•EBITDA – Earnings before interest, tax, depreciation and amortization. Defined as profit for the year adjusted to exclude income tax (expense), financial cost, net and depreciation of property, plant and equipment and amortization of intangible assets.
•Adjusted EBITDA – Defined as profit for the year adjusted to exclude income tax (expense), financial cost, net, depreciation of property, plant and equipment, amortization of intangible assets and impairments of certain capitalized development expenses as defined.
•Net Debt – Defined as current loans and borrowings plus current and non-current convertible bonds minus cash and cash equivalents minus current and non-current restricted cash.
To provide investors with additional information regarding our financial results we have provided a reconciliation below of EBIT, EBITDA and Adjusted EBITDA to profit for the year, the most directly comparable IFRS financial measure.
We have included EBIT, EBITDA, and Adjusted EBITDA in our Annual Report because we believe these measures are useful for investors to compare key financial data both within and across reporting periods. Specifically, we believe that these measures provide investors with a supplemental measure of our operating performance and highlights trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business.
Our use of EBIT, EBITDA and Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under IFRS. Some of these limitations are:
•Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
•They do not reflect changes in, or cash requirements for, our working capital needs;
•They do not reflect tax payments that may represent a reduction in cash available to us; and
•Other companies, including companies in our industry, may calculate these measures differently, which reduces its usefulness as a comparative measure.
The table below presents a reconciliation of the non-GAAP measures to the measures disclosed in our Annual Report for the periods indicated:

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Years ended December 31,
Amounts in $ ‘000202220212020
Profit for the year13,674 15,996 37,746 
Income tax credit (expense)(1,313)(7,082)(6,348)
Financial (cost)/income, net(2,163)8,823 (32,524)
EBIT17,150 14,255 76,618 
Add: Depreciation & Amortization
6,305 6,390 6,052 
EBITDA23,455 20,645 82,670 
Add: Impairment(1)
4,376 10,438 — 
Adjusted EBITDA27,831 31,083 82,670 

(1) The impairment charge in 2022 of $4.4 million primarily consists of impairment charges related to Right-of-Use Asset for the downstream facility in Oss of $3.9 million. The impairment charge in 2021 of $10.4 million consists of impairment charges of $5.4 million related to the cancellation of the downstream facility is Oss and $5.0 million related to a halted development program for a new form variant of RUCONEST® and a deprioritized development track of alpha-galactosidase for Fabry’s disease. For further details, refer to Note 9 and 10 in the Annual Financial Statements included elsewhere in this Annual Report.
To provide investors with additional information regarding our financial results, we have disclosed in the table below Net Debt, a non-GAAP financial measure. We have provided a reconciliation below of Non-current convertible bonds to net debt, the most directly comparable IFRS financial measure. Net debt is a useful indicator of the Company’s indebtedness, financial flexibility and capital structure because it indicates the level of debt after taking account of cash and cash equivalents within the Company’s business that could be utilized to pay down the outstanding borrowings.

Years ended December 31,
Amounts in $ ‘000202220212020
Non-current convertible bonds131,618 139,007 149,727 
Add: Current convertible bonds1,768 1,879 2,040 
Less: Cash and cash equivalents(207,342)(191,924)(205,159)
Less: Current and non-current Restricted cash(1,312)(1,039)(1,505)
Net Debt (2)
(75,268)(52,077)(54,897)
(2) Discounted value as per the balance sheet.


B. Liquidity and Capital Resources
Liquidity and Capital Resources
Cash and cash equivalents (excluding restricted cash) amounted to $207.3 million, as at December 31, 2022. We have financed our operations primarily through sales of our commercial products and the proceeds of debt and equity offerings. We expect that our marketing and sales, research and development and general and administrative costs will increase for the foreseeable future as we continue commercializing our approved products and advancing the clinical development of our product candidates. We expect that our research and development and sales, general and administrative costs will increase in connection with conducting clinical trials for our product candidates and any new product candidates we acquire or develop and due to the costs of seeking marketing approval for our product candidates in Europe, the United States and other jurisdictions.
The 2022 year-end cash balance (excluding restricted cash) of $207.3 million is expected to fund our operations for more than twelve months from the date of this report. The receipts from commercial supply of product to our partners in Latin America, South Korea and Israel and proceeds from direct sales in the United States and Europe currently generate more cash than we require for day-to-day expenses and to supply those sales, and thus the surplus cash generated will support our capital expenditure plans and financial reserves further.
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Presently, however, no further assurance can be given on either the timing or size of future profits or whether consistent net profitability can be maintained on this basis. In addition, in the event that we need to raise capital by issuing additional shares, shareholders’ equity interests may be diluted as to voting power, and their interests as to value will depend on the price at which such issues are made. We see no further need to raise capital to support our current operations, but may take an opportunity to do so in either equity issue, through an expansion of the current convertible debt or to raise debt, or through a combination of such instruments, to support an acquisition or in-licensing of additional assets, if appropriate terms can be obtained that are in the best interests of shareholders.
Cash Flows
The table below provides selected cash flow information for the years ended December 31, 2022, 2021 and 2020.

Amounts in $’000202220212020
Net cash flows generated from operating activities22,458 37,842 83,626 
Net cash flows generated from (used in) investing activities5,323 (21,305)(15,629)
Net cash flows generated from (used in) financing activities(4,982)(27,947)60,686 
Exchange rate effects(7,381)(1,825)2,128 
Net change in cash and cash equivalents15,418 (13,235)130,811 
Operating Activities
Net cash flows generated from operating activities was $22.5 million and $37.8 million for the years ended December 31, 2022 and 2021. The decrease of $15.4 million was mainly related to a decrease in profit before tax of $8.1 million, a negative impact of changes in non-cash adjustment of $10.7 million, offset by a favorable impact of working capital changes of $4.6 million.
Net cash flows generated from operating activities was $37.8 million and $83.6 million for the years ended December 31, 2021 and 2020. The decrease of $45.8 million was mainly related to the decrease of operating profit to $13.6 million for the year ended December 31, 2021 from $76.3 million for the year ended December 31, 2020. This is in line with the lower revenues and increased operating costs for the year ended December 31, 2021.
Investing Activities
Net cash flows generated from investing activities was $5.3 million and $21.3 million for the years ended December 31, 2022 and 2021. This increase of $26.6 million was primarily due to the decrease in capital expenditures from $10.7 million in the year ended December 31, 2021 to an expenditure of $1.4 million for the year ended December 31, 2022. A cash inflow of $7.3 million was recognized in 2022 associated with the disposal of our position in BioConnection B.V.
Net cash flows used in investing activities was $21.3 million and $15.6 million for the years ended December 31, 2021 and 2020. This increase of $5.7 million was primarily due to increased capital expenditures of $10.7 million and $4.7 million for the years ended December 31, 2021 and 2020. These capital expenditures mainly related to investments in new production facilities, machinery and equipment.
Financing Activities
For financing activities, we saw a net cash outflow of $5.0 million for the year ended December 31, 2022, compared from a net cash outflow from financing activities of $27.9 million for the year ended December 31, 2021. This change of $23.0 million was primarily related to the absence of contingent consideration as compared to the $25.0 million paid in 2021 related to the acquisition of all North American commercialization rights for its own product RUCONEST® from Bausch. This was offset by a decrease of $2.4 million in the amount of equity proceeds and warrants in 2022 versus 2021. There were no new loans or borrowings in 2022.
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For financing activities, we saw a net cash outflow of $27.9 million for the year ended December 31, 2021, as opposed to a net cash inflow from financing activities of $60.7 million for the year ended December 31, 2020. This change of $88.6 million was primarily related to the absence of proceeds from the issuance of convertible bonds in January 2021 compared to the proceeds of $142.8 million in January 2020. In addition, in 2020, the Company repaid and extinguished the loan from Orbimed completely. No new loans and borrowings were entered into during 2021.

Sources of Liquidity
Convertible bonds
On January 21, 2020, the Company issued €125 million aggregate principal amount of 3.00% convertible bonds to be due in 2025. The net proceeds of the issue of the bonds were used to redeem the balance of $51.0 million of the loan of Orbimed Advisors in full. The remaining balance of the net proceeds is being used to support capital expenditure in relation to the expansion of our commercialization and manufacturing infrastructure and will also serve as a funding for the launch of leniolisib, as well as for additional acquisitions and in-licensing opportunities. The bonds were issued at par and bear interest at a rate of 3.00% per annum payable semi-annually in arrears in equal installments. Unless previously converted, redeemed or purchased and cancelled, the bonds will mature on January 21, 2025. We may use a combination of resources to repay the bond such as cash generated by operating activities, bank financing and bonds. The right mix will be established when we get closer to the maturity date of the bond.
The bonds are convertible into our ordinary shares at an initial conversion price of €2.0028. This initial conversion price is subject to customary adjustment provisions. The number of ordinary shares initially underlying the bonds is 62,412,622. Any adjustment to the conversion price resulting in an increase in the number of conversion shares may require the Company to obtain further authorization from our shareholders to issue shares, grant rights to subscribe for shares and exclude pre-emptive rights. The Company has the option to redeem all of the outstanding bonds together in cash at par plus accrued interest at any time, (a) if, on or after February 13, 2023, the parity value on each of at least 20 trading days in a period of 30 consecutive trading days shall have exceeded 130% of the principal amount, or (b) if, at any time, 85% or more of the aggregate principal amount of the bonds originally issued shall have been previously converted and / or repurchased and cancelled.
The convertible bonds are comprised of two components. The first component is a financial liability, which represents our contractual obligation to deliver cash or another financial asset for payment of interest and principal, if not converted. The second component is an equity instrument as it represents a written call option granting the holder the right, for a specified period of time, to convert it into a fixed number of our ordinary shares.
The fair value of the consideration in respect of the liability components is measured at the fair value of a similar liability that does not have any associated equity conversion option (IFRS 9 paragraph 5.1.1). This is the liability component’s carrying amount at initial recognition.
The equity component is measured at the residual difference between the nominal value and the fair value of a similar liability that does not have any associated equity conversion option (IAS 32 paragraph 31). The original equity component as recorded at initial recognition amounts to $1.6 million.

C. Research and Development, Patents and Licenses, etc.
Full details of our research and development activities and expenditures are given in Item 4 and under the description of the “Operating Results” in this Item 5 within this Annual Report.

D. Trend Information
See “Operating Results” in Item 5 of this Annual Report.


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E. Critical Accounting Estimates
Our Annual Financial Statements have been prepared in accordance with IFRS as issued by the IASB. In the application of accounting policies, certain judgments, estimates and assumptions about the value of assets and liabilities for which there is no definitive third-party reference were required. The estimates and associated assumptions are based on historical experience and other factors that were considered to be relevant. Actual results may differ from these estimates. These estimates and assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revisions and future periods if the revision affects both current and future periods. For a discussion of the estimates and assumptions used by us in the preparation of our financial statements, see Note 2 of our Annual Financial Statements for the year ended December 31, 2022.

Item 6. Directors, Senior Management and Employees

A. Directors and Senior Management

Board Structure
Since December 11, 2020, we had one-tier board structure, with a single board of directors consisting of executive directors and non-executive directors. Our Chief Executive Officer, or CEO, serves as our executive director.
Our management team is comprised of our executive directors together with our executive officers and be referred to as the Executive Committee.

Executive Officers and Directors
The following table sets forth information regarding our executive officers and directors, including their ages, as of December 31, 2022. Our executive directors are also executive officers.

NameAgePosition(s)Term Expiring
Executive Directors:
Sijmen de Vries, MD MBA63Chief Executive Officer, Chair Executive Committee2025
Executive Officers:
Anurag Relan50Chief Medical Officern/a
Jeroen Wakkerman53Chief Financial Officern/a
Mireille Sanders, MSc54Chief Operations Officern/a
Stephen Toor51Chief Commercial Officer and GM Americasn/a
Ruud van Outersterp58Chief Ethics and Compliance Officern/a
Non-Executive Directors:
Paul Sekhri (6)
64Chairperson2023
Deborah Jorn, MBA (2)(3)
64Vice Chairperson2023
Barbara Yanni (2)(6)
68Director2024
Mark Pykett (4)
59Director2024
Leonard Kruimer (1)
56Director2025
Jabine van der Meijs (2)(5)
56Director2025
Steven Baert (4)(6)(7)
48Director2025

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Notes:
(1) Chair of the Audit Committee
(2) Member of the Audit Committee
(3) Member of the Remuneration Committee (Chair until May 2022)
(4) Chair of the Remuneration Committee (since May 2022, Member until May 2022)
(5) Chair of the Corporate Governance Committee
(6) Member of the Corporate Governance Committee
(7) Member of the Remuneration Committee since 15 March 2023
Executive Directors
Sijmen de Vries, MD MBA. Dr. de Vries has been our CEO since 2008. Dr. de Vries was reappointed by the General Meeting of Shareholders held on May 19, 2021 for another term of four years, ending at the Annual General Meeting in 2025. Prior to joining Pharming, Dr. de Vries was the CEO of 4-Antibody and Morphochem AG. Dr. de Vries also held senior business and commercial positions at Novartis, Novartis Ophthalmics and at SmithKline Beecham Pharmaceuticals plc. Dr. de Vries holds an MD degree from the University of Amsterdam and an MBA in General Management from Ashridge Management College (UK). Dr. de Vries is on the Board of Directors of our fill & finish partner BioConnection and is also a non-executive director of Midatech Pharma plc.
Executive Officers
Anurag Relan. Prior to being appointed Chief Medical Officer in June 2021, Mr. Relan has been Vice President Clinical Research and Medical Affairs, having held several roles within the Company during the past 15 years. Prior to his work at Pharming, he was in clinical practice while also teaching medical residents and students. Mr. Relan holds an MD and MPH from the University of California, Los Angeles, and a bachelor’s degree in Economics from the University of California, Berkeley.
Jeroen Wakkerman. Mr. Wakkerman has been our CFO since November 2020. From 2015 to 2020, Mr. Wakkerman served as CFO of Nutreco N.V., a global leader in animal nutrition and aqua feed. Prior to that, Jeroen served as CFO of SHV Energy N.V., as finance director at Calor Gas (UK) and has also held several financial and commercial positions at Unilever and Rabobank. Jeroen holds an MSc degree in Business Economics from the University of Groningen and is a Chartered Treasurer (UK) and a Chartered Management Accountant (UK).
Mireille Sanders, MSc. Prior to being appointed Chief Operations Officer on December 15, 2020, Ms. Sanders served as our Senior Vice President, Operations since 2019. From 2016 until 2019, Ms. Sanders served as Head of Clinical Supply Chain Strategic Management and Systems at Janssen Pharmaceuticals, a Johnson & Johnson company. Prior to Janssen, Ms. Sanders held senior positions at MSD/Merck, from 2007 until 2015. She holds an MSc in Chemical Engineering from the Technical University Eindhoven in The Netherlands.
Stephen Toor. Mr. Toor was appointed Chief Commercial Officer (CCO) in 2020. He oversees Pharming’s U.S. and ex-U.S. operations and the company’s expansion to key markets and regions globally. Prior to that, Mr. Toor served as President and General Manager of Pharming Healthcare, Inc., our U.S. subsidiary, and also oversaw the broader Americas region. Mr. Toor has over 28 years’ experience leading and managing commercial operations, brand launches and portfolios (rare disease, biologics and small molecule) in the U.S., Europe and globally. His former companies include Pharmacia/Pfizer, Schering-Plough/Merck and Valeant/Bausch Health Companies. He holds a BA (Hons) in European and American History from the Manchester Metropolitan University in the U.K.
Ruud van Outersterp. Prior to being appointed Chief Ethics and Compliance Officer on May 1, 2021, Mr. van Outersterp served as our Company Secretary from April 1, 2020. Prior to joining Pharming, Mr. van Outersterp held several senior leadership positions at ABN AMRO and its predecessors, including the positions of Global Head of Legal and Company Secretary, and as senior legal counsel at the former Dutch aircraft manufacturer Fokker. Mr. van Outersterp is also a member of the supervisory board of a healthcare institution and is a teacher at the Governance University in Driebergen in The Netherlands. He earned a Master’s in Law from the Vrije Universiteit Amsterdam.

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Non-Executive Directors
Paul Sekhri. Mr. Sekhri has been the Chair of our Board of Directors (or the former Board of Supervisory Directors until December 2020) since 2016 and has served as a director since 2015. He was appointed the President and CEO and Director of vTv Therapeutics, Inc. in August 2022. Prior to joining vTv Therapeutics, Mr. Sekhri served as President and CEO of eGenesis, Inc. in 2019 and also served as President and CEO of Lycera Corp from February 2015 to December 2018. Between April 2014 and January 2015, Mr. Sekhri served as Senior Vice President, Integrated Care at Sanofi. From May 2013 to March 2014, Mr. Sekhri served as Group Executive Vice President, Global Business Development and Chief Strategy Officer for Teva Pharmaceutical Industries Ltd., or Teva. Before joining Teva, Mr. Sekhri spent five years as Operating Partner and Head of the Biotechnology Operating Group at TPG Biotech, the life sciences venture capital arm of TPG Capital. From 2004 to 2009, Mr. Sekhri was Founder, President, and CEO of Cerimon Pharmaceuticals, Inc., or Cerimon. Prior to founding Cerimon, Mr. Sekhri was President and Chief Business Officer of ARIAD Pharmaceuticals, Inc. Previously, Mr. Sekhri spent four years at Novartis, as Senior Vice President, and Head of Global Search and Evaluation, Business Development and Licensing for Novartis Pharma AG. Mr. Sekhri also developed the Disease Area Strategy for Novartis, identifying those specific therapeutic areas upon which the company would focus. His first role at Novartis was as Global Head, Early Commercial Development. Mr. Sekhri completed graduate work in Neuroscience at the University of Maryland School of Medicine, where he also received his BS in Zoology. Currently, he is Chair of the Board of Directors of Compugen Ltd. and Longboard Pharmaceuticals, and is on the Board of Axcella Therapeutics, eGenesis, Inc., Ipsen S.A., Spring Discovery, Inc., Veeva Systems, Inc. and Oryn Therapeutics. As an avid classical music enthusiast, Mr. Sekhri is on the Boards of the Metropolitan Opera, the Knights, and is the new Chair of the Board of Young Concert Artists (YCA).
Deborah Jorn, MBA. Ms. Jorn has been on the Board of Directors since 2019. From 2016 to 2018, she was Executive Vice President of Corporate and Commercial Development at Eyepoint Pharmaceuticals, or Eyepoint. Prior to joining Eyepoint, she was Executive Vice President and Group Company Chair at Bausch Health (formerly Valeant Pharmaceuticals) where she led the dermatology, gastroenterology, and HAE businesses. Ms. Jorn was Chief Global Marketing Officer at Bausch & Lomb prior to its acquisition in 2013 by Bausch Health where she led the launch of several new products and the integration of Ista Pharmaceuticals following acquisition. Previously, she was Group Vice President of Women’s Healthcare and Fertility (2008-2010) and Allergy and Respiratory (2004-2008) at Schering Plough Corporation prior to its acquisition by Merck and Co., Inc., or Merck. Ms. Jorn was also at Johnson & Johnson as the Worldwide Vice President of Internal Medicine and Early Commercial input. She began her career at Merck and for more than 20 years held roles of progressive responsibility in various functional areas including R&D, Regulatory and Sales and Marketing. She served as a member of the Board of Directors of Orexigen Therapeutics, Inc. from May 2016 until July 2018, for Diurnal Group in 2021 and 2022 and for Viveve Medical, Inc. until March 2023.
Barbara Yanni. Ms. Yanni has served as a director since December 2020. Ms. Yanni was Vice President and Chief Licensing Officer at Merck, a pharmaceutical company, from November 2001 until her retirement in March 2014. Prior to this, she served in various roles at Merck including in corporate development, financial evaluation, and tax. Currently, Ms. Yanni serves on the board of directors of three other public biotechnology companies: Oncorus, Inc., Trevena, Inc. and Vaccinex, Inc. She is also a member of the board of directors of Mesentech, Inc., a private Canadian biotechnology company. Ms. Yanni earned a J.D. from Stanford Law School and an A.B. from Wellesley College. She also holds a Master of Law in Taxation from New York University. Before joining Merck in 1985 Barbara was a tax lawyer in New York City.
Mark Pykett. Dr. Pykett has served as a director since December 2020 and is currently President and Chief Executive Officer of the biotechnology company Myrtelle Inc. Previously, he was the Chief Scientific Officer of PTC Therapeutics. Dr. Pykett was the President and CEO of Agilis Biotherapeutics, or Agilis, from 2014 until its acquisition by PTC Therapeutics in 2018. Prior to Agilis, Dr. Pykett served as CEO of Navidea Biopharmaceuticals, President of Alseres Pharmaceuticals, President of Cygenics, and President and CEO of Cytomatrix. Currently, Dr. Pykett serves on the Board of Directors of the private companies Myrtelle, InFlectis BioSciences and Exubrion Therapeutics. He holds a PhD in Molecular Biology from the University of Pennsylvania, a VMD from the University of Pennsylvania School of Veterinary Medicine, a B.A. in Biology from Amherst College, and an MBA from Northeastern University.

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Leonard Kruimer. Mr. Kruimer has more than 30 years of experience in corporate finance, planning, and strategy, including 20 years in senior executive positions in private and publicly listed biotechnology companies. Mr. Kruimer served as CFO of Crucell N.V., or Crucell, from 1997 to 2011. Prior to Crucell, he was Managing Director of Europe TIP Trailer, a GE Capital company. He was also a consultant with McKinsey & Co. and an auditor at Price Waterhouse & Company, New York. Mr. Kruimer is currently Chair of the Board at Swedish BioInvent International AB. In addition, he is a board member of both Zealand Pharma A/S in Copenhagen and Swiss based Basilea. Previously, he served as member of the Board of Directors for Calgary-based Oncolytics Biotech Inc. He is Director of AI Global Investments (Netherlands) PCC Ltd. and serves on the Investment Advisory Council of Karmijn Kapitaal. Mr. Kruimer holds a Master of Business Administration from Harvard Business School and is Certified Public Accountant in New York State.
Jabine van der Meijs. Mrs. van der Meijs has served as a Non-Executive Director since 2021. Prior to this, she served as the Executive Vice President & CFO of the Royal Schiphol Group (2017 - 2021) and worked for the Royal Dutch Shell Group for 25 years in primarily financial leadership positions, but also in HR and strategy positions in The Netherlands, Scotland, England, Brunei, and Australia. In her most recent position at Shell, she was VP Finance Projects for Shell’s Projects and Technology business. Mrs. van der Meijs is also a Non-Executive Director at V.Group Ltd (since 1 September 2022) and VFS Global AG (since 1 January 2023). Mrs. van der Meijs is a Member of the Supervisory Board of Koole Terminals Holding B.V. and a Member of the Board of Directors of Grundfos Holding A/S. Previously, Mrs. van der Meijs served as a Non-Executive Director on various boards, including Kendrion N.V., Aeroports de Paris (France) and Brisbane Airport Corporation.
Mrs. van der Meijs holds a Master of Science (Pharmacy) and a Doctor of Pharmacy (Pharm D) degree from the University of Utrecht, and she completed her professional accounting degree in the U.K. with the Chartered Institute of Management Accountants (ACMA).
Steven Baert. As of April 1, 2023, Steven Baert is the Chief People Officer and member of the Executive Committee of GE Vernova, the combined power and energy businesses of GE that are scheduled for a spin and public listing in Q1 2024. Prior to this, Steven Baert was managing director of Propuli LLC, a human capital advisory firm that provided advice to private equity and venture capital clients. From 2006 until 2021 Steven Baert worked for Novartis AG and served as Chief People Officer and member of the Executive Committee from 2024 until 2021 and held several leadership roles within that company, including Head of Human Resources for Emerging Growth Markets, Head of Human Resources, United States and Canada, and Global Head, Human Resources, Novartis Oncology. Prior to joining Novartis Oncology, Steven held senior HR positions at Bristol-Myers Squibb Co. and Unilever. Mr. Baert holds a Master of Business Administration from the Vlerick Business School, Gent, a Master of Laws from the Katholieke Universiteit Leuven and a Bachelor of Laws from the Katholieke Universiteit Brussels. Mr. Baert also serves on the Board of WeSeeHope USA, a charity that focuses on empowering children isolated by poverty in Africa.

B. Compensation
Overview of our Remuneration Policy
In accordance with Dutch law, the remuneration packages for the directors and executive officers are determined by the Board of Directors, without the involvement of the executive directors in the deliberations and decision-making concerning their own remuneration. The Board of Directors is authorized to determine the remuneration packages of the executive and non-executive directors in accordance with the remuneration policy that has to be adopted every four years by the General Meeting of Shareholders.
Before listing of our ADSs on Nasdaq, an updated remuneration policy, that has been aligned with the revised European Union Shareholder Rights Directive, or “SRD II”, and prevailing best practices, was adopted at the General Meeting of Shareholders. Arrangements in the form of shares or rights to subscribe for shares will each time remain subject to the approval of the shareholders at the General Meeting, notwithstanding the adopted policy.
Our remuneration policy has been designed to support our continuous efforts aimed at improving the overall performance, facilitating growth and sustainable success and enhancing the other long-term value and interests
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of our Company, providing remuneration packages that are competitive to attract the required executive and non-executive talent and expertise for reaching these objectives in accordance with the long-term strategy.
The remuneration policy is based on the overarching principle that the average level of total remuneration of both the executive directors and officers is consistent with the position of our Company relative to the benchmark groups that are relevant to us. A comparison with a peer group is periodically made. Every two years, an independent consultant makes a market comparison (remuneration benchmark). The peer group each time consists of a group of European and U.S. integrated and commercial stage listed companies active in Life Sciences, reflecting our Company’s operating areas and the markets most relevant in relation to the recruitment and retention of top talent, including the important U.S. market.
EU and U.S. benchmark group:
European peers (2022 and ongoing)U.S. peers (2022 and ongoing)
Allergy Therapeutics Worthing Innate Pharma MarseilleAerie Pharmaceuticals Karyopharm Therapeutics
Alliance Pharma ChippenhamMerus UtrechtAnika Therapeutics Ligand Pharmaceuticals
Autolus Therapeutics LondonMithra Pharmaceuticals LiègeClovis Oncology MannKind
Basilea Pharmaceutica BaselMyovant Sciences LondonCoherus BioSciencesRadius Health
Bavarian Nordic HellerupOxford Biomedica OxfordCollegium Pharmaceutical Rigel Pharmaceuticals
BioGaia StockholmuniQure AmsterdamEnanta Pharmaceuticals Supernus Pharmaceuticals
Biotest DreieichValneva Saint-HerblainHeron Therapeutics San Travere Therapeutics
Camurus LundZealand Pharma CopenhagenIntercept PharmaceuticalsVanda Pharmaceuticals
Cosmo Pharmaceuticals DublinIronwood Pharmaceuticals
A consistent and competitive remuneration structure, which applies across the workforce, is another core principle of our remuneration policy to promote a culture of shared purpose and performance, focusing all executive directors, executive directors and all staff members on delivering on our mission, vision and strategy and creating long-term stakeholder value.
We disclose information regarding remuneration paid to the executive and non-executive directors in our Annual Report of the Company, in line with the applicable rules and regulations. The remuneration amounts paid to executive officers are not required to be disclosed according to Dutch law. Total remuneration paid to the executive officers is $5.1 million.
Executive Directors and Officers
The remuneration packages of the executive directors and officers consist of:
•Fixed remuneration in the form of an annual base salary;
•Performance-based variable remuneration in the form of:
◦Short-term incentives, in the form of an annual bonus of cash as a percentage of the fixed component, and;
◦Long-term incentives, in the form of the grant of restricted shares; and
•Others benefits, including contribution of pension premiums, travel allowance and holiday allowance.
The respective fixed and variable remuneration elements are explained below:
Historical Remuneration
The following table reflects the remuneration amounts paid to the Executive Director in the year ended December 31, 2022:

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Amounts in $ ‘000Fixed remunerationShort-term variable: annual bonusShare-based paymentsPost-employment benefitsOtherTotal
Mr Sijmen de Vries, CEO and Executive Director6363941,221112342,396
The short-term variable bonus of $0.4 million in 2022 is based on the 2022 annual salary of $0.6 million, and is paid in 2023.
The remuneration amounts paid to executive officers, other than the above mentioned individual, are not required to be disclosed according to Dutch law and accordingly are not disclosed herein.
Share Option plan
The following table gives an overview of changes in option holdings of the Executive Director in 2022, the exercise prices and expiration dates:

January 1, 2022Granted 2022Exercised in 2022Forfeited/Expired in 2022December 31, 2022Exercise price ($)Expiration date
Dr. Sijmen de Vries2,800,000 — — — 2,800,000 0.859 5/22/2024
Total2,800,000 — — — 2,800,000 

Long Term Incentive Plan
The Executive Director was eligible to participate in our Company’s Long Term Incentive Plan, or LTIP, until 2019. Under the plan, participants receive shares in our Company, the number of which is dependent upon the performance of our share price over a three-year period when compared to a peer group of European biotech companies.
The below table reflects the number of LTIP/LTI shares granted and vested over the years from 2019 to 2022 for the CEO:

YearGrantedSettledForfeitedUnvestedReserved as at 31 December 2022
Dr. Sijmen de Vries20222,363,455 — — — 2,363,455
20211,337,888 — — — 1,337.888 
2020— — — — — 
2019201,050 (20,306)— (180,744)— 
An overview of the number of LTIP shares granted in 2022 and in total as well as the fair value per share award is as follows:

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Participant category2022
Non Executive members of the Board of Directors— 
Executive Members of the Board of Directors2,363,455 
Executive Committee5,816,083 
Senior managers— 
Total8,179,538 
Fair value per share award ($)0.517 
The following table provides an overview of LTIP shares granted, forfeited or issued from 2019 to 2022 as well as the number of LTIP shares reserved at December 31, 2022:

Participant categoryGrantedIssuedForfeited / UnvestedReserved at December 31, 2022
Non Executive members of the Board of Directors205,000(18,000)(187,000)—
Executive Members of the Board of Directors3,902,393(20,306)(180,744)3,701,343 
Executive Committee12,549,290(440,934)(3,260,738)8,847,618 
Senior managers3,572,500(180,616)(2,059,384)1,332,500 
Total20,229,183 (659,856)(5,687,866)13,881,461 
Current Year Remuneration
Fixed Compensation
The following table reflects the gross annual base salary (fixed remuneration) of the Executive Director/CEO paid in the financial year 2022:

PositionFixed remuneration amount ($ ‘000)Fixed remuneration amount (EUR ‘000)
CEO636603
Variable Compensation
The variable part of the remuneration of the executive directors and officers is linked to the performance of each of our officers and directors against a set of financial and non-financial targets that is consistent with and supportive of the strategy and long-term interests of our Company. Risk alignment is also embedded in the target setting to promote sound and effective risk management. At the end of the relevant performance period, the Board of Directors, without the participation of the executive directors for their performance, will determine whether the targets have been achieved. We provide in our Remuneration Report, included in each Annual Report, a retrospective explanation of actual performance against the objectives set for the preceding year. The components of variable compensation from 2020 onwards are set forth below.
Short-term Incentive
The individual on-target bonus for the CEO, as from the financial year 2020, has been set at 70% of the gross annual salary and for other executive directors and officers at 50% of the gross annual salary. A maximum on-target bonus of 140% of the gross annual salary applies to both the CEO and the executive officers.
Long-term Incentive
Executive directors and officers will also participate in the revised (Executive) Long Term Incentive, or LTI, program. Under this program, our ordinary shares are granted, subject to the achievement of predefined long-
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term strategy oriented performance objectives and targets, which apply a defined weighting, that have been set at the start of a three-year performance period. The performance objectives include the Total Shareholder Return (40% weighing) and the achievement of long-term strategy oriented objectives (60% weighing). The peer group used to determine the Total Shareholder Return is composed of the companies included in the AScX Index and the NASDAQ Biotechnology Index, represented by the IBB ETF, respectively, equally weighted.
For the executive directors, the on-target value of the (restricted) shares to be awarded under the LTI at the start of the performance period is set at 300% of the gross annual salary for the CEO and 200% for the other executive directors and officers. The maximum value of the shares that can vest under the LTI is set at 450% of the gross annual salary for the CEO and 300% for other executive directors and officers. Executive directors are required to retain the shares awarded under the LTI for a minimum of five years from the date of grant.
The implementation of the new three-year vesting scheme under the LTI program has a major impact on the current remuneration packages of existing executive directors and the executive officers for the period until 2023, as the first vesting of the shares granted to them is scheduled for the first quarter of 2024.
The share-based compensation under the existing packages and plans over this three-year period, based on the number of share options granted in 2019, would have resulted in three option grants, with guaranteed vesting of a total of 8,400,000 options for the CEO on the basis of continued tenure over the three-year period. In addition, the CEO would have been eligible for three annual long-term incentive plan restricted share grants of up to 30% of the base salary.
To mitigate the described impact, we have agreed to a one-off transition arrangement with the CEO as approved at the General Meeting of Shareholders held prior to the listing of the ADS on Nasdaq. This one-off transition arrangement provides for (i) the conversion of a total number of 8,400,000 options for the CEO into one grant for a total number of 4,200,000 shares, which vesting will be governed by the performance-based criteria of the new LTI program, and (ii) the vesting of the performance shares, granted to the CEO in 2020, in three annual tranches in the first quarter of 2021, 2022 and 2023. This arrangement will be subject to a waiver by the CEO of all (contractual and other) rights and entitlements under the share option and long-term incentive plans as of 2020. A similar one-off transition arrangement was agreed with the executive officers in 2021, as the first vesting of the shares granted to the executive officers under the new LTI plan is scheduled for the first quarter of 2024, while the executive officers are no longer entitled to the annual share options and the grant of LTIP shares effective in 2021. The restricted shares granted to the executive officers in 2021 under the one-off transition arrangement vested in two equal tranches in the first quarter of 2022 and in the first quarter of 2023, respectively.
Non-executive directors
The remuneration of the non-executive directors is fixed and not linked to the performance of our Company to ensure independence in the discharge of their supervisory tasks and responsibilities, in accordance with prevailing best practices. Until 2020, the members of the former Board of Supervisory Directors (the non-executive directors as of December 11, 2020) were entitled to participate in the Company’s LTIP scheme. From 2020 and onwards, the members of the former Board of Supervisory Directors will no longer participate in the LTIP.
Historical Remuneration of our non-executive directors
The below table provides an overview of the remuneration paid to the non-executives members of the former Board of Supervisory Directors, to the extent still in office, for the year ended December 31, 2022 . Note that the dollar compensation was translated using a yearly average exchange rate applicable for the year, which was was 1.0543 and 1.1860 in 2022 and 2021, respectively.
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Amounts in $ ‘000YearCashShare-Based PaymentTotal
Mr. Paul Sekhri202272 42 114 
202177 55 132 
20207459133
Mr. Barrie Ward2022— — — 
202123 20 43 
20206246108
Mr. Jan Hendrik Egberts2022— — — 
2021— — — 
2020— 55
Mr. Juergen Ernst2022— — — 
2021— 6 6 
2020574299
Mr. Aad de Winter2022— — — 
202126 21 47 
20206546111
Ms. Deborah Jorn202255 32 87 
202164 42 106 
20206240102
Ms. Barbara Yanni202253 32 85 
202160 36 96 
2020352459
Dr. Mark Pykett202250 3282 
202157 36 93 
2020352459
Ms. Jabine van der Meijs202257 3289 
202147 24 71 
2020— — — 
Mr. Leonard Kruimer202257 3289 
202147 24 71 
2020— — — 
Mr. Steven Baert202255 3287 
202145 24 69 
2020— — — 
Total2022399 234 633 
2021446 288 734 
2020390286676
Current Year Remuneration Non-Executive Directors
For 2020 and onwards, the non-executive directors are entitled to the following annual remuneration, taking into consideration their responsibilities and time commitment as members of the Company’s one tier board. Non-executive directors receive an annual retainer of €45,000 ($47,444) in cash and €30,000 ($31,629) of unrestricted shares. Our Chair of the Board of Directors will receive an annual retainer of €65,000 ($68,530) in cash and €40,000 ($42,172) in unrestricted shares. Share remuneration is valued at the 20-day VWAP preceding the Annual General Meeting of Shareholders, without further restrictions for grant.

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In addition, non-executive directors receive the following committee fees:
• Audit Committee: €3,000 ($3,163) per annum in cash (Chair €9,000 ($9,489));
• Remuneration Committee: €3,000 ($3,163) per annum in cash (Chair €6,000 ($6,326)); and
• Corporate Governance Committee: €3,000 ($3,163) per annum in cash (Chair €6,000 ($6,326)).
An additional compensation of €1,000 ($1,054) per day may be paid in case of extraordinary activities, as determined by the Chair of the Board of Directors.
The below table provides an overview of the total remuneration paid to the non-executives, to the extent still in office, for the year ended December 31, 2022. Note that the dollar compensation was translated using a yearly average exchange rate applicable for the year, which was 1.0543 in 2022.

Amounts in $ ‘000Fixed remunerationShare-based payment
Mr. Paul Sekhri7242
Ms. Deborah Jorn5532
Ms. Barbara Yanni5332
Dr. Mark Pykett5032
Ms. Jabine van der Meijs5732
Mr. Leonard Kruimer5732
Mr. Steven Baert5532

The non-executive directors do not have an individual employment contract with us and are not entitled to participate in any benefits offered to management and staff, including but not limited to pension plans. No loans or other financial commitments will be made by or on behalf of the Company to any non-executive director.
Share ownership
Executive directors are required to acquire and hold shares in our Company. For the CEO, the value of the shares held in the Company should at least equal 400% of his or her annual base salary. For other executive directors, the value of the shares held in the Company should at least equal 200% of their respective annual base salaries.
All executive directors may decide to accrue their required minimum shareholding over time by the vesting of after-tax performance shares from the LTI, without the requirement for own purchases, provided that the minimum shareholding is reached within five years following first appointment.
In accordance with the Dutch Corporate Governance Code, all shares in the Company held by the non-executive directors shall be a long-term investment.
Change of control
Following a change of control that has been approved by the General Meeting of Shareholders becoming unconditional, the executive directors will be entitled to pro-rata vesting of outstanding but unallocated shares for the performance period that has lapsed at that moment, subject to the achievement of the applicable performance measures and targets. The remaining shares will vest in accordance with the predetermined schedule (i.e. no accelerated vesting) subject to the achievement of the applicable performance measures and targets.
In case of an unsolicited change of control becoming unconditional, share-based incentive plans do not vest automatically as result of the change of control becoming unconditional.
In case of an event resulting in a change of control or in case of the announcement of a proposed formal public offer for the shares in the Company, the Board of Directors, without the participation of the executive directors, can decide to settle the allocated shares for the members of the Board of Directors in cash.
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Severance pay
The executive directors are entitled to severance pay, subject to the following conditions in accordance with the Dutch Corporate Governance Code and prevailing Dutch laws and regulations:
•The maximum severance pay is 100% of the fixed annual remuneration;
•Severance pay is not awarded in the event of failure;
•Severance pay that can be classified as variable is not awarded.
Neither fixed nor variable severance pay may be awarded in the following cases:
•If a relationship is terminated early at the executive director’s own initiative, except where this is due to serious culpable conduct or neglect on the part of the Company;
•In the event of serious culpable conduct or gross negligence on the part of the executive director in the performance of his or her role.
Non-executive directors shall resign in accordance with the retirement schedule as adopted by the Board of Directors. No notice period, severance pay or other or termination fees are applicable.

C. Board Practices

For an overview of the foreign private issuer exemptions applicable to our Company, we refer to Item 16G “Corporate Governance” in this Annual Report.

Committees of our Board of Directors
The Board of Directors has appointed from among its non-executive members an Audit Committee, a Remuneration Committee and a Corporate Governance Committee.
Audit Committee
During the financial year 2022, the Audit Committee consisted of Mr. Kruimer (Chairperson), Ms. Jorn, Ms. Yanni and Ms. van der Meijs. The composition of our Audit Committee is consistent with the best practice provisions of the DCGC and with applicable SEC and Nasdaq regulations. The Audit Committee supports the Board of Directors in monitoring and ensuring the integrity of the Company’s financial reporting. The committee related tasks and responsibilities include, without limitation:

•the supervision and monitoring of the financial accounting process;
•the monitoring of the effectiveness of the Company’s internal management system, internal audit system, and internal risk management and control systems;
•the review of intended material financial disclosures by the Company (including the Annual Report, quarterly results and the related draft press releases);
•the review of disclosures in applicable filings as required by the U.S. Securities Act of 1933, the Exchange Act and their related rules;
•the nomination for (re)appointment or dismissal of the external auditor, the monitoring of the external auditor’s independence and the annual evaluation of the external auditor’s performance;
•the review of the external auditor’s audit plan, management letters and audit report, respectively;
•the monitoring of the Company’s funding, application of information and communication technology by the Company, including risks relating to cybersecurity, and the Company’s tax policy.
The Audit Committee is governed by a charter that complies with applicable Nasdaq rules, which charter is available on our website at www.pharming.com.
Remuneration Committee
The composition of our Remuneration Committee is consistent with the best practice provisions of the DCGC, SEC and Nasdaq requirements. During the financial year 2022, the Remuneration Committee consisted of Ms. Jorn, Dr. Pykett and Mr. Baert. Ms. Jorn was the Chairperson of the Remuneration Committee until the closing of the Annual General Meeting, or AGM, held on May 18, 2022. Ms. Jorn transitioned the role of Chairperson to Mr. Baert at the AGM, but has remained an active member of the Remuneration Committee.The
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Remuneration Committee met six times in 2022 and two times in 2021, including a combined meeting with the Corporate Governance Committee on December 8, 2022. The meeting on October 25, 2022, was held in Warren, NJ. The other meetings were held virtually.
The Remuneration Committee is governed by a charter that complies with applicable Nasdaq rules, which charter is available on our website at www.pharming.com.
Corporate Governance Committee
During the fiscal year of 2022, the Corporate Governance Committee consisted of Ms. van der Meijs (Chairperson), Mr. Sekhri, Ms. Yanni and Mr. Baert. The composition of our Corporate Governance Committee is consistent with the best practice provisions of the DCGC, SEC and Nasdaq requirements. The main tasks performed by the Corporate Governance Committee include monitoring our compliance with the DCGC and corporate governance-related laws and regulations, monitoring and evaluating the functioning of the Board of the Directors, its committees and individual members and the recruitment and selection for nomination of new Directors (if applicable).
The Corporate Governance Committee met four times in 2022 and two times in 2021, including a combined meeting with the Remuneration Committee on December 8, 2022. The meeting on October 25, 2022 was held in Warren, NJ. The other meetings were held virtually.
The Corporate Governance Committee is governed by a charter that complies with applicable Nasdaq rules, which charter is available on our website at www.pharming.com. The charter was evaluated in 2022 and the updated charter was approved on July 11, 2022.

D. Employees
Throughout the year 2022, we employed an average full time equivalent of 332 people, compared to 277 and 229 employees for 2021 and 2020, respectively. The increase in employees in the period from 2020 to 2022 aligns with the growth that the business demonstrated. Our business involves specific high-technology processes and requires the employment of highly skilled and motivated personnel. Therefore, it is important for us to create an attractive work environment that retains and motivates a diverse range of personnel and attracts talent in a competitive and global marketplace. None of our employees are represented by any collective bargaining unit.

Average full time equivalent202220212020
The Netherlands198186145
France191614
Germany112
Italy1— — 
United Kingdom1053
United States1027766
Total332285229
Average full time equivalent
General and administrative696043
Research and development 186169136
Marketing and sales775650
Total332285229

E. Share Ownership
The share ownership information with respect to Board of Directors and Executive Committee is presented in Item 7 below.

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F. Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation
Not Applicable.

Item 7. Major Shareholders and Related Party Transactions

A. Major Shareholders
The below table sets forth information with respect to the beneficial ownership of our ordinary shares as of March 31, 2023 by:
•each person, or group of affiliated persons, that beneficially owns 5% or more of our outstanding ordinary shares;
•each of our directors and executive officers; and
•all of our directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities and include ordinary shares that can be acquired within 60 days of March 31, 2023. Percentage ownership calculations are based on 656,348,225 ordinary shares issued and outstanding as of March 31, 2023, plus, consistent with SEC rules on disclosure of beneficial ownership, ordinary shares that can be acquired within 60 days of March 31, 2023.
Except as otherwise indicated, all of the ordinary shares reflected in the table are ordinary shares and all persons listed below have sole voting and investment power with respect to the ordinary shares beneficially owned by them, subject to applicable community property laws. The information is not necessarily indicative of beneficial ownership for any other purpose. Except as otherwise indicated in the table below, addresses of the directors, executive officers and named beneficial owners are in care of Pharming Group N.V, Darwinweg 24, 2333 CR Leiden, The Netherlands.
As of March 31, 2023, there were no persons known to us to be the beneficial owner of more than five percent (5%) of each class of our common shares issued and outstanding.
The voting rights of our major shareholders do not differ from the voting rights of holders of our common shares who are not major shareholders.
The following table sets forth the number of our issued and outstanding common shares that are held (beneficially owned) by record holders of March 31, 2023:

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Name of Beneficial OwnerNumber of Ordinary Shares Beneficially Percentage of Ordinary Shares Beneficially Owned
Executive Officers and Executive Directors:15,452,443.00 2.35%
Sijmen de Vries, MD MBA (1)10,941,383.00 1.66%
Mireille Sanders, MSc (2)1,385,896.00 *
Stephen Toor (3)1,523,280.00 *
Jeroen Wakkerman (4)707,361.00 *
Anurag Relan (5)735,927.00 *
Ruud van Outersterp (6)158,596.00 *
Non-Executive Directors:977,731.00 *
Paul Sekhri (7)495,400.00 *
Deborah Jorn, MBA (8)105,800.00 *
Barbara Yanni (9)90,209.00 *
Mark Pykett (9)90,209.00 *
Jabine van der Meijs (10)65,371.00 *
Leon Kruimer (10)65,371.00 *
Steven Baert (10)65,371.00 *
.
*Represents beneficial ownership of less than one percent.
(1) Consists of 8,141,383 ordinary shares held as of April 1, 2023 and 2,800,000 exercisable share options.
(2) Consists of 260,896 ordinary shares held as of April 1, 2023 and 1,125,000 exercisable share options.
(3) Consists of 385,780 ordinary shares held as of April 1, 2023 and 1,137,500 exercisable share options.
(4) Consists of 257,361 ordinary shares held as of April 1, 2023 and 450,000 exercisable share options.
(5) Consists of 285,927 ordinary shares held as of April 1, 2023 and 450,000 exercisable share options.
(6) Consists of 78,596 ordinary shares held as of April 1, 2023 and 80,000 exercisable share options.
(7) Consists of 495,400 ordinary shares held as of April 1, 2023.
(8) Consists of 105,800 ordinary shares held as of April 1, 2023.
(9) Consists of 90,209 ordinary shares held as of April 1, 2023.
(10) Consists of 65,371 ordinary shares held as of April 1, 2023
We estimate that as of March 31, 2023, approximately 9.1% of our outstanding ordinary shares are held by 20 institutional U.S. record holders.

B. Related Party Transactions
We have engaged in the following transactions with our directors, executive officers or holders of more than 10% of our outstanding share capital and their affiliates, which we refer to as our related parties. For further details on related party transactions with our directors or executive officers please refer to the Management section.

Transactions with BioConnection
We enter into transactions with BioConnection B.V., our fill and finish partner, in the ordinary course of business. Following a restructuring in 2022, we are holding a stake of 22.98% in BioConnection. For the years ended December 31, 2022, 2021 and 2020, we paid BioConnection $3.0 million, $3.5 million and $3.0 million respectively, for fill and finish services. At December 31, 2022, the Company was owed $0.5 million from Bioconnection for fill & finish services supplied. At December 31, 2021 the Company owed $0.1 million to Bioconnection for fill & finish services.

Agreements with Our Executive Officers and Directors
We have entered into management contracts with certain executive officers (including our executive directors), while the other executive officers are employed by us. We have service contracts with certain non-executive directors. These agreements contain customary provisions and representations, including confidentiality, non-competition, non-solicitation and inventions assignment undertakings by the executive officers. However, the enforceability of the non-competition provisions may be limited under applicable law.
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Indemnification Agreements
The Articles of Association include an indemnity in favor of all Board members and Executive Officers. We entered into indemnity agreements with each of our directors and executive officers in connection with the listing of our ADSs on Nasdaq, in line with the indemnity included in our Articles of Association. The indemnity agreements and our Articles of Association require us to indemnify our directors and executive officers to the fullest extent permitted by law.
The contract with Dr. de Vries includes a third party indemnity arrangement. The service contracts with our non-executive directors, except for Mr. Sekhri, include a general indemnity.
The employment agreements with Mrs. Sanders, Mr. Toor, Mr.Wakkerman and Mr. van Outersterp do not include a contractual indemnity (and third party liability claims are therefore governed by the applicable law).

Related Party Transactions Policy
In connection with our listing on Nasdaq, we adopted a related party transaction policy, or the Related Person Policy, requiring that all related party transactions required to be disclosed by a foreign private issuer pursuant to the Exchange Act be approved by our Board of Directors or a designated committee thereof consisting solely of independent directors, including the Audit Committee. Our Board of Directors has also established an internal procedure to periodically assess whether related party transactions (as defined under Dutch law) are entered into in the ordinary course of business and under normal market conditions. In addition, under Dutch law, we are required to disclose material transactions with a related party (as defined under Dutch law and subject to certain exceptions) that were not entered into in the ordinary course of business and/or not under normal market conditions at the time the transaction was entered into and such transactions shall be subject to the approval of our Board of Directors.
In December 2022, the Audit Committee conducted its annual review of the existing related person transactions within the meaning of the Company’s Related Person Policy. The Audit Committee concluded, based on the gathered information, that (i) each of the transactions in scope of that policy was entered into in the ordinary course of business, and (ii) without the involvement of the relevant related persons. Accordingly, the Audit Committee ratified these transactions in accordance with the prevailing policy.

C. Interests of Experts and Counsel
Not applicable.

Item 8. Financial Information

A. Consolidated Statements and Other Financial Information.

Consolidated Financial Statements
Our consolidated financial statements are included at the end of this Annual Report, starting at page F-1. See “Item 17 — Financial Statements”.

Legal Proceedings
From time to time, we may become involved in litigation or other legal proceedings relating to claims arising from the ordinary course of business.
We successfully defended against a claim by the French Committee for Health Care Products to refund approximately €750,000 in connection with sales of RUCONEST® in 2018. The Administrative Tribunal in Paris rejected this claim in May 2022.
Currently we are not a party to any material legal or administrative proceedings.

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Dividend Distribution Policy
We have never declared or paid any dividends on our ordinary shares since our ordinary shares were listed on Euronext Amsterdam. We intend to retain any earnings for use in our business and do not currently intend to pay dividends on our ordinary shares. We may only pay dividends or distributions from our reserves to the extent our shareholders’ equity (eigen vermogen) exceeds the sum of our paid-up and called-up share capital plus the reserves we must maintain by Dutch law or by our Articles of Association from time to time and (if it concerns a distribution of profits) after adoption of the annual accounts by our general meeting from which it appears that such distribution is allowed. Subject to such restrictions, any future determination to pay dividends or other distribution will be at the discretion of our Board of Directors and will depend upon a number of factors, including our results of operations, cash requirements, financial condition, future prospects, contractual restrictions, any future debt agreements, restrictions under applicable laws and other factors that our Board of Directors may deem relevant.
Under our Articles of Association (see “Management – Board Structure” for additional information), our Board of Directors may decide that all or part of our profits shall be added to our reserves and any remaining profit will be at the disposal of the general meeting at the proposal of our Board of Directors for distribution on our ordinary shares, subject to restrictions of Dutch law. Our Board of Directors is permitted, subject to certain requirements, to declare interim dividends without the approval of the general meeting.

B. Significant Changes
Not applicable.

Item 9. The Offer and Listing

A. Offer and Listing Details
Since December 22, 2020, our ADSs, each representing ten ordinary shares of Pharming Group N.V., have been quoted on the Nasdaq Global Market under the symbol “PHAR”. Since December 21, 2009, our ordinary shares of Pharming Group N.V. have been quoted on Euronext Amsterdam under the symbol “PHARM”.

B. Plan of Distribution
Not applicable.

C. Markets
Our ADSs, each representing ten ordinary shares of Pharming Group N.V., are listed on the Nasdaq Global Market under the symbol “PHAR”.
Our ordinary shares are currently traded on Euronext Amsterdam under the symbol “PHARM”.

D. Selling Shareholders
Not applicable.

E. Dilution.
Not applicable.

F. Expenses of the Issue.
Not applicable.

Item 10. Additional Information

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A. Share Capital
Not applicable.
B. Memorandum and Articles of Association
We incorporate by reference into this Annual Report the description of our Articles of Association effective upon the closing of our initial public offering contained in our F-1 registration statement (File No.333-250984) originally filed with the SEC on December 17, 2020, as amended. Such description sets forth a summary of certain provisions of our Articles of Association as currently in effect.

C. Material Contracts

Material Agreements
Novartis Development Collaboration and License Agreement
On August 12, 2019, we entered into a License Agreement, or the Novartis License Agreement, with Novartis, pursuant to which Novartis granted to us an exclusive license to develop and commercialize leniolisib (CDZ173), a small molecule phosphoinositide 3-kinase delta, or PI3Kδ, inhibitor being developed by Novartis to treat patients with APDS. Under the terms of the Novartis License Agreement, the license is exclusive even as to Novartis and its affiliates, and we are permitted to sublicense the exclusive license. Effective May 8, 2020, Novartis merged into Novartis Pharma AG. As a result, all assets and liabilities of Novartis, including the Novartis License Agreement, became assets and liabilities of Novartis Pharma AG.
Under the terms of the Novartis License Agreement, we made an upfront payment of $20 million to Novartis in August 2019. Novartis has completed all the preclinical and clinical work to date and will continue to run the ongoing open label extension study. We will plan to commercialize leniolisib through our existing commercial infrastructure in the United States and Europe and expect to look for ways to make the drug available in other markets worldwide. Pursuant to the agreement, we agreed to make certain milestone payments to Novartis in an aggregate amount of up to $200 million upon (i) the completion of certain regulatory milestones and (ii) the achievement of certain leniolisib sales milestones. We also agreed to make tiered royalty payments to Novartis, calculated as low double-digit to high-teen percentage of net sales of leniolisib.
The Novartis License Agreement will terminate on a licensed product-by-licensed product and country-by-country basis upon the expiration of the royalty term for such licensed product in such country, and will terminate in its entirety upon the expiration of the royalty term with respect to the last licensed product then being developed, manufactured or commercialized in all countries of the territory. The royalty term ends on the last to occur of (i) the expiration of the last to expire valid claim of the licensed patents that covers such licensed product in such country; (ii) the expiration of any regulatory exclusivity for such licensed product in such country; or (iii) the ten (10) year anniversary of the first commercial sale of the licensed product in such country. Either party may terminate the agreement upon a material breach by the other party that is not cured within a specified period after receiving written notice. We have the right to terminate the agreement for any reason upon specified prior written notice to Novartis.
Orchard Research Collaboration and License Agreement
On July 1, 2021, we entered into a strategic collaboration with Orchard, to research, develop, manufacture and commercialize OTL-105, an investigational HSC, gene therapy for the treatment of HAE. Under the terms of the collaboration we were granted worldwide rights to OTL-105 and will be responsible for clinical development, regulatory filings and commercialization of the investigational gene therapy, including associated costs. Orchard will support the completion of IND-enabling activities and oversee manufacturing of OTL-105 during pre-clinical and clinical development, which will be funded by us. In addition, both companies will explore the application of non-toxic conditioning regimen for use with OTL-105 administration. We paid an upfront payment of $17.5 million comprising of $10 million in cash and a $7.5 million equity investment at a premium to Orchard’s share price. Orchard is also eligible to receive up to $189.5 million in development, regulatory and sales milestones as well as mid-single to low double-digit royalty payments on future worldwide sales.
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D. Exchange Controls
Under the existing laws of The Netherlands, there are no exchange controls applicable to the transfer to persons outside of The Netherlands of dividends or other distributions with respect to, or of the proceeds from the sale of, shares of a Dutch company, subject to applicable restrictions under sanctions and measures, including those concerning export control, pursuant to EU regulations, the Sanctions Act 1977 (Sanctiewet 1977) or other legislation, applicable anti-boycott, anti-money-laundering or anti-terrorism regulations and similar rules. There are no special restrictions in the Articles of Association or Dutch law that limit the right of shareholders who are not citizens or residents of The Netherlands to hold or vote shares.

E. Taxation

MATERIAL INCOME TAX CONSIDERATIONS
The following summary contains a description of material Dutch and U.S. federal income tax considerations of the acquisition, ownership and disposition of our ordinary shares or ADSs. This summary should not be considered a comprehensive description of all the tax considerations that may be relevant to the decision to acquire ADSs representing our ordinary shares.

Material U.S. Federal Income Tax Considerations for U.S. Holders
The following is a description of the material U.S. federal income tax considerations to the U.S. Holders described below of owning and disposing of our ordinary shares or ADSs. It is not a comprehensive description of all tax considerations that may be relevant to a particular person’s decision to acquire securities. This discussion applies only to a U.S. Holder that holds our ordinary shares or ADSs as a capital asset within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended, or the Code, for tax purposes (generally, property held for investment). In addition, it does not describe all of the tax considerations that may be relevant in light of a U.S. Holder’s particular circumstances, including state and local tax considerations, any U.S. federal non-income tax considerations such as estate or gift tax considerations, alternative minimum tax considerations, the Medicare contribution tax on net investment income, the special tax accounting rules under Section 451 (b) of the Code, and tax considerations applicable to U.S. Holders subject to special rules, such as:
•banks, insurance companies, and certain other financial institutions;
•U.S. expatriates and certain former citizens or long-term residents of the United States;
•dealers or traders in securities who use a mark-to-market method of tax accounting;
•persons holding ordinary shares or ADSs as part of a hedging transaction, “straddle,” wash sale, conversion transaction or integrated transaction or persons entering into a constructive sale with respect to ordinary shares or ADSs;
•persons whose “functional currency” for U.S. federal income tax purposes is not the U.S.     dollar;
•brokers, dealers or traders in securities, commodities or currencies;
•tax-exempt entities or government organizations;
•S corporations, partnerships, or other entities or arrangements classified as partnerships or pass-throughs for U.S. federal income tax purposes (and investors therein);
•tax-qualified retirement plans;
•regulated investment companies, real estate investment trusts, corporations that accumulate income to avoid U.S. federal income tax;
•persons who acquired our ordinary shares or ADSs pursuant to the exercise of any employee stock option or otherwise as compensation;
•persons that own or are deemed to own (including by attribution) ten percent or more of our shares (by vote or value); and
•persons holding our ordinary shares or ADSs in connection with a trade or business, permanent establishment, or fixed base outside the United States.
If an entity or arrangement that is classified as a partnership for U.S. federal income tax purposes holds ordinary shares or ADSs, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. Partnerships holding ordinary shares or ADSs and partners in such
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partnerships are encouraged to consult their tax advisers as to the particular U.S. federal income tax considerations of holding and disposing of ordinary shares or ADSs.
The discussion is based on the Code, administrative pronouncements, judicial decisions, final, temporary and proposed Treasury Regulations, and the income tax treaty between The Netherlands and the United States, or the Treaty, all as of the date hereof, changes to any of which may affect the tax consequences described herein—possibly with retroactive effect.
A “U.S. Holder” is a holder who, for U.S. federal income tax purposes, is a beneficial owner of ordinary shares or ADSs who is eligible for the benefits of the Treaty and is:
•an individual who is a citizen or resident of the United States;
•a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state therein or the District of Columbia;
•an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
•a trust if (a) a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust or (b) the trust has a valid election to be treated as a U.S. person under applicable U.S. Treasury Regulations.
U.S. Holders are encouraged to consult their tax advisers concerning the U.S. federal, state, local and non-U.S. tax consequences of owning and disposing of our ordinary shares or ADSs in their particular circumstances. The discussion below assumes that the representations contained in the deposit agreement are true and that the obligations in the deposit agreement and any related agreement will be complied with in accordance with their terms. Generally, a holder of an ADS should be treated for U.S. federal income tax purposes as holding the ordinary shares represented by the ADS. Accordingly, no gain or loss will be recognized upon an exchange of ADSs for ordinary shares.
Passive Foreign Investment Company Rules
A non-U.S. corporation will be classified as a PFIC, for any taxable year in which, after applying certain look-through rules, either:
•at least 75% of its gross income is passive income (such as interest income); or
•at least 50% of its gross assets (determined on the basis of a quarterly average) is attributable to assets that produce passive income or are held for the production of passive income (including cash).
•For this purpose, cash is a passive asset and passive income generally includes dividends, interest, royalties and rents (other than royalties and rents derived in the active conduct of a trade or business and not derived from a related person). For purposes of this test, we will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation, the equity of which we own, directly or indirectly, 25% or more (by value).
Based on the estimated composition of our income, assets, operations and market capitalization for 2022, we do not believe that we were classified as a PFIC for U.S. federal income tax purposes for the taxable year ending December 31, 2022. However, no assurances can be provided that we will not be a PFIC for the current or any future taxable year or that we have not been a PFIC in any prior taxable years. The determination of whether we are a PFIC is a fact-intensive determination made on an annual basis and the applicable law is subject to varying interpretation. In particular, the characterization of our assets as active or passive may depend in part on our current and intended future business plans, which are subject to change. In addition, for our current and future taxable years, the total value of our assets for PFIC testing purposes may be determined in part by reference to the market price of our ordinary shares or ADSs from time to time, which may fluctuate considerably. Under the income test, our status as a PFIC depends on the composition of our income which will depend on a variety of factors that are subject to uncertainty, including the characterization of certain intercompany payments and payments from tax authorities, transactions we enter into in the future and our corporate structure. Even if we were to determine that we are not a PFIC for a taxable year, there can be no assurance that the IRS would not successfully challenge our position. Accordingly, our U.S. counsel expresses no opinion with respect to our PFIC status for any prior, current or future taxable year.
If we are classified as a PFIC in any year with respect to which a U.S. Holder owns the ordinary shares or ADSs, we will continue to be treated as a PFIC with respect to such U.S. Holder in all succeeding years during which the U.S. Holder owns the ordinary shares or ADSs, regardless of whether we continue to meet the tests
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described above unless (a) we cease to be a PFIC and the U.S. Holder has made a “deemed sale” election under the PFIC rules, or (b) the U.S. Holder (i) makes a “QEF Election” (defined below) or (ii) is eligible to make and makes a mark-to-market election (as described below), with respect to all taxable years during such U.S. Holder’s holding period in which we are a PFIC. If such a deemed sale election is made, a U.S. Holder will be deemed to have sold the ordinary shares or ADSs the U.S. Holder holds at their fair market value as of the date of such deemed sale and any gain from such deemed sale would be subject to the rules described below. After the deemed sale election, so long as we do not become a PFIC in a subsequent taxable year, the U.S. Holder’s ordinary shares or ADSs with respect to which such election was made will not be treated as shares in a PFIC and the U.S. Holder will not be subject to the rules described below with respect to any “excess distribution” the U.S. Holder receives from us or any gain from an actual sale or other disposition of the ordinary shares or ADSs. U.S. Holders should consult their tax advisers as to the possibility and consequences of making a deemed sale election if we cease to be a PFIC and such election becomes available.
For each taxable year we are treated as a PFIC with respect to U.S. Holders, U.S. Holders will be subject to special tax rules with respect to any “excess distribution” such U.S. Holder receives and any gain such U.S. Holder recognizes from a sale or other disposition (including a pledge) of ordinary shares or ADSs, unless (a) such U.S. Holder makes a “qualified electing fund” election, or QEF Election, with respect to all taxable years during such U.S. Holder’s holding period in which we are a PFIC, or (b) our ordinary shares or ADSs constitute “marketable stock” and such U.S. Holder makes a mark-to-market election (as discussed below). Distributions a U.S. Holder receives in a taxable year that are greater than 125% of the average annual distributions a U.S. Holder received during the shorter of the three preceding taxable years or the U.S. Holder’s holding period for the ordinary shares or ADSs will be treated as an excess distribution. Under these special tax rules:

•the excess distribution or gain will be allocated ratably over a U.S. Holder’s holding period for the ordinary shares or ADSs;
•the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we became a PFIC, will be treated as ordinary income; and
•the amount allocated to each other year will be subject to the highest tax rate in effect for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.
The tax liability for amounts allocated to years prior to the year of disposition or “excess distribution” cannot be offset by any net operating losses for such years, and gains (but not losses) realized on the sale of the ordinary shares or ADSs cannot be treated as capital gains, even if a U.S. Holder holds the ordinary shares or ADSs as capital assets.
If we are a PFIC, a U.S. Holder will generally be subject to similar rules with respect to distributions we receive from, and our dispositions of the stock of, any of our direct or indirect subsidiaries that also are PFICs, as if such distributions were indirectly received by, and/or dispositions were indirectly carried out by, such U.S. Holder. U.S. Holders should consult their tax advisers regarding the application of the PFIC rules to our subsidiaries.
If a U.S. holder makes a QEF Election covering all taxable years during which the holder holds ordinary shares and in which we are a PFIC, distributions and gains will not be taxed as described above. If a U.S. Holder makes an effective QEF Election, the U.S. Holder will be required to include in gross income each year, whether or not we make distributions, as capital gains, such U.S. Holder’s pro rata share of our net capital gains and, as ordinary income, such U.S. Holder’s pro rata share of our earnings in excess of our net capital gains. If a U.S. holder makes a QEF Election with respect to us, any distributions paid by us out of our earnings and profits that were previously included in the U.S. holder’s income under the QEF Election would not be taxable to the holder. A U.S. holder will increase its tax basis in its ordinary shares by an amount equal to any income included under the QEF Election and will decrease its tax basis by any amount distributed on the ordinary shares that is not included in the holder’s income. If a U.S. holder has made a QEF Election with respect to its ordinary shares, any gain or loss recognized by the U.S. holder on a sale or other disposition of such ordinary shares will constitute capital gain or loss. In addition, if a U.S. holder makes a timely QEF Election, our ordinary shares will not be considered shares in a PFIC in years in which we are not a PFIC, even if the U.S. holder had held ordinary shares in prior years in which we were a PFIC. However, a U.S. Holder can only make a QEF Election with respect to ordinary shares or ADSs in a PFIC if such company agrees to furnish such U.S. Holder with certain tax information annually. We do not currently expect to provide such information in the event that we are classified as a PFIC.
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If we are a PFIC in any taxable year with respect to which a U.S. Holder owns our ordinary shares or ADSs, such U.S. Holders can avoid the interest charge on excess distributions or gain relating to our ordinary shares or ADSs by making a mark-to-market election with respect to the ordinary shares or ADSs, provided that the ordinary shares or ADSs are “marketable stock.” Ordinary shares or ADSs will be marketable stock if they are “regularly traded” on a “qualified exchange”. For these purposes, the ordinary shares or ADSs will be considered regularly traded during any calendar year during which they are traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. Any trades that have as their principal purpose meeting this requirement will be disregarded. Our ADSs (but not ordinary shares) are listed on the Nasdaq, which is a qualified exchange for these purposes. Consequently, if our ADSs remain listed on the Nasdaq and are regularly traded, we expect the mark-to-market election would be available to U.S. Holders of our ADSs if we are a PFIC. Each U.S. Holder should consult its tax advisor as to whether a mark-to-market election is available or advisable with respect to our ordinary shares or ADSs.
A U.S. Holder that makes a mark-to-market election must include in ordinary income for each year an amount equal to the excess, if any, of the fair market value of our ordinary shares or ADSs at the close of the taxable year over the U.S. Holder’s adjusted tax basis in the ordinary shares or ADSs. An electing holder may also claim an ordinary loss deduction for the excess, if any, of the U.S. Holder’s adjusted basis in the ordinary shares or ADSs over the fair market value of the ordinary shares or ADSs at the close of the taxable year, but this deduction is allowable only to the extent of any net mark-to-market gains for prior years. Gains from an actual sale or other disposition of the ordinary shares or ADSs will be treated as ordinary income, and any losses incurred on a sale or other disposition of the shares will be treated as an ordinary loss to the extent of any net mark-to-market gains for prior years. Once made, the election cannot be revoked without the consent of the IRS unless the ordinary shares or ADSs cease to be marketable stock.
However, a mark-to-market election generally cannot be made for equity interests in any lower-tier PFICs that we own, unless shares of such lower- tier PFIC are themselves “marketable stock.” As a result, even if a U.S. Holder validly makes a mark-to-market election with respect to our ordinary shares or ADSs, the U.S. Holder may continue to be subject to the PFIC rules (described above) with respect to its indirect interest in any of our investments that are treated as an equity interest in a PFIC for U.S. federal income tax purposes. U.S. Holders should consult their tax advisers as to the availability and desirability of a mark-to-market election, as well as the impact of such election on interests in any lower-tier PFICs.
Unless otherwise provided by the U.S. Treasury, each U.S. shareholder of a PFIC is required to file an Annual Report containing such information as the U.S. Treasury may require. A U.S. Holder’s failure to file the Annual Report will cause the statute of limitations for such U.S. Holder’s U.S. federal income tax return to remain open with regard to the items required to be included in such report until three years after the U.S. Holder files the Annual Report, and, unless such failure is due to reasonable cause and not willful neglect, the statute of limitations for the U.S. Holder’s entire U.S. federal income tax return will remain open during such period. U.S. Holders should consult their tax advisers regarding the requirements of filing such information returns under these rules.
Taxation of Distributions
Subject to the discussion above under “Passive Foreign Investment Company Rules,” distributions paid on ordinary shares or ADSs, other than certain pro rata distributions of ordinary shares or ADSs, will generally be treated as dividends to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Because we may not calculate our earnings and profits under U.S. federal income tax principles, we expect that distributions generally will be reported to U.S. Holders as dividends. Non corporate U.S. holders may qualify for the preferential rates of taxation applicable to long term capital gains (i.e., gains from the sale of capital assets held for more than one year) with respect to dividends on ADSs if we are a “qualified foreign corporation.” A non-United States corporation (other than a corporation that is classified as a PFIC for the taxable year in which the dividend is paid or the preceding taxable year) generally will be considered to be a qualified foreign corporation (a) if it is eligible for the benefits of a comprehensive tax treaty with the United States which the Secretary of Treasury of the United States determines is satisfactory for purposes of these rules and which includes an exchange of information provision (which includes the Treaty), or (b) with respect to any dividend it pays on ADSs which are readily tradable on an established securities market in the United States. Therefore, subject to the discussion under “Passive Foreign Investment Company Rules,” above, if the Treaty is applicable, or if the ADSs are readily tradable on an established securities market in the
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United States, such dividends will generally be “qualified dividend income” in the hands of non-corporate U.S. holders eligible for the preferential tax rates, provided that certain conditions are met, including conditions relating to holding period and the absence of certain risk reduction transactions. The amount of the dividend will be treated as foreign-source dividend income to U.S. Holders and will not be eligible for the dividends-received deduction generally available to U.S. corporations under the Code. Dividends will generally be included in a U.S. Holder’s income on the date of the U.S. Holder’s receipt of the dividend. The amount of any dividend income paid in foreign currency will be the U.S. dollar amount calculated by reference to the exchange rate in effect on the date of actual or constructive receipt, regardless of whether the payment is in fact converted into U.S. dollars. If the dividend is converted into U.S. dollars on the date of receipt, a U.S. Holder should not be required to recognize foreign currency gain or loss in respect of the dividend income. A U.S. Holder may have foreign currency gain or loss if the dividend is converted into U.S. dollars after the date of receipt. Such gain or loss would generally be treated as U.S.-source ordinary income or loss. The amount of any distribution of property other than cash (and other than certain pro rata distributions of ordinary shares or ADSs or rights to acquire ordinary shares or ADSs) will be the fair market value of such property on the date of distribution. For foreign tax credit purposes, our dividends will generally be treated as passive category income. The rules relating to the determination of the U.S. foreign tax credit are complex, and U.S. Holders should consult their tax advisors regarding the availability of a foreign tax credit in their particular circumstances and the possibility of claiming a deduction (in lieu of the foreign tax credit) for any foreign taxes paid or withheld.
Sale or Other Taxable Disposition of Ordinary Shares and ADSs
Subject to the discussion above under “Passive Foreign Investment Company Rules,” gain or loss realized on the sale or other taxable disposition of ordinary shares or ADSs will be capital gain or loss, and will be long-term capital gain or loss if the U.S. Holder held the ordinary shares or ADSs for more than one year. The amount of the gain or loss will equal the difference between the U.S. Holder’s tax basis in the ordinary shares or ADSs disposed of and the amount realized on the disposition, in each case as determined in U.S. dollars. This gain or loss will generally be U.S.-source gain or loss for foreign tax credit purposes. The deductibility of capital losses is subject to limitations. If the consideration received by a U.S. Holder is not paid in U.S. dollars, the amount realized will be the U.S. dollar value of the payment received determined by reference to the spot rate of exchange on the date of the sale or other disposition. However, if the ordinary shares or ADSs are treated as traded on an “established securities market” and you are either a cash basis taxpayer or an accrual basis taxpayer that has made a special election (which must be applied consistently from year to year and cannot be changed without the consent of the IRS), you will determine the U.S. dollar value of the amount realized in a non-U.S. dollar currency by translating the amount received at the spot rate of exchange on the settlement date of the sale. If you are an accrual basis taxpayer that is not eligible to or does not elect to determine the amount realized using the spot rate on the settlement date, you will recognize foreign currency gain or loss to the extent of any difference between the U.S. dollar amount realized on the date of sale or disposition and the U.S. dollar value of the currency received at the spot rate on the settlement date. U.S. Holders should consult their tax advisors regarding the tax consequences if foreign taxes are imposed on a taxable disposition of ordinary shares and their ability to credit such foreign tax against their U.S. federal income tax liability.

WE STRONGLY URGE YOU TO CONSULT YOUR TAX ADVISOR REGARDING THE IMPACT OF OUR PFIC STATUS ON YOUR INVESTMENT IN THE ORDINARY SHARES OR ADSs AS WELL AS THE APPLICATION OF THE PFIC RULES TO YOUR INVESTMENT IN THE ORDINARY SHARES OR ADSs.
Information Reporting and Backup Withholding
Payments of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries generally are subject to information reporting, and may be subject to backup withholding, unless (a) the U.S. Holder is a corporation or other exempt recipient or (b) in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number and a duly executed IRS Form W-9 or certification of other exempt status that it is not subject to backup withholding, unless the U.S. Holder otherwise establishes that it is exempt from such rules.
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Backup withholding is not an additional tax. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the holder’s U.S. federal income tax liability and may entitle it to a refund, provided that the required information is timely furnished to the IRS.
Information with Respect to Foreign Financial Assets
Individuals who own “specified foreign financial assets” with an aggregate value in excess of $50,000 may be required to file an information report on IRS Form 8938, “Statement of Specified Foreign Financial Assets,” with respect to such assets with their tax returns. “Specified foreign financial assets” include any financial accounts maintained by foreign financial institutions, as well as any of the following, but only if they are not held in accounts maintained by financial institutions: (i) stocks and securities issued by non-U.S. persons; (ii) financial instruments and contracts held for investment that have non-U.S. issuers or counterparties; and (iii) interests in foreign entities. Such U.S. Holders who fail to timely furnish the required information may be subject to a penalty. Additionally, if a U.S. Holder does not file the required information, the statute of limitations with respect to tax returns of the U.S. Holder to which the information relates may not close until three years after such information is filed. U.S. Holders should consult their tax advisers regarding their reporting obligations with respect to their ownership and disposition of the ordinary shares or ADSs.

Material Dutch Tax Considerations
General
The following is a general summary of certain material Dutch tax consequences of the acquisition, ownership and disposition of our ordinary shares or ADSs. This summary does not purport to describe all possible tax considerations or consequences that may be relevant to a holder or prospective holder of our ordinary shares or ADSs and does not purport to deal with the tax consequences applicable to all categories of investors, some of which (such as trusts or similar arrangements) may be subject to special rules. In view of its general nature, this general summary should be treated with corresponding caution.
This summary is based on the tax laws of The Netherlands, published regulations thereunder and published authoritative case law, all as in effect on the date hereof, and all of which are subject to change, possibly with retroactive effect. Where the summary refers to “The Netherlands” or “Dutch” it refers only to the part of the Kingdom of The Netherlands located in Europe.
This discussion is for general information purposes only and is not Dutch tax advice or a complete description of all Dutch tax consequences relating to the acquisition, ownership and disposition of our ordinary shares or ADSs. Holders or prospective holders of our ordinary shares or ADSs should consult their own tax advisors regarding the Dutch tax consequences relating to the acquisition, ownership and disposition of our ordinary shares or ADSs in light of their particular circumstances.
Please note that this summary does not describe the Dutch tax consequences for:
i.holders of ordinary shares or ADSs if such holders, and in the case of individuals, such holder’s partner or certain of its relatives by blood or marriage in the direct line (including foster children), have a substantial interest (aanmerkelijk belang) or deemed substantial interest (fictief aanmerkelijk belang) in us under the Dutch Income Tax Act 2001 (Wet inkomstenbelasting 2001). Generally speaking, a holder of securities in a company is considered to hold a substantial interest in such company, if such holder alone or, in the case of individuals, together with such holder’s partner (as defined in the Dutch Income Tax Act 2001), directly or indirectly, holds (a) an interest of 5% or more of the total issued and outstanding capital of that company or of 5% or more of the issued and outstanding capital of a certain class of shares of that company; or (b) rights to acquire, directly or indirectly, such interest; or (c) certain profit sharing rights in that company that relate to 5% or more of the company’s annual profits or to 5% or more of the company’s liquidation proceeds. A deemed substantial interest may arise if a substantial interest (or part thereof) in a company has been disposed of, or is deemed to have been disposed of, on a non-recognition basis;
ii.holders of ordinary shares or ADSs, if the ordinary shares or ADSs held by such holders qualify or qualified as a participation (deelneming) for purposes of the Dutch Corporate Income Tax Act 1969 (Wet op de vennootschapsbelasting 1969). Generally, a holder’s shareholding of 5% or more in a
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company’s nominal paid-up share capital qualifies as a participation. A holder may also have a participation if such holder does not have a shareholding of 5% or more but a related entity (statutorily defined term) has a participation or if the company in which the shares are held is a related entity (statutorily defined term);
iii.pension funds, investment institutions (fiscale beleggingsinstellingen), exempt investment institutions (vrijgestelde beleggingsinstellingen) (each as defined in the Dutch Corporate Income Tax Act 1969) and other entities that are, in whole or in part, not subject to or exempt from Dutch corporate income tax as well as entities that are exempt from corporate income tax in their country of residence, such country of residence being another state of the EU, Norway, Liechtenstein, Iceland or any other state with which The Netherlands has agreed to exchange information in line with international standards; and
iv.holders of ordinary shares or ADSs who are individuals for whom the ordinary shares or ADSs or any benefit derived from the ordinary shares or ADSs are a remuneration or deemed to be a remuneration for activities performed by such holders or certain individuals related to such holders (as defined in the Dutch Income Tax Act 2001).
Withholding tax
Dividends distributed by us generally are subject to Dutch dividend withholding tax at a rate of 15%. Generally, we are responsible for the withholding of such dividend withholding tax at source; the Dutch dividend withholding tax is for the account of the holder of ordinary shares or ADSs.
The expression “dividends distributed” includes, among other things:
•distributions in cash or in kind, deemed and constructive distributions and repayments of paid-in capital not recognized for Dutch dividend withholding tax purposes;
•liquidation proceeds, proceeds of redemption of ordinary shares or ADSs, or proceeds of the repurchase of ordinary shares or ADSs by us or one of our subsidiaries or other affiliated entities to the extent such proceeds exceed the average paid-in capital of those ordinary shares or ADSs as recognized for Dutch dividend withholding tax purposes;
•an amount equal to the par value of ordinary shares or ADSs issued or an increase of the par value of ordinary shares or ADSs, to the extent that it does not appear that a contribution recognized for Dutch dividend withholding tax purposes has been made or will be made; and
•partial repayment of the paid-in capital, recognized Dutch dividend withholding tax purposes, if and to the extent that we have net profits (zuivere winst), unless (a) the general meeting has resolved in advance to make such repayment and (b) the par value of the ordinary shares or ADSs concerned has been reduced by an equal amount by way of an amendment of the company’s Articles of Association.
Individuals and corporate legal entities who are resident or deemed to be resident of The Netherlands for Dutch tax purposes (“Dutch Resident Individuals” and “Dutch Resident Entities”, as the case may be), generally are entitled to an exemption of or a credit for any Dutch dividend withholding tax against their income tax or corporate income tax liability and to a refund of any residual Dutch dividend withholding tax. The same generally applies to holders of ordinary shares or ADSs that are neither resident nor deemed to be resident of The Netherlands if the ordinary shares or ADSs are attributable to a Dutch permanent establishment of such non-resident holder.
A holder of ordinary shares or ADSs resident of a country other than The Netherlands may, depending on such holder’s specific circumstances, be entitled to exemptions from, reductions of, or full or partial refunds of, Dutch dividend withholding tax under Dutch national tax legislation or a double taxation convention in effect between The Netherlands and such other country.
Remittance to the Dutch tax authorities
In general, we will be required to remit all amounts withheld as Dutch dividend withholding tax to the Dutch tax authorities. However, under certain circumstances, we are allowed to reduce the amount to be remitted to the Dutch tax authorities by the lesser of:
•3% of the portion of the distribution paid by us that is subject to Dutch dividend withholding tax; and
•3% of the dividends and profit distributions, before deduction of foreign withholding taxes, received by us from qualifying foreign subsidiaries in the current calendar year (up to the date of the distribution by
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the Company) and the two preceding calendar years, as far as such dividends and profit distributions have not yet been taken into account for purposes of establishing the above mentioned reduction.
Although this reduction reduces the amount of Dutch dividend withholding tax that we are required to remit to the Dutch tax authorities, it does not reduce the amount of tax that we are required to withhold on dividends distributed by us.
Dividend stripping
Pursuant to legislation to counteract “dividend stripping”, a reduction, exemption, credit or refund of Dutch dividend withholding tax is denied if the recipient of the dividend is not the beneficial owner as described in the Dutch Dividend Withholding Tax Act 1965 (Wet op de dividendbelasting 1965). This legislation generally targets situations in which a shareholder retains its economic interest in shares but reduces the withholding tax costs on dividends by a transaction with another party. It is not required for these rules to apply that the recipient of the dividends is aware that a dividend stripping transaction took place. The Dutch State Secretary of Finance takes the position that the definition of beneficial ownership introduced by this legislation will also be applied in the context of a double taxation convention.
Taxes on income and capital gains
Dutch Resident Entities
Generally speaking, if the holder of ordinary shares or ADSs is a Dutch Resident Entity, any payment under the ordinary shares or ADSs or any gain or loss realized on the disposal or deemed disposal of the ordinary shares or ADSs is subject to Dutch corporate income tax at a rate of 15% with respect to taxable profits up to €245,000 and 25% with respect to taxable profits in excess of that amount (rates and brackets for 2021).
Dutch Resident Individuals
If the holder of ordinary shares or ADSs is a Dutch Resident Individual, any payment on the ordinary shares or ADSs or any gain or loss realized on the disposal or deemed disposal of the ordinary shares or ADSs is taxable at the progressive Dutch income tax rates (with a maximum of 49.50% in 2021), if:
i.the ordinary shares or ADSs are attributable to an enterprise from which the holder of ordinary shares or ADSs derives a share of the profit, whether as an entrepreneur (ondernemer) or as a person who has a co-entitlement to the net worth (medegerechtigd tot het vermogen) of such enterprise without being a shareholder (as defined in the Dutch Income Tax Act 2001); or
ii.the holder of ordinary shares or ADSs is considered to perform activities with respect to the ordinary shares or ADSs that go beyond ordinary asset management (normaal, actief vermogensbeheer) or derives benefits from the ordinary shares or ADSs that are taxable as benefits from other activities (resultaat uit overige werkzaamheden).
If the above-mentioned conditions (i) and (ii) do not apply to the individual holder of ordinary shares or ADSs, such holder will be taxed annually on a deemed return (with a maximum of 5.53% in 2022) on the individual’s net investment assets (rendementsgrondslag) for the year, insofar the individual’s net investment assets for the year exceed a statutory threshold (heffingvrij vermogen). The deemed return on the individual’s net investment assets for the year is taxed at a rate of 30%. Actual income, gains or losses in respect of the ordinary shares or ADSs are as such not subject to Dutch income tax.
The net investment assets for the year are the fair market value of the investment assets less the allowable liabilities on 1 January of the relevant calendar year. The ordinary shares or ADSs are included as investment assets. For the net investment assets on January 1, 2022, the deemed return ranges from 1.82% up to 5.53%. The deemed return will be adjusted annually on the basis of historic market yields.
Non-residents of The Netherlands
A holder of ordinary shares or ADSs that is neither a Dutch Resident Entity nor a Dutch Resident Individual will not be subject to Dutch taxes on income or capital gains in respect of any payment under the ordinary shares or
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ADSs or in respect of any gain or loss realized on the disposal or deemed disposal of the ordinary shares or ADSs, provided that:
i.such holder does not have an interest in an enterprise or deemed enterprise (as defined in the Dutch Income Tax Act 2001 and the Dutch Corporate Income Tax Act 1969) which, in whole or in part, is either effectively managed in The Netherlands or carried on through a permanent establishment, a deemed permanent establishment or a permanent representative in The Netherlands and to which enterprise or part of an enterprise the ordinary shares or ADSs are attributable; and
ii.in the event the holder is an individual, such holder does not carry out any activities in The Netherlands with respect to the ordinary shares or ADSs that go beyond ordinary asset management and does not derive benefits from the ordinary shares or ADSs that are taxable as benefits from other activities in The Netherlands.
Gift and inheritance taxes
Residents of The Netherlands
Gift or inheritance taxes will arise in The Netherlands with respect to a transfer of ordinary shares or ADSs by way of a gift by, or on the death of, a holder of such ordinary shares or ADSs who is resident or deemed resident of The Netherlands at the time of the gift or the holder’s death.
Non-residents of The Netherlands
No gift or inheritance taxes will arise in The Netherlands with respect to a transfer of the ordinary shares or ADSs by way of gift by, or on the death of, a holder of ordinary shares or ADSs who is neither resident nor deemed to be resident of The Netherlands, unless:
i.in the case of a gift of ordinary shares or ADSs by an individual who at the date of the gift was neither resident nor deemed to be resident of The Netherlands, such individual dies within 180 days after the date of the gift, while being resident or deemed to be resident of The Netherlands; or
ii.the transfer is otherwise construed as a gift or inheritance made by, or on behalf of, a person who, at the time of the gift or death, is or is deemed to be resident of The Netherlands.
For purposes of Dutch gift and inheritance taxes, amongst others, a person that holds the Dutch nationality will be deemed to be resident of The Netherlands if such person has been resident in The Netherlands at any time during the ten years preceding the date of the gift or such person’s death. Additionally, for purposes of Dutch gift tax, amongst others, a person not holding the Dutch nationality will be deemed to be resident of The Netherlands if such person has been resident in The Netherlands at any time during the twelve months preceding the date of the gift. Applicable tax treaties may override deemed residency.
Value added tax (VAT)
No Dutch VAT will be payable by a holder of ordinary shares or ADSs in respect of any payment in consideration for the ownership or disposition of the ordinary shares or ADSs.
Other taxes and duties
No Dutch registration tax, stamp duty or any other similar documentary tax or duty will be payable by a holder of ordinary shares or ADSs in respect of any payment in consideration for the ownership or disposition of the ordinary shares or ADSs.
F. Dividends and Paying Agents
Not applicable.

G. Statement by Experts
Not applicable.


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H. Documents on Display
We are subject to the informational requirements of the Exchange Act. Accordingly, we are required to file reports and other information with the SEC, including Annual Reports on Form 20-F and reports on Form 6-K. The SEC maintains an Internet website that contains reports and other information about issuers, like us, that file electronically with the SEC. The address of that website is http://www.sec.gov.
We also make available on our website, free of charge, our Annual Report and the text of our reports on Form 6-K, including any amendments to these reports, as well as certain other SEC filings, as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. Our website address is www.pharming.com. The information contained on our website is not incorporated by reference in this Annual Report and our website address is included in this Annual Report as an inactive textual reference only.
Documents concerning our Company referred to in this Annual Report may be viewed by appointment during normal business hours at our registered and records office at 10 Independence Blvd, Suite 401, Warren, New Jersey 07059.

I.Subsidiary Information
Not Applicable.

J. Annual Report on Security Holder
Not Applicable.

Item 11. Quantitative and Qualitative Disclosures About Market Risk
Quantitative and Qualitative Disclosures about Market Risk
Our operations expose us to some financial risks arising from our use of financial instruments, the most significant ones being liquidity, market risk and credit risk. The Board of Directors is responsible for our risk management policies and while retaining responsibility for them it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to our finance function. Refer to Note 24 of the Annual Financial Statements.

Item 12. Description of Securities Other than Equity Securities

A.Debt Securities
Not applicable.

B. Warrants and Rights
Not applicable.

C. Other Securities
Not applicable.

D. American Depositary Shares
The depositary may charge each person to whom ADSs are issued, including, without limitation, issuances against deposits of shares, issuances in respect of share distributions, rights and other distributions, issuances pursuant to a stock dividend or stock split declared by us or issuances pursuant to a merger, exchange of securities or any other transaction or event affecting the ADSs or deposited securities, and each person surrendering ADSs for withdrawal of deposited securities or whose ADRs are cancelled or reduced for any other reason, $5.00 for each 100 ADSs (or any portion thereof) issued, delivered, reduced, canceled or surrendered, or upon which a share distribution or elective distribution is made or offered, as the case may be. The depositary
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may sell (by public or private sale) sufficient securities and property received in respect of a share distribution, rights and/or other distribution prior to such deposit to pay such charge.
The following additional charges will also be incurred by the ADR holders, the beneficial owners, by any party depositing or withdrawing shares or by any party surrendering ADSs and/or to whom ADSs are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by us or an exchange of stock regarding the ADSs or the deposited securities or a distribution of ADSs), whichever is applicable:
•a fee of $0.05 or less per ADS held for any cash distribution made, or for any elective cash/stock dividend offered, pursuant to the deposit agreement;
•an aggregate fee of $0.05 or less per ADS per calendar year (or portion thereof) for services performed by the depositary in administering the ADRs (which fee may be charged on a periodic basis during each calendar year and will be assessed against holders of ADRs as of the record date or record dates set by the depositary during each calendar year);
•a fee for the reimbursement of such fees, charges and expenses as are incurred by the depositary and/or any of its agents (including, without limitation, the custodian and expenses incurred on behalf of ADR holders in connection with compliance with foreign exchange control regulations or any law or regulation relating to foreign investment) in connection with the servicing of the shares or other deposited securities, the sale of securities (including, without limitation, deposited securities), the delivery of deposited securities or otherwise in connection with the depositary’s or its custodian’s compliance with applicable law, rule or regulation (which fees and charges will be assessed on a proportionate basis against ADR holders as of the record date or dates set by the depositary and will be payable at the sole discretion of the depositary by billing such ADR holders or by deducting such charge from one or more cash dividends or other cash distributions);
•a fee for the distribution of securities (or the sale of securities in connection with a distribution), such fee being in an amount equal to the $0.05 per ADS issuance fee for the execution and delivery of ADSs which would have been charged as a result of the deposit of such securities (treating all such securities as if they were shares) but which securities or the net cash proceeds from the sale thereof are instead distributed by the depositary to those ADR holders entitled thereto;
•stock transfer or other taxes and other governmental charges;
•cable, telex and facsimile transmission and delivery charges incurred at holders’ request in connection with the deposit or delivery of shares, ADRs or deposited securities;
•transfer or registration fees for the registration of transfer of deposited securities on any applicable register in connection with the deposit or withdrawal of deposited securities; and
•fees of any division, branch or affiliate of the depositary utilized by the depositary to direct, manage and/or execute any public and/or private sale of securities under the deposit agreement. To facilitate the administration of various depositary receipt transactions, including disbursement of dividends or other cash distributions and other corporate actions, the depositary may engage the foreign exchange desk within JPMorgan Chase Bank, N.A., or the Bank, and/or its affiliates in order to enter into spot foreign exchange transactions to convert foreign currency into U.S. dollars. For certain currencies, foreign exchange transactions are entered into with the Bank or an affiliate, as the case may be, acting in a principal capacity. For other currencies, foreign exchange transactions are routed directly to and managed by an unaffiliated local custodian (or other third party local liquidity provider), and neither the Bank nor any of its affiliates is a party to such foreign exchange transactions.
The foreign exchange rate applied to an foreign exchange transaction will be either (a) a published benchmark rate, or (b) a rate determined by a third party local liquidity provider, in each case plus or minus a spread, as applicable. The depositary will disclose which foreign exchange rate and spread, if any, apply to such currency on the “Disclosure” page (or successor page) of www.adr.com. Such applicable foreign exchange rate and spread may (and neither the depositary, the Bank nor any of their affiliates is under any obligation to ensure that such rate does not) differ from rates and spreads at which comparable transactions are entered into with other customers or the range of foreign exchange rates and spreads at which the Bank or any of its affiliates enters into foreign exchange transactions in the relevant currency pair on the date of the foreign exchange transaction. Additionally, the timing of execution of an foreign exchange transaction varies according to local market dynamics, which may include regulatory requirements, market hours and liquidity in the foreign exchange market or other factors. Furthermore, the Bank and its affiliates may manage the associated risks of their position in the market in a manner they deem appropriate without regard to the impact of such activities on the depositary, us, holders or beneficial owners. The spread applied does not reflect any gains or losses that may be earned or incurred by the Bank and its affiliates as a result of risk management or other hedging related activity.
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The depositary reimburses the Company for certain expenses incurred by the Company that are related to the maintenance of the ADR program upon such terms and conditions as the Company and the depositary agree from time to time. The depositary may make available to the Company a set amount or a portion of the depositary fees charged in respect of the ADR program or otherwise upon such terms and conditions as the Company and the depositary may agree from time to time.

Item 13. Defaults, Dividend Arrearages and Delinquencies
Not applicable.

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
Not applicable.

Item 15. Controls and Procedures

A. Disclosure Controls and Procedures
As required by Rule 13a-15 under the Exchange Act, management, including our chief executive officer (“CEO”) and our chief financial officer (“CFO”), has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report. Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.
Disclosure controls and procedures include, without limitations, controls and procedures designed to ensure that information required to be disclosed by us in our reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding our required disclosures.
Based on such evaluation, due to the material weaknesses in our internal control over financial reporting described below, our CEO and our CFO have concluded that our disclosure controls and procedures were not effective as of December 31, 2022.

B. Management’s Annual Report on Internal Control over Financial Reporting
Management, including the CEO and CFO, is responsible for establishing and maintaining adequate internal control over Pharming’s financial reporting and the preparation of the consolidated financial statements. They conducted an evaluation of the effectiveness of Pharming’s internal control over financial reporting and the preparation of the consolidated financial statements based on the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
Internal Control over Financial Reporting
In connection with the preparation of our consolidated financial statements for the year ended December 31, 2022, we have identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
As previously identified and disclosed in the prior year, we continue to have material weaknesses across each of the five components of the COSO framework at the entity level and accordingly, across our business and IT processes. The material weaknesses identified are the following:

•Control Environment - We did not maintain an effective control environment with the structure necessary for effective internal controls over financial reporting. We did not exercise sufficient oversight in order to design and operate effective internal controls.
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•Risk Assessment – Our risk and internal control framework is in development and accordingly, we did not identify, implement and operate the controls necessary to respond to the risks of material misstatement.

•Control Activities – The designed and implemented control activities were not sufficient to address all the identified risks of material misstatements. In addition, where control activities are dependent on Information Used in a Control, the Company did not perform controls to determine the completeness and accuracy of such information.

•Information and Communication – Our controls over our IT systems were not effective in ensuring that the information used in financial reporting was timely, accurate, complete, protected and verifiable and we did not have sufficient processes and controls in place to enable appropriate disclosure of such information in our financial reporting processes.

•Monitoring – As the risk assessment and internal control framework are in development, we did not have sufficient controls in place to monitor control activities and identify control deficiencies.
Remediation plan
We are in the process of remediating the material weaknesses identified including further developing and implementing formal policies, processes, internal controls and documentation relating to our financial reporting. We are in the process of developing a risk assessment framework which outlines our key processes and controls for all risk of material misstatements. We are actively working on implementing key controls and have put in place an implementation plan.
In addition, during 2022, we have hired a risk and control officer and continued to invest in the finance and other departments to support internal control improvements. We have also implemented several additional entity level controls and general IT controls.
Despite the improvements that have been made and several entity-level controls and general IT controls that have been implemented during the year, they were not yet sufficient to fully address all the principles in the COSO components.
We have developed an internal control plan and have been working towards the goal of effective controls over financial reporting. The plan is based on a phased approach, in which 2022 has been dedicated to further developing the internal control framework, setting up process narratives, and implementing SAP as ERP system which will be used as the foundation for implementing controls. We believe that this structured and phased approach is essential in order to establishing effective internal controls over financial reporting in a sustainable manner, which will also enable us to support and adapt to the Company’s continuous growth path.
As we implement these remediation efforts and continue to evaluate and work to improve our internal control over financial reporting, our management may determine that additional steps or measures may be necessary to address and remediate the material weaknesses. Management may also determine that it is necessary to modify the above mentioned remediation efforts depending on the circumstances and Company needs. We cannot assure you that these remediation efforts will be successful or that its internal control over financial reporting will be effective in accomplishing all control objectives all of the time. Management will continue to assess the effectiveness of these remediation efforts in connection with its evaluations of internal control over financial report.

C. Attestation Report of the Registered Public Accounting Firm
This Annual Report includes an attestation report of the Company’s registered public accounting firm on the effectiveness of the Company’s internal control over financial reporting.


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Pharming Group N.V.

Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Pharming Group N.V. and subsidiaries (the “Company”) as at December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, because of the effect of the material weaknesses identified below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as at December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as at and for the year ended December 31, 2022, of the Company and our report dated April 4, 2023, expressed an unqualified opinion on those financial statements.

Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


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Material Weaknesses
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
The following material weaknesses have been identified across each of the five components of the COSO framework at the entity level and across the business and IT processes as included in management's assessment:

•Control Environment - The Company did not maintain an effective control environment with the structure necessary for effective internal controls over financial reporting. The Company did not exercise sufficient oversight in order to design and operate effective internal controls.

•Risk Assessment – The Company's risk and internal control framework is in development and accordingly, the Company did not identify, implement and operate the controls necessary to respond to the risks of material misstatement.

•Control activities – The designed and implemented control activities were not sufficient to address all the identified risks of material misstatements. In addition, where control activities are dependent on Information Used in a Control, the Company did not perform controls to determine the completeness and accuracy of such information.

•Information & Communication – The Company's controls over the IT systems were not effective in ensuring that the information used in financial reporting was timely, accurate, complete, protected and verifiable and the Company did not have sufficient processes and controls in place to enable appropriate disclosure of such information in the financial reporting processes.

•Monitoring – As the risk assessment and internal control framework are in development, the Company did not have sufficient controls in place to monitor control activities and identify control deficiencies.
These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended December 31, 2022, of the Company, and this report does not affect our report on such financial statements.
/s/ Deloitte Accountants B.V.
Amsterdam, The Netherlands
April 4, 2023

D. Changes in Control over Financial Reporting
Other than as discussed above in Item 15.A, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the period covered by this Annual Report that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

ITEM 16. Reserved

Item 16 A. Audit Committee Financial Expert
Our board of directors has determined that Mr. Leonard Kruimer, the Chairman of the Audit Committee, is an “audit committee financial expert” as defined by SEC rules and has the requisite financial sophistication under the applicable rules and regulations of the Nasdaq. Mr. Kruimer is independent, as such term is defined in Rule 10A-3 under the Exchange Act and under the listing standards of the Nasdaq.


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Item 16 B. Code of Ethics
We have adopted a Code of Business Conduct & Ethics, or Code of Conduct, which outlines the principles of legal and ethical business conduct under which we do business. The Code of Conduct applies to all of our Executive Committee members, Board of Directors members and our affiliates and employees. The full text of the Code of Conduct is available on our website at https://www.pharming.com.
During the meeting held on July 11, 2022, the Corporate Governance Committee reviewed the updated Code of Conduct, which included input from a cross-functional consultation by Business Integrity. The input resulted in realignment of our Code of Conduct to our purpose and mission, updates of several chapters with our latest policies such as Third Party Compliance Policy, Anti-Fraud Policy and amendments inline with the latest Privacy Guidelines, as well as establishing an investigations procedure. The Corporate Governance Committee also delivered input and recommended the Board of Directors to approve the updated Code of Conduct. The Board approved the Code of Conduct during its meeting on August 3, 2022.
The information and other content appearing on our website are not part of this Annual Report and our website address is included in this Annual Report as an inactive textual reference only. Any amendments or waivers from the provisions of the Code of Conduct for members of our Executive Committee or Board of Directors will be made available only after approval by our Executive Committee and will be disclosed on our website promptly following the date of such amendment or waiver.

Item 16 C. Principal Accountant Fees and Services
Deloitte Accountants B.V., or Deloitte, has served as our independent registered public accounting firm for 2022 and 2021. Our accountants billed the following fees to us for professional services in each of those fiscal years:

Amounts in $ ‘00020222021
Audit Fees(1,357)(1,201)
Audit Related Fees— (16)
Total(1,357)(1,217)

“Audit Fees” consist of fees billed for the annual audit of our consolidated financial statements. Audit Fees also include services that only our independent external auditor can reasonably provide, such as the review of documents filed with the SEC. For the fiscal year ended December 31, 2022, and 2021, the aggregate fees billed for audit services by Deloitte were $1.4 million and $1.2 million, respectively.
“Audit-Related Fees” consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of its financial statements or that are traditionally performed by the external auditor, and mainly include services such as comfort letters issued in connection with securities offerings, due diligence and agreed-upon or expanded audit procedures.

“Tax Fees” consist of tax consultations, such as advice in connection with employees’ taxation arising from share-based compensation. For the fiscal years ended December 31, 2022 and 2021, there were no fees billed for tax compliance and tax planning by Deloitte.
“All Other Fees” consist of advisory services such as the adoption or application of IFRS. For the fiscal years ended December 31, 2022 and 2021, there were no fees billed by Deloitte. for other non-audit professional services.
Pre-Approval Policies and Procedures
The Audit Committee evaluates the qualifications, independence and performance of the independent auditor as well as pre-approves and reviews the audit and non-audit services to be performed by the independent auditor.
The Audit Committee reviewed and discussed the external auditor’s 2022 audit plan (including proposed fees) - both in April and December - and the draft management letters submitted by the external auditor. The Audit
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Committee approved the 2022 audit plan at the meeting held on August 3, 2022. The 2022 Audit Plan and the draft management letters were also shared and discussed with the full Board of Directors.
In accordance with the Audit Committee Charter, as published on the Company’s website www.pharming.com/aboutus/corporategovernance, the Audit Committee monitors compliance with the Dutch and U.S. rules on non-audit services provided by an independent registered public accounting firm. Accordingly, the Audit Committee shall pre-approve all audit services to be provided to the Company, and all other services (review, attest and non-audit) to be provided to the Company by the external auditor, to the extent permitted under applicable law, provided, however, that de minimis non-audit services may instead be approved in accordance with applicable SEC rules. The Audit Committee did not have to approve non-audit services by Deloitte in 2022.
In March 2022, the Audit Committee evaluated the performance of Deloitte and its duties as external auditor for the financial year 2021. Deloitte was appointed by the general meeting of shareholders held on May 19, 2021, as external auditor for the financial years 2021 and 2022. The Audit Committee discussed during its meeting on March 14, 2023, the outcome of the evaluation and the performance of Deloitte and its duties as external auditor for the financial year 2022. The evaluation resulted in an overall positive outcome and the Audit Committee, taking into account the positive outcome of the evaluation for 2021, recommended to the Board of Directors to nominate Deloitte to the General Meeting of Shareholders scheduled for May 17, 2023, for reappointment as external auditor for the financial years 2023 and 2024.
During its meeting on April 4, 2022, the Audit Committee discussed and confirmed, the independence of the external auditor.

Item 16 D. Exemptions from the Listing Standards for Audit Committees
Not applicable.

Item 16 E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Not applicable.

Item 16 F. Change in Registrant’s Certifying Accountant
Not applicable.

Item 16 G. Corporate Governance

Foreign Private Issuer Exemption
We are a “foreign private issuer,” as defined by the SEC. As a result, in accordance with Nasdaq rules, we comply with home country governance requirements and certain exemptions thereunder rather than complying with Nasdaq corporate governance standards. While we voluntarily follow most Nasdaq corporate governance rules, we have chosen, or may decide to choose, to take advantage of the following limited exemptions:
•Exemption from filing quarterly reports on Form 10-Q containing unaudited financial and other specified information or current reports on Form 8-K upon the occurrence of specified significant events;
•Exemption from Section 16 under the Exchange Act, which requires insiders to file public reports of their securities ownership and trading activities and provides for liability for insiders who profit from trades in a short period of time;
•Exemption from the Nasdaq rules applicable to domestic issuers requiring disclosure within four business days of any determination to grant a waiver of the code of conduct and ethics to directors and officers;
•Exemption from the requirement to obtain shareholder approval for certain issuances of securities, including shareholder approval of share option plans;
•Exemption from the requirement that our Audit Committee have review and oversight responsibilities over all “related party transactions,” as defined in Item 7.B of Form 20-F;
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•Exemption from the requirement that our board of directors has a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and
•Exemption from the requirements that director nominees are selected, or recommended for selection by our board of directors, either by (a) independent directors constituting a majority of our board of director’s independent directors in a vote in which only independent directors participate, or (b) a committee comprised solely of independent directors, and that a formal written charter or board resolution, as applicable, addressing the nominations process is adopted.
Furthermore, Nasdaq Rule 5615(a)(3) provides that a foreign private issuer, such as us, may rely on home country corporate governance practices in lieu of certain of the rules in the Nasdaq Rule 5600 Series and Rule 5250(d), provided that we nevertheless comply with Nasdaq’s Notification of Noncompliance requirement (Rule 5625), the Voting Rights requirement (Rule 5640) and that we have an Audit Committee that satisfies Rule 5605(c) (3), consisting of committee members that meet the independence requirements of Rule 5605(c)(2)(A)(ii).
We comply with the Nasdaq corporate governance rules applicable to foreign private issuers, which means that we are permitted to follow certain corporate governance rules that conform to Dutch requirements in lieu of many of the Nasdaq corporate governance rules. Accordingly, our shareholders do not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of Nasdaq. We may utilize these exemptions for as long as we continue to qualify as a foreign private issuer.
For an overview of some specific differences between corporate governance principles for a Netherlands public company, such as us, and those that are applicable to a Delaware corporation, see “Description of Securities” filed as Exhibit 2.1 to this Annual Report. This also summarizes our implementation of the corporate governance principles in accordance with Dutch law and the Dutch Corporate Governance Code. Finally, reference is made to the sections “Organizational Structure” and “Directors and Senior Management” for more details on our group structure and corporate governance structure. All referenced sections are incorporated in this section by reference.

Nasdaq Diversity Disclosure

Board Diversity Matrix (As of March 27, 2023)
Country of Principal Executive Offices:The Netherlands
Foreign Private Issuer:Yes
Disclosure Prohibited under Home Country Law:No
Total Number of Directors:8


Part I: Gender IdentityFemaleMaleNon-BinaryDid Not Disclose Gender
Directors35— — 
Part II: Demographic Background
Underrepresented Individual in Home Country Jurisdiction1
LGBTQ+1
Did Not Disclose Demographic Background1

Item 16 H. Mine Safety Disclosure
Not applicable.

Item 16 I. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections
Not applicable.

123

Item 17. Financial Statements
See Item 18.

Item 18. Financial Statements

See pages F‑1 through F‑63 of this Annual Report.


124

Item 19. Exhibits


EXHIBIT INDEX

Exhibit Number
Description of Exhibit
1.1
1.2
2.1
2.2
2.3
2.4
4.1
4.2
4.3
4.4
4.5
4.6
4.7
8.1
12.1
12.2
13.1
13.2
† Portions of this exhibit (indicated by asterisks) have been omitted because the registrant has determined they are not material and would likely cause competitive harm to the registrant if publicly disclosed.
125

+ Certain schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant hereby undertakes to furnish supplementally a copy of any omitted exhibit or schedule upon request by the SEC.
# Previously filed.

SIGNATURES
The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.

Pharming Group N.V.
/s/ Sijmen de Vries, MD MBA
——————————————
By: Sijmen de Vries, MD MBA
Title: Chief Executive Officer
Date: April 5, 2023



126


Index to Financial Statements
FINANCIAL SECTION
Audited consolidated financial statements as of and for the years ended December 31, 2022, 2021, and 2020




F-1


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Pharming Group N.V.

Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Pharming Group N.V. and subsidiaries (the “Company”) as at December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, changes in equity and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as at December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 04, 2023 expressed an adverse opinion on the Company's internal control over financial reporting because of material weaknesses.

Basis for Opinion
These financial statements are the responsibility of the Company's Board of Directors. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Revenues and trade and other payables. Rebate Accruals in the U.S. - Refer to Notes 2.4, 2.5, 4 and 18 to the Financial statements
Critical Audit Matter Description
The Company recognized revenues from product sales in the United States totaling $200 million for the year ended December 31, 2022, and a payable of $10.5 million relating to government and other rebate programs as at December 31, 2022. The sales in the United States are subject to rebates relating directly to customers or to ultimate reimbursement claims from government or insurance payers, which are referred to as gross-to-net adjustments, mainly U.S. Medicaid (“U.S. revenue rebates”). These are accounted for on an estimated basis.
F-2

The U.S. revenue rebates related liability involves the use of significant assumptions and judgments in its calculation. These significant assumptions and judgments include historical claims experience, unbilled claims, and claims submission time lags. Given the complexity of this estimate, together with the limited amount of historical data available and judgments necessary to develop this estimate, and the internal control over financial reporting deficiencies identified, auditing this estimate required both extensive audit effort due to the complexity of the estimation and a high degree of auditor judgment when performing auditing procedures and evaluating the results of those procedures and therefore we identified the accounting treatment for rebate accruals in the US as a critical audit matter.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the assumptions and judgments made by management in estimating the U.S. revenue rebates liability included the following, amongst others:
•We evaluated the appropriateness and consistency of the Company’s method, data, and assumptions used to calculate the U.S. revenue rebate accrual.
•We tested mathematical accuracy of the U.S. revenue rebate accrual calculation.
•We tested significant assumptions and key inputs used to calculate the U.S. revenue rebate accruals, namely, testing rebate claims received during the financial year against source documentation and assessing the reasonableness of the Board of Directors’ forecast of reclaimed vials by comparing to historical claims.
•We evaluated the Company’s ability to estimate U.S. revenue rebate accruals accurately by comparing actual amounts incurred for U.S. revenue rebate accruals to historical estimates.
•We created data visualizations to compare recorded U.S. revenue rebates against historic data and followed-up on any unusual trends.
Financial Assets – Investment in BioConnection Investments B.V. - Refer to Notes 2.4, 2.5 and 12.2 to the Financial statements
Critical Audit Matter Description
The Company recognized the preference share on its investment in the associate BioConnection Investments B.V. for an amount of USD 6.8 million as at December 31, 2022. The preference share was obtained during the second quarter of 2022, when the Company entered into a share purchase agreement, following receipt of an offer for all its shares in BioConnection B.V. by Gimv Nederland Holding B.V. (“Gimv”), an European investment company listed on Euronext Brussels. The existing shareholders (including the Company) reached an agreement with Gimv on the sale of all issued and outstanding shares to a new holding company (BioConnection Investments B.V.) incorporated by Gimv, followed by a partial re-investment by existing shareholders of the purchase price in the share capital of BioConnection Investments B.V., by means of ordinary shares and a preference share.
The Company made an assessment on the accounting treatment of the agreement and concluded that the preference share be classified as an investment in debt instruments designated as at fair value with changes through profit and loss (FVTPL).
To determine the fair value of the preference share, the Company used the option pricing model which requires management to make significant estimates and assumptions related to underlying equity value, strike price, time to maturity, risk free rate, expected volatility and dividend yield of the underlying equity. Changes in these assumptions could have a significant impact on the fair value of the preference share.
Given the significant judgments made by management to estimate the fair value of the preference share, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions, required a high degree of auditor judgment and an increased extent of effort, including the need to involve fair value specialists. Therefore, we identified the accounting treatment of the preference share as a critical audit matter.

F-3

How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures, related to the methodology and assumptions used by management to estimate the fair value of the preference share included the following, amongst others:
•We evaluated the reasonableness of management’s revenue and operating margin forecasts used to estimate the underlying equity value by comparing the forecasts to:
◦actual historical revenues and operating margins; and
◦internal communications to management and the Board of Directors.

•We evaluated the reasonableness of management’s assumptions regarding time to maturity by comparing the estimate to:
◦contractual supporting documentation;
◦internal communications to management and the Board of Directors; and
◦external information regarding lead times for IPO processes.

•We evaluated the impact of changes in management’s estimates and forecasts from the initial determination as at the transaction date (April 1, 2022) and December 31, 2022.

•With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology, (2) valuation assumptions, namely strike price, risk free rate, expected volatility and dividend yield and (3) underlying information by:
◦testing the source information underlying the determination of the main assumptions and the mathematical accuracy of the calculation; and
◦developing a range of independent estimates of the main assumptions and comparing those to the ones selected by management.

/s/ Deloitte Accountants B.V.
Amsterdam, The Netherlands
April 4, 2023
We have served as the Company’s auditor since 2019.


F-4


CONSOLIDATED STATEMENT OF INCOME
For the year ended December 31,
Amounts in $ ‘000Notes202220212020
Revenues4205,622 198,871 212,174 
Costs of sales6(17,562)(21,142)(23,539)
Gross profit188,060 177,729 188,635 
Other income514,523 2,620 1,829 
Research and development(52,531)(70,369)(38,519)
General and administrative(46,016)(36,974)(24,085)
Marketing and sales(85,803)(59,445)(51,604)
Other Operating Costs6(184,350)(166,788)(114,208)
Operating profit18,233 13,561 76,256 
Fair value gain (loss) on revaluation (1,185)114 69 
Other finance income74,485 14,894 715 
Other finance expenses7(5,463)(6,185)(33,308)
Finance result, net(2,163)8,823 (32,524)
Share of net profits (loss) in associates using the equity method12(1,083)694 362 
Profit before tax14,987 23,078 44,094 
Income tax expense8(1,313)(7,082)(6,348)
Profit for the year13,674 15,996 37,746 
Basic earnings per share ($)250.0210.0250.058
Diluted earnings per share ($)250.0190.0230.055
The Notes are an integral part of these financial statements.

F-5

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended December 31,

Amounts in $ ‘000Notes202220212020
Profit for the year13,674 15,996 37,746 
Currency translation differences26(10,349)(14,802)14,956 
Fair value remeasurement investments26(705)(2,283)— 
Items that may be subsequently reclassified to profit or loss(11,054)(17,085)14,956 
Other comprehensive income (loss), net of tax(11,054)(17,085)14,956 
Total comprehensive income (loss) for the year2,620 (1,089)52,702 
The Notes are an integral part of these financial statements.
F-6

CONSOLIDATED BALANCE SHEET
As at December 31,
Amounts in $ ‘000Notes20222021
Non-current assets
Intangible assets975,121 83,834 
Property, plant and equipment1010,392 13,222 
Right-of-use assets1128,753 19,943 
Long-term prepayments228 194 
Deferred tax assets822,973 21,216 
Investment accounted for using the equity method122,501 7,201 
Investments in equity instruments designated as at FVTOCI12403 1,449 
Investment in debt instruments designated as at FVTPL126,827 — 
Restricted cash131,099 812 
Total non-current assets148,297 147,871 
Current assets
Inventories1442,326 27,310 
Trade and other receivables1527,619 29,983 
Restricted cash13213 227 
Cash and cash equivalents13207,342 191,924 
Total current assets277,500 249,444 
Total assets425,797 397,315 
Equity
Share capital7,509 7,429 
Share premium462,297 455,254 
Other reserves(8,737)3,400 
Accumulated deficit(256,431)(273,167)
Shareholders’ equity26204,638 192,916 
Non-current liabilities
Convertible bonds16131,618 139,007 
Lease liabilities1729,843 18,456 
Other financial liabilities22— 165 
Total non-current liabilities161,461 157,628 
Current liabilities
Convertible bonds161,768 1,879 
Trade and other payables1854,465 42,473 
Lease liabilities173,465 2,419 
Total current liabilities59,698 46,771 
Total equity and liabilities425,797 397,315 
The Notes are an integral part of these financial statements.
F-7

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Amounts in $ ‘000NotesShare capitalShare premiumOther reservesAccumulated deficitTotal equity
Balance at January 1, 20207,226 441,951 8,926 (340,715)117,388 
Profit for the year— — — 37,746 37,746 
Other comprehensive income (loss) for the year26— — 14,956 — 14,956 
Total comprehensive income (loss) for the year— — 14,956 37,746 52,702 
Other reserves26— — 732 (732)— 
Income tax benefit from excess tax deductions related to share-based payments— — — 2,361 2,361 
Share-based compensation19, 26— — — 6,537 6,537 
Bonuses settled in shares26— 51 — — 51 
Value conversion rights of convertible bonds26— — — 1,605 1,605 
Warrants exercised/ issued261 89 — — 90 
Options exercised / LTIP shares issued2685 5,039 — (2,423)2,701 
Total transactions with owners, recognized directly in equity86 5,179 732 7,348 13,345 
Balance at January 1, 20217,312 447,130 24,614 (295,621)183,435 
Profit for the year— — — 15,996 15,996 
Other comprehensive income (loss) for the year26— — (17,085)— (17,085)
Total comprehensive income (loss) for the year— — (17,085)15,996 (1,089)
Legal reserves26— — (4,129)4,129 — 
Income tax benefit from excess tax deductions related to share-based payments— — — (1,853)(1,853)
Share-based compensation19, 26— — — 9,056 9,056 
Bonuses settled in shares26— — — — — 
Value conversion rights of convertible bonds26— — — — — 
Warrants exercised/ issued261 80 — — 81 
Options exercised / LTIP shares issued26116 8,044 — (4,874)3,286 
Balance at Total transactions with owners, recognized directly in equity117 8,124 (4,129)6,458 10,570 
Balance at 31 December 20217,429 455,254 3,400 (273,167)192,916 
Profit for the year— — — 13,674 13,674 
Other comprehensive income (loss) for the year26— — (11,054)— (11,054)
Total comprehensive income (loss) for the year— — (11,054)13,674 2,620 
Legal reserves26— — (1,083)1,083 — 
Income tax benefit from excess tax deductions related to share-based payments— — — 430 430 
Share-based compensation19, 26— — — 6,392 6,392 
Bonuses settled in shares26— — — — — 
Value conversion rights of convertible bonds26— — — — — 
Warrants exercised26— — — — — 
Options exercised / LTIP shares issued2680 7,043 — (4,843)2,280 
Balance at Total transactions with owners, recognized directly in equity80 7,043 (1,083)3,062 9,102 
Balance at December 31, 20227,509 462,297 (8,737)(256,431)204,638 
The Notes are an integral part of these financial statements.

During 2022, the Company changed the presentation of the consolidated statement of changes in equity whereby the components of other reserves is included in note 26.

F-8

CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended December 31,
Amounts in $ ‘000Notes202220212020
Profit before tax14,987 23,078 44,094 
Non-cash adjustments:
Depreciation, amortization, impairment of non-current assets6,9,10,1113,188 19,610 8,314 
Equity settled share based payments196,392 9,056 6,537 
Gain on disposal of investment in associate5(12,242)— — 
Fair value gain (loss) on revaluation121,185 (114)(69)
Other finance income7(4,485)(14,906)(713)
Other finance expenses75,463 6,196 33,308 
Share of net profits in associates using the equity method121,083 (694)(362)
Other(1,576)524 (1,624)
Operating cash flows before changes in working capital23,995 42,750 89,485 
Changes in working capital:
Inventories14(15,016)(6,153)(4,934)
Trade and other receivables152,364 5,918 (7,040)
Payables and other current liabilities1811,992 (5,193)7,019 
Restricted cash13273 467 1,039 
Total changes in working capital(387)(4,961)(3,916)
Interest received785 53 715 
Income taxes paid8(1,235)— (2,658)
Net cash flows generated from (used in) operating activities22,458 37,842 83,626 
Capital expenditure for property, plant and equipment10(1,376)(10,739)(4,657)
Investment intangible assets9(601)(3,447)(9,060)
Proceed from sale of Investment associate127,300 — (329)
Investment in equity instruments designated as at FVTOCI12— (4,589)— 
Acquisition of license9— (2,530)(1,583)
Net cash flows generated from (used in) investing activities5,323 (21,305)(15,629)
Repayment on loans and borrowings— — (57,231)
Payment on contingent consideration— (25,000)(20,722)
Payment of lease liabilities(3,311)(3,217)(2,186)
Proceeds of issued convertible bond16— — 142,825 
Transaction costs related to issued convertible bond16— — (2,649)
Interests on loans16, 17(3,952)(4,448)(2,142)
Proceeds of equity and warrants2,281 4,718 2,791 
Net cash flows generated from (used in) financing activities(4,982)(27,947)60,686 
Increase (decrease) of cash22,799 (11,410)128,683 
Exchange rate effects(7,381)(1,825)2,128 
Cash and cash equivalents at 1 January13191,924 205,159 74,348 
Total cash and cash equivalents at December 31207,342 191,924 205,159 
The Notes are an integral part of these financial statements.
F-9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.CORPORATE INFORMATION
Pharming Group N.V., hereafter “the Company”, “the Group” or “Pharming”, is a global biopharmaceutical company dedicated to transforming the lives of patients with rare, debilitating, and life-threatening diseases. Pharming is commercializing and developing a portfolio of protein replacement therapies and precision medicines, including small molecules, biologics, and gene therapies that are in early to late-stage development. Pharming is headquartered in Leiden, Netherlands, and has employees around the globe who serve patients in over 30 markets in North America, Europe, the Middle East, Africa, and Asia-Pacific.
The consolidated financial statements of Pharming for the year ended December 31, 2022 were authorized for issue in accordance with a resolution of the Board of Directors on April 4, 2023. The financial statements are subject to adoption by the Annual General Meeting of shareholders, which has been scheduled for May 17, 2023.
The headquarters and registered office of Pharming Group N.V. are located at:

Darwinweg 24
2333 CR Leiden
The Netherlands
2.ACCOUNTING PRINCIPLES AND POLICIES
2.1.BASIS OF PREPARATION AND GOING CONCERN ASSUMPTION
The consolidated financial statements are prepared in accordance with the International Financial Reporting Standards, or IFRS, issued by the International Accounting Standards Board, or IASB, and the interpretations issued by the IASB’s International Financial Reporting Interpretation Committee. The consolidated financial statements provide a general overview of our activities and the results achieved and have been prepared on a going concern basis.
Management exercises its judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 2.5.
These financial statements are presented in U.S. dollars, or $, and rounded to the nearest thousand U.S. dollars ($ ‘000), unless otherwise stated.
Going Concern
In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. These consolidated financial statements have been prepared for the Group as a going concern.
The 2022 year-end cash balance (including restricted cash) of $208.7 million is expected to fund the Company for more than twelve months from the date of this report.
So far, we have not experienced any noteworthy disruption to our supply chain and none of the Company’s (external) production facilities/sales locations have been closed. The receipts from commercial supply of product to our partners in Latin America, South Korea and Israel and proceeds from direct sales in the United States and Europe currently generate more cash than the Company requires for day to day expenses and to
F-10

supply those sales, and thus the surplus cash generated will support our capital expenditure plans and financial reserves further.
The Board of Directors anticipate significant investments in the preparations of the launch of leniolisib, expected in 2023. These investments will have a negative effect on the profit in 2023. Consequently, the Company expects the cash and cash equivalents to reduce during the year as the Company invests in its future. Expected revenue for leniolisib, if approved, will increase significantly from 2023 and onwards. The Company remains confident in the robustness of RUCONEST® sales, in the expansion of its pipeline and the addition of leniolisib, if approved for the treatment of APDS.
Presently, however, no further assurance can be given on either the timing or size of future profits. In addition, in the event that the Company needs to raise capital by issuing additional shares, shareholders’ equity interests may be diluted as to voting power, and their interests as to value will depend on the price at which such issues are made. The Company currently sees no further need to raise capital to support its current operations, but may take an opportunity to do so in either equity issue or through an expansion of the current convertible debt or to raise debt, or through a combination of such instruments, to support an acquisition or in-licensing of additional assets, if appropriate terms can be obtained that are in the best interests of shareholders.
Overall, based on the outcome of this assessment, our 2022 financial statements have been drawn up on the basis of a going concern assumption.

2.2New and revised IFRS standards
The Company applied for the first-time certain amendments, which are effective for annual periods beginning on or after January 1, 2022 as disclosed below.
•Amendments to IFRS 3: Reference to the conceptual framework;
•Amendments to IAS 16: Property, plant and equipment - Proceeds before intended use;
•Amendments to IAS 37: Onerous contracts - cost of fulfilling a contract;
•Amendments included in the Annual Improvements to IFRS Accounting Standards 2018-2020 Cycle relating to IFRS 1, IFRS 9, IFRS 16 and IAS 41.
Their adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements. The Company has not early adopted any other standard, interpretation or amendment that has been 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, which the Group intends to adopt, if applicable, when they become effective, are disclosed below.
•IFRS 17: Insurance contracts.
•Amendments to IFRS 10 and IAS 28: Sale or contribution of assets between investors and its associate or joint venture.
•Amendments to IAS 1: Classification of Liabilities as Current or Non-current.
•Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of accounting policies.
•Amendments to IAS 8: Definition of accounting estimates.
•Amendments to IAS 12: Deferred tax related to assets and liabilities arising from a single transaction.
Management does not expect that the adoption of the Standards listed above will have a material impact on the financial statements of the Company in future periods.
2.3Basis of consolidation
The consolidated financial statements include Pharming Group N.V. and its controlled subsidiaries, after the elimination of all intercompany transactions and balances. Subsidiaries are consolidated from the date the acquirer obtains effective control until control ceases.
An entity is considered effectively controlled if the Company, directly or indirectly, has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Acquisitions of subsidiaries are accounted for using the acquisition method of accounting. The financial statements of the
F-11

subsidiaries are prepared for the same reporting year as Pharming Group N.V., using the same accounting policies. Intercompany transactions, balances and unrealized gains and losses on transactions between group companies are eliminated.
2.4Accounting principles and policies
Business combinations
Business combinations are accounted for using the acquisition accounting method. Identifiable assets, liabilities and contingent liabilities acquired are measured at fair value at acquisition date. The consideration transferred is measured at fair value and includes the fair value of any contingent consideration. Where the consideration transferred exceeds the fair value of the net assets, liabilities and contingent liabilities acquired, the excess is recorded as goodwill. The costs of acquisition are recognized as an expense.
Foreign currency translation
In preparing the financial statements of the Group, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences are recognized in profit or loss in the period in which they arise except for:
•Exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings;
•Exchange differences on transactions entered into to hedge certain foreign currency risks (see below under financial instruments/hedge accounting);
•Exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur in the foreseeable future (therefore forming part of the net investment in the foreign operation), which are recognized initially in other comprehensive income and reclassified from equity to profit or loss on disposal or partial disposal of the net investment.
For the purpose of presenting consolidated financial statements in U.S. dollars, the assets and liabilities of the Group’s operations having Euro as functional currency are translated at exchange rates prevailing on the reporting date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any, are recognized in other comprehensive income and accumulated in a foreign exchange translation reserve.
The EUR/$ exchange rate applied at December 31, 2022, December 31, 2021 and December 31, 2020 was 1.0667, 1.1334 and 1.228 respectively. The average exchange rate applied in 2022, 2021 and 2020 was 1.0543, 1.1860 and 1.1426 respectively.
Distinction between current and non-current
An item is classified as current when it is expected to be realized (settled) within 12 months after the end of the reporting year. Liabilities are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting year.
Intangible assets acquired separately
Intangible assets, or IFA, acquired separately are measured at historical cost. The cost of intangible assets acquired in a business combination is recognized and measured at fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses.
F-12

Intangible assets with finite lives are amortized over the useful life and assessed for impairment whenever there is an indication that the intangible assets may be impaired and at the end of each reporting period. The estimated useful lives, residual values and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. Changes in the expected useful life, according to the straight-line method, or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the statement of income in the relevant expense category consistent with the function of the intangible asset.
Intangible assets are also recognized through the capitalization of certain types of expenditure, including particularly pharmaceutical research and development expenses. These are discussed in more detail under the “Internally-generated intangible assets – research and development expenditure” section of this Note.
The remaining amortization periods for intangible assets at December 31, 2022 are:
Amortization period
CategoryDescriptionTotalRemaining
Transgenic technologyPatents and licenses
6 to 10 years
Divested
RUCONEST® for HAE (EU)Development costs10 yearsFully amortized
RUCONEST® for HAE (U.S.)Re-acquired commercial rights 20 years14 years
RUCONEST® for HAE (EU)Re-acquired commercial rights 12 years9 years
Software expensesDevelopment costs
3 to 5 years
2 to 5 years
Development costs*Development costsNot yet in useNot yet in use
* Regarding acquired assets for Pompe and Fabry’s disease and internal generated assets for modifications of RUCONEST®
The Company’s original transgenic technology has been fully amortized and now has a carrying value of nil. The Company is developing new transgenic technology based on own technology that has been patented and is also using externally developed technology to produce certain founder transgenic animals. The new technology, if capitalized upon completion, will be amortized over its then useful life.
Internally-generated intangible assets – research and development expenditure
Expenditure on research activities is recognized as an expense in the period in which it is incurred. An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognized if, and only if, all of the following conditions have been demonstrated:
•The technical feasibility of completing the intangible asset so that it will be available for use or sale
•The intention to complete the intangible asset and use or sell it
•The ability to use or sell the intangible asset
•How the intangible asset will generate probable future economic benefits
•The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset
•The ability to measure reliably the expenditure attributable to the intangible asset during its development
The amount initially recognized for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally generated intangible asset can be recognized, development expenditure is recognized in profit or loss in the period in which it is incurred.
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortization and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.

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Intangible assets acquired in a business combination
Intangible assets acquired in a business combination and recognized separately from goodwill are recognized initially at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortization and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
Derecognition of intangible assets
An intangible asset is derecognized on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognized in profit or loss when the asset is derecognized.
Biological Assets
Under IAS 41 “Agriculture”, management is required to assess whether ‘biological assets’ which are contributing to production of our cash flows should be accounted for as assets. Management has assessed Pharming’s biological assets and conclude that these do not qualify to be recognized under the relevant standard IAS 41 “Agriculture” due to their uniqueness and very special transgenic nature and thus all relevant costs are expensed through the income statement.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation charges and accumulated impairment charges. Generally, depreciation is calculated using a straight-line basis over the estimated useful life of the asset. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal.
Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of income in the year the asset is derecognized. Residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year-end.
All costs that are directly attributable to bringing an asset to the location and condition necessary for it to be capable of operating in the manner intended by management, will be capitalized. These costs include direct employee benefits, rent and testing costs. Capitalization will be done until the asset is capable of operating in the manner intended by management.
The depreciation periods for property, plant and equipment are:

CategoryDepreciation period
LandNot depreciated
Operational facilities
10-20 years
Leasehold improvements
5-10 years
Machinery and equipment*
5-10 years
Other property, plant & equipment
5-10 years
* Depreciation charges for machinery and equipment are based on actual use of the equipment involved, which is expected to take place in a period before technical expiration

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Investments in associates
An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting. Under the equity method, an investment in an associate is recognized initially in the consolidated statement of financial position at cost and adjusted thereafter to recognize the Group’s share of the profit or loss and other comprehensive income of the associate.
When the Group’s share of losses of an associate exceeds the Group’s interest in that associate (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate), the Group discontinues recognizing its share of further losses. Additional losses are recognized only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate. The requirements of IAS 36 are applied to determine whether it is necessary to recognize any impairment loss with respect to the Group’s investment in an associate.
When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with IAS 36 as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs of disposal) with its carrying amount. Any impairment loss recognized is not allocated to any asset, including goodwill that forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases.
When a Group entity transacts with an associate of the Group, profits and losses resulting from the transactions with the associate or joint venture are recognized in the Group’s consolidated financial statements only to the extent of interests in the associate or joint venture that are not related to the Group.
Financial assets
Financial assets are recognized when the Company becomes a party to the contractual provisions of a financial instrument. Financial assets are derecognized when the rights to receive cash flows from the financial assets expire, or if the Company transfers the financial asset to another party and does not retain control or substantially all risks and rewards of the asset. Purchases and sales of financial assets in the normal course of business are accounted for at settlement date (i.e., the date that the asset is delivered to or by the Company).
At initial recognition, the Company measures its financial assets at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset.
After initial recognition, the Company classifies its financial assets as subsequently measured at either i) amortized cost, ii) fair value through other comprehensive income or iii) fair value through profit or loss on basis of both:
•The Company’s business model for managing the financial assets;
•The contractual cash flow characteristics of the financial asset.
Subsequent to initial recognition, financial assets are measured as described below. At each balance sheet date, the Company assesses whether there is objective evidence that a financial asset or a group of financial assets is impaired and recognizes a loss allowance for expected credit losses for financial assets measured at either amortized costs or at fair value through other comprehensive income. If, at the reporting date, the credit risk on financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12 months of expected credit losses. If, at the reporting date, the credit risk on a financial instrument has increased significantly since initial recognition, the Company measures the loss allowance for the financial instrument at an amount equal to the lifetime expected credit losses.

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Financial assets at amortized cost
Financial assets are measured at amortized cost if both i) the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and ii) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest of on the principal amount outstanding.
A financial asset measured at amortized cost is initially recognized at fair value plus transaction cost directly attributable to the asset. After initial recognition, the carrying amount of the financial asset measured at amortized cost is determined using the effective interest method, less any impairment losses.
Financial assets at fair value through other comprehensive income, or FVTOCI
On initial recognition, the Group may make an irrevocable election (on an instrument-by-instrument basis) to designate investments in equity instruments as at FVTOCI. Investments in equity instruments at FVTOCI are initially measured at fair value plus transaction costs.
Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in the legal reserve fair value revaluation. The cumulative gain or loss is reclassified to profit or loss on disposal of the equity investments.
Financial assets at fair value through profit and loss, or FVTPL
Financial assets that do not meet the criteria for being measured at amortized cost or FVTOCI are measured at FVTPL.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses recognized in profit or loss. The net gain or loss recognized in profit or loss includes any dividend or interest earned on the financial asset and is included in the ‘fair value gain (loss) on revaluation’ line item (Note 12). Fair value is determined in the manner described in Note 12.
Impairment of assets
Assets that have an indefinite useful life and assets not yet available for use are not subject to depreciation or amortization and are tested at least annually for impairment. Assets that are subject to depreciation or amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. Non-financial assets for which an impairment loss is recorded, are reviewed for possible reversal of the impairment at each reporting date.
Inventories
Inventories are stated at the lower of cost and net realizable value. Cost comprises direct materials and, where applicable, direct labor costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the First in First out (FIFO) method. Net realizable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.
Trade and other receivables
Trade and other receivables are recognized initially at transaction price. Subsequent measurement is at amortized cost using the effective interest method, less the expected credit loss. Trade receivables are amounts due from customers for goods sold in the ordinary course of business. They are generally due for settlement within 30 days and therefore are all classified as current. For trade receivables and contract assets, the Company
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applies a simplified approach in calculating expected credit loss. The Company assesses the expected credit loss that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment. Due to the short-term nature of the current receivables, their carrying amount is considered to be the same as their fair value.
Cash and cash equivalents
Cash and cash equivalents are defined as cash on hand, demand deposits and short-term, highly liquid investments (maturity less than 3 months) readily convertible to known amounts of cash and subject to insignificant risk of changes in value. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position. For the purpose of the statement of cash flow, cash and cash equivalents are net of outstanding bank overdrafts and do not include restricted cash. Restricted cash is cash held on short term deposits with certain banks as security mainly for credit card and is not considered cash and cash equivalents.
Equity
The Company only has ordinary shares, and these are classified within equity upon issue. Shares transferred in relation to settlement of (convertible) debt are measured at fair value with fair value based on the closing price of the shares on the trading day prior to the settlement date. Equity is recognized upon the recognition of share-based payment expenses; shares issued upon exercise of such options are measured at their exercise price.
Transaction costs associated with an equity transaction are accounted for as a deduction from equity to the extent they are incremental costs directly attributable to the equity transaction that otherwise would have been avoided. Transaction costs related to the issue of a compound financial instrument are allocated to the liability and equity components of the instruments in proportion to the allocation of proceeds.
Financial liabilities and borrowings
Financial liabilities are classified as either financial liabilities at fair value through profit or loss (derivative financial liabilities) or financial liabilities at amortized cost (borrowings and trade and other payables). All financial liabilities and borrowings are initially recognized at the fair value of the consideration received less directly attributable transaction costs; transaction costs related to the issue of a compound financial instrument are allocated to the liability and equity components of the instruments in proportion to the allocation of proceeds. After initial recognition, financial liabilities and borrowings are subsequently measured at amortized cost using the effective interest method.
Gains and losses are recognized in the statement of income when the liabilities are paid off or otherwise eliminated as well as through the amortization process. Purchases and sales of financial liabilities are recognized at settlement date.
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expired. Where 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 a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the statement of income.
Convertible bonds
The Company has issued convertible bonds. At the time of the issue of bonds itself the split between equity and liability portion has been accounted for. The liability portion of the convertible bonds is the present value of the future cash flows, calculated by discounting the future cash flows of the bonds (interest and principal) at the market rate of interest with the assumption that no conversion option is available. The value of the equity portion will be the difference between the total proceeds received from the bonds and the present value (liability portion).
The equity component is not remeasured after initial recognition.
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In the case the Company extinguishes the convertible bonds before maturity through an early redemption or repurchase in which the original conversion privileges are unchanged, the entity allocates the consideration paid and any transaction costs for the repurchase or redemption to the liability and equity components of the convertible bond at the date of the transaction. The method used in allocating the consideration paid and transaction costs to the separate components is consistent with that used in the original allocation to the separate components of the proceeds received by the Company when the convertible instrument was issued. Once the allocation of the consideration is made, any resulting gain or loss is treated as follows:
•the amount of gain or loss relating to the liability component is recognized in profit or loss; and
•the amount of consideration relating to the equity component is recognized in equity
If the convertible bonds are converted before maturity, the amount recognized in equity in respect of the shares issued should be the amount at which the liability for the debt is stated as at the date of conversion.
On conversion of the convertible bonds at maturity, the Company recognizes the liability component and recognizes it as equity. The original equity component remains as equity (although it may be transferred from one line item within equity to another). There is no gain or loss on conversion at maturity date.
The transaction costs that are directly attributable to the convertible bonds are deducted from the initial fair value of the convertible bonds. The transaction costs are allocated between the liability and the equity components in proportion to the allocation of the proceeds. The transaction costs of the liability component are recognized as part of interest costs.
Provisions
Provisions are recognized when there is a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material). The expense relating to any provision is presented in the statement of income net of any reimbursement.
Trade and other payables
Trade and other payables are initially recognized at fair value. Subsequent measurement is at amortized cost using the effective interest method.
Revenue recognition
In order to determine when to recognize revenue and at what amount, the Company applies the following five steps, based on transfer of control over goods to the customer:
1.Identify the contract(s) with a customer;
2.Identify the performance obligations in the contract. Performance obligations are promises in a contract to transfer to a customer goods that are distinct;
3.Determine the transaction price. The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. If the consideration promised in a contract includes a variable amount, an entity must estimate the amount of consideration to which it expects to be entitled in exchange for transferring the promised goods or services to a customer;
4.Allocate the transaction price to each performance obligation on the basis of the relative stand-alone selling prices of each distinct good or service promised in the contract;
5.Recognize revenue when a performance obligation is satisfied by transferring a promised good or service to a customer (which is when the customer obtains control of that good or service). A performance obligation may be satisfied at a point in time (typically for promises to transfer goods to a customer) or over time (typically for promises to transfer services to a customer). For a performance obligation satisfied over time, an entity would select an appropriate measure of progress to determine how much revenue should be recognized as the performance obligation is satisfied.
F-18

All of the Group’s revenue from contracts with customers is derived from delivery of goods, specifically vials of pharmaceutical products. The Group does not provide any additional services (including financing services) or equipment to its customers. In accordance with IFRS 15, revenue is recognized when the customer obtains control of the goods. For the Group’s contracts the customer usually obtains control immediately after shipment of the product, which arrives at the customer within a short time frame.
The vast majority of the Group’s contracts for revenue with customers are subject to chargebacks, discounts and/or rebates relating directly to customers or to ultimate reimbursement claims from government or insurance payers. These are accounted for on an estimated net basis, with any actual discounts and rebates used to refine the estimates in due course. These variable elements are deducted from revenue in the same period as the related sales are recorded. Due to the nature of these variable elements, it is not practicable to give meaningful sensitivity estimates due to the large volume of variables that contribute to the overall discounts, rebates and chargebacks accruals.
Other income
Other income consists of gains upon sale of investments and income from government grants.
Pharming receives certain grants which support the Company’s research efforts in defined research and development projects. These subsidies generally provide for reimbursement of approved costs incurred as defined in various grants. Subsidies are recognized if the Company can demonstrate it has complied with all attached conditions and it is probable that the grant amount will be received. Grants are recognized in profit or loss on a systematic basis over the periods in which the Group recognizes as expenses the related costs for which the grants are intended to compensate.
The Company includes income from grant under other income in the statement of income in order to enable comparison of its statement of income with companies in the life sciences sector.
Costs of sales
Costs of sales represent all production costs related to product sales, including production costs of the skimmed milk, external manufacturing costs, costs of vials used for product testing and other costs incurred in bringing the inventories to their present location and condition. The costs are measured at their actual costs based on FIFO and incurred to net realizable value if sales price is below actual costs.
Research and development costs
Research expenditure is recognized as an expense in the period in which it is incurred. An intangible asset arising from development expenditure on an individual project is recognized only when the following criteria are met:
•The technical feasibility of completing the intangible asset so that it will be available for use or sale is not in doubt;
•The Company has the clear intention and resources to complete the asset, and to use or sell it;
•Its ability to use or sell the asset is not in doubt;
•The probability of future economic benefits is clear at the time of making the decision;
•The availability of resources to complete the development required is not expected to change during the development process;
•It is possible to measure the expenditure reliably during the development.
Technical feasibility and ability to use or sell the asset are, in general, considered probable when the Company estimates that obtaining marketing approval is deemed likely. In practice this is only the case when we have either (i) completed a similar program before on the same therapeutic molecule or combination, or (ii) completed an identical program before on a similar molecule or combination. In other situations, the likelihood of success at each remaining level of clinical development and regulatory approval is assessed and, unless the collective probability is considered high, the criteria is difficult to meet in these circumstances.
Following the initial recognition of the development expenditure, the cost model is applied requiring the asset to be carried at cost less any accumulated amortization and accumulated impairment losses.
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Any expenditure capitalized is amortized over the period of expected useful life of the related patents. The carrying value of development costs is reviewed for impairment annually when the asset is not yet in use or more frequently when an indication of impairment arises during the reporting year.
Interest income
Interest income is recognized as interest accrues, using the effective interest method. For the purpose of the consolidated statement of cash flows, interest income derived from cash and cash equivalents have been presented as operating cash flows.
Operating costs
Operating costs are expensed as incurred. Costs of research and development cover those activities that are carried out to gain new scientific or technical knowledge and understanding as well as the application of research findings or other knowledge to a plan or design for the production of new or substantially improved products. Costs of general and administrative nature apply to overhead expenses. Costs of marketing and sales relate to all expenses incurred to commercialize the product.
Short-term employee benefits
The Company does not provide any benefits based on financial measurement of the statement of income.
Liabilities for wages and salaries, including non-monetary benefits and accumulating sick leave that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognized in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented under trade and other payables in the balance sheet.
Pension plan
For all Dutch employees, the Company participates in defined contribution pension plans with an independent insurance company. Defined contributions are expensed in the year in which the related employee services are rendered.
Employees in the United States are enabled to participate in a 401k plan, which also qualifies as a defined contribution plan. To become an eligible participant, an employee must complete 6 months of service and attain the age of 18 years. The employer matches 100% of the first 3% the employee contributes to their 401k plan and 50% of any amount over 3% up to 5%. Any employee contribution over 5% is not matched. Costs of the 401k plan are expensed in the year in which the related employee services are rendered.
Share-based payment
The costs of option plans are measured by reference to the fair value of the options on the date on which the options are granted. The fair value is determined using the Black-Scholes model. The costs of these options are recognized in the income statement (share-based compensation) during the vesting period, together with a corresponding increase in equity (other reserves). Share-based payment charges do not affect liabilities or cash flows in the year of expense since all transactions are equity-settled.
Pharming’s employee option plan states that an employee is entitled to exercise the vested options within five years after the date of the grant. The period in which the options become unconditional is defined as the vesting period.
Long Term Incentive Plan
For a limited number of board members and officers, performance shares are granted free of charge. A maximum number of predetermined shares vest three years after the grant date, provided that the participant to the long-term incentive plan is still in service (continued employment condition), with actual shares to be
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transferred based on the relative achievement of Pharming’s share price compared to a peer group. The maximum number of shares immediately vests upon a change of control.
The fair value is determined using Monte Carlo simulation. The costs of the LTIP are recognized in the income statement during the vesting period. The fair value at the grant date includes the market performance condition (relative total shareholder return performance) but excludes the three-year service condition.

On December 11, 2020 the LTIP for the Executive Director was implemented. The LTIP has been aligned with prevailing ‘best practices’ and is performance-related only. The performance includes Total Shareholder Return (40% weighing) and achievement of long-term strategy oriented objectives (60% weighing). The Total Shareholders Return is compared to a peer group.
The shares granted to the Executive Director under the LTIP, will vest in 3 years after the grant date, subject to the achievement of targets for a three-year performance period, their relative weightings and the pay-out limits. All shares will be subject to a retention period of 5 years from the date of grant. In order to fully become entitled to the shares vesting under the LTI conditions the participant has to be a member of the Board of Directors as Executive Board Member at the vesting date.
The fair value of the LTIP is determined using the Monte Carlo simulation. The costs of the LTIP are recognized in the income statement during the vesting period. The fair value at the grant date includes the financial performance condition of Pharming compared to the benchmark, the strategic performance condition as well as the service condition.
Restricted Stock Unit Plan
For a limited number of board members and officers, restricted stock units are granted free of charge. A maximum number of predetermined shares vest four years after the grant date, provided that the participant to the long-term incentive plan is still in service (continued employment condition).
The fair value is determined to be the market price at the grant date. The costs of the RSU grant are recognized in the income statement during the vesting period.
Leases
The Group assesses whether a contract is or contains a lease at the inception of the contract. The Group recognizes a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is a lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (such as tablets and personal computers, small items of office furniture and telephones). For these leases the Group recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which the economic benefits from the leased assets are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Company uses its incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
•Fixed lease payments;
•Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date.
The lease liability is presented as a separate line in the consolidated balance sheet.
The lease liability is subsequently measured by increasing the carrying amount to reflect the interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.
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The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
•The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.
•The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which case the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case, a revised discount rate is used).
•A lease contract is modified, and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of modification.
The Group did not make any such adjustments during the periods presented.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognized and measured under IAS 37. To the extent that the costs relate to a right-of-use asset, the costs are included in the related right-of-use asset, unless those costs are incurred to produce inventories.
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.
The right-of-use assets are presented as a separate line in the consolidated balance sheet.
The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in the ‘Property, Plant and Equipment’ policy.
Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right-of-use asset. The related payments are recognized as an expense in the period in which the event or condition triggers those payments occur.
As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any lease and associated non-lease components as a single arrangement. The Group has not used this practical expedient. For contracts that contain lease components and one or more additional lease or non-lease components, the Group allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components. The Group had no such lease arrangements in 2022 and has none at the date of this report.
Income taxes
The income tax expense or credit for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which
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applicable tax regulation is subject to interpretation. It establishes provisions where appropriate based on amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using tax rates that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realized, or the deferred income tax liability is settled.
Deferred tax assets are recognized only if it is probable that future taxable amounts will be available to use those temporary differences and losses. The Company has assessed all its income tax amounts and provisions in the light of IFRIC 23 Accounting for Uncertain Income Taxes, and has concluded that it is probable that its particular tax treatment will be accepted in all relevant jurisdictions and thus it has determined taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates consistently with the tax treatment included in its income tax filings.
Current and deferred tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or directly in equity.
Cash flow statement
Operating cash flows in the statement of cash flows are reported using the indirect method. Under the indirect method the figure is produced by adjusting the profit and loss by removing the effects of non-cash items and changes in working capital. The Company has chosen the profit before tax as a starting point for the reconciliation as most of the other elements in the net result have a non-cash nature. Payments of the finance lease liabilities related to operating assets and equipment are included in the operating cash flows, whereas all other finance lease liabilities are included in financing cash flows. They are part of the manufacturing costs, thus part of the working capital. This way the statement properly reflects the cash flows.
Earnings per share
Basic earnings per share are calculated based on the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share are computed based on the weighted average number of ordinary shares outstanding including the dilutive effect of shares to be issued in the future under certain arrangements such as option plans, warrants issued and convertible loan agreements.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting of segmental information provided to and used by the chief operating decision-maker function in managing that segment.
As from December 11, 2020, the Executive Members of the Board of Directors, which makes the Company’s strategic decisions, have been identified as the chief operating decision-maker responsible for allocating resources and assessing performance of the operating segments. Up to December 11, 2020, the former Board of Management was the chief operating decision-maker. See Note 20.
2.5 Significant accounting judgements and estimates
The preparation of financial statements requires judgments and estimates that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the financial statements. The resulting accounting estimates will, by definition, seldom equal the related actual results. The main estimates and assumptions that have a risk of causing an adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.


F-23

Judgements:
Financial assets - Investment in BioConnection
During the second quarter of 2022, Pharming entered into a share purchase agreement, following receipt of an offer for all shares in BioConnection B.V. by Gimv Nederland Holding B.V (“Gimv”)., a European investment company listed on Euronext Brussels. The existing shareholders (including Pharming) reached agreement with Gimv on the sale of all issued and outstanding shares to a new holding company (BioConnection Investments B.V.) incorporated by Gimv, followed by a partial re-investment by existing shareholders of the purchase price in the share capital of BioConnection Investments B.V. The re-investment relates to the purchase of ordinary shares and a preference share.
Management made an assessment on the accounting treatment of the agreement and concluded that the sale of the BioConnection ordinary shares and purchase of the BioConnection Investments B.V. ordinary shares shall be considered as a dilution of an existing equity stake in an investment, accounted for using the equity method. Hence Pharming recognized the dilution of its equity stake as a reduction of the carrying amount of the investment accounted for using the equity method. The preference share is valued as an investment in debt instruments designated at FVTPL.

The fair value of the preference share was calculated based on a commonly accepted valuation method, the option pricing model (“OPM”), which considers the share classes as call options on the total shareholders’ equity value according to the rights and preferences of each class of equity. The payoff profile of the share classes was analyzed through a portfolio of call options, with the total equity value of a company as the underlying asset of the options and specific terms for each option calibrated to mirror, in aggregate, the payoff profile of the share classes. Relying on the forward-looking Black-Scholes-Merton (“BSM”) financial instrument pricing framework, the OPM effectively captures the full range of potential outcomes for the share classes at exit. The OPM takes into consideration the full spectrum of risks in terms of future potential upside or downside but does not require explicit estimates of the possible future outcomes. The BSM model is commonly used to price assets on financial markets and allows to estimate the theoretical value of a call option, using six key parameters, namely the underlying equity value, strike price, time to maturity, risk free rate, expected volatility of the underlying equity and dividend yield on the underlying equity. The most important drivers for the fair value using the BSM model are:
•the equity value, for which the determination of its value is highly dependent on the estimate of projected revenues, EBITDA and discount rate;
•volatility; and
•time to maturity.
As a result of this transaction, Pharming has received net cash proceeds $7.3 million (EUR6.9 million) and recognized a gain of $12.2 million.

In the Board of Directors’ judgement, the investment in BioConnection constitutes an investment in an associated company and is therefore not consolidated, as Pharming has significant influence but does not have control of BioConnection and is embargoed by a shareholders agreement between the shareholders of BioConnection from influencing any activity between the two parties which is in any significant way different from the relationship which existed between the two prior to the investment. Further reference is made to Note 12.
Biological Assets
Under IAS 41 “Agriculture”, management is required to assess whether ‘biological assets’ which are contributing to production of our cash flows should be accounted for as assets. Management has assessed Pharming’s biological assets and conclude that these do not qualify to be recognized under the relevant standard IAS 41 “Agriculture” due to their uniqueness and very special transgenic nature and thus all relevant costs are expensed through the income statement.


F-24

Estimates:
Revenue
Revenue is recognized when control has been transferred to the customer. Revenue is reduced by chargebacks and rebates for government healthcare programs, discounts to specialty pharmacies and wholesalers, and product returns given or expected to be given, which vary by patient groups. Chargebacks and rebates for healthcare programs depend upon the submission of claims sometime after the initial recognition of the sale. The liability for this variable consideration is made, at the time of sale, for the estimated chargebacks and rebates, mainly U.S. Medicaid, based on available market information and historical experience. Because the amounts are estimated they may not fully reflect the final outcome, and the amounts are subject to change dependent upon, amongst other things, the types of patient groups. The level of these liabilities is being reviewed and adjusted regularly in the light of contractual and legal obligations, historical charges and trends, past experience and projected mixtures of patient groups. The Group acquires this information from both internal resources and external parties.
Future events could cause the assumptions on which the accruals are based to change, which could affect the future results of the Group.
3.SEGMENT INFORMATION
The Executive Members of the Board of Directors are the chief operating decision-makers and consider the business from both a geographic and product perspective.
From a product perspective, the Company’s business is exclusively related to the recombinant human C1 esterase inhibitor business. From a geographic perspective, the Company is operating in the United States, Europe and the Rest of the World.
The Executive Members of the Board of Directors primarily measure revenues and gross profit to assess the performance of the geographic areas. Operating costs as well as non-current assets are not sub-allocated to the geographic areas.
Total external revenues and gross profit per geographic segment for the financial year 2022, 2021 and 2020 are:

Amounts in $ ‘000202220212020
Revenues:
U.S.200,082 193,419 202,684 
Europe4,924 4,933 8,232 
RoW616 519 1,258 
Total revenues205,622 198,871 212,174 
Gross profit:
U.S.186,263 176,266 184,024 
Europe1,378 1,049 3,534 
RoW419 414 1,077 
Total gross profit188,060 177,729 188,635 
4.REVENUE
The revenue fully relates to the transfer of goods and is recognized at a point in time when the goods have been delivered to the customer. For the years ended December 31, 2022 and 2021, the sales of RUCONEST® in the U.S. market were $200.1 million and $193.4 million.
F-25

For the years ended December 31, 2022 and 2021 revenues in Europe were $4.9 million. Revenues in Rest of the World (excluding Europe) were $0.6 million and $0.5 million in 2022 and 2021 respectively.
Two U.S. customers represented approximately $173.6 million, or 84%, of our net revenues in 2022. For 2021 and 2020, the two U.S. customers represented approximately $156.6 million, or 79%, and $161.7 million, or 76%, of our revenues. These customers are large specialty wholesale companies that are specialized in distribution of pharmaceuticals in our and our competitors’ disease area and that distribute our product.
5.OTHER INCOME
Amounts in $ ‘000202220212020
Grants1,774 2,620 1,829 
Gain on divestment in associates12,242 — — 
Other507 — — 
Total14,523 2,620 1,829 
The received grants amounted to $1.8 million in 2022 (2021: $2.6 million; 2020: $1.8 million). The grants are annual payroll-tax reimbursement granted by the Dutch and French governments for research and development activities actually conducted by the Company in those countries.
The gain on divestment in associates relates to the sale of shares of BioConnection, following receipt of an offer for all shares in BioConnection by Gimv. As a result of this transaction, Pharming has recognized a gain of $12.2 million at initial recognition, which relates to the initial recognition of the obtained preference share ($7.9 million) and the gain on the dilution of ordinary shares in BioConnection ($4.3 million). Further reference is made to Note 12.
6.EXPENSES BY NATURE
Costs of sales
Costs of sales in 2022, 2021 and 2020 were as follows:

Amounts in $ ‘000202220212020
Costs of sales (17,398)(19,107)(23,539)
Obsolescence inventory impairments(164)(2,035)— 
Total(17,562)(21,142)(23,539)
Costs of sales in 2022 and 2021 amounted to $17.4 million and $19.1 million and relate to actual product sales.
Obsolescence inventory impairment stems from the valuation of the inventories against lower net realizable value. Impairments related to inventories designated for commercial activities in 2022 and 2021 amounted to a charge of $0.2 million and $2.0 million.
Costs of research and development
Research and development costs in 2022, 2021 and 2020 were as follows:

F-26

Amounts in $ ‘000202220212020
Employee costs(20,595)(24,451)(20,984)
Amortization costs IFA(55)(132)(774)
Impairment losses IFA— (4,992)— 
Depreciation PPE and right of use assets(1,602)(3,152)(2,062)
Direct Operating Expenses(27,107)(33,190)(12,804)
Other indirect research and development costs(3,172)(4,452)(1,895)
Total research and development costs(52,531)(70,369)(38,519)
Operating expenses for research and development activities in 2022 and 2021 were $52.5 million and $70.4 million. The costs mainly relate to leniolisib, for the treatment of APDS, and AKI and cattle. The costs for 2021 include costs incurred for OTL-105 ($13.1 million) and impairment losses of $5.0 million on intangible assets related to the development of RUCONEST® in a more convenient form for patients (see Note 9).
Costs of general and administrative activities
General and administrative costs for 2022, 2021 and 2020 were as follows:

Amounts in $ ‘000202220212020
Employee costs(14,868)(12,178)(11,217)
Amortization costs IFA(492)— — 
Depreciation PPE and right of use assets(2,525)(857)(1,144)
Impairment losses PPE and right of use assets(4,376)(5,447)— 
Direct Operating Expenses(9,038)(8,419)(9,546)
Other indirect general and administrative costs(14,717)(10,073)(2,178)
Total general and administrative costs(46,016)(36,974)(24,085)
For the years ended December 31, 2022 and 2021, operating expenses for general and administrative activities were $46.0 million and $37.0 million. Other indirect general and administrative costs include insurance, compliance, control implementation and other costs.
Costs of marketing and sales activities
Marketing and sales costs for 2022, 2021 and 2020 were as follows:

Amounts in $ ‘000202220212020
Employee costs(32,858)(24,125)(23,094)
Amortization costs IFA(3,765)(4,098)(3,238)
Depreciation PPE and right of use assets(372)(930)(865)
Direct Operating Expenses(42,398)(28,543)(23,362)
Other indirect marketing and sales costs(6,410)(1,749)(1,045)
Total marketing and sales costs(85,803)(59,445)(51,604)
For the years ended December 31, 2022 and 2021, operating expenses for marketing and sales were $85.8 million and $59.4 million.
Employee benefits
Employee benefit costs for 2022, 2021 and 2020 were as follows:

F-27

Amounts in $ ‘000202220212020
Salaries(53,328)(44,202)(36,811)
Social security costs(6,317)(5,318)(4,302)
Pension costs(2,284)(2,179)(1,844)
Share-based compensation(6,392)(9,055)(8,405)
Total(68,321)(60,754)(51,362)
Salaries include holiday allowances and cash bonuses for staff.
Depreciation and amortization charges
Depreciation and amortization charges are included in:
Amounts in $ ‘000202220212020
Property, plant and equipment (1,993)(2,158)(2,044)
Intangible assets(4,312)(4,232)(4,008)
Total(6,305)(6,390)(6,052)
Right of use assets(2,565)(2,781)(2,027)
Total(2,565)(2,781)(2,027)
7.OTHER FINANCIAL INCOME AND EXPENSES

Amounts in $ ‘000202220212020
Interest income85 53 715 
Foreign currency results4,400 14,841 
Other financial income4,485 14,894 715 
Loan settlement— — (4,313)
Foreign currency results— — (19,233)
Interest loans and borrowings(4,736)(5,296)(5,178)
Interest leases(622)(795)(766)
Contingent consideration— — (3,744)
Other financial expenses(105)(94)(74)
Other financial expenses(5,463)(6,185)(33,308)
Total other financial income and expenses(978)8,709 (32,593)
Loan settlement
In 2020, settlement fees and expenses were paid for an amount of $4.3 million as a result of the fact that the Company, in 2020, paid back and extinguished the loan from Orbimed Advisors completely. In 2022 and 2021, no settlement fees were paid.
Foreign currency results
These results primarily follow from the revaluation of bank balances which are denominated in foreign currencies, mainly U.S. dollars, and the timing of foreign currency payments against the actual exchange rate as compared to the original exchange rate applied upon the charge of fees or expenses. The gains in 2022 are mainly a result of the revaluation of the bank balances in U.S. dollars, incorporated in our Dutch entities where the functional currency is Euro.
F-28

Interest loans and borrowings
Interest on loans and borrowings in 2022, 2021 and 2020 relate to the amortized costs from the convertible bond and loans and borrowings, calculated under IFRS at the effective rate of interest, which takes account of any equity component on recognition such as warrants or early repayment options.
Contingent consideration
The contingent consideration was fully repaid in the second quarter of 2021, hence there were no expenses for 2022 and 2021.

F-29

8.INCOME TAX
Income taxes on ordinary activities
The following table specifies the current and deferred tax components of income taxes in the income statement:

Amounts in $ ‘000202220212020
Income tax expense
Current tax
Current tax on profit for the year(3,761)(97)(2,705)
Adjustments for current tax of prior periods(9)96 1,497 
Total current tax expense(3,770)(1)(1,208)
Deferred income tax
Deferred tax on profit for the year2,581 (8,196)(8,609)
Adjustments for deferred tax of prior periods(124)1,115 3,469 
Total deferred tax expense2,457 (7,081)(5,140)
Income tax expense(1,313)(7,082)(6,348)

Effective income tax rate
Pharming Group’s effective rate in its consolidated income statement differed from The Netherlands’ statutory tax rate of 25.8%. The following table reconciles the statutory income tax rate with the effective income tax rate in the consolidated income statement:

Amounts in $ ‘000202220212020
Reconciliation of tax charge
Profit, (loss) on ordinary activities before taxation 14,987 23,078 44,094 
Profit/(loss) on ordinary activities multiplied by
standard rate of tax in The Netherlands(3,866)(5,770)(11,023)
Effects of:
Tax rate in other jurisdictions554 307 266 
Non-taxable income (expense)2,142 (2,853)293 
Adjustments of prior periods15 655 2,122 
Change in statutory applicable tax rate(1)555 2,844 
Other(157)24 (850)
Income tax expense for the year(1,313)(7,082)(6,348)
Factors affecting current and future tax charges
The main difference between the nominal tax and the effective tax for the year 2022 can be explained by the effects of non-taxable income, mainly related to the other income generated from the dilution of shares of our investment accounted for using the equity method and share-based payments, U.S. State taxes and the effect of taxable income generated and taxed in jurisdictions where tax rates differ from the statutory rate in The Netherlands.

F-30

Deferred tax
The balance of the net deferred tax assets/(liabilities) is therefore shown below:

Amounts in $ ‘00020222021
Total deferred tax assets29,211 27,025 
Total deferred tax liabilities(6,238)(5,809)
Total net deferred tax assets /( liabilities)22,973 21,216 

The deferred tax assets and liabilities are offset since there is a legally enforceable right to set off current tax assets against current tax liabilities and since the deferred tax income taxes relate to the same tax jurisdiction.
The significant components and annual movements of deferred income tax assets as of December 31, 2022 and December 31, 2021 are as follows:

Amounts in $ ‘00020222021
Intangible fixed assets9,876 10,493 
Lease Liabilities7,042 3,795 
Accruals2,026 2,289 
Other6,721 2,672 
Tax losses3,546 7,776 
Total deferred tax assets29,211 27,025 

Amounts in $ ‘000Intangible fixed assetsLease liabilitiesAccrualsOtherTax lossesTotal
At January 1, 202117,705 1,279 5,123 3,856 5,772 33,735 
(Charged)/credited
 - to profit or loss(6,121)2,696 (2,834)823 2,515 (2,921)
- other movement— — — (598)— (598)
- to accumulated deficit— — — (1,366)— (1,366)
 - currency translation(1,091)(180)— (43)(511)(1,825)
At December 31, 202110,493 3,795 2,289 2,672 7,776 27,025 
(Charged)/credited
 - to profit or loss— 3,431 (263)3,746 (3,814)3,100 
 - other movement— — — (28)— (28)
- to accumulated deficit— — — 337 — 337 
- currency translation(617)(184)— (6)(416)(1,223)
At December 31, 20229,876 7,042 2,026 6,721 3,546 29,211 
Based upon the Company’s latest budget for 2023 and its long-range forecasts for the three years thereafter, it is considered probable that there will be sufficient taxable profits in the future to realize the deferred tax assets, and therefore these assets should continue to be recognized in these financial statements.
Deferred taxes relating to intangible fixed assets represent the tax effect on temporary difference between the tax base and the carrying amount of the rights to the Pompe program, which were at the end of 2018 transferred within the Group. The deferred taxes relating to the rights to the Pompe program will be realized through the amortization of the intangible assets once in use within the fiscal unity.
Accruals represent deferred tax assets recognized for temporary differences between the carrying amount and tax bases of accrued liabilities in the United States.
F-31

The unused tax losses were incurred by the Dutch fiscal unity and Pharming Healthcare.
The calculation of the deferred tax asset is as shown below:

Amounts in $ ‘00020222021
Net Operating Losses - Netherlands
Net Operating Losses at year-end13,556 25,364 
Portion selected for deferred tax asset13,556 25,364 
Tax rates used:
2023 and later: 25,8% (25%)3,497 6,545 
Total tax effect Netherlands3,497 6,545 
Net Operating Losses - U.S.
Net Operating Losses at year-end670 4,356 
Portion selected for deferred tax asset670 4,356 
Tax rate used:
2022: 28,26%— 1,231 
2023 and later: 7,65%49 
Total tax effect U.S.49 1,231 
Tax effect Netherlands - losses deferred3,497 6,545 
Tax effect U.S. - losses deferred49 1,231 
Total deferred tax asset3,546 7,776 

The current part of the net deferred tax assets is $5.4 million and $2.4 million for the years ended December 31, 2022 and 2021.
The component and annual movement of deferred income tax liabilities as of December 31, 2022 and December 31, 2021 are as follows:

Amounts in $ ‘00020222021
Tangible fixed assets(6,238)(4,149)
Other liabilities— (1,660)
Total deferred tax liabilities(6,238)(5,809)

Amounts in $ ‘000Tangible fixed assetsOther liabilitiesTotal
At January 1, 2021(1,648)(210)(1,858)
(Charged)/credited
 - to profit or loss(2,710)(1,450)(4,160)
 - to other comprehensive income
 - currency translation209 — 209 
At December 31, 2021(4,149)(1,660)(5,809)
(Charged)/credited
 - to profit or loss(2,302)1,660 (642)
- other movement28 28 
 - currency translation185 — 185 
At December 31, 2022(6,238)— (6,238)
F-32

9.INTANGIBLE ASSETS
Amounts in $ ‘000Transgenic technologyRUCONEST® for HAE (EU)Development costs Re-acquired
 rights and Licenses		Novartis LicenseSoftwareTotal
At cost3,256 648 7,779 77,806 24,667 958 115,114 
Accumulated:
Amortization charges(3,213)(648)— (14,699)— (104)(18,664)
Impairment charges(43)— (2,324)— — — (2,367)
Carrying value at January 1, 2021— — 5,455 63,107 24,667 854 94,083 
Amortization charges— — — (4,054)— (178)(4,232)
Impairment charges— — (4,991)— — — (4,991)
Assets acquired— — — — 2,530 3,447 5,977 
Transfer from PPE - cost— — — — — 175 175 
Transfer from PPE - accumulated amortization— — — — — (78)(78)
Divestments - cost(3,145)— — — — (99)(3,244)
Divestment - accumulated amortization3,105 — — — — 99 3,204 
Divestment - impairment charges40 — — — — — 40 
Currency translation - cost(111)(50)(599)(5,995)(2,012)(226)(8,993)
Currency translation - amortization108 50 — 1,312 — 19 1,489 
Currency translation - impairment3 — 401 — — — 404 
MOVEMENT 2021— — (5,189)(8,737)518 3,159 (10,249)
At cost— 598 7,180 71,811 25,185 4,255 109,029 
Accumulated:
Amortization charges— (598)— (17,441)— (242)(18,281)
Impairment charges— — (6,914)— — — (6,914)
Carrying value at December 31, 2021— — 266 54,370 25,185 4,013 83,834 
Amortization charges— — — (3,597)— (720)(4,317)
Impairment charges— — — — — — — 
Assets acquired— — — — — 601 601 
Transfer from PPE - cost— — — — — — — 
Transfer from PPE - accumulated amortization— — — — — — — 
Divestments - cost— — (6,431)— — — (6,431)
Divestment - accumulated amortization— — — — — — — 
Divestment - impairment charges— — 6,431 — — — 6,431 
Currency translation - cost— (35)(499)(4,228)(1,482)(235)(6,479)
Currency translation - amortization— 35 — 984 — (20)999 
Currency translation - impairment— — 483 — — — 483 
Movement 2022— — (16)(6,841)(1,482)(374)(8,713)
At cost— 563 250 67,583 23,703 4,621 96,720 
Accumulated:
Amortization charges— (563)— (20,054)— (982)(21,599)
Impairment charges— — — — — — — 
Carrying value at December 31, 2022— — 250 47,529 23,703 3,639 75,121 
F-33

Transgenic technology
The transgenic technology relates to the patents and licenses historically acquired in light of Pharming’s production platform on the expression of human proteins in the milk of transgenic mammals. This technology enables the development of complex therapeutic proteins in a cost-effective manner. During 2021, these assets were disposed.
RUCONEST® for HAE (EU)
In 2022, the Company has capitalized development costs in relation to RUCONEST® for HAE in the EU. Following market launch of the product in 2010 the amortization of the asset started, and no further development costs have been capitalized in respect to this item since then. These development costs are fully amortized at the end of 2022 and 2021.
Development costs
In 2014, the Company acquired assets from Transgenic Rabbit Models SASU, for a total amount of $0.5 million, which was recognized as intangible assets related to development costs of two new product leads: alpha-glucosidase for Pompe disease and alpha-galactosidase for Fabry’s disease. Given a re-prioritization of the effort invested in the Company’s pipeline asset, the board of directors decided to fully impair the asset relating to alpha-galactosidase for Fabry’s disease in 2021, resulting in an impairment charge of $0.3 million. In 2022, this asset has been disposed.
In 2018, the Company started to modify the current product RUCONEST® for more convenient forms of administration by the patient. This was expected to have resulted in better variants of the existing product. A total amount of $4.5 million for the new variant prioritized version has been recognized as an internally generated intangible asset as at December 31, 2019. In 2020, the Company incurred $0.2 million development costs, while in 2021 no costs were incurred given a re-prioritization of the effort invested in the Company’s pipeline assets. The cost of the asset has been fully impaired in 2021 as the development program of the variant has been hibernated, resulting in an impairment charge of $4.7 million. In 2022, the assets have been disposed.
The remaining balance of $0.3 million relates to the asset related to development costs of a product lead for alpha-glucosidase for Pompe disease.
Re-acquired rights and Licenses
The re-acquired rights relate to the acquisition of all North American commercialization rights from Bausch Health (formerly Valeant Pharmaceuticals) in 2016 and the acquisition of all European commercialization and distribution rights from Swedish Orphan International AB, or Sobi, in 2020.
Novartis license
In August 2019, Pharming entered into a development collaboration and license agreement with Novartis to develop and commercialize leniolisib, the P13Kδ inhibitor being developed by Novartis to treat patients with Activated Phosphoinositide 3-kinase Delta Syndrome, or APDS. In 2022, no additional development costs were capitalized. Note that FDA approval was granted as per March 24, 2023 and hence the asset will start amortizing in 2023.
Software
Assets acquired related to software mainly relate to improvements and updates to our ERP system SAP S/4HANA.

F-34

10.PROPERTY, PLANT AND EQUIPMENT
Amounts in $ ‘000Land and land improvementsOperational facilitiesLeasehold ImprovementMachinery and equipmentOtherAsset under constructionTotal
At cost 33 6,170 2,476 6,591 9,602 2,872 27,744 
Accumulated depreciation— (3,030)(2,176)(5,375)(4,937)— (15,518)
Carrying value at January 1, 202133 3,140 300 1,216 4,665 2,872 12,226 
Investments— 27 457 1,206 952 8,097 10,739 
Internal transfer - cost— (544)3,097 7,977 (5,743)(4,787)— 
Internal transfer - accumulated depreciation— 408 61 (3,871)3,402 — — 
Transfer to software - cost— — — — (175)— (175)
Transfer to software - accumulated depreciation— — — — 78 — 78 
Divestments— (2)— (20)(131)(5,447)(5,600)
Depreciation charges— (455)(86)(2,004)(680)— (3,225)
Depreciation of disinvestment— 2 — 4 54 — 60 
Currency translation - cost(2)(451)(324)(914)(347)(112)(2,150)
Currency translation - accumulated depreciation— 236 166 674 193 — 1,269 
Movement 2021(2)(779)3,371 3,052 (2,397)(2,249)996 
At cost 31 5,200 5,706 14,840 4,158 623 30,558 
Accumulated depreciation— (2,839)(2,035)(10,572)(1,890)— (17,336)
Carrying value at December 31, 202131 2,361 3,671 4,268 2,268 623 13,222 
Investments— 54 15 797 504 6 1,376 
Internal transfer - cost— — 42 380 170 (592)— 
Internal transfer - accumulated depreciation— — — — — — — 
Transfer to software - cost— — — — — — — 
Transfer to software - accumulated depreciation— — — — — — — 
Divestments (29)(214)(107)(6,422)(27)— (6,799)
Impairment— (72)(55)(377)(13)— (517)
Depreciation charges — (403)(294)(1,116)(822)— (2,635)
Depreciation of disinvestment— 214 107 6,097 27 — 6,445 
Currency translation - cost(2)(309)(319)(940)(101)(31)(1,702)
Currency translation - accumulated depreciation— 162 114 676 50 — 1,002 
Movement 2022(31)(568)(497)(905)(212)(617)(2,830)
At cost — 4,659 5,282 8,278 4,691 6 22,916 
Accumulated depreciation— (2,866)(2,108)(4,915)(2,635)— (12,524)
Carrying value at December 31, 2022— 1,793 3,174 3,363 2,056 6 10,392 
The Company had capital expenditures of $1.4 million and $10.7 million, mainly related to new machinery and equipment for the years ended December 31, 2022 and 2021.
For the years ended December 31, 2022 and 2021, depreciation charges on machinery and equipment of $1.0 million and $1.1 million have been charged to the value of inventories and an amount of $1.6 million and $2.1 million of the total depreciation costs for 2022 and 2021 have been charged to the statement of income. The divestments during 2022 mainly relate to fully depreciated assets which were disposed.
During 2021, the Company has assessed the assets in the “Other PPE” category and concluded that for some assets, having a carrying value of $2.3 million, better fit the characteristics of machinery and equipment, operational facilities or leasehold improvements. These assets have been reclassified to the corresponding categories.

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11.RIGHT-OF-USE ASSETS
This Note provides information for leases where the Group is a lessee.

Amounts recognized in the balance sheet
The balance sheet shows the following amounts relating to lease:

Amounts in $ ‘000BuildingsCarsTotal
Carrying value at At cost10,874 2,290 13,164 
Carrying value at Accumulated depreciation(3,103)(634)(3,737)
Carrying value at January 1, 20217,771 1,656 9,427 
Investments13,802 401 14,203 
Divestments(51)(165)(216)
Depreciation charges(2,112)(669)(2,781)
Depreciation of disinvestment30 81 111 
Other movement - cost(478)(79)(557)
Other movement - accumulated depreciation644 57 701 
Currency translation - cost(1,148)(67)(1,215)
Currency translation - accumulated depreciation245 25 270 
Movement 202110,932 (416)10,516 
At cost 22,999 2,380 25,379 
Accumulated depreciation(4,296)(1,140)(5,436)
Carrying value at December 31, 202118,703 1,240 19,943 
Investments15,066 1,741 16,807 
Divestments(292)(739)(1,031)
Depreciation charges(2,223)(797)(3,020)
Depreciation of disinvestment78 596 674 
Impairment(3,860)— (3,860)
Depreciation Impairment59 — 59 
Currency translation - cost(1,029)(48)(1,077)
Currency translation - accumulated depreciation197 61 258 
Movement 20227,996 814 8,810 
At cost 32,884 3,334 36,218 
Accumulated depreciation(6,185)(1,280)(7,465)
Carrying value at December 31, 202226,699 2,054 28,753 
Investments in buildings in 2022 primarily relate to the lease contract for the DSP facility at Pivot Park, Oss. As communicated in prior year, as a result of our renewed strategic manufacturing partnership with long-term manufacturing partner Sanofi S.A., the Company decided to have the construction of the new building completed, but no longer pursue the realization of its own downstream production capacity at Pivot Park in Oss. During 2022, the lease commenced and resulted in an investment of $14.6 million. We will continue to use the building for alternative purposes. As a result of aforementioned decision, the right of use asset was impaired for an amount of $3.9 million. The impairment was calculated on a value in use basis, using the incremental borrowing rate as the applicable discount rate (4.47%). The recoverable amount is reflecting in the book value of the asset, being $10.7 million
The Company applies for the exemption of accounting of short-term leases and low-value leases. The amounts recorded in the consolidated statement of income are immaterial to the financial statements.


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Amounts recognized in the statement of income
The statement of income shows the following amounts relating to leases:

Amounts in $ ‘0002022  2021 2020
Depreciation rights of use assets
Depreciation right of use buildings(2,223)(2,112)(1,681)
Depreciation right of use cars(797)(669)(346)
Total depreciation right of use assets(3,020)(2,781)(2,027)
Interest expense (Note 7)(622)(795)(766)
Total expense right of use assets(3,642)(3,576)(2,793)

Lease charges
For the years ended December 31, 2022, 2021 and 2020, the Company charged $3.6 million, $3.6 million and $2.8 million, respectively, to the statement of income with regard to lease commitments for office rent, equipment, facilities and lease cars.
The non-cancellable leases at December 31, 2022 have remaining terms of between one and 15 years and generally include a clause to enable upward revision of the rental charge on an annual basis according to prevailing market conditions.
The expected lease charges after the end of the reporting year have been disclosed in Note 24 below. Allocations of the lease charges to costs or general and administrative expenses have been based on the nature of the asset in use.
12.INVESTMENTS

12.1 INVESTMENT ACCOUNTED FOR USING THE EQUITY METHOD
The investment in BioConnection BV (BioConnection) announced in April 2019 provides the Company with significant influence over BioConnection, and as such has been treated as an associate of the Group.
As at December 31, 2022, the asset relates to an investment in the ordinary shares of BioConnection Investments B.V. During the second quarter of 2022, Pharming entered into a share purchase agreement, following receipt of an offer for all shares in BioConnection by Gimv, a European investment company listed on Euronext Brussels. The existing shareholders (including Pharming) reached agreement with Gimv on the sale of all issued and outstanding shares to a new holding company (BioConnection Investments B.V.) incorporated by Gimv, followed by a partial re-investment by existing shareholders of the purchase price in the share capital of BioConnection Investments B.V. The re-investment relates to the purchase of ordinary shares and a preference share. The transaction diluted Pharming’s stake in BioConnection from 43.85% in 2021 to 22.98% in 2022. Furthermore, as part of this transaction, the financial guarantee recognized in 2019, was released.
The Board of Directors made an assessment on the accounting treatment of the agreement and concluded that the sale of the BioConnection ordinary shares and purchase of the BioConnection Investments B.V. ordinary shares shall be considered as a dilution of an existing equity stake in an investment accounted for using they equity method. Hence Pharming recognized the dilution of its equity stake as a reduction of the carrying amount of the investment accounted for using the equity method. The preference share is valued as an investment in debt instruments designated at FVTPL. As a result of this transaction, Pharming has received one-off net cash proceeds of $7.3 million (EUR6.9 million) and recognized a gain of $12.2 million.
BioConnection has a share capital consisting solely of ordinary shares, which are held directly by a small group of shareholders. The proportion of ownership interest is the same as the proportion of voting rights held.

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% of ownership interest
Name of entityPlace of business202220212020Nature of relationshipMeasurement method
BioConnection Investment B.V.Oss, NL22.98 %43.85 %43.85 %AssociateEquity
$ ‘000Carrying amount
Name of entity202220212020
BioConnection Investment B.V.
Balance at January 17,201 7,118 6,177 
Movement during the year
Share in net profit(1,083)694 361 
Amortization of financial guarantee(153)(33)(32)
Dilution of equity stake(2,991)— — 
Currency translation(473)(578)612 
Balance at December 312,501 7,201 7,118 

12.2 INVESTMENT IN DEBT INSTRUMENTS DESIGNATED AS AT FVTPL
The asset relates to the preference share as obtained as part of the agreement referred to above relating to BioConnection Investments B.V. The Board of Director’s made an assessment on the accounting treatment of the preference share obtained. The Board concluded that the asset should be recognized as a financial asset (debt instrument) measured at initial recognition at fair value, subsequently measured at fair value through profit and loss. The fair value was calculated based on a commonly accepted valuation method, the option pricing model (“OPM”), which considers the share classes as call options on the total shareholders’ equity value according to the rights and preferences of each class of equity. The payoff profile of the share classes was analyzed through a portfolio of call options, with the total equity value of a company as the underlying asset of the options and specific terms for each option calibrated to mirror, in aggregate, the payoff profile of the share classes. Relying on the forward-looking Black-Scholes-Merton (“BSM”) financial instrument pricing framework, the OPM effectively captures the full range of potential outcomes for the share classes at exit. The OPM takes into consideration the full spectrum of risks in terms of future potential upside or downside but does not require explicit estimates of the possible future outcomes. The BSM model is commonly used to price assets on financial markets and allows to estimate the theoretical value of a call option, using six key parameters, namely the underlying equity value, strike price, time to maturity, risk free rate, expected volatility of the underlying equity and dividend yield on the underlying equity, which is a Level 3 input in terms of IFRS 13. Significant increases or decreases in equity value, volatility and time to maturity and below assumptions in isolation would result in a significantly lower or higher fair value assessment.
The following assumptions were used in the Black-Scholes model to determine the fair value of the asset:

2022
Expected time to maturity
5 years
Volatility55 %
Risk-free interest rate2.51 %
The carrying amount of this investment has changed as follows:

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Amounts in $ ‘0002022
Balance at January 1—
Investment7,933
Fair value changes(1,185)
Currency translation79
Balance at December 316,827


Sensitivity analysis
To illustrate the exposure of the carrying value of the investment to further fair value movements as a result of changes in the economic environment, a sensitivity analysis of fair value has been prepared over the key drivers most affected by the current uncertainties. It is possible that there will be movements in these key inputs after December 31, 2022. While it is unlikely that these reported inputs would move in isolation, these sensitivities have been performed independently to illustrate the impact each individual input has on the reported fair value, and they do not represent management’s estimate at December 31, 2022.
The main assumptions in determination of the equity value are shown in below table.

Preference share BioConnection (in million $)
Revenue levelFair valueDiscount rateFair valueEBITDA marginFair value
-10.0 %5.8-2.0 %7.4-5.0 %6.2
-5.0 %6.3-1.0 %7.0-2.5 %6.5
Base case6.8Base case6.8Base case6.8
+5.0%7.3+1.0%6.6+2.5%7.1
+10.0%7.6+2.0%6.4+5.0%7.4
The impact of the remaining variables on the Black-Scholes model are shown in below table:

Preference share BioConnection (in million $)
Time to maturityFair valueVolatilityFair value
-2 years
8.2-10.0 %7.8
- 1 year
7.5-5.0 %7.3
Base case6.8Base case6.8
+ 1 year
6.3+5.0%6.4
+ 2 years
5.8+10.0%6.0


12.3 INVESTMENT IN EQUITY INSTRUMENTS DESIGNATED AS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
The Group holds 1.00% of the ordinary share capital of Orchard Therapeutics Plc., or Orchard, a global gene therapy leader. The shares were acquired as of 1 July 2021, as part of strategic collaboration between Pharming Group NV and Orchard Therapeutics to research, develop, manufacture and commercialize OTL-105, a newly disclosed investigational ex-vivo autologous HSC gene therapy for the treatment of HAE, a life-threatening rare disorder that causes recurring swelling attacks in the face, throat, extremities and abdomen.
As part of the agreement, Orchard received an upfront payment of $17.5 million comprising of $10.0 million in cash and a $7.5 million equity investment from Pharming at a premium to Orchard’s fair value share price. Orchard is also eligible to receive up to $189.5 million in development, regulatory and sales milestones as well as mid-single to low double-digit royalty payments on future worldwide sales.
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The fair value of the shares at acquisition was $4.6 million. The upfront cash payment of $10.0 million and the premium on the share price of $2.9 million were expensed as an R&D expense for 2021. See Note 7. The fair value of the investment at December 31, 2022 was $0.4 million.
Management does not consider that the Group is able to exercise significant influence over Orchard as the other 99.0% of the ordinary share capital is publicly traded at the Nasdaq stock exchange (Nasdaq: ORTX).

% of ownership interest
Name of entityPlace of business202220212020Nature of relationshipMeasurement method
Orchard Therapeutics Plc.London, UK1.00%1.00%—%InvestmentFair value
The fair value as at December 31, 2022 was determined on the basis of the trading price as at that date.
$ ‘000Carrying amount
Name of entity202220212020
Orchard Therapeutics Plc.
Balance at January 11,449 — — 
Movement during the year
Initial recognition— 4,589 — 
Fair value adjustments through OCI(950)(3,077)
Currency Translation(96)(63)— 
Balance at December 31403 1,449 — 

13.RESTRICTED CASH, CASH AND CASH EQUIVALENTS

Amounts in $ ‘00020222021
Restricted cash (non-current)1,099 812 
Restricted cash (current)213 227 
Cash and cash equivalents207,342 191,924 
Total restricted cash, cash and cash equivalents208,654 192,963 
Cash and cash equivalents comprises of cash and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, except for restricted cash, which amounts to $1.3 million and $1.0 million in 2022 and 2021 respectively. Restricted cash includes the value of banker’s guarantees issued with respect to (potential) commitments towards third parties which is considered to be of a short-term nature. Furthermore, restricted cash includes a deposit for rent which is considered long-term.
As such, although temporarily restricted, the Company can access the current portion of this cash if necessary. For purposes of the cash flow statements all restricted cash is not considered as “cash and cash equivalents”.
14.INVENTORIES

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Inventories include batches RUCONEST®, work in progress available for production of RUCONEST®.

Amounts in $ ‘00020222021
Finished goods 12,460 9,853 
Work in progress 29,553 16,911 
Raw materials313 546 
Balance at December 3142,326 27,310 
Changes in the adjustment to net realizable value:

Amounts in $ ‘00020222021
Balance at January 1(2,448)(646)
Addition to impairment(164)(2,342)
Release of impairment312 20 
Usage of impairment195 407 
Currency translation134 113 
Balance at December 31(1,971)(2,448)
The inventory valuation at 31 December 2022 of $42.3 million is stated net of an impairment of $2.0 million and $2.4 million for the years ended 31 December 2022 and 2021. The impairment relates to writing down inventories to their net realizable value.
Inventories are available for use in commercial, pre-clinical and clinical activities. Estimates have been made with respect to the ultimate use or sale of product, taking into account current and expected sales as well as pre-clinical and clinical programs. These estimates are reflected in the additions to the impairment. The releases to the impairment relate to amendments to the estimates as a result of the fact that actual sales can differ from forecasted sales and the fact that vials allocated to pre-clinical and clinical programs can be returned to inventory. The costs of vials used in preclinical and clinical programs are presented under the research and development costs.
Cost of inventories included in the cost of sales in 2022 amounted $17.4 million (2021: $19.1 million; 2020: $23.5 million). The main portions of inventories at 31 December 2022 have expiration dates starting beyond 2023 and are all expected to be sold and/or used before expiration.
Pharming management has assessed the different production stages, including the classification of Pharming’s goods at every separate stage. Based on the assessment, Pharming management concluded that applying a reclassification would result in providing more reliable and relevant information about Pharming’s inventory and production processes. As a result, the skimmed milk used in the production of RUCONEST® will be classified as work in progress rather than raw materials as part of the production is already performed. Furthermore, the products that still have to be labelled are classified as work in progress rather than finished goods
There is no impact on the total amount of inventory at hand, nor the primary financial statements. The table below shows a summary of the disclosure impact of the inventory reclassification in the prior year closing balance.

Amounts in $ ‘0002021 as previously reportedAdjustment2021 reclassified
Finished Goods13,560 (3,707)9,853 
Work in Progress9,606 7,305 16,911 
Raw Materials4,144 (3,598)546 
Balance at December 3127,310 — 27,310 
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15.TRADE AND OTHER RECEIVABLES

Amounts in $ ‘00020222021
Trade receivables20,964 18,076 
Prepaid expenses2,288 2,392 
Value added tax1,453 2,486 
Other receivables1,117 2,363 
Taxes and social securities1,797 4,666 
Balance at December 3127,619 29,983 
Trade receivables are amounts due from customers for goods sold in the ordinary course of business. They are generally due for settlement within 30-60 days and therefore are all classified as current. The Company’s outstanding trade receivables are mainly related to the sales in the United States. The decrease in trade receivables relates to timing of customer orders and payments around year-end.
The Company did not recognize any expected credit losses. Pharming measures the loss allowance for trade receivables at an amount equal to lifetime ECL. The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for factors that are specific to the debtors, general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of conditions at the reporting date. Pharming has a limited number of customers with long term relationships, without a history of shortfalls. As a result no loss allowance for expected credit losses is recognized.
Due to the short-term nature of the current receivables, their carrying amount is considered to be the same as their fair value.
16.CONVERTIBLE BONDS
Recognition and movements of the convertible bonds were as follows:

Amounts in $ ‘00020222021
Balance at January 1140,886 151,767 
Interest paid (cash flow)(3,952)(4,448)
Amortization transaction cost784 849 
Accrued interest3,952 4,447 
Currency translation(8,284)(11,729)
Balance at December 31133,386 140,886 
- Current portion1,768 1,879 
- Non-current portion131,618 139,007 
On January 21, 2020, the Company issued €125 million aggregate principal amount of 3.00% convertible bonds due 2025. The bonds were issued at par and bear interest at a rate of 3.00% per annum payable semi-annually in arrears in equal installments. Unless previously converted, redeemed or purchased and cancelled, the bonds will mature on January 21, 2025.
The bonds are convertible into the Company’s ordinary shares at an initial conversion price of €2.0028. This initial conversion price is subject to customary adjustment provisions. The number of ordinary shares initially underlying the bonds is 62,412,622. Any adjustment to the conversion price resulting in an increase in the number of conversion shares may require the Company to obtain further authorization from the Company’s shareholders to issue shares, grant rights to subscribe for shares and exclude preemptive rights. The Company has the option to redeem all, but not some only, of the outstanding bonds in cash at par plus accrued interest at any time, (a) if, on or after February 13, 2023, the parity value on each of at least 20 trading days in a period of 30 consecutive trading days shall have exceeded 130% of the principal amount or (b) if, at any time, 85% or
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more of the aggregate principal amount of the bonds originally issued shall have been previously converted and / or repurchased and cancelled.
The convertible bonds comprise of two components. The first component is a financial liability, which represents our contractual obligation to deliver cash or another financial asset for payment of interest and principal, if not converted. The second component is an equity instrument as it represents a written call option granting the holder the right, for a specified period of time, to convert it into a fixed number of the Company’s ordinary shares.
The fair value of the consideration in respect of the liability components is measured at the fair value of a similar liability that does not have any associated equity conversion option (IFRS 9 paragraph 5.1.1). This is the liability component’s carrying amount at initial recognition.
The equity component will be measured at the residual difference between the nominal value and the fair value of a similar liability that does not have any associated equity conversion option (IAS 32 paragraph 31). The original equity component as recorded at initial recognition amounts to $1.6 million.

17.LEASES
Lease liabilities can be specified as follows:

Amounts in $ ‘00020222021
Balance at January 120,875 10,192 
New Leases16,248 14,118 
Interest expense accrued718 680 
Payments of lease liabilities(3,311)(3,217)
Other movements(348)94 
Currency translation(874)(992)
Balance at December 3133,308 20,875 
- Current portion3,465 2,419 
- Non-current portion29,843 18,456 
New leases in 2022 primarily relate to new lease contracts for our operational facilities in The Netherlands.
Future minimum lease payments as at December 31, 2022 and 2021 are as follows:

20222021
Amounts in $ ‘000Minimum paymentsPresent value of paymentsMinimum paymentsPresent value of payments
Within one year4,6444,5353,1183,068
After one year but not more than five years15,15713,58210,2559,392
More than five years20,89015,19110,1238,415
Balance at December 3140,69133,30823,49620,875
18.TRADE AND OTHER PAYABLES

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Trade and other payables as at December 31, 2022 and 2021 are as follows:

Amounts in $ ‘00020222021
Accounts payable8,753 7,599 
Taxes and social security2,099 1,505 
Other payables— 34 
Accruals for employees12,139 8,850 
Accruals for rebates and discounts10,490 11,111 
Accrual for production8,175 5,760 
Other accruals12,809 7,614 
Balance at December 3154,465 42,473 
19.SHARE-BASED COMPENSATION
The remuneration policy for the Board of Directors was adopted by our shareholders on December 11, 2020 and governs the remuneration of both the Executive and the Non-Executive Directors, hereafter referred to as the Remuneration Policy. In accordance with Dutch law, the policy has to be submitted to our shareholders for adoption every four years.
The Policy refers to an undefined number of Executive Directors and Non-Executive Directors. Since May 19, 2021, the Board of Directors is composed of one Executive Director (i.e., the CEO) and seven Non-Executive Directors. In case of future appointments of additional Executive Directors, the Policy shall also be applicable to the remuneration packages for these additional Directors, if any, in accordance with the terms thereof. Therefore, any reference below to Executive Director in the singular also includes the plural, and vice-versa, subject to more restrictive deviations in the Policy and except for specific references to the CEO.
The remuneration packages of the individual Directors are determined by the Board of Directors, without the involvement of the Executive Director in the deliberations and decision-making concerning his own remuneration, and each time within the restrictions set by the remuneration policy.
Arrangements in the form of shares or rights to subscribe for shares will each time remain subject to the approval of the shareholders at the General Meeting, notwithstanding the adopted policy. On December 11, 2020, the shareholders approved the proposals that were submitted accordingly for the new long-term incentive program for the Executive Director, as described in the Remuneration Policy, and the one-off transition arrangement for the implementation of that new program. Our shareholders also authorized the Board of Directors, for a period of eighteen months, as the company body authorized to grant and issue the ordinary shares to the Executive Director under the new long-term incentive program and the one-off transition arrangement, respectively, and to exclude any pre-emptive rights of existing shareholders in connection with these issuances.
The total expense recognized for the years ended December 31, 2022 and 2021 for share-based payment plans amounts to $6.4 million and $9.1 million. The total expense recognized in 2020 for share-based payment plans amounts to $8.4 million.
The total expenses for share based payment plans in 2022, 2021 and 2020 is specified as follows:

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Amounts in $ ‘000
Share-based compensation (in $ ‘000)202220212020
Board of Directors options— — 86 
Employee options2,390 4,262 2,964 
Long term incentive plan3,528 4,793 5,304 
Restricted stock units474 — — 
Bonus shares— — 51 
Balance at December 316,392 9,055 8,405 
The employee options expense decreased due to vesting of the majority options for the board of directors relating to historic option plans and a change in the employee share based compensation plans where for 2022 RSU’s have been granted instead of employee options. As mentioned above, options for board of director’s are not included in any new granted share based compensation plans. The remainder of the decrease is caused by currency translation effects.
Long-term incentive plan expenses decreased due to a release of the share based compensation provision relating to leavers during 2022. The remainder of the decrease is caused by currency translation effects.
The restricted stock units relates to the new 2022 share based compensation plan for (senior) management of the company. The RSU’s were granted as of October 26, 2022 and is an equity settled compensation plan vesting in four equal yearly tranches. The expenses represents the fair value of the granted RSU’s for the year 2022 as of the grant date.
19.1 Models and assumptions
Models and assumptions
IFRS 2 describes a hierarchy of permitted valuation methods for share-based payment transactions. If possible, an entity should use market prices at measurement date to determine the fair value of its equity instruments. If market prices are unavailable, as is the case with Pharming’s option plans and long-term incentive plan, the entity shall estimate the fair value of the equity instruments granted. A valuation technique should be used to estimate the value or price of those equity instruments as it would have been at the measurement date in an arm’s length transaction between knowledgeable, willing parties.
The valuation technique shall be consistent with generally accepted valuation methodologies for pricing financial instruments and shall incorporate all factors and assumptions that knowledgeable market participants would consider in setting the price.
Whatever pricing model is selected, it should, as a minimum, take into account the following elements:
•The exercise price of the option;
•The expected time to maturity of the option;
•The current price of the underlying shares;
•The expected volatility of the share price;
•The dividends expected on the shares;
•The risk-free interest rate for the expected time to maturity of the option.
Models and assumptions option plans
The costs of option plans are measured by reference to the fair value of the options at the grant date of the option.
The 6 elements above are all incorporated in the Black-Scholes model used to determine the fair value of options. The exercise price of the option and the share price are known at grant date. Volatility is based on the historical end-of-month closing share prices over a period prior to the option grant date being equal to the expected option life, with a minimum of 3 years . It is assumed no dividend payments are expected.
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The total number of shares with respect to which options may be granted pursuant to the option plans accumulated, shall be determined by Pharming, but shall not exceed 10% of all issued and outstanding shares of Pharming on a diluted basis. Shares transferred or to be transferred, upon exercise of options shall be applied to reduce the maximum number of shares reserved under the plans. Unexercised options can be re-used for granting of options under the option plans.
Pharming may grant options to a member of the Executive Committee or an employee:

•At the time of a performance review;
•Only in relation to an individual: a date within the first month of his or her employment;
•In case of an extraordinary achievement;
•In case of a promotion to a new function within Pharming.
The option exercise price is the price of the Pharming shares on the stock exchange on the trading day prior to the date of grant. Vested options can be exercised at any time within five years following the date of grant. Unexercised options shall be deemed lapsed and shall cease to exist automatically after five years. Exercise of options is subject to compliance with laws and regulations in The Netherlands. Exercise of options is including withholding taxes. Each option is equal to one share unless otherwise stated. Options are not applicable for early retirement.
The following assumptions were used in the Black-Scholes model to determine the fair value of options at grant date:

202220212020
Expected time to maturity
1-4 years
1-4 years
1-4 years
Volatility
36% - 50%
47% - 57%
53% - 60%
Risk-free interest rate
 (0.48)% - 2.49%
(0.52)% - (0.03)%
 (0.52)% - (0.27)%
Option plan employees
Article 2.1 of the option plan for employees’ states: Pharming may grant options to any employee. The criteria for the granting of the options up to December 11, 2020 was determined by the Board of Supervisory Directors of Pharming, at its sole discretion. Up to December 11, 2020, the Board of Management proposed (i) whether the criteria for granting an option have been met by a potential participant and (ii) the number of options to be granted. As from December 11, 2020, the execution of the Company’s remuneration policy and other benefits policies and incentive programs, as approved by the Board of Directors (to the extent required), for all staff members of the Company and its subsidiaries, excluding the CEO and the other members of the Executive Committee, is delegated to the CEO.
Article 4.4 of the employee option plan deals with the vesting scheme of employee options and reads as follows: in case of the termination of the employment of a participant, except for retirement and death, Pharming at its sole discretion is entitled to decide that the options of the participant shall lapse. The following schedule shall apply for the cancellation:
•In the event of termination of employment within one year as of a date of grant, all options shall lapse;
•In the event of termination of employment after the first year as of a date of grant, all options, less 1/4 of the number of options shall be lapsed. The number of options to be cancelled decreases for each month that the employment continued for more than one year as of that date of grant by 1/48 of the number of options granted of that date of grant.
Models and assumption Long Term Incentive Plan
For the long-term incentive plan, the following elements of Pharming and/or the peer group are included in order to determine the fair value of long-term incentive plan share awards, using Monte Carlo simulation:
•Start and end date of performance period;
•The grant date;
•The share prices;
•Exchange rates;
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•Expected volatilities;
•Expected correlations;
•Expected dividend yields;
•Risk free interest rates.
Volatilities are based on the historical end-of-month closing share prices over the 3 years.
Correlations are based on 3 years of historical correlations based on end-of-month closing quotes, taking into account exchange rates. Expected dividend yields for peers and risk-free interest rates (depending on the currency) are obtained from Bloomberg.
Under the LTIP, restricted shares are granted conditionally each year with shares vesting based on the market condition in which the total shareholder return performance of the Pharming share is compared to the total shareholder return of a peer group of other European biotech companies.
During 2022, there were no LTIP grants other than the grants for the executive directors as disclosed below.
Upon a change of control, all remaining LTIP shares will vest automatically.
Long Term Incentive Plan for the Executive Directors
As part of the Remuneration Policy, the Long Term Incentive Program is applicable to Executive Directors and has been aligned with prevailing “best practices” and is performance related only. For the Executive Directors, the on-target value of the shares to be awarded under the newly designed LTI Program, as described in the remuneration policy, is set at 300% of the gross annual salary for the CEO (representing 50% below the lowest quartile of the U.S. benchmark group and just below the top quartile of the EU benchmark group for the executive directors) and 200% for other Executive Directors and Officers (representing between 20% and 30% below the lowest quartile of the U.S. benchmark group and just in the top quartile of the EU benchmark group for the Executive Directors).
The maximum value of the shares that can vest under the LTI program is set at 450% of the gross annual salary for the CEO and 300% for other Executive Directors and Officers. Executive Directors are required to retain the shares awarded under the LTI program for a minimum of five years from the date of grant.
The shares granted to the Executive Directors under the LTI program will vest in three years after the grant date, subject to the achievement of the targets set by the Board of Directors, upon proposal of the Remuneration Committee, for the three-year performance period (i.e., double-trigger vesting), their relative weightings and the pay-out limits. All shares awarded will be subject to a retention period of five years from the date of grant (i.e., two years after vesting), in accordance with the best practice provisions of the DCGC.
The performance objectives include the Total Shareholder Return (40% weighing) and the achievement of long-term strategy oriented objectives (60% weighing). The peer group used to determine the Total Shareholder Return is composed of the companies included in the AScX Index and the NASDAQ Biotechnology Index, represented by the IBB ETF, respectively, equally weighted, at the time of the determination.
The thresholds and payout percentages for the LTI program are given by the following table, as to be determined for each of the AScX and IBB indices separately (each weighted at 50% of pay-out):

TSR equal to index
80%pay-out
TSR 10% above index
90% pay-out
TSR 20% above index
100% pay-out
TSR 40% above index
110% pay-out
TSR 60% above index
120% pay-out
TSR 80% above index
130% pay-out
TSR 100% above index
150% pay-out
TSR below index
0% pay-out
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The range of assumptions used in the Monte Carlo simulation to determine the fair value of long-term incentive plan share awards at grant date were:

202220212020
Volatilities46.00 %49.00 %53.46 %
Risk-free interest rates 0.61 %
(0.554)% - (0.416)%
(0.528)% - (0.551)%
Dividend yields— %— %— %
Restricted Stock Units
This Plan is effective as of October 26, 2022, and shall be executed in compliance with the Articles of Association and applicable law and concerns Pharming's (senior) management. The RSU plans are not applicable for the board of directors, nor the executive committee. For each participant, the RSU’s granted to them will vest in four equal tranches of twelve months, provided that at the time of vesting such participant is still an employee. No performance criteria are applicable to this plan. The fair value of the grant is, in line with IFRS 2, the actual share price at date of the grant (October 26, 2022), being EUR 0.97. A total of 4,931,000 RSUs were granted with a total expense of $5.0 million (US$ yearly average exchange rate = 1.0543). This expense will be charged to Pharming's results over the vesting for the following tranches:
a.a first tranche of 25% of the RSU’s granted, vesting twelve months after the Vesting Commencement Date;
b.a second tranche of 25% of the RSU’s granted, vesting two years after the Vesting Commencement Date;
c.a third tranche of 25% of the RSU’s granted, vesting three years after the Vesting Commencement Date; and
d.a fourth tranche of 25% of the RSU’s granted, vesting four years after the Vesting Commencement Date.
One-off transition arrangement for the CEO
The implementation of the new three-year vesting scheme under the LTIP has a major impact on the current remuneration packages of existing Executive Directors for the 2020 to 2023 period, as the Executive Directors’ current packages feature annual option and share grants. The share-based compensation under the existing packages and plans over this three-year period would have resulted in three option grants, with guaranteed vesting of a total of 8,400,000 options for the CEO on the basis of continued tenure over the three-year period. In addition, the CEO would have been eligible for three annual restricted share grants pursuant to the LTIP of up to 30% of the base salary.
To mitigate the described impact, the Company has agreed to a one-off transition arrangement with the CEO as approved at the General Meeting of Shareholders on December 11, 2020. This one-off transition arrangement provides for (i) the conversion of the total number of 8,400,000 options for the CEO (i.e., the total number of share options that was expected to be granted in 2021, 2022 and 2023 without the arrangement) into one grant for a total number of 4,200,000 shares for 2020, which vesting will be governed by the performance-based criteria of the new LTI program, and (ii) the vesting of the performance shares in three annual tranches in the first quarter of 2021, 2022 and 2023, subject to the performance-based criteria of the new LTI program for Executive Directors as described above in the Long Term Incentive Plan for the Executive Directors paragraph.
In addition, the grant and each of the three potential vestings of the granted shares under the Long-term Incentive One-Off Arrangement is subject to:
•a five year retention period for the granted shares;
•the annual pro-rata satisfaction upon vesting of the set long-term performance targets, as determined by the Board of Directors; and
•the other terms and conditions applicable to the LTI Program pursuant to the Remuneration Policy for the Board of Directors dated December 11, 2020.
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Pursuant to the one-off transition arrangement, the CEO has waived all his rights for the grant of restricted shares and option rights, respectively, under the LTIP and the existing option plans for the financial year 2020. On December 22, 2020, a total number of 4,200,000 (restricted) shares was granted to the CEO in accordance with the terms of the one-off transition arrangement.

Option plans
An overview of activity in the number of options for 2022 is as follows (please also refer to Note 27 in respect of movements since the reporting date)(note that the dollar weighted average exercise price is translated using the closing exchange rate for the respective year (2022: 1:1.0667)):

202220212020
NumberWeighted Average Exercise Price ($)NumberWeighted Average Exercise Price ($)NumberWeighted Average Exercise Price ($)
Balance at January 152,789,478 0.911 50,106,4880.909 40,327,5370.696 
Expired— — — — (3,281)0.361 
Forfeited(3,660,928)0.847 (946,738)1.046 (411,250)0.640 
Granted4,801,938 0.902 12,081,0000.931 15,536,7501.196 
Exercised(6,333,687)0.599 (8,451,272)0.520 (5,343,268)0.544 
Balance at December 3147,596,801 0.897 52,789,4780.911 50,106,4880.909 
- Vested8,687,584 0.844 21,388,2370.833 19,675,8750.716 
- Unvested38,909,217 0.910 31,401,2410.966 30,430,6131.034 
Exercised options 2022
In 2022, a total of 6,333,687 options have been exercised with an average exercise price of $0.599. In 2021, a total of 8,451,272 options have been exercised with an average exercise price of $0.520.
All options outstanding at December 31, 2022 are exercisable with the exception of the unvested options granted to the employees still in service. The 2022 share options for the employees vest after one year under the condition the employees are still in service at vesting date.
Exercise prices of options outstanding at December 31, 2022 and the exercise values are in the following ranges (note that the exercise value in $ is translated using the closing exchange rate for the respective year 1:1.0667)):

202220212020
Exercise prices in $NumberExercise value
in $ ‘000		NumberExercise value
in $ ‘000		NumberExercise value
in $ ‘000
0.071 - 0.28
— — — — 3,225,000828 
0.28 - 0.57
— — 3,482,4281,322 6,742,8632,774 
0.57- 0.85
26,796,67521,847 12,290,92510,155 12,974,37511,615 
0.85 - 2.83
20,800,12620,895 37,016,12536,646 27,164,25030,314 
Balance at December 3147,596,80142,742 52,789,47848,123 50,106,48845,531 
Granted options
In 2022, the Company granted 4,801,938 options to employees with a weighted average exercise price of $0.902, fair values for options granted in 2022 were in the range of $0.092 - $0.489. In 2021, the Company granted 12,081,000 options to employees with a weighted average exercise price of $0.931; fair values for options granted in 2021 were in the range of $0.891 - $1.292.
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Long Term Incentive Plan
An overview of the number of LTIP shares granted in 2019-2022 and in total as well as the fair value per share award is as follows (note that the fair value per share award in $ is translated using the closing exchange rate for the respective year (2022: 1:1.0667)):

Participant category2022202120202019Total
Non Executive members of the Board of Directors— — — 205,000 205,000 
Executive Members of the Board of Directors2,363,455 1,337,888 — 201,050 3,902,393 
Executive Committee5,816,083 6,301,400 105,000 326,807 12,549,290 
Senior managers— 812,500 930,000 1,830,000 3,572,500 
Total8,179,538 8,451,788 1,035,000 2,562,857 20,229,183 
Fair value per share award ($)0.517 0.887 0.923 0.387 

The following table provides an overview of LTIP shares granted, forfeited or issued in 2019-2022 as well as the number of LTIP shares reserved at December 31, 2022:

Participant categoryGrantedIssuedUnvestedReserved at December 31, 2022
Non Executive members of the Board of Directors205,000(18,000)(187,000)0
Executive Members of the Board of Directors3,902,393(20,306)(180,744)3,701,343 
Executive Committee12,549,290(440,934)(3,260,738)8,847,618 
Senior managers3,572,500(180,616)(2,059,384)1,332,500 
Total20,229,183 (659,856)(5,687,866)13,881,461 
Restricted stock units
The fair value of the grant is, in line with IFRS 2, the actual share price at date of the grant (October 26, 2022), being EUR0.97 ($1.035, translated at the closing exchange rate of 1:1.0667). A total of 4,931,000 RSU’s were granted with a total future expense of $5 million ($ yearly average exchange rate = 1.0543).
Transition arrangement for the Chief Executive Officer, or CEO
On December 22, 2020, a total number of 4,200,000 (restricted) shares was granted to the CEO in accordance with the terms of the one-off transition arrangement. These shares will vest in three equal annual tranches in the first quarter of 2021, the first quarter of 2022 and the first quarter of 2023, subject to the pro-rata achievement of the long-term targets under the new LTI program.
The second year of the 3-year performance period for the 2021 share grant pursuant to the LTI one-off transition arrangement, ended on December 31, 2021. Accordingly, the Board of Directors, upon a recommendation of the Remuneration Committee, determined in the first quarter of 2022 the vesting of the second annual tranche of the total number of 4,200,000 shares conditionally granted to the CEO (i.e., 1,400,000 shares).
The shares will not vest, until the first quarter of 2024, applying the targets set at the start of the three-year performance period in 2021.
The performance on both the TSR and the strategic corporate objectives, applying the respective weightings, leads to the following vesting level under the One-Off Transition Arrangement for the CEO (i.e., second annual tranche of 1,400,000 shares):


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Metric definitionAchievementWeightingVesting level
TSR115 %40 %46 %
Strategic Objectives90 %60 %54 %
Total100 %100 %
In accordance with the resulting 100% vesting level, a total number of 1,400,000 shares vested in 2023 for the CEO for the second annual tranche of the shares granted under the LTI One-Off Transition Arrangement. These shares are subject to a retention period of five years.
20. BOARD OF DIRECTORS
In connection with the listing of our ADSs on Nasdaq, we converted our two-tier board structure into a one-tier board structure, with a single board of directors consisting of the executive director and non-executive directors. The new structure became effective on December 11, 2020. Since that date, the Board of Directors is jointly responsible for the management of the Company. The daily management of the Company and the execution of the strategy are entrusted to the CEO, as the only Executive Director. The CEO is supported by the non-statutory Executive Committee in the execution of his tasks and responsibilities. The Non-Executive Directors share statutory management responsibility, but shall focus on the supervision on the policy and functioning of the performance of the duties by the Executive Director and the Company’s general state of affairs. The Non-Executive Directors would focus on the supervision on the policy and functioning of the performance of the duties by the Executive Directors and the Company’s general state of affairs.
Dr. S. de Vries is the Company’s sole Executive member of the Board of Directors and is continuing to be the CEO.
The Board of Directors has the following members:


Mr. P. SekhriChair of the Board of Directors and Non-Executive Board Member
Ms. D. JornVice Chair of the Board of Directors and Non-Executive Board Member
Ms. B. YanniNon-Executive Board Member
Dr. M. PykettNon-Executive Board Member
Ms. J. van der MeijsNon-Executive Board MemberAppointed 19 May 2021
Mr. L. KruimerNon-Executive Board MemberAppointed 19 May 2021
Mr. S. BaertNon-Executive Board MemberAppointed 19 May 2021
Dr. S. de VriesExecutive Board Member and Chief Executive Officer
Non-Executive members Board of Directors
Remuneration
For 2022 the annual compensation of the non-executive members of the Board of Directors was as follows:


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Responsibility
Cash in Euros
 (per annum)
Ordinary shares in Euros *
(per annum)
Cash in U.S. dollars
(per annum)		Ordinary shares in U.S. dollars *
(per annum)
Chair of the Board of Directors65,00040,00068,53042,172
Non-Executive Director45,00030,00047,44431,629
Chair Audit Committee9,0009,489
Member Audit Committee3,0003,163
Chair Remuneration Committee6,0006,326
Member Remuneration Committee3,0003,163
Chair Governance Committee6,0006,326
Member Governance Committee3,0003,163
*All shares to be valued at the 20 day VWAP preceding the Annual General Meeting of Shareholders, without further restrictions or grant.
An additional compensation of €1,000 ($1,054) per day in case of extraordinary activities, as determined by the Chair of the Board of Directors. Compensation of the Non-Executive members of the Board of Directors and / or of former members of the Supervisory Board of Directors for 2022, 2021 and 2020 was as follows:

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F-53

Amounts in $ ‘000YearCashShare-Based PaymentTotal
Mr. Paul Sekhri202272 42 114 
202177 55 132 
202074 59 133 
Mr. Barrie Ward2022— — — 
202123 20 43 
202062 46 108 
Mr. Jan Hendrik Egberts2022— — — 
2021— — — 
2020— 5 5 
Mr. Juergen Ernst2022— — — 
2021— 6 6 
202057 42 99 
Mr. Aad de Winter2022— — — 
202126 21 47 
202065 46 111 
Ms. Deborah Jorn202255 32 87 
202164 42 106 
202062 40 102 
Ms. Barbara Yanni202253 32 85 
202160 36 96 
202035 24 59 
Dr. Mark Pykett202250 3282 
202157 36 93 
202035 24 59 
Ms. Jabine van der Meijs202257 3289 
202147 24 71 
2020— — — 
Mr. Leonard Kruimer202257 3289 
202147 24 71 
2020— — — 
Mr. Steven Baert202255 3287 
202145 24 69 
2020— — — 
Total2022399 234 633 
2021446 288 734 
2020390 286 676 

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Shares, options and warrants
Shares
At December 31, 2022, the Non-Executive members of the Board of Directors held the following numbers of shares:

Ordinary sharesCertificates of shares
Mr. Paul Sekhri486,037 — 
Ms. Deborah Jorn98,778 — 
Ms. Barbara Yanni83,187 — 
Dr. Mark Pykett83,187 — 
Ms. Jabine van der Meijs58,349 — 
Mr. Leonard Kruimer58,349 
Mr. Steven Baert58,349 — 
Total926,236 — 
All shares held by the Non-Executive members of the Board of Directors are unrestricted.
Loans or guarantees
During 2022, the Company has not granted loans or guarantees to any member of the Non- Executive members of the Board of Directors. No loans or guarantees to Non-Executive members of the Board of Directors were outstanding at December 31, 2022.
Executive members Board of Directors
Remuneration
The Executive Board Member is entitled to the following remuneration packages:
•Fixed remuneration: annual base salary;
•Variable remuneration: the variable remuneration components are (a) an annual bonus in cash as a percentage of the fixed component (short-term incentive) and (b) a (share- based) long-term incentive;
•Others: contribution pension premiums, travel allowance and holiday allowance.
The one-off transition arrangement as identified herein above provides for (i) the grant to the CEO, of a total number of 4,200,000 shares for the financial year 2020, and (ii) the vesting of these shares in three annual tranches in the first quarters of 2021, 2022 and 2023, respectively.
Compensation was as follows and includes the entire year 2022, up to December 31, 2022:

F-55

Amounts in $ ‘000Fixed remunerationShort-term variable: annual bonusShare-based paymentsPost-employment benefitsOtherTotal
Mr Sijmen de Vries, CEO and Executive Director2022:636 2022:394 2022:1,221 2022:112 2022:34 2022:2,396 
2021:681 2021:357 
2021:*
1,594 2021:120 2021:38 2021:2,790 
2020:614 2020:431 2020:1,739 2020:107 2020:37 2020:2,927 
Mr Bruno Giannetti2022:— 2022:— 2022:— 2022:— 2022:— 2022:— 
2021:— 2021:— 2021:— 2021:— 2021:— 2021:— 
2020:402 2020:201 2020:708 2020:85 2020:27 2020:1,424 
Mr Robin Wright 2022:— 2022:— 2022:— 2022:— 2022:— 2022:— 
2021:— 2021:— 2021:— 2021:— 2021:— 2021:— 
2020:155 2020:14 2020:107 2020:15 2020:350 2020:641 
* Due to a disclosure error in 2021 caused by the incorrect apportionment of the fair value share based payment expense over the vesting period, the restated 2021 share based payments remuneration disclosure of Dr. S. de Vries is $1.6 million compared to previously reported share based payments of $1.3 million.
Options
The following table gives an overview of movements in number of option holdings of the individual members of the executive board of directors in 2022, the exercise prices and expiration dates up to December 31, 2022:

January 1, 2022Granted 2022Exercised in 2022Forfeited/Expired in 2022December 31, 2022Exercise price ($)Expiration date
Dr. Sijmen de Vries2,800,000 — — — 2,800,000 0.859 May 22, 2024

Shares
At December 31, 2022, the executive members of the board held the following numbers of shares:

Shares heldAs at December 31, 2022
Dr. Sijmen de Vries7,434,383 
Long term Incentive Plan

YearGrantedSettledForfeitedNot vestedReserved as at 31 December 2022
Dr. Sijmen de Vries20222,363,455 — — — 2,363.455 
20211,337,888 — — — 1,337.888 
2020— — — — — 
2019201,050 (20,306)— (180,744)— 

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Loans or guarantees
During the year 2022, no loans or guarantees have been granted to the Executive members of the Board of Directors. No loans or guarantees to the Executive member of the Board of Directors were outstanding at December 31, 2022.
The Executive member of the Board of Director is the sole statutory director.
21. RELATED PARTY TRANSACTIONS
Related parties’ disclosure relates mainly to key management compensation and to transactions with the associated company BioConnection Investments B.V. (formally BioConnection B.V.).
Key management includes members of the Board of Directors:

Amounts in $ ‘000202220212020
Salaries and other short-term employee benefits1,463 1,522 2,695 
Post-employment benefits112 120 207 
Share-based compensation1,455 1,882 *2,841 
Total3,030 3,524 5,743 
*2021 figure restated. Refer to Note 20 for further disclosure.
All direct transactions with members of the Board of Directors have been disclosed in Notes 19 and 20 of these financial statements. At December 31, 2022, the Company had no payable balance to members to the Board of Directors. At December 31, 2021, the balance to members to the Board amounted to $0.1 million.
For the years ended December 31, 2022 and 2021, related party transactions with Bioconnection were in the ordinary course of that company’s fill and finish business and amounted to $3.0 million and $3.5 million respectively. At December 31, 2022 the Company was owed $0.5 million from Bioconnection. At December 31, 2021 the Company owed $0.1 million to Bioconnection for fill and finish services supplied.
22. OTHER FINANCIAL LIABILITIES
Other Financial Liabilities:

Amounts in $ ‘00020222021
Non-current
Financial guarantee contracts— 165 
Total non-current— 165 
Total— 165 
The financial guarantee relates to a guarantee for BioConnection, which due to the new ownership structure at Bioconnection, was released during 2022.
23. COMMITMENTS AND CONTINGENCIES
Material agreements
At the end of 2022, the Company had several agreements with third parties related to the manufacturing of RUCONEST and development of new products. In these agreements certain minimum volumes are committed. Total potential liabilities under these agreements for the year ended December 31, 2022 and December 31, 2021
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are approximately $73.8 million and $97.3 million, of which $20.8 million relates to 2023 and $53.0 million relates to 2024 and further. All expenditures relate to the cost of goods.

Joenja® (lensiolisib) milestone commitments
In August 2019, Pharming entered into a development collaboration and license agreement with Novartis to develop and commercialize leniolisib, a P13Kδ inhibitor being developed by Novartis to treat patients with APDS. In November 2022, Pharming submitted regulatory filings to the FDA and EMA for the purpose to commercialize leniolisib. On March 24, 2023, Pharming received FDA approval for the commercialization of Joenja® (leniolisib) in the United States. Pharming is preparing its first Joenja® (leniolisib) sale in the second quarter of 2023. We anticipate that the CHMP will issue its opinion on the leniolisib MAA in the second half of 2023 and expect European marketing authorisation approximately two months later.
As a result of the FDA approval and the expected EMA approval, it is expected that the first commercial sale of Joenja® (leniolisib) will be made which triggers milestone payments for a maximum amount of $20 million to Novartis. Furthermore, Pharming is committed to certain milestone payments based on actual worldwide annual sales. The total commitment equals $180 million when yearly net sales reach $500 million. The first milestone equals $5 million when yearly net sales reach $50 million.
In addition to these milestone payments, the Company has agreed to pay royalty fees to Novartis. These royalties are calculated as a fixed percentage over net sales, growing to a maximum of 18% when net sales exceed $300 million. These royalty payments have a term of 10 years. The minimum royalty liability of 12% is applicable for sales up until $150 million. The timing of the milestone payments, except for the milestones related to the first commercial sale in the U.S. and Europe, and royalty payments is uncertain as these are highly dependent on the enrollment of new patients for leniolisib.
After the FDA approval of March 24, 2023, Pharming has obtained an FDA Priority review voucher. As part of the agreement with Novartis, Novartis has the right to purchase this voucher from Pharming for an amount of 20% of the average sale price of similar transactions. This right expires within three years after the receipt of the voucher.
24. FINANCIAL RISK MANAGEMENT
Pharming is exposed to several financial risks: market risks (being currency risk and interest rate risk), credit risks and liquidity risks. The Board of Directors and the Executive Committee are responsible for the management of currency, interest, credit and liquidity risks and as such ultimately responsible for decisions taken in this field.
Capital risk management
The Company manages its capital to ensure that it will be able to continue as a going concern. This includes a regular review of cash flow forecasts and, if deemed appropriate, subsequent raising of funds through execution of equity and/or debt transactions. In doing so, the Board of Directors’ and Executive Committees’ strategy is to achieve a capital structure which takes into account the best interests of all stakeholders. Pharming’s capital structure includes cash and cash equivalents, debt and equity. Compared to last year there have been no significant changes in risk management policies.
Currency risk
This is the risk that the fair value of assets, liabilities and especially the future cash flows of financial instruments will fluctuate because of changes in foreign exchange rates. Pharming’s policy for the management of foreign currency risks is aimed at protecting the operating profit and positions held or recorded in foreign currencies, in particular of the United States dollar (U.S. dollar). Certain payments and sales of RUCONEST® in the United States are being and will be received in U.S. dollar. In 2022, repayments and interest payments of the loans were made in U.S. dollar. Some direct payments of U.S. activities are carried in U.S. dollar through the Dutch entities. At December 31, 2022 the Group’s cash and cash equivalents, including restricted cash, amounted to $208.7 million. This balance consists of cash assets denominated in euros for a total amount of
F-58

$150.3 million or €140.9 million (applying an exchange rate EUR/$ at 31 December 2022 of 1.0667 ) and cash assets in U.S. dollars for a total amount of $58.4 million. The U.S. dollar cash balance will be used for the commercialization activities of the U.S. organization and to cover the operating costs of the activities in the EU and RoW.
Cash and cash equivalents (including restricted cash), accounts receivables and inventories denominated in EUR amounted in total $82.1 million (€77.0 million), respectively $23.8 million (€22.3 million) for the trade and other payables denominated in EUR. Pharming performed a sensitivity analysis by applying an adjustment to the spot rate at year-end. As the balance of the cash and cash equivalents (including restricted cash) accounts receivables, inventories, trade and other payables, denominated in $, at year-end is $58.3 million, a 10% strengthening or weakening of the euro versus U.S. dollar would have an impact of $5.8 million on the Group’s gain (weakening of the euro) or loss (strengthening of the euro).
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Pharming’s interest rate risk policy is aimed at minimizing the interest rate risks associated with the financing of the Company and thus at the same time optimizing the net interest costs. This policy translates into a certain desired profile of fixed-interest and floating interest positions, including those generated by cash and cash equivalents and those paid on finance lease liabilities. As the interest rate on the convertible bond is a fixed percentage, Pharming concluded that the total risk on interest is not material.
The issue of the Convertible Bonds due 2025 at a fixed interest rate of 3% p.a. replacing the Company’s previous debt facility has rendered this concern obsolescent. The interest on the vast majority of the Company’s financial instruments is now not variable with market interest rates. More information on the Convertible Bonds due 2025 can be found in Note 16.
Credit risk
Credit risk is defined as the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge obligations. Pharming manages credit risk exposure through the selection of financial institutions having a high credit rating, using credit rating reports issued by institutions such as Standard & Poor’s and Moody’s. The exposure to credit risk at December 31, 2022 is represented by the carrying amounts of cash and cash equivalents and trade and other receivables.
The carrying amounts of the cash and cash equivalents (including restricted cash) as at December 31, 2022 amounted to $208.7 million and was held through financial institutions with a BB+ to A rating or better from Standard & Poor’s, Baa3 to A1 ratings from Moody’s and BBB+ to A ratings from Fitch.
Trade and other receivables at December 31, 2022 amounted to $27.6 million. As at the date of these financial statements, these amounts have largely been settled, including receipts in cash and receipt of goods and services in exchange of prepaid expense items. Based on the credit ratings of cash and cash equivalents (including restricted cash) as well as the position taken with respect to trade and other receivables, the Company considers that this risk is adequately managed.
Liquidity risk
The liquidity risk refers to the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. Pharming’s objective is to maintain a minimum level and certain ratio of cash and cash equivalents (including short-term deposits). The strategy of the Company is to repay its obligations through generation of cash income from operating activities such as product sales and licensing agreements. In case such cash flows are insufficient, the Company relies on financing cash flows as provided through the issuance of shares or incurring financial liabilities. Note 2 of these financial statements more extensively describes the Company’s going concern assessment.
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The following table presents the financial liabilities at year-end 2022, showing the remaining undiscounted contractual amounts due including nominal interest. Liabilities denominated in foreign currency have been converted at the exchange rate at December 31, 2022.
Maturity profile of financial liabilities:

Amounts in $ ’00020232024202520262027 and onwardsTotalPrior year total
Trade and other payables54,465 — — — — 54,465 42,473 
Other financial liabilities— — — — — — 165 
Lease Liabilities4,644 4,397 3,583 3,583 24,484 40,691 23,496 
Convertible Bonds4,000 4,000 135,338 — — 143,338 156,550 
Total63,109 8,397 138,921 3,583 24,484 238,494 222,684 
Fair value estimation
The Company uses the following hierarchy for determining the fair value of financial instruments measured at fair value:
•Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;
•Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices);
•Level 3: Inputs for the asset or liability that are not based on observable market data or which are based on the probability of future events occurring (that is, unobservable inputs).
The following table presents the assets that are measured at fair value at year-end 2022 and 2021:

20222021
Amounts in $ ’000Level 1Level 3TotalLevel 1Level 3Total
Investments in equity instruments designated as at FVTOCI403 — 403 1,449 — 1,449 
Investments in debt instruments designated as at FVTPL— 6,827 6,827 — — — 
Balance at December 31 403 6,827 7,230 1,449 — 1,449 
The following table presents the liabilities that are measured at fair value at year-end 2022 and 2021:

20222021
Amounts in $ ’000Level 3TotalLevel 3Total
Other financial liabilities— — 165 165 
Balance at December 31— — 165 165 
The following table includes carrying values and the estimated fair values of financial instruments:

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20222021
Amounts in $ ‘000Carrying valueFair valueCarrying valueFair value
Assets:
Cash and cash equivalents, including restricted cash208,654 208,654 192,963 192,963 
Trade and other receivables27,619 27,619 29,983 29,983 
Liabilities:
Convertible Bond133,386 133,386 140,886 140,886 
Lease Liabilities33,308 33,308 20,875 20,875 
Other financial liabilities— — 165 165 
Trade and other payables54,465 54,465 42,473 42,473 
The above fair values of financial instruments are based on internal calculations with the exception of the warrant and conversion option in the derivative financial liabilities as calculated by an independent valuator. Cash and cash equivalents, trade and other receivables as well as trade and other payables are stated at carrying amount, which approximates the fair value in view of the short maturity of these instruments. The fair values of finance lease liabilities and loans and borrowings (both non-current and current portion) are based on arm’s length transactions.
The table sets out an analysis for each of the period presented of the net position of the convertible bond, and Cash and cash equivalents, showing the remaining (discounted) contractual amounts due including nominal interest.

Amounts in $ ‘00020222021
Cash and cash equivalents208,654 192,963 
Convertible bond - repayable within one year(1,768)(1,879)
Convertible bond - repayable after one year(131,618)(139,007)
Net debt75,268 52,077 
Cash and cash equivalents 208,654 192,963 
Gross debt - fixed interest rates(133,386)(140,886)
Net debt75,268 52,077 
Reconciliation of liabilities arising from financing activities:

2021CashflowsNon - Cash changes2022
Amounts in $ ‘000AcquisitionInterest Expense AccruedAmortized costsFair Value ChangesOther
Convertible Bond140,886 (3,952)— 3,952 784 — (8,284)*133,386 
Other financial liabilities165 — (165)— — — — — 
Lease Liabilities20,875 (3,311)16,248 718 — — (1,222)33,308 
Total liabilities from financing activities161,926 (7,263)16,083 4,670 784 — (9,506)166,694 
* Represents the translation effect of convertible bonds as reflected in the consolidated statement of comprehensive income

25. EARNINGS PER SHARE AND FULLY-DILUTED SHARES
Basic earnings per share is calculated based on the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share is computed based on the weighted average number of ordinary
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shares outstanding including the dilutive effect of shares to be issued in the future under certain arrangements such as option plans and warrants issued. For the years ended 31 December 2022, 2021 and 2020, the basic and diluted profit per share is:

202220212020
Net profit attributable to equity owners of the parent (in $ ‘000)13,674 15,996 37,746 
Weighted average shares outstanding648,676,119 642,007,692 636,268,929 
Basic profit per share (in $)0.021 0.025 0.058 
Weighted average diluted shares outstanding707,141,263 701,151,525 682,737,280 
Diluted profit per share (in $)0.019 0.023 0.055 
For 2022 the diluted net profit used in the calculation of dilutive profit per share amounts to $13.7 million. Difference between the weighted average shares outstanding and the weighted average diluted shares outstanding used for basic profits calculations per share relates to options, warrants and LTIP. The 62,412,622 average shares related to the convertible bonds are anti-dilutive and are therefore excluded from the weighted average number of ordinary shares for the purpose of diluted earnings per share.
Diluted shares
The composition of the number of shares and share rights outstanding as well as authorized share capital as per December 31, 2022 and the date of these financial statements is provided in the following table.
Movements of shares and other instruments between December 31, 2022 and April 4, 2023 are shown in the table below:

December 31, 2022Shares issuedShares reservedApril 4, 2023
Shares656,348,2252,324,118—658,672,343
RSU4,931,000——4,931,000
Options47,596,801(756,191)(762,000)46,078,610
Convertible bonds62,412,622——62,412,622
LTIP15,304,821(1,516,432)3,790,99317,579,382
Issued786,593,46951,4953,028,993789,673,957
Available for issue93,406,531(51,495)(3,028,993)90,326,043
Authorized share capital880,000,000——880,000,000
26. SHAREHOLDERS’ EQUITY
The Company’s authorized share capital amounts to $9.4 million (€8.8 million, exchange rate (EUR:$) equals 1:1.0667) and is divided into 880,000,000 ordinary shares with a nominal value of €0.01 each. At December 31, 2022 and 31 December 2021, all 656,348,225 (€6.6 million) and 648,749,282 shares outstanding, have been fully paid-up.
Other reserves include those reserves related to currency translation, fair value revaluation, participating interest and capitalized development costs in which the movements can shown below:

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Amounts in $ ‘000Legal Reserve Currency translation reserve (CTA)Legal Reserve Capitalized development costLegal Reserve participating interestReserve Fair value revaluationTotal
Balance at January 1, 202119,0374,955622—24,614
Movements in the year(15,072)(4,553)694(2,283)(21,214)
Balance at December 31, 20213,9654021,316(2,283)3,400
Movements in the year(10,349)—(1,083)(705)(12,137)
Balance at December 31, 2022(6,384)402233(2,988)(8,737)
Please refer to the consolidated statement of changes in equity and Note 25.

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27. EVENTS AFTER THE REPORTING YEAR

Leniolisib FDA Approval
In August 2019, Pharming entered into a development collaboration and license agreement with Novartis to develop and commercialize leniolisib, a small molecule phosphoinositide 3-kinase delta (P13Kδ) inhibitor being developed by Novartis to treat patients with Activated Phosphoinositide 3-kinase Delta Syndrome (APDS). In November 2022, Pharming submitted regulatory filings to the FDA and EMA for the purpose to commercialize leniolisib. On March 24, 2023, Pharming received FDA approval for the commercialization of leniolisib in the United States. Pharming is preparing its first leniolisib sale in the second quarter of 2023. We anticipate that the CHMP will issue its opinion on the leniolisib MAA in the second half of 2023 and expect European marketing authorisation approximately two months later. For further details, refer to Note 23 of the consolidated financial statements.
Management identified no other events after the reporting period affecting the 2022 financial statements.

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