Idorsia : FY 2023 Financial Report

Financial

Report

20

23ANNUAL REPORT

The purpose of Idorsia is to discover, develop, and commercialize innovative medicines to help more patients.

We have more ideas, we see more opportunities, and we want to transform the horizon of therapeutic options.

2

Further parts of the

Idorsia Annual Report 2023

	Business				Sustainability
	Report				Report
	20									20
	23									23

	Compensation				Governance
	Report				Report
	20									20
	23									23

Contents

Financial Review

Consolidated

Financial Statements

Holding Company

Financial Statements

Contents

4 Financial Review

Consolidated

17 Financial Statements

Holding Company

75 Financial Statements

3

Financial

Review

	Idorsia measures and reports its non-GAAP operating
	performance, which management believes more
Contents	accurately reflects the underlying business performance.
	The Group believes that these non-GAAP financial
> Financial Review	measurements provide useful supplementary
	information for investors. These non-GAAP measures
Consolidated	are reported in addition to, not as a substitute for,
Financial Statements	US GAAP financial performance.
Holding Company	Rounding differences may occur
Financial Statements	nm = not meaningful

4

Contents

• Financial Review
  Consolidated Financial Statements
  Holding Company Financial Statements
  5

Idorsia's key numbers

Profit and loss

					Twelve months ended Dec 31,						Fourth quarter
			US GAAP			Non-GAAP			US GAAP			Non-GAAP
(in CHF millions, except EPS)		2023	2022		2023	2022		2023	2022		2023	2022
Net revenue
Product sales		65	51		65	51		11	23		11	23
Contract revenue - milestones		82	45		82	45		9	30		9	30
Contract revenue - others	5	2	5	2	1	1	1	1
Operating expenses
Cost of sales		(7)	(6)		(7)	(6)		(0)	(3)		(0)	(3)
Research and development		(294)	(384)		(269)	(357)		(59)	(105)		(57)	(97)
Selling, general and administrative		(396)	(510)		(378)	(492)		(78)	(139)		(80)	(134)
Net results
Operating income (loss)		(255)	(803)		(501)	(757)		(111)	(193)		(115)	(180)
Net income (loss)		(298)	(828)		(542)	(782)		(117)	(193)		(121)	(186)
Basic EPS		(1.67)	(4.67)		(3.04)	(4.41)		(0.65)	(1.09)		(0.68)	(1.05)
Diluted EPS	(1.67)	(4.67)	(3.04)	(4.41)	(0.65)	(1.09)	(0.68)	(1.05)

Cash flow						Liquidity and indebtedness
	Twelve months ended Dec 31,	Fourth quarter			Dec 31,	Sep 30,	Dec 31,
(in CHF millions)	2023	2022	2023	2022		(in CHF millions)	2023	2023	2022
Cash flow						Liquidity
Operating cash flow	(307)	(859)	(108)	(221)		Cash and cash equivalents	145	205	146
Proceeds/ (repayments) of	-	162	-	-		Short-term deposits	-	50	320
borrowings, net		Total liquidity	145	255	466
Capital expenditure	(9)	(27)	(1)	(4)		Indebtedness
Shares						Convertible loan	335	335	335
					Convertible bonds	796	796	795
		Dec 31,	Sep 30,	Dec 31,		Other financial debt	162	162	162
(in millions)		2023	2023	2022		Total indebtedness	1,293	1,293	1,292
Share count
Issued common shares		188.5	188.2	177.6
Equity derivatives		54.0	54.0	54.0
Equity instruments		14.6	15.5	14.3
Total potential issued shares		257.2	257.8	245.9

Transaction with Sosei Heptares

On July 20, 2023 Idorsia sold its Asia Pacific (ex-China) operations for a total consideration of CHF 400 m that led to a one-off profit of CHF

366 m of which CHF 68 m are recorded as contract revenue, CHF 305 m are recorded as gains on sale of disposal group and CHF 7 m are recorded as impairment charge of intangible assets. This transaction is referred hereafter as "the Sosei Deal".

In addition to the US GAAP and Non-GAAP measures presented above, the company has prepared proforma figures corresponding to the scope of operations that the company currently operates excluding the APAC operations in 2023 until the closing of the Sosei Deal and the one-off impact of such transaction, as shown in the table below.

Operational performance as reported					Operational performance proforma
	Twelve months ended Dec 31,	Fourth quarter			Twelve months ended Dec 31,	Fourth quarter
(in CHF millions)	2023	2022	2023	2022		(in CHF millions)	2023	2022	2023	2022
Revenue						Revenue
Product sales	65	51	11	23		Product sales	32	7	11	4
Contract revenue - milestones	82	45	9	30		Contract revenue - milestones	14	45	9	30
Contract revenue - others	5	2	1	1		Contract revenue - others	5	2	1	1
US GAAP revenue	152	97	22	54		US GAAP revenue	51	53	22	35

Operating expenses
Cost of sales	(7)	(6)	(0)	(3)
Research	(92)	(117)	(18)	(30)
Development	(177)	(240)	(39)	(67)
Selling	(303)	(394)	(57)	(106)
General and administrative	(75)	(97)	(22)	(28)
Non-GAAP operating expenses	(654)	(854)	(137)	(234)

Operating expenses

Cost of sales	(4)	(2)	(0)	(1)
Research	(92)	(117)	(18)	(30)
Development	(169)	(210)	(39)	(62)
Selling	(286)	(367)	(57)	(104)
General and administrative	(72)	(90)	(22)	(20)
Non-GAAP operating expenses	(623)	(786)	(137)	(217)

Other income	1	-	1	-		Other income	-	-	-	-
Non-GAAP operating loss	(501)	(757)	(115)	(180)		Non-GAAP operating loss	(572)	(733)	(116)	(182)

Contents

> Financial Review

Consolidated

Depreciation and amortization	(19)	(20)	(4)	(6)
Share-based compensation	(23)	(26)	4	(7)
Restructuring charges	(11)	-	1	-
Effect of Sosei transaction	298	-	3	-
Other operating expenses	246	(46)	4	(13)
US GAAP operating loss	(255)	(803)	(111)	(193)

Depreciation and amortization	(18)	(17)	(4)	(5)
Share-based compensation	(22)	(24)	4	(6)
Restructuring charges	(11)	-	1	-
Effect of Sosei transaction	-
Other operating expenses	(51)	(41)	0	(11)
US GAAP operating loss	(623)	(774)	(115)	(193)

Financial Statements

Holding Company

Financial Statements

6

Full-Year and Q4 US GAAP and Non-GAAP numbers as reported below include the impact of the Sosei Deal described above.

Revenue					Operating expenses
Revenue					Operating expenses
	Twelve months ended Dec 31,	Fourth quarter			Twelve months ended Dec 31,	Fourth quarter
(in CHF millions)	2023	2022	2023 2022		(in CHF millions)	2023	2022	2023 2022

Revenue

Product sales	65	51	11	23
Contract revenue - milestones	82	45	9	30
Contract revenue - others	5	2	1	1
US GAAP revenue	152	97	22	54

Product sales comprised of:

• PIVLAZ™ (clazosentan) with CHF 33.7 m net sales in Japan until July 19, 2023 when Idorsia sold its Asia Pacific (ex-China) business and CHF 0.7 m from product supplied to Sosei Heptares.
• QUVIVIQ™ (daridorexant) with CHF 30.9 m net sales in the US, Germany, Italy, Switzerland, Spain, Canada and UK. US net sales do not fully reflect the volumes of the products dispensed due to coupon and co-pay programs.

Contract revenue mainly consisted of the license of daridorexant and assignment of potential milestones from Mochida to Sosei Heptares (CHF 68 m) in connection with the Sosei Deal and a CHF 9 m milestone payment from Santhera based on the product approval vamorolone by the FDA.

Operating expenses

Cost of sales	7	6	0	3
Research	92	117	18	30
Development	177	240	39	67
Selling	303	394	57	106
General and administrative	75	97	22	28
Non-GAAP operating expenses	654	854	137	234
Depreciation and amortization	19	20	4	6
Share-based compensation	23	26	(4)	7
Restructuring charges	11	-	(1)	-
Effect of the Sosei Deal	(298)	-	(3)	-
Other operating expenses	(246)	46	(4)	13
US GAAP operating expenses	409	900	134	247

US GAAP operating expenses of CHF 409 m comprised of Non-GAAP operating expenses (CHF 654 m), depreciation and amortization (CHF 19 m) and share-based compensation (CHF 23 m). It also includes one-offs with restructuring charges (CHF 11 m) and the impact of the Sosei Deal (CHF 298 m net gain offsetting the operating expenses).

Contents

• Financial Review
  Consolidated Financial Statements
  Holding Company Financial Statements
  7

Cost of sales						Selling, general and administrative ("SG&A") expenses
	Twelve months ended Dec 31,	Fourth quarter			Twelve months ended Dec 31,	Fourth quarter
(in CHF millions)	2023	2022	2023	2022		(in CHF millions)	2023	2022	2023	2022

Contents

• Financial Review
  Consolidated Financial Statements
  Holding Company Financial Statements
  8

Cost of sales
Cost of goods sold	4	2	0	1
Royalty paid	3	4	-	2
US GAAP cost of sales	7	6	0	3

Cost of sales of CHF 7 m comprised the cost of goods sold (CHF 4 m), which does not reflect the actual manufacturing costs (as prior to product approval, manufacturing costs were expensed in prior periods), and royalties paid (CHF 3 m) in connection to the net sales of Pivlaz in Japan. Since the closing of the Sosei Deal, the company no longer pays such royalties.

Research and development ("R&D") expenses

	Twelve months ended Dec 31,	Fourth quarter
(in CHF millions)	2023	2022	2023	2022
R&D expenses
Research	92	117	18	30
Development	177	240	39	67
Non-GAAP R&D expenses	269	357	57	97
Depreciation and amortization	13	15	3	5
Share-based compensation	11	12	(1)	3
US GAAP R&D expenses	294	384	59	105

Non-GAAP research expenses of CHF 92 m, comprised of biology (CHF 22 m), chemistry (CHF 24 m), preclinical activities (CHF 40 m) and other activities (CHF 6 m).

Non-GAAP development expenses of CHF 177 m, comprised of CHF 106 m for clinical activities (including CHF 60 m study costs, mainly driven by late stage studies for selatogrel, cenerimod, daridorexant, lucerastat, clazosentan and aprocitentan) and CHF 72 m for chemical and pharmaceutical development activities (including CHF 33 m for drug substance and drug product).

SG&A expenses

Selling	303	394	57	106
General and administrative	75	97	22	28
Non-GAAP SG&A expenses	378	492	80	134
Depreciation and amortization	6	5	1	1
Share-based compensation	12	14	(3)	4
US GAAP SG&A expenses	396	510	78	139

Non-GAAP SG&A expenses of CHF 378 m, comprised of commercial activities (CHF 303 m), information systems (CHF 35 m) and other support functions (CHF 40 m).

Operating results						Financial results
Non-GAAP and US GAAP operating results					Financial results
	Twelve months ended Dec 31,	Fourth quarter			Twelve months ended Dec 31,	Fourth quarter
(in CHF millions)	2023	2022	2023	2022		(in CHF millions)	2023	2022	2023	2022

Operating results

Revenues	152	97	22	54
Operating expenses	(654)	(854)	(137)	(234)
Other income	1	-	1	-
Non-GAAP operating income	(501)	(757)	(115)	(180)
(loss)
Operating results
Revenues	152	97	22	54
Operating expenses	(409)	(900)	(134)	(247)
Other income	1	-	1	-
US GAAP operating income (loss)	(255)	(803)	(111)	(193)

US GAAP operating loss of CHF 255 m comprised of Non-GAAP operating loss (CHF 501 m), depreciation and amortization

(CHF 19 m), share-based compensation (CHF 23 m), a net gain from asset disposals deriving from the Sosei Deal (CHF 305 m), impairments of intangible assets (CHF 7 m) and restructuring charges (CHF 11 m).

Financial results

Interest income (expense), net	(19)	(16)	(4)	(5)
Other financial income (expense),	(16)	(0)	(2)	1
net
Non-GAAP financial income	(36)	(16)	(6)	(3)
(expense)
Accretion expense	(1)	(1)	(0)	(0)
Gain (loss) on securities	(2)	0	2	6
US GAAP financial income	(39)	(17)	(5)	2
(expense)

US GAAP financial expense of CHF 39 m comprised of Non-GAAP financial expense (CHF 36 m) and losses on marketable securities (CHF 2 m).

Non-GAAP financial expense of CHF 36 m mainly included interest expenses on the convertible bonds (CHF 14 m), a net foreign currency exchange loss (CHF 16 m) and interest expense resulting from the sales and lease back transaction (CHF 7 m).

Contents

• Financial Review
  Consolidated Financial Statements
  Holding Company Financial Statements
  9

Income tax					Net results, EPS and shares
Income tax					Net results
	Twelve months ended Dec 31,	Fourth quarter			Twelve months ended Dec 31,	Fourth quarter
(in CHF millions)	2023	2022	2023 2022		(in CHF millions)	2023	2022	2023 2022

Income tax

Income tax benefit (expense)	(5)	(9)	(0)	(3)
Non-GAAP tax benefit (expense)	(5)	(9)	(0)	(3)
Other tax benefit (expense)	2	1	(0)	0
US GAAP income tax benefit	(4)	(8)	(0)	(3)
(expense)

US GAAP income tax expense of CHF 4 m mainly included the Non- GAAP tax expense of foreign affiliates (CHF 3 m).

Both US- and Non-GAAP income tax expense included an increase of the valuation allowance of CHF 46 m that related to deferred tax assets arising from operating losses which can be carried forward for 7 years.

Non-GAAP operating income	(501)	(757)	(115)	(180)
(loss)
Financial income (expense)	(36)	(16)	(6)	(3)
Income tax benefit (expense)	(5)	(9)	(0)	(3)
Non-GAAP net income (loss)	(542)	(782)	(121)	(186)
US GAAP operating income (loss)	(255)	(803)	(111)	(193)
Financial income (expense)	(39)	(17)	(5)	2
Income tax benefit (expense)	(4)	(8)	(0)	(3)
US GAAP net income (loss)	(298)	(828)	(117)	(193)

US GAAP net loss of CHF 298 m mainly included the Non-GAAP net loss (CHF 542 m), depreciation and amortization (CHF 19 m), share- based compensation (CHF 23 m), losses on marketable securities (CHF 2 m), a net gain from asset disposals deriving from the Sosei Deal (CHF 305 m), impairments of intangible assets (CHF 7 m) and restructuring charges (CHF 11 m).

Contents

• Financial Review
  Consolidated Financial Statements
  Holding Company Financial Statements
  10