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Form 8-K PERRIGO Co plc For: Mar 28

March 28, 2022 7:40 AM EDT

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Exhibit 99.1

Non GAAP Disclosure

The following provides a reconciliation of pro forma EBITDA and pro forma Adjusted EBITDA to pro forma net income (loss), which is the most directly comparable financial measure prepared in accordance with GAAP:

 

     Pro Forma
Twelve months ended December 31, 2021
 
in millions (unaudited)    Perrigo      Héra
(€)
     Conversion
and
Adjustments
(a)
     Pro Forma
Condensed
Combined
 

Pro forma loss from continuing operations

   $  (130.9     (3.2    $  (137.7    $  (268.6

Interest expense, net

     125.0        56.0        48.8        173.8  

Income tax expense

     389.6        2.9        (17.8)        371.8  

Depreciation and amortization

     296.8        5.0        74.1        370.9  
  

 

 

    

 

 

    

 

 

    

 

 

 

Pro forma EBITDA

     680.5        60.8        (32.6)        647.9  

Non-cash stock-based compensation expense

     57.0        —          —          57.0  

Acquisition and integration-related charges and contingent consideration adjustments

     37.7        —          77.3        115.0  

Restructuring charges and other termination benefits

     16.9        1.2        1.4        18.3  

Unusual litigation (b)

     (365.2)        —          —          (365.2)  

Impairment and abandonment charges

     173.1        —          —          173.1  

Indirect RX business support costs (c)

     12.2        —          —          12.2  

Other, net (d)

     6.6        —          12.9        19.5  

Non-current expense, net (e)

     —          4.6        5.4        5.4  

Hedging and other financial expenses, net (f)

     —          1.4        1.7        1.7  

Expected cost synergies (g)

     —          —          —          46.7  
  

 

 

    

 

 

    

 

 

    

 

 

 

Pro forma Adjusted EBITDA

   $ 618.8      67.9      $ 66.0      $ 731.6  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(a)

Includes Héra conversion to US GAAP and US dollar, and financing and acquisition adjustments.

(b)

Primarily relates to proceeds received from arbitration related to our claims of fraud in connection with the Omega acquisition.

(c)

Includes certain costs, which are reported in GAAP continuing operations but were previously allocated to the RX business, which has since been sold. On a go-forward basis, such costs will either be covered by the transition services agreement or eliminated.

(d)

Includes Perrigo adjustments of $2.5 million loss on divestiture, $2.1 million separation and reorganization expenses, $2.0 million loss on investment securities, as well as $12.9 million of loss on early debt extinguishment associated with financing adjustments.

(e)

Primarily represents Héra transaction expenses, and business combination expenses.

(f)

Primarily represents Héra expenses associated with hedging activities and foreign exchange gains and losses.

(g)

Represents management’s estimated run-rate of annual cost synergies from the Héra acquisition expected to be realized within 24 months of consummation of the acquisition. The approximately €40 million of cost synergies, or US$47 million, consists of approximately €28 million in logistics, selling and marketing activity synergies and approximately €12 million of fixed cost infrastructure synergies. No assurances can be made whether these synergies will be achieved in this time frame, or at all. For more information, see “Part I.—Item 1A.—Risk Factors—Strategic Risks—We may not realize the benefits of business acquisitions, divestitures, and other strategic transactions, which could have a material adverse effect on our operating results” of Perrigo Company plc’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

The presentation of pro forma Adjusted EBITDA should not be construed as an inference that Perrigo’s future results will be unaffected by any of the adjusted items, or that Perrigo’s projections and estimates will be realized in their entirety or at all. In addition, because of these limitations, pro forma Adjusted EBITDA should not be considered as a measure of liquidity or discretionary cash available to Perrigo to fund its cash needs, including investing in the growth of its business and meeting its obligations. You should compensate for these limitations by relying primarily on Perrigo’s U.S. GAAP results and only use pro forma Adjusted EBITDA for supplementary analysis.

The adjustments reflected in pro forma Adjusted EBITDA have not been prepared with a view towards complying with Article 11 of Regulation S-X under the Securities Act. Pro forma Adjusted EBITDA is intended to provide additional information on a more comparable basis than would be provided without such adjustments. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. These measures are not measurements of Perrigo’s financial performance under GAAP and should not be considered in isolation or as alternatives to net income (loss), net cash flows provided by (used in) operating activities, total net cash flows or any other performance measures derived in accordance with GAAP or as alternatives to net cash flows provided by (used in) operating activities or total net cash flows as measures of Perrigo’s liquidity.

The use of pro forma Adjusted EBITDA instead of GAAP measures has limitations as an analytical tool, and you should not consider pro forma Adjusted EBITDA in isolation, or as a substitute for analysis of our results of operations and operating cash flows as reported under GAAP. For example, pro forma Adjusted EBITDA does not reflect:

 

   

cash expenditures or future requirements for capital expenditures;

 

   

changes in, or cash requirements for, working capital needs;

 

   

interest expense, or the cash requirements necessary to service interest or principal payments, on debt;

 

   

any cash income taxes that we may be required to pay;

 

   

any cash requirements for replacements of assets that are depreciated or amortized over their estimated useful lives and may have to be replaced in the future; or

 

   

all non-cash income or expense items that are reflected in our statements of cash flows

The definition of and method of calculating pro forma Adjusted EBITDA may vary from the definitions and methods used by other companies, which may limit their usefulness as comparative measures. As a result of these and other limitations, this measure should not be considered as a measure of discretionary cash available to invest in the growth of our business or as a measure of our liquidity.

Exhibit 99.2

 

LOGO   KPMG Audit    Telephone:      +33 (0)1 55 68 68 68  
  Tour EQHO    Telefax:    +33 (0)1 55 68 73 00
  2 Avenue Gambetta    Internet:    www.kpmg.fr
 

CS 60055

92066 Paris la Défense Cedex

     
  France      

HERA S.A.S.

Statutory auditor’s report on the consolidated

financial statements as of and for the years ended

December 31, 2020 and 2021

Years ended December 31, 2020 and 2021

HERA S.A.S.

200, avenue de Paris – 92320 Chtillon

 

 

KPMG S.A

a French limited liability entity and a member firm of the KPMG Network of independent member firms affiliated with KPMG International Limited, a private Englsh company limited by guarantee

   Société anonyme d’expertise comptable et de commissariat aux comptes à directoire et conseil de surveillance. Inscrite au Tableau de l’Ordre à Paris sous le n° 14-30080101 et à la Compagnie Régionale des Commissaires aux Comptes de Versailles.et du Centre   

Headquarters:

KPMG S.A.

Tour Eqho

2 avenue Gambetta

92066 Paris la Défense Cedex

Capital: 5 497 100 €.

Code APE 6920Z

775 726 417 R.C.S. Nanterre

TVA Union Européenne

FR 77 775 726 417


 

LOGO   KPMG Audit    Telephone:      +33 (0)1 55 68 68 68  
  Tour EQHO    Telefax:    +33 (0)1 55 68 73 00
  2 Avenue Gambetta    Internet:    www.kpmg.fr
 

CS 60055

92066 Paris la Défense Cedex

     
  France      

 

HERA S.A.S

Registered office: 200, avenue de Paris – 92320 Chatillon

Statutory auditor’s report on the consolidated financial statements as of and for the years ended December 31, 2020 and 2021

To the Chairman of HERA S.A.S.;

In our capacity as Statutory Auditor of HERA S.A.S. and in compliance with your request in the context of the proposed acquisition of HERA S.A. by Perrigo Company Plc, we have audited the accompanying consolidated financial statements of HERA S.A.S. as of and for the years ended December 31, 2020 and 2021.

Due to the global crisis related to the Covid-19 pandemic, the consolidated financial statements have been prepared and audited under specific conditions. Indeed, this crisis and the exceptional measures taken in the context of the state of sanitary emergency have had numerous consequences for companies, particularly on their operations and their financing, and have led to greater uncertainties on their future prospects. Those measures, such as travel restrictions and remote working, have also had an impact on the companies’ internal organisation and the performance of the audits.

The Chairman of HERA S.A.S. is responsible for the preparation and fair presentation of these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with professional standards applicable in France and the professional doctrine of the French national auditing body (Compagnie nationale des commissaires aux comptes) related to this engagement; these standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures, on a test basis or by other means of selection, to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting policies used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position and assets and liabilities of HERA S.A.S. as of December 31, 2020 and 2021 and the results of its operations for the years then ended in accordance with International Financial Reporting Standards (“IFRS”) as adopted in the European Union and in accordance with IFRS as issued by the International Accounting Standards Board.

 

 

KPMG S.A

a French limited liability entity and a member firm of the KPMG Network of independent member firms affiliated with KPMG International Limited, a private Englsh company limited by guarantee

   Société anonyme d’expertise comptable et de commissariat aux comptes à directoire et conseil de surveillance. Inscrite au Tableau de l’Ordre à Paris sous le n° 14-30080101 et à la Compagnie Régionale des Commissaires aux Comptes de Versailles.et du Centre   

Headquarters:

KPMG S.A.

Tour Eqho

2 avenue Gambetta

92066 Paris la Défense Cedex

Capital : 5 497 100 €.

Code APE 6920Z

775 726 417 R.C.S. Nanterre

TVA Union Européenne

FR 77 775 726 417


HERA S.A.S.

Statutory auditor’s report on the consolidated financial statements

as of and for the years ended December 31, 2020 and 2021

 

LOGO

This report shall be governed by, and construed in accordance with French law. The Courts of France shall have exclusive jurisdiction in relation to any claim, dispute or difference concerning the engagement letter or this report, and any matter arising from them. Each party irrevocably waives any right it may have to object to an action being brought in any of those Courts, to claim that the action has been brought in an inconvenient forum or to claim that those Courts do not have jurisdiction.

Paris la Défense March 23, 2022

KPMG Audit

A division of KPMG S.A.

/s/ Catherine Porta            

Catherine Porta

Partner

 

3


CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2021 and 2020

 

LOGO


STATEMENT OF FINANCIAL POSITION      4  
STATEMENT OF PROFIT AND LOSS      5  
CONSOLIDATED STATEMENT OF CASH FLOWS      6  
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY      7  
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS      8  

1

 

ACCOUNTING PRINCIPLES AND METHODS

     8  
1.1   Reporting Entity      8  
1.2   Accounting principles      8  

1.2.1

 

Statement of compliance and accounting principles

     8  

1.2.2

 

Basis of measurement and presentation

     9  

1.2.3

 

Functional and reporting currency

     9  

1.2.4

 

Conversion of foreign currency transactions

     9  

1.2.5

 

Translation of financial statements of foreign subsidiaries whose functional currency is not the euro

     9  

1.2.6

 

Use of Judgments and Estimates

     10  
1.3   Main accounting principles      10  

1.3.1

 

Consolidation method

     10  

1.3.2

 

Business combinations

     10  

1.3.3

 

Development costs

     11  

1.3.4

 

Other intangible assets

     11  

1.3.5

 

Property, plant and equipment

     12  

1.3.6

 

Financial assets and liabilities

     12  

1.3.7

 

Inventories and work in progress

     15  

1.3.8

 

Employee benefits

     15  

1.3.9

 

Share-based payments

     16  

1.3.10

 

Provisions

     16  

1.3.11

 

Revenue from ordinary activities

     17  

1.3.11.1

 

Turnover

     17  

1.3.11.2

 

Other income from operations

     17  

1.3.12

 

Research Tax Credit

     17  

1.3.13

 

Cost of sales and other operating expenses

     17  

1.3.14

 

Non-current income and expenses

     17  

1.3.15

 

Lease agreements

     18  

1.3.16

 

Financial income and expenses

     18  

1.3.17

 

Income tax

     18  

1.3.18

 

Earnings per share

     19  

1.3.19

 

Impairment testing of non-financial assets

     19  
1.4   Determining fair value      19  
1.5   Significant changes in accounting policies      20  
1.6   Significant events of the fiscal year period      20  

1.6.1

 

Change of scope

     20  

1.6.2

 

COVID-19

     21  

1.6.3

 

Buyback offer from PERRIGO

     22  

1.6.4

 

Ongoing legal actions

     22  

1.6.5

 

Other Information

     23  

 

2


2

 

NOTES TO THE STATEMENT OF FINANCIAL POSITION

     24  

2.1

 

Goodwill

     24  

2.2

 

Intangible assets

     25  

2.3

 

Property, plant and equipment

     26  

2.4

 

Rights of Use associated with Leases

     27  

2.5

 

Current and non-current financial assets

     28  

2.6

 

Inventories

     28  

2.7

 

Trade and other receivables

     29  
2.8   Other receivables      30  

2.9

 

Cash and cash equivalents

     31  

2.10

 

Share capital

     31  

2.10.1

 

Share-based payments - Stock options and free shares

     32  

2.10.2

 

Non-controlling interests

     32  

2.11

 

Provisions for employee benefits

     33  

2.12

 

Provisions

     34  

2.12.1

 

Provisions for tax liabilities

     34  

2.13

 

Borrowings and financial debts

     35  

2.13.1

 

Changes in financial liabilities

     36  

2.14

 

Lease liabilities

     37  

2.15

 

Other debts

     37  

2.16

 

Deferred income

     38  

2.17

 

Fair value table

     39  

3

 

NOTES TO THE STATEMENT OF COMPREHENSIVE INCOME

     39  

3.1

 

Revenue from ordinary activities

     39  

3.2

 

Operating expenses

     40  

3.2.1

 

Staff costs

     40  

3.2.2

 

Headcount

     41  

3.3

 

Other operating income and expenses

     41  

3.4

 

Other non-current income and expenses

     42  

3.5

 

Financial result

     43  

3.6

 

Income tax

     43  

3.6.1

 

Breakdown of tax expense

     43  

3.6.2

 

Reconciliation between actual and notional tax

     44  

3.6.3

 

Breakdown of deferred tax assets and liabilities

     44  

3.7

 

Earnings per share

     45  

3.7.1

 

Basic earnings per share

     45  

3.7.2

 

Diluted earnings per share

     45  

4

 

RELATED PARTIES

     45  

5

 

LITIGATION

     46  

6

 

OFF-BALANCE SHEET COMMITMENTS

     46  

7

 

FINANCIAL RISK MANAGEMENT

     47  

8

 

SUBSEQUENT EVENTS

     47  

9

 

AUDITORS’ FEES

     48  

 

3


STATEMENT OF FINANCIAL POSITION

 

in thousands of euros

        December 31, 2021      December 31, 2020  

Assets

        

Goodwill

   Note 2.1      529 585        529 585  

Intangible assets

   Note 2.2      514 489        505 893  

Tangible assets

   Note 2.3      3 261        3 427  

Usage rights under leasing contracts

   Note 2.4      8 654        9 873  

Financial assets - Non-current portion

   Note 2.5      773        575  

Derivative asset instruments - Non-current portion

        —          10  

Deferred taxes - Assets

   Note 3.6.3      30 618        34 577  
     

 

 

    

 

 

 

Non-current assets

        1 087 381        1 083 940  
     

 

 

    

 

 

 

Stocks and work in progress

   Note 2.6      22 726        31 543  

Trade and other receivables

   Note 2.7      53 599        48 423  

Current tax assets

   Note 2.8      10 205        6 115  

Other receivables

   Note 2.8      11 108        13 544  

Prepayments

        2 622        2 833  

Financial assets - Current portion

        9        9  

Derivative asset instruments - Current portion

        63        259  

Cash and cash equivalents

   Note 2.9      40 575        18 163  
     

 

 

    

 

 

 

Current assets

        140 907        120 888  
     

 

 

    

 

 

 

TOTAL ASSETS

        1 228 288        1 204 827  
     

 

 

    

 

 

 

Equity

        

Share capital

   Note 2.10      35 862        35 862  

Share premium

        319 897        319 897  

Consolidated reserves - Group share

        -171 588        -145 631  

Profit or loss for the financial year - Group share

        -3 166        -27 241  
     

 

 

    

 

 

 

Equity - Group share

        181 005        182 888  

Non-controlling interests

        107        29  
     

 

 

    

 

 

 

Equity

        181 112        182 917  
     

 

 

    

 

 

 

Liabilities

        

Provisions for employee benefits

   Note 2.11      2 441        2 266  

Borrowings and financial debts - Non-current portion

   Note 2.13      842 692        815 415  

Leasing debts - Non-current portion

   Note 2.14      7 359        8 759  

Deferred income - Non-current portion

   Note 2.16      666        625  

Derivative liability instruments - Non-current portion

        —          —    

Deferred taxes - Liabilities

   Note 3.6.3      127 508        128 658  
     

 

 

    

 

 

 

Non-current liabilities

        980 667        955 724  
     

 

 

    

 

 

 

Provisions - Current portion

   Note 2.12      822        335  

Borrowings and financial debts - Current portion

   Note 2.13      —          -1  

Leasing debts - Current portion

   Note 2.14      2 341        2 296  

Trade and other payables

        33 243        43 931  

Current tax liabilities

   Note 2.15      610        1 271  

Other debts - Current portion

   Note 2.15      28 405        18 163  

Deferred income - Current portion

   Note 2.16      137        191  

Derivative liability instruments - Current portion

        952        —    
     

 

 

    

 

 

 

Current liabilities

        66 509        66 187  
     

 

 

    

 

 

 

LIABILITIES

        1 047 176        1 021 911  
     

 

 

    

 

 

 

TOTAL LIABILITIES AND EQUITY

        1 228 288        1 204 827  
     

 

 

    

 

 

 

 

4


STATEMENT OF PROFIT AND LOSS AND COMPREHENSIVE INCOME    

Profit and Loss account

 

in thousands of euros

          December 31, 2021      December 31, 2020  

Turnover

        255 923        201 543  

Other income from operations

        605        1 384  

Revenue from ordinary activities

     Note 3.1        256 529        202 926  

Costs of sales

        -73 681        -56 635  

Marketing and sales costs

     Note 3.2        -77 834        -63 212  

General and administrative costs

     Note 3.2        -33 926        -27 449  

Research and development costs

     Note 3.2        -9 062        -9 418  

Other operating revenues

     Note 3.3        1 874        1 561  

Other operating expenses

     Note 3.3        -2 204        -11 178  

Other income

     Note 3.4        111        8 031  

Other expenses

     Note 3.4        -4 675        -24 338  
     

 

 

    

 

 

 

Operating Result

        57 133        20 290  
     

 

 

    

 

 

 

Financial revenues

        2 205        1 251  

Financial expenses

        -59 559        -55 188  
     

 

 

    

 

 

 

Financial Result

     Note 3.5        -57 354        -53 937  
     

 

 

    

 

 

 

Pre-tax Result

        -221        -33 648  

Income/(expenses) from taxation

     Note 3.6        -2 872        6 439  
     

 

 

    

 

 

 

Net Result

        -3 093        -27 209  
     

 

 

    

 

 

 

Of which:

        

Group share

        -3 166        -27 241  

Non-controlling interest

        72        32  

Basic and diluted earnings per share

 

in thousands of euros

   December 31, 2021      December 31, 2020  

Basic and diluted earnings per share

     -0,09        -0,76  

Other comprehensive income

     

in thousands of euros

   December 31, 2021      December 31, 2020  

Net Result

     -3 093        -27 209  

Revaluation of net defined benefit liability (asset)

     -154        191  

Related taxes

     42        -55  
  

 

 

    

 

 

 

Total items that will not be reclassified to income in the future

     -112        135  
  

 

 

    

 

 

 

Exchange differences

     1 045        -282  

Gains / losses at fair value

     193        255  
  

 

 

    

 

 

 

Total items likely to be reclassified to profit or loss in the future

     1 238        -28  
  

 

 

    

 

 

 

Other components of comprehensive income

     1 126        108  
  

 

 

    

 

 

 

Total Global Result

     -1 967        -27 101  
  

 

 

    

 

 

 

Of which:

     

Group share

     -2 042        -27 132  

Non-controlling interests

     75        32  

 

5


CONSOLIDATED STATEMENT OF CASH FLOWS

 

in thousands of euros

        December 31, 2021      December 31, 2020  

Loss of fully consolidated companies before tax

        -221        -33 648  

Interest charges

        57 085        52 739  

Net provision for amortization

        2 795        4 244  

Net allocation for amortization of usage right - IFRS 16

        2 379        2 419  

Net provision for amortization (revaluation of assets - PPA Astorg)

        1 237        3 806  

Net allocation to provisions

        904        -530  

Capital gains and losses on the disposal of tangible and intangible assets and cost of disposa

        193        8 907  

Operating working capital

        541        13 478  

Stocks

        9 238        -7 634  

Trade and other receivables

        -4 001        19 637  

Trade and other payables

        -4 696        1 475  
     

 

 

    

 

 

 

Cash flows generated by operating activities

        64 913        51 415  
     

 

 

    

 

 

 

Tax income / (expenses) paid

        -1 355        -71  

Other components of operational activities

        339        -619  
     

 

 

    

 

 

 

Net cash flow from operational activities

        63 897        50 725  
     

 

 

    

 

 

 

Acquisition of tangible assets

   Note 2.3      -427        -196  

Acquisition of intangible assets

   Note 2.2      -12 217        -11 031  

Changes in payables to suppliers of fixed assets

        3 298        -7 022  

Change in financial assets

        -1 026        -43  

Change in the scope

        -174     

Other components of investment activities

        -2        —    
     

 

 

    

 

 

 

Net cash flow used in investment activities

        -10 546        -18 292  
     

 

 

    

 

 

 

Loan repayments

   Note 2.13.1      -18 000        -35 030  

New borrowings

   Note 2.13.1      10 000        28 000  

Repayment of leasing debts

        -2 521        -2 355  

Interest paid

        -20 650        -21 264  

Other components of financing activities

        67        204  
     

 

 

    

 

 

 

Net cash flow used in financial activities

        -31 103        -30 446  
     

 

 

    

 

 

 

Net cash flow

        22 249        1 988  
     

 

 

    

 

 

 

Opening cash

        18 163        16 259  

Effects of exchange rate fluctuations on hedging cash flow

        163        -84  

Closing cash

        40 575        18 163  
     

 

 

    

 

 

 

Net cash increase / (decrease)

        22 249        1 988  
     

 

 

    

 

 

 

 

6


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

In thousands of euros

  Share
capital
    Share premium     Translation
reserves
    Fair value
reserves
    Consolidation
reserves
    Reserves -
Actuarial
gains and
losses
    Equity
component of
convertible
bonds
    Profit or loss     Total
transactions
with owners
of the
Company
    Non-
controlling
interests
    Total
shareholders’
equity
 

Equity as of January 1, 2020

    35 862       319 897       72       6 564       - 96 975       - 243       9 636       - 65 014       209 799       —         209 799  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income for the period

                     

Net income

                  - 27 241       - 27 241       32       - 27 209  

Other comprehensive income

        - 236       255       - 62       153           109       -2       107  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income for the period

    —         —         - 236       255       - 62       153       —         - 27 241       - 27 131       29       - 27 102  

Transactions with the Company’s owners

                    —           —    

Contributions and distributions

                    —           —    

Other variances

            220             220         220  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total contributions and distributions

    —         —         - 236       255       158       153       —         - 27 241       - 26 911       29       - 26 881  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity as of December 31, 2020

    35 862       319 897       - 165       6 818       - 96 816       -90       9 636       - 92 254       182 888       29       182 917  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity as of January 1, 2021

    35 862       319 897       - 165       6 818       - 96 816       -90       9 636       - 92 254       182 888       29       182 917  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income for the period

                     

Net income

                  - 3 166       - 3 166       72       - 3 094  

Other comprehensive income

        1 039       193         - 112           1 120       6       1 126  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income for the period

    —         —         1 039       193       —         - 112       —         - 3 166     - 2 046       78       - 1 968  

Transactions with the Company’s owners

                    —           —    

Contributions and distributions

                    —           —    

Other variances

        59         104             163         163  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total contributions and distributions

    —         —         1 098       193       104       - 112       —         - 3 166       - 1 883       78       - 1 805  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity as of December 31, 2021

    35 862       319 897       934       7 011       - 96 713       - 201       9 636       - 95 420       181 006       107       181 112  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

7


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1    ACCOUNTING PRINCIPLES AND METHODS

1.1    Reporting Entity

The parent company, Héra S.A.S. (hereinafter “the Company”) is a company domiciled in France with its registered office in Chatillon 92320, 200 avenue de Paris; it was established on November 16, 2015.

The financial statements of the Company and its subsidiaries controlled, directly or indirectly, by the Company are included in the consolidated financial statements.

The Héra Group (hereafter “the Group”) aspires to be a global leader in the development and commercialization of pharmaceuticals, medical devices, and cosmetics.

The Group is comprised of the following companies:

 

Entities

   Country    % holding  

Héra Sas

   France      Mother  

Laboratoire HRA Pharma Sas

   France      100,00

HRA Pharma France Sas

   France      100,00

HRA Pharma Development Sarl

   France      100,00

HRA Pharma Deutschland GmbH

   Germany      100,00

HRA Pharma UK & Ireland Limited

   UK      100,00

HRA Pharma Italia Srl

   Italy      100,00

HRA Pharma Iberia SL

   Spain      100,00

HRA Pharma LLC

   USA      100,00

HRA Pharma Switzerland Sarl

   Switzerland      100,00

HRA Pharma Rare Diseases Sas

   France      100,00

HRA Pharma Benelux

   Belgium      100,00

HRA Pharma America Inc

   USA      100,00

HRA Pharma APAC

   Hong Kong      100,00

HRA Pharma Hong Kong Limited

   Hong Kong      67,00

HRA Pharma China

   China      100,00

1.2    Accounting principles

The consolidated financial statements were approved by the Chairman on March 23, 2022.

1.2.1    Statement of compliance and accounting principles

The consolidated financial statements have been prepared on the basis of IFRS (International Financial Reporting Standards) as adopted by the European Union, IFRS as issued by the IASB (International Accounting Standard Board) and interpretations of international standards (SIC and IFRIC) as of December 31, 2020 and 2021.

All of the European Union’s adopted texts can be found on the European Commission’s website at the following location:

http://ec.europa.eu/commission/index_fr

 

8


Effective January 1, 2021, the following standards and interpretations will apply:

The IASB’s published standards, revisions to standards, and interpretations that are mandatory as of the fiscal year 2021 are given below:

 

   

Amendments to IFRS 4 “Extension of the temporary exemption from IFRS 9”

 

   

Amendments to IFRS 9, IAS 39 and IFRS 7 “Reform of reference interest rates - Phase 2”

 

   

Amendments to IFRS 16 “Covid-19 rent concessions beyond June 30, 2021”

 

   

Agenda decision of the IFRS Interpretations Committee (IFRS IC): Attributing Benefit to Periods of Service (IAS 19)

The impact of these standards is not significant in the financial statements as of December 31, 2021.

Standards, amendments and interpretations published but not yet endorsed by the European Union and Standards, amendments and interpretations endorsed by the European Union and not early adopted by the Group:

The estimated impact of applying the IASB’s (International Accounting Rules Board) and IFRS IC’s (International Financial Reporting Standards Interpretations Committee) standards and interpretations, is not significant.

1.2.2    Basis of measurement and presentation

With the exception of specific asset and liability classes, the consolidated financial statements are prepared on a historical cost basis in accordance with IFRS. The relevant classes are listed in the notes below, as applicable.

Assets and liabilities of different types, functions, and sizes are shown individually.

Current assets and liabilities are those included in the working capital used throughout a normal business cycle. Current and non-current assets and liabilities are categorized according to whether they are due within one year as of the balance sheet date.

1.2.3    Functional and reporting currency

An entity’s functional currency is the currency of the economic environment in which it is principally active. The functional currency for subsidiaries is the local currency.

The Company’s functional currency is the euro, hence the consolidated financial statements are presented in euros. Unless otherwise stated, all financial data is expressed in thousands of euros.

1.2.4    Conversion of foreign currency transactions

Foreign currency transactions are translated into the relevant functional currencies of Group entities using the exchange rate in effect at the time of the transactions, in accordance with IAS 21.

Monetary assets and liabilities denominated in foreign currencies are converted into the functional currency at the balance sheet date using the closing rate. Exchange gains and losses are recorded in the income statement as a result of the relevant exchange variations.

1.2.5    Translation of financial statements of foreign subsidiaries whose functional currency is not the euro

Foreign subsidiaries whose functional currency is not the euro have their financial statements translated into euros as follows:

 

   

the balance sheets of foreign subsidiaries are translated into euros using the exchange rate prevailing at the balance sheet date;

 

9


   

the income statements and cash flows of these companies are translated using the average exchange rate for the period;

 

   

differences arising from the translation of the financial statements of foreign companies are recorded in other comprehensive income under the heading “Exchange differences”.

1.2.6    Use of Judgments and Estimates

Management must use judgment and make estimates and assumptions while preparing financial statements, which affect the application of accounting policies and the reported values of assets and liabilities, income and expenses. Actual values may differ from those estimated due to changes in assumptions or economic conditions that differ from those in effect at the time the balance sheet was prepared.

The estimates and underlying assumptions are reviewed on an ongoing basis. The impact of changes in accounting estimates is recognized in the period of the change and any subsequent periods affected.

The following are some examples of key estimates and judgments used in adopting accounting policies:

 

   

the valuation of goodwill and intangible assets;

 

   

the valuation of employee benefits;

 

   

the valuation of provisions for risks, particularly in the event of litigation;

 

   

deferred tax assets on losses carried forward.

1.3    Main accounting principles

1.3.1    Consolidation method

The Group controls a subsidiary when it has power over the subsidiary, is exposed or has rights to variable returns from its involvement with the subsidiary and has the ability to use its power to affect the amount of its returns.

1.3.2    Business combinations

The acquisition method is used to account for business combinations. At the time of exchange, the consideration transferred is the fair value of the assets given, equity instruments issued, and liabilities incurred. Direct costs incurred as a result of the combination are recorded in “Other operating expenses” in the period in which they occur.

Except for particular exceptions provided for in the revised IFRS 3, the assets, liabilities, and contingent liabilities of the acquired firm are measured at fair value on initial consolidation of a controlled company.

Goodwill recorded in the consolidated balance sheet represents the difference between:

 

   

the aggregate of the following components:

 

   

the consideration transferred for the acquisition of control;

 

   

the amount of non-controlling interests in the acquired company, determined either at fair value at the acquisition date (full goodwill method) or on the basis of their proportionate share of the fair value of the net identifiable assets and liabilities acquired (partial goodwill method). This option is available on a transaction-by-transaction basis;

 

   

for step acquisitions, the fair value at the acquisition date of the Group’s share of the net assets acquired prior to the acquisition of control;

 

   

and the net amount of identified assets acquired and identified liabilities incurred, measured at their fair value at the acquisition date.

 

10


After initial recognition, goodwill are tested for impairment in accordance with IAS 36 – Impairment of Assets, at least once a year and whenever there is an indication that the asset may be impaired.

The difference is recognized directly in the income statement when the consideration transferred is less than the fair value of the Group’s share of the identifiable assets acquired and liabilities assumed of the subsidiary acquired.

When the accounting for a business combination may only be determined provisionally, IFRS 3 requires that the asset and liability values be adjusted within twelve months of the acquisition date.

Adjustments to the values recognized after the measurement period expires in relation to the values assigned to the assets acquired and liabilities assumed on initial consolidation are recognized prospectively in profit or loss for the year of the change and subsequent years, if any, without adjustment to goodwill.

If the changes in the initial accounting for the combination are due to an error, the values assigned to the acquired assets and liabilities, non-controlling interests, or purchase price elements are changed retrospectively, as if their corrected fair values had been recognized as of the acquisition date. Goodwill must also be adjusted accordingly, and the impact of the error correction is recognized in opening equity in the year of the error correction, in accordance with IAS 8 - Accounting policies, changes in accounting estimates and errors.

1.3.3    Development costs

Research costs for the purpose of acquiring new scientific or technical knowledge and understanding are expensed as incurred.

Development activities involve the existence of a plan or design for producing new or substantially improved products and processes. Development expenditure is recognized as an asset if and only if the costs can be reliably measured and the Group can demonstrate:

 

   

the technical and commercial feasibility of the product or process in the short term;

 

   

the recognition of probable future economic benefits;

 

   

and its intention and the availability of sufficient resources to complete the development and use or sell the asset.

The cost of materials and directly relevant subcontracting costs required to bring the asset to its intended use are included in the expense so capitalized.

Other development costs are expensed as incurred.

With the exception of products that have an active or exploitable marketing authorization and are capable of generating future economic benefits, or that are related to the safety of the environment or people, or that are indispensable for the continuation of the business, Héra believes that the criteria laid out in IAS 38 “Intangible Assets” have not yet been met, given the risks inherent in development programs and the progress of the Group’s projects.

1.3.4    Other intangible assets

Other intangible assets include intangible assets with an indefinite useful life (trademarks and property rights acquired from a third party for drugs) as well as patents, software, licenses, and marketing authorizations acquired or developed internally by the Group with a finite useful life. They are valued at the cost of acquisition (purchase price and related expenses).

Subsequent spending on intangible assets is recognized only if it boosts the asset’s future economic benefits. Other expenses are deducted as they are incurred.

Amortization is recognized over the expected useful life of intangible assets on a straight-line basis:

 

•   Patents:

                           20 years

•   Development costs:

   between 3 and 15 years

•   Other intellectual property rights and licenses:

   between 3 and 19 years

 

11


•   Software:

                      1 to 3 years

•   Licenses:

   between 3 and 10 years

•   Domain names:

   between 1 and 5 years

1.3.5    Property, plant and equipment

Property, plant and equipment are initially recognized at acquisition cost.

If it is expected that future economic advantages connected with the asset will flow to the Group and the cost of the asset can be determined accurately, subsequent costs are included in the carrying amount of the asset or, where appropriate, recognized as a distinct asset.

Fixed assets are depreciated on a straight-line basis over the estimated useful life of the assets. Depreciation is recognized as an expense for the year.

The estimated useful lives are as follows:

 

•   Fixtures and fittings

  8 years  

•   Industrial equipment

  10 years  

•   Office and computer equipment

  3 years  

•   Furniture

  10 years  

Depreciation methods, useful lives and residual values are reviewed and, if necessary, adjusted at each balance sheet date.

1.3.6    Financial assets and liabilities

Financial assets and liabilities mainly include:

 

   

Group investments (non-consolidated investments, debt securities, etc.)

   

Loans and financial receivables

   

Cash and cash equivalents

   

Borrowings and other financial liabilities

   

Derivative instruments

Financial assets

Contractual characteristics and management models are used to classify financial assets.

Non-recyclable financial assets at fair value through other comprehensive income

The Group has made the irreversible decision to record investments in equity instruments at fair value through non-recyclable “other comprehensive income,” i.e., without the ability to transfer them to the income statement in the case of a sale. Only dividends received are recorded in the income statement.

Recyclable financial assets at fair value through other comprehensive income

Investments in debt instruments with a cash flow collection and resale mechanism and contractual flows consisting entirely of principal repayments and interest payments are reported at fair value with an offsetting entry in recyclable “other comprehensive income” (recyclable OCI).

Financial assets at fair value through profit or loss

Financial assets classified as fair value through profit or loss are financial assets purchased with the goal of resale in the near future or equity instruments for which the Group has not opted to define them as fair value through other comprehensive income.

 

12


Loans

Loans are measured at amortized cost if the business model is to collect contractual cash flows consisting solely of principal and interest payments.

The effective interest rate technique is used to account for interest in the income statement’s “Other financial income and costs.”

The Group has taken an approach to loan impairment that is based on the counterparty’s likelihood of default and its assessment of the credit risk’s progression. The difference between the carrying amount and the value of the expected future cash flows, discounted at the financial assets’ original effective interest rate, is the impairment loss.

Trade and other receivables

Trade receivables are recognized and recorded at their transaction price.

A depreciation is recognized based on the expected losses since the origin of the receivable. Bad debts are recognized as losses when they are identified as such.

Cash and cash equivalents

Cash equivalents are short-term, liquid investments that are readily convertible into a known amount of cash and which are subject to an insignificant risk of change in value. Cash and cash equivalents therefore includes cash at bank and in hand, as well as cash investments in marketable securities with a maturity of three months or less and with very low sensitivity to interest rate risk.

In the cash flow statement, cash and cash equivalents comprise cash in hand, demand deposits in banks, and short-term liquid investments, net of bank overdrafts. It should be noted that bank overdrafts are included in the balance sheet under “Borrowings - current portion”.

Financial liabilities

Borrowings and financial debts

Bank loans are initially valued at fair value of the consideration received, minus transaction costs that are directly traceable.

They are then measured using the effective interest rate approach at amortized cost. Specifically, using the effective interest rate method, all costs associated with the issuance of loans or bonds, as well as any difference between the issuance proceeds net of transaction costs and the redemption value, are recognized in the income statement as financial expenses over the life of the loans.

Compound instruments

Compound financial instruments issued by the Group in euros include convertible bonds which give the holder the option to convert them into a specified number of shares.

The liability component of the compound financial instrument is initially valued at the fair value that a similar liability would have if it did not have a conversion option. The equity component is the difference between the fair value of the entire compound financial instrument and the fair value of the liability component when it is first recognized.

The liability component of a compound financial instrument is measured at amortized cost using the effective interest method after initial recognition. After initial recognition, the equity component of the compound financial instrument is not remeasured.

The income statement accounts for interest on financial liabilities.

 

13


Derivative instruments

Hedging transactions in the form of derivative instruments, such as forward contracts, currency options, and interest rate options, are used by the Group to manage market risks (interest and exchange rates).

According to the standards of IFRS 9, these financial products are designated as hedging instruments and are primarily accounted for as cash flow hedges.

Hedge accounting

A cash flow hedge protects against the risk of profit or loss from variations in cash flows of an asset, obligation, or highly probable projected transaction that are linked to one or more risk components.

For the effective portion of the hedging relationship, changes in the fair value of the hedging instrument are recognized directly in the consolidated statement of comprehensive income, and for the ineffective portion, they are recorded in the income statement.

When the hedged transaction affects the income statement, cumulative changes in the fair value of the hedging instrument previously recognized in the consolidated statement of comprehensive income are recycled to the income statement.

Gains and losses are recorded in “Other operating income” for hedging operational activities and “Financial income” or “Financial expense” for hedging investment and financing activities.

The cumulative changes in the fair value of the hedging instrument previously recorded in the consolidated statement of comprehensive income are included in the initial measurement of the asset or liability concerned when the forecasted transaction results in the recognition of a non-financial asset or liability.

Hedging cost

The Group may document currency or interest rate options as hedging instruments as part of its market risk management policy, and the effectiveness of these products is assessed based on changes in intrinsic value. Depending on the nature of the risk hedged, the time value of these options is handled as a hedging cost and recognized in the consolidated statement of comprehensive income and recycled to the income statement.

Discontinuation of hedge accounting

When the criteria for hedge accounting’s application are no longer met, such as when the hedging instrument expires, is sold, terminated, or exercised, or when the hedging relationship’s market risk management purpose changes, hedge accounting is discontinued.

IBOR reform

A reform of the main reference rates is underway with the replacement of Interbank Offered Rates (IBOR) by alternative risk-free reference rates.

The Group is closely monitoring market activity as well as the publications of various bodies, particularly the IFRIC and the IASB, and has prepared itself for a gradual transition to risk-free rates.

Financial instruments (finance and derivatives) and, to a lesser extent, certain commercial contracts are likely to be affected by this reform (late payment interest, etc.).

In this context, the IASB has published several amendments to IFRS 9 and IFRS 7, including phase 2, which was adopted on January 13, 2021 and went into effect on January 1, 2021, to reflect the impact of replacing benchmark interest rates with new benchmark interest rates without any accounting impact that would not provide useful information to financial statement users.

 

14


The Group’s financial statements for 2021 are unaffected by this rate change.

1.3.7    Inventories and work in progress

The cost of inventory is determined using the F.I.F.O. (First In, First Out) method. The cost of inventories includes all direct material costs, labor costs and the allocation of indirect production costs and/or subcontracting costs.

Inventories are measured at cost or net realizable value if lower than the net book value.

An impairment loss is recognized when:

 

   

products are damaged and therefore, not saleable;

 

   

products that have expired or are nearing obsolescence between 0 and 12 months before the expiration date.

1.3.8    Employee benefits

In accordance with the specific laws and provisions of each country in which it operates, the Group provides its employees with post-employment benefits (pension plans, termination benefits, etc.).

Defined contribution plans

A defined contribution plan is a post-employment benefit plan in which a company makes pre-determined contributions to a separate company and is under no legal or constructive duty to pay additional contributions. When contributions to defined contribution plans are due, they are recorded as an expense. Prepaid contributions are classified as assets if they may result in a cash refund or a reduction in future payments.

Defined benefit plans

A defined benefit plan is a post-employment plan other than a defined contribution plan.

Employees’ future benefits are estimated in exchange for services given in the current and preceding periods, and liabilities under defined benefit plans are measured separately for each plan. A certified actuary performs annual actuarial valuations using the predicted unit credit approach. This technique involves calculating the rights that employees have earned at the end of the year for all plans, taking into consideration the outlook for wage increases and the economic conditions in each country.

For post-employment benefits, the valuation is based in particular on the following methods and assumptions:

 

   

the retirement age, determined on the basis of the provisions applicable to each of the schemes and the conditions required to qualify for a full pension;

 

   

the projected salary level at retirement, taking into account the expected career progression and the estimated change in the retirement age;

 

   

the projected number of retirees determined on the basis of staff turnover rates and mortality tables available in each country;

 

   

the discount rate determined at the balance sheet date by reference to the rate on high quality corporate bonds with a duration close to that of the Group’s obligations.

The net expense recognized during the year for employee benefits includes:

 

  -  

in the Profit & Loss account:

 

   

the service cost corresponding to the acquisition of additional rights;

 

15


   

the net interest cost, corresponding to the interest cost on obligations net of income from hedging assets, now measured using the discount rate for obligations;

 

   

past service cost, including the expense or income arising from plan amendments/liquidation or the introduction of new plans;

 

   

actuarial gains and losses relating to other long-term benefits.

 

  -  

in the statement of net income and gains and losses recognized directly in other comprehensive income:

 

   

actuarial differences relating to post-employment benefits.

Termination benefits

When the Group is manifestly committed to a specific formal strategy for either termination of employment before the typical retirement date or an offer to induce voluntary redundancy with the goal of decreasing the workforce, termination benefits are recognized as an expense. If the Group has made an offer to encourage voluntary redundancies, it is likely that the offer will be accepted, and the number of employees who will accept the offer can be reasonably anticipated, voluntary redundancy payments are recorded as an expense.

Short-term benefits

If the Group has a present legal or constructive obligation to make such payments in return for past service rendered by the employee and the obligation can be reliably estimated, a provision is recognized for the amount that the Group expects to pay in respect of short-term cash-settled incentive and profit-sharing plans and bonuses.

1.3.9    Share-based payments

Over the time during which the staff members definitively acquire the rights, the fair value established at the date of grant of the options issued to employees is recognized as an employee benefit expense, with a corresponding rise in equity. The expense amount is adjusted to reflect the actual number of vested options for which the service and performance standards are met.

The fair value of the amount to be settled to an employee for cash-settled share appreciation rights is recognized as an expenditure, with a corresponding rise in the liability, over the period in which the employees become entitled to the final payment. At each balance sheet date and at the settlement date, the liability is remeasured. Personnel expenses account for any changes in the liability’s fair value.

Regardless of how the Group obtains the equity instruments, share-based payment transactions in which the Group receives goods or services in exchange for its own equity instruments are accounted for as equity-settled transactions.

The standards of IFRS 2 are used to measure and recognize plans that have been authorized but have not yet vested as of December 31, 2021.

1.3.10    Provisions

Provisions are accounted for when the Group has a present legal or constructive obligation as a result of a past event, the obligation can be reliably estimated and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation.

These provisions are calculated based on the most likely assumptions at the time of the balance sheet.

 

16


1.3.11    Revenue from ordinary activities

1.3.11.1     Turnover

The Group’s revenue consists primarily of revenue from the sale of pharmaceutical products and medical devices. It is recognized when control of the goods or services is transferred to the client generally upon delivery, in accordance with the delivery and acceptance terms of the contract with the customer. Revenue is accounted for at the amount that reflects the sums that the Group expects to receive.

Revenue from product sales consists of the sale of products net of returns, rebates, discounts and allowances granted to customers. Rebates, discounts and rebates are recognized concurrently with the sales to which they relate and are identified as a variable component of the price in accordance with the provisions of IFRS 15.

1.3.11.2     Other income from operations

Other revenue includes royalties, income from licensing agreements with partners and other services.

Royalties received are recorded under “Royalties and Downpayments” on the basis of revenues generated by partners during the fiscal year and the contractual royalty rates.

1.3.12    Research Tax Credit

The French government provides tax incentives to businesses to encourage them to conduct technological and scientific research. Companies that can show that they have incurred expenses that meet the criteria (research expenses incurred in France, the European Union, or another country that has signed a tax treaty with France containing an administrative assistance clause since January 1, 2005) are eligible for a tax credit that can be used to pay corporate income tax. Except for the research tax credit arising from capitalized expenses, which is accounted for first as deferred income and then as a deduction from development costs as the expenses are amortized, this research tax credit is accounted for as a grant, as a deduction from recognized research and development costs.

1.3.13    Cost of sales and other operating expenses

The costs of manufacturing the marketed products are included in the sales costs.

The costs of distribution, promotion, and sale of pharmaceuticals are all included in marketing expenditures.

General management and support tasks are included in general and administrative costs (finance, IT, HR, etc.).

Internal and external costs of research and development studies that do not meet the criteria for the activation of new products, as well as regulatory affairs expenses, are included in research and development expenses.

1.3.14    Other income and expenses

Other income and expenses include a limited number of income and expenses, such as:

 

 

gains and losses on disposals of non-current tangible or intangible assets;

 

 

impairment of non-current tangible or intangible assets;

 

 

amortization of intangible assets acquired in business combinations;

 

 

restructuring costs;

 

 

provisions relating to major litigation for the company.

 

17


1.3.15    Lease agreements

For all leases, regardless of their nature, the Group recognizes leases as assets in the form of a right of use against a rental liability on the balance sheet. The Group recognizes a depreciation charge and an interest charge in the profit and loss account, and lease payments are included in cash flows from financing activities in the cash flow statement.

Property leases and vehicle leases are the two principal contracts affected by the standard.

1.3.16    Financial income and expenses

Net financial income / (loss) includes interest on investments, interest payable on borrowings calculated using the effective interest method, changes in the fair value of financial assets at fair value through profit or loss, impairment losses recognized in respect of financial assets, foreign exchange gains and losses on financial transactions, foreign exchange differences and discounting and undiscounting effects.

When interest income is earned using the effective interest technique, it is recorded in the income statement.

1.3.17    Income tax

Current tax expense/income and deferred tax expense/income are both included in income tax (expense or income).

Tax is included in profit or loss unless it is related to items that are directly recorded in other comprehensive income or equity, in which case it is recorded in the same manner.

Current tax is defined as (i) the estimated amount of tax payable in respect of taxable profit for a period, calculated using tax rates enacted or substantively enacted at the balance sheet date, and (ii) any adjustment to the amount of tax payable in prior periods.

Unless otherwise specified, all transitory differences between the carrying amount of assets and liabilities and their tax bases are determined and recorded using the balance sheet liability technique. Based on tax regulations that have been passed or substantively enacted by the balance sheet date, deferred tax assets and liabilities are measured at the tax rates that are projected to apply to the period when the asset is realized and the liability is settled.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets and liabilities and they relate to income taxes levied by the same taxation authority, either on the same taxable entity or on different taxable entities, but which intend to settle the current tax assets and liabilities on a net basis or to realize the assets and settle the liabilities at the same time.

A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred tax assets are reviewed at each balance sheet date and are recognized to the extent that it is probable that sufficient taxable profit will be available.

Deferred taxes are calculated using domestic tax rates that are projected to apply when the asset is realized and the liability is resolved, based on tax rates that have been enacted or substantially enacted by the balance sheet date, depending on the jurisdiction.

As a result, as of December 31, 2021, deferred taxes for French corporations have been recognized at the rates approved by the French National Assembly (including the 3.3% social contribution) based on the reversal schedules below:

 

   

27.37% in 2021;

 

   

25.83% in 2022 and beyond.

 

18


1.3.18    Earnings per share

Basic earnings per share are calculated by dividing the profit or loss attributable to ordinary and preference shareholders of the Company by the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per share are determined by adjusting the profit or loss attributable to ordinary and preference shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares (bonus share grants, warrants and stock options granted to beneficiaries).

1.3.19    Impairment testing of non-financial assets

In accordance with IAS 36 - Impairment of Non-Financial Assets, goodwill, trademarks, and non-amortizable rights of use are tested for impairment at least once a year, or more frequently if there is an indication of impairment. If there is any sign of impairment, additional assets are also subjected to impairment assessments.

In addition, at each balance sheet date, the carrying amounts of other intangible assets are examined to see whether there is any indication that the asset may be impaired. If such an indicator exists, the asset’s recoverable value is estimated.

The success of subsequent rounds of clinical research, pharmacovigilance, patent protection, the arrival of competitor treatments, or changes in actual sales compared to expectations can all be indicators of impairment.

Goodwill and assets identified in a business combination are allocated to one of the Group’s two cash-generating units, CHC (i.e., the sale of products in pharmacies, supermarkets, or e-commerce outlets and, for the most part, without prescription) and RX (i.e. the sale of prescription products and mainly comprising the rare disease activities), for the purposes of impairment testing, from the date of acquisition. These assets include, in particular, emergency contraceptive products (Compeed and Mederma), as well as RX.

Impairment tests consist of comparing the net book value of the asset or cash-generating unit with its recoverable amount, which is the higher of its fair value less costs to sell and its value in use.

Value in use is calculated as the sum of the discounted cash flows expected from the use of the asset or cash-generating unit and its ultimate disposal.

The amount that may be collected through the sale of an asset or cash-generating unit in an arm’s length transaction, minus costs directly related with the disposal, is known as fair value less costs to sell.

The Group’s weighted average cost of capital is used to discount the expected cash flows.

If the carrying value of an asset or its cash-generating unit exceeds its recoverable value, an impairment loss is recognized. Losses due to impairment are recorded in the income statement. A cash-generating unit’s impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit, and then to reduce the carrying amounts of the unit’s other assets pro rata to the carrying amount of each asset in the unit.

The methods and key assumptions specific to the asset impairment tests performed for the year ended December 31, 2021 are presented with respect to goodwill in note 2.1.

1.4    Determining fair value

The following are the valuation methodologies utilized at each level:

 

 

Level 1 (unadjusted quoted prices): prices available to the entity at the measurement date in active markets for identical assets or liabilities;

 

 

Level 2 (observable inputs): data about the asset or liability other than quoted market prices included in Level 1 inputs that are observable either directly (such as a price) or indirectly (i.e. derived from observable prices);

 

19


 

Level 3 (unobservable inputs): inputs that are not observable in a market, including observable inputs that are subject to significant adjustments.

The following procedures were used to determine fair values for balance sheet measurement and disclosure.

 

(i)

Investment in equity and debt securities

The fair value of listed financial instruments measured at fair value through profit or loss or through other comprehensive income is determined by comparing their last quoted bid price at the balance sheet date to their fair value or using recognized valuation techniques such as the discounted cash flow method if the instrument is not listed.

 

(ii)

Trade and other receivables

The fair value of trade and other receivables is calculated using the present value of future cash flows, discounted at the current market interest rate.

 

(iii)

Non-derivative financial liabilities

The present value of future cash flows generated by the debt (principal and interest) at the market interest rate adjusted for a credit spread at the reporting date is used to calculate fair value for disclosure purposes.

 

(iv)

Derivative instruments

The fair value of derivatives is based on recognized valuation techniques such as the discounted cash flow method and includes credit risk (Credit Value Adjustment) and counterparty risk (Debit Value Adjustment).

1.5    Changes in accounting policies

The IFRIC’s agenda decision issued in May 2021 on attributing retirement benefits on length of services has no significant impact on the consolidated financial statements.

1.6    Significant events of the fiscal year period

1.6.1    Change of scope

 

   

As part of the Group’s development in Asia, particularly in China, HRA Pharma has established 3 entities in 2019:

 

   

HRA Pharma APAC Limited, based in Hong Kong, was founded on December 10, 2019 with the goal of managing and supervising the company’s operations in Asia outside of China;

 

   

HRA Pharma Hong Kong Limited, based in Hong Kong, was founded on December 10, 2019 and is responsible for managing and supervising the company’s operations in China;

 

   

HRA Pharma China (WFOE), a Shanghai-based company founded on August 6, 2019.

As of December 31, 2020:

 

   

HRA Pharma APAC and HRA Pharma China are wholly owned by HRA Pharma;

 

   

HRA Pharma Hong Kong is 67% owned by HRA Pharma and 33% owned by the partner Profex;

 

20


   

A capital of 700 thousand CNY was paid from HRA Pharma Laboratory to HRA Pharma China in June 2020;

 

   

Activity in China began in April 2020.

1.6.2    COVID-19

Financial year 2020:

The company has taken a targeted approach to conveying the most important impacts on the year’s performance and financial position.

The information presented pertains to the main impacts of the event that are recorded in the accounts, as judged appropriate. By measuring the gross and net impacts, these effects are described, taking into account the interactions and repercussions of the event on the normal aggregates. It is also evaluated in terms of the support measures from which it may have benefited.

The global epidemic known as “Covid-19” has had a detrimental influence on the Group’s operations, owing to containment and social distancing measures implemented in most nations throughout the world, particularly in Europe.

The impact on sales was felt most acutely in the “Consumer Healthcare” area, which had a 22% drop in sales, or - 44,564 thousand euros, compared to the previous year. The “Endocrinology” segment’s sales remained unaffected (+10% in comparison to 2019).

Despite the fact that practically all points of sale (pharmacies and supermarkets in particular) were open during these periods of confinement, there was a decline in sales.

The Group has attempted to mitigate the impact of Covid-19 on its profitability by cutting costs, particularly promotional expenses (-7%, or 2,462 thousand euros, compared to 2019) and development expenses (line item “Research and development expenses” in the income statement) (-16%, or -709 thousand euros compared with 2019).

It should be highlighted that the group’s manufacturing and transportation of products has not been disrupted.

With the prolongation of the €20 million senior loan took out in March 2020 and a new €8 million loan taken out with the BPI in September 2020, the company has strengthened its liquidity and has the required resources to ensure the company’s expansion.

Except for a suspension of payment of certain social security and tax expenses during the first confinement, the Group has not sought any remedy or aid from the government. At the end of the year, these deferrals were repaid up to 80%.

Financial year 2021:

The Group’s sales increased by more than 26% in 2021 compared to 2020, reflecting the strength of its brands as well as the recovery from the Covid-19 pandemic’s consequences.

After a negative impact from Covid-19 in 2020, Compeed branded revenues rebounded dramatically in 2021.

The Group concentrated on reducing and optimizing its material costs, notably in the area of “rare diseases” as well as its operating expenses, throughout this time. These efforts paid off with an operating profit of €57.1 million, up €36.8 million (+181.5%) over the previous year.

The Group’s inventory management has also been improved.

It should be emphasized that the Group’s manufacturing and supply of products has not been disrupted.

 

21


Except for the German subsidiary, which has received 594,000 euros since the initial restriction, the Group has not sought recourse or assistance from the government.

As of December 31, 2021, all deferred payments of certain social security and tax costs made at the time of the first containment have been repaid.

1.6.3    Buyback offer from PERRIGO

Perrigo made an offer to the shareholders Astorg and Goldman Sachs Asset Management on September 8, 2021, to buy 100% of the Group’s share capital.

This offer was accepted by the shareholders in early November 2021. The sale of the Group is still subject to antitrust approval in the United States, despite the fact that all other prerequisites have been completed.

The deal is expected to be completed in the first half of 2022.

1.6.4    Ongoing legal actions

Financial year 2020:

 

   

In May 2018, BILIM, a Turkish generics business, requested that the Turkish counterpart of the European patent EP 2,419,108, which covers the protection of ella, be declared illegal by the Ankara Court.

Laboratoire HRA Pharma has filed its defense.

Laboratoire HRA Pharma withdrew the Turkish patent in January 2021, bringing the case to a close.

There were no financial or accounting implications.

 

   

In Europe, patent opposition procedures are pending before the European Patent Office, including the products ella and Esmya:

 

   

Opposition to the patent on the formulation of ella and Esmya tablets: HRA has challenged the European Patent Office’s first instance ruling. We predict that the appeal hearing will take place in 2021, and that the appeal judgment will be announced in 2021, with no additional information.

 

   

Opposition to the patent on the “Esmya” treatment: HRA filed an appeal; the hearing was place on November 23, 2020, and the European Patent Office revoked the patent.

There were no financial or accounting consequences.

 

   

Opposition to the patent on the contraceptive method “ella”: HRA appealed the first instance judgement and filed an appeal brief; the hearing before the European Patent Office’s Board of Appeal was held on October 11, 2020, and the European Patent Office revoked the patent.

There were no financial or accounting consequences.

 

   

Since early 2019, Laboratoire HRA Pharma and Vifor have engaged in a pre-litigation over the Esmya distribution contract in Australia and New Zealand. Laboratoire HRA Pharma sought 400 thousand euros under a condition that may be reduced if a disagreement arose.

Vifor expressed dissatisfaction with HRA Pharma but did not make a quantifiable claim.

On April 8, 2020, a deal was reached; HRA acknowledged the idea of contract cancellation, and neither side is responsible for any payments.

There has been no provision made.

 

   

Esmya Canada is the subject of a lawsuit filed in August 2019 against Apotex (Fibristal). This is a patent infringement case involving the patent for tablet composition and the patent for indication.

 

22


Two similar litigations were initiated involving AbbVie, the local distributor of Esmya, the US Government and HRA against Jamp Pharma in one case and Pharma Science in the other case.

AbbVie relinquished its marketing license for Fibristal, bringing the case to a close.

Financial year 2021:

 

   

In Europe, ella and Esmya products are the subject of a patent opposition proceeding before the European Patent Office:

 

   

HRA filed an appeal against the European Patent Office’s first instance ruling on the patent for the formulation of ella and Esmya tablets.

HRA has filed an appeal against the European Patent Office’s first instance revocation judgment. A summons to an oral hearing before the Board of Appeal in Harr (Germany) has been issued; the hearing is scheduled for November 24, 2022. By the end of 2022, a conclusive decision on the patent’s maintenance or revocation is expected.

 

   

HRA filed an infringement claim against four generic makers of ellaOne products with the District Court in Korea on December 23, 2021, based on the ellaOne “formulation” patent.

 

   

A legal battle is underway with ella’s former Austrian distributor, who has sued HRA Pharma for non-delivery of supplies.

SANOVA also blames HRA Pharma for terminating the contract with too little notice.

HRA Pharma intends to actively defend itself against this attack, it has recorded a provision of 150 thousand euros in its financial statements.

The court is now hearing the case.

1.6.5    Other Information

Financial year 2020:

 

   

European health authorities have conducted evaluations of the medication Esmya (containing the active ingredient ulipristal acetate for the treatment of uterine fibroids in 3-month cycles at 5mg per day). The most recent decision is that of the European Union, which agreed to keep the medicine on the market but with a drastically limited indication on January 11, 2021.

The product’s marketing has been halted in practically every other country on the planet.

 

   

At the end of 2020, Laboratoire HRA Pharma’s management decided to put the “ELLIS” and “UPSI” projects on hold. As a result of this decision, items previously recognized as fixed assets have been removed for the following amounts: 8,666 thousand euros for ELLIS (net book value of 7,935 thousand euros) and 419 thousand euros for UPSI (net book value of 415 thousand euros).

Financial year 2021:

 

   

HRA France’s “rare diseases” business was transferred to HRA Pharma Rare Diseases on April 1, 2021.

 

   

HRA Pharma Development, which is wholly owned by Laboratoire HRA Pharma, was absorbed by the latter via a Universal Asset Transfer on December 31, 2021.

 

23


   

On September 15, 2021, HRA Pharma LLC, which had no activity, was dissolved.

 

   

From July 2021, the local subsidiary in the United Kingdom began marketing Hana, a regular contraceptive tablet.

2    NOTES TO THE STATEMENT OF FINANCIAL POSITION

2.1    Goodwill

The goodwill shown in the December 31, 2021 balance sheet is the result of the acquisition of Laboratoire HRA Pharma in 2016 for an initial €303 million, the Compeed acquisition in 2017, the acquisition of the property rights of Lysodren in 2018, the acquisition of Mederma assets in June 2019 for €57 million.

At the end of the two fiscal years, goodwill had a balance of €530 million (gross €553 million minus a €23 million impairment).

Impairment testing

Impairment tests are conducted at the level of each of the two Cash Generating Units (CGUs): RX (the sale of prescription products, which primarily includes rare disease activities) and CHC (the sale of products in pharmacies, supermarkets, or e-commerce, which, for the most part, does not require a prescription). The CHC CGU includes, for example, emergency contraceptive medications such as Compeed and Mederma).

The recoverable amount of each cash-generating unit corresponds to its value in use, which is calculated using the discounted value of the expected future cash flows. The assumptions used for the impairment tests of each cash-generating unit are reviewed annually:

 

   

Business plan drawn up by management for the period 2022 to 2025 with structural costs allocated according to the weight of the activities of each CGU;

 

   

Beyond this horizon, cash flows are extrapolated by applying the expected long-term market growth rate;

 

   

An average tax rate has been used over the business plan horizon and corresponds to the weight of the activity in each area;

 

   

A discount rate determined by geographical area, ranging from 8% to 9.2% depending on the cash generating units tested;

 

   

Perpetual growth rate set at 2% for the calculation of terminal values of CGUs.

 

24


The carrying amounts of the respective Cash Generating Units and the main assumptions are presented below:

 

in thousands of euros

   RX     CHC     Total  

Net book value as of December 31, 2020

      

Goodwill

     63 879       465 707       529 585  

Net assets

     43 297       466 023       509 320  

Total

     107 176       931 730       1 038 905  

Perpetual growth rate

     2     2  

Discount rate

     8,2     8  

Net book value as of December 31, 2021

      

Goodwill

     63 879       465 707       529 585  

Net assets

     41 934       475 816       517 750  

Total

     105 813       941 523       1 047 335  

Perpetual growth rate

     2     2  

Discount rate

     9,2     8,3  

For the years 2020 and 2021, tests were conducted to determine the sensitivity of the recoverable amount to likely changes in various actuarial assumptions, primarily the discount rate (range +/- 1%), change in cash flows (range +/- 20%), and perpetual growth rate (range +/- 1%). The sensitivity analyses were calculated by changing a single parameter and did not result in the recognition of any risk of goodwill impairment.

For the years 2020 and 2021, no impairment of goodwill has been identified.

2.2    Intangible assets

The following are the changes in “intangible assets” over the last two years:

 

Gross value

in thousands of euros

   Development
Costs
     Concessions,
patents,
trademarks
and licenses
     Marketing
authorizations
and exploitation
rights
     Software      Other
intangible
assets
     Total  

December 31, 2019

     88 666        527 867        21 873        78        64        638 549  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Acquisitions

     10 420        350        39        222           11 031  

Redeployment

                    0  

Sales / Scrapping

     -9 064        -730        -6        -23           -9 823  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2020

     90 022        527 487        21 907        277        64        639 757  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Acquisitions

     11 349        128        726        15           12 217  

Redeployment

                    0  

Sales / Scrapping

     -195              -10           -205  

Exchange differences

           9              9  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2021

     101 176        527 615        22 641        281        64        651 778  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

Amortization

in thousands of euros

   Development
Costs
     Concessions,
patents,
trademarks
and licenses
     Marketing
authorizations
and exploitation
rights
     Software      Other
intangible
assets
     Impairment
losses
     Total  

December 31, 2019

     -41 138        -20 253        -13 806        -59        -2        -52 139        -127 397  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Allowances

     -4 512        -166        -1 470        -54           -1 210        -7 412  

Redeployment

                       0  

Sales / Scrapping

     788        129        5        24              946  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2020

     -44 862        -20 290        -15 271        -90        -2        -53 348        -133 864  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Allowances

     -1 828        -542        -1 482        -103           520        -3 437  

Redeployment

        186                 -186        0  

Sales / Scrapping

     2              10              11  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2021

     -46 689        -20 647        -16 753        -183        -2        -53 014        -137 289  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

25


Net value

in thousands of euros

   Development
Costs
     Concessions,
patents,
trademarks
and licenses
     Marketing
authorizations
and exploitation
rights
     Software      Other
intangible
assets
     Impairment
losses
     Total  

December 31, 2019

     47 528        507 614        8 067        19        62        -52 139        511 151  

December 31, 2020

     45 160        507 197        6 636        187        62        -53 348        505 893  

December 31, 2021

     54 487        506 968        5 888        98        62        -53 014        514 489  

Intangible assets other than brands are amortized over a period of between 1 and 20 years.

Financial year 2020:

Over the fiscal year period, 78% of investments were made in the CGU “CHC”.

The drop in gross value is primarily due to the decision to freeze the “ELLIS” and “UPSI” projects in the “CHC” domain: 8,666 thousand euros for ELLIS (net book value of 7,935 thousand euros) and 419 thousand euros for UPSI (net book value of 415 thousand euros).

Financial year 2021:

Investments during the period mainly concern the CGU “CHC” for 89%.

2.3    Property, plant and equipment

The following is a breakdown of tangible assets:

 

Gross value

in thousands of euros

   Fixtures and
fittings
     Plant,
machinery and
equipment
     Other tangible
fixed assets
     Total  

December 31, 2019

     1 375        2 356        1 386        5 117  
  

 

 

    

 

 

    

 

 

    

 

 

 

Acquisitions

        100        46        145  

Sales / Scrapping

        -14        -41        -54  

Redeployment

        20        32        52  

Exchange differences

        -6        -5        -12  
  

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2020

     1 375        2 456        1 418        5 249  
  

 

 

    

 

 

    

 

 

    

 

 

 

Acquisitions

        395        33        427  

Sales / Scrapping

        -4        -1        -5  

Redeployment

              0  

Exchange differences

     1        7        6        15  
  

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2021

     1 376        2 854        1 456        5 686  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

26


Amortization

in thousands of euros

   Fixtures and
fittings
     Plant, machinery
and equipment
     Other tangible
fixed assets
     Total  

December 31, 2019

     -181        -702        -341        -1 224  
  

 

 

    

 

 

    

 

 

    

 

 

 

Allowances

     -156        -273        -161        -589  

Write-back on

           36        36  

Redeployment

        -20        -32        -52  

Exchange differences

        5        2        7  
  

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2020

     -336        -990        -496        -1 822  
  

 

 

    

 

 

    

 

 

    

 

 

 

Allowances

     -155        -280        -163        -598  

disposals/scrapping

        4        1        5  

Redeployment

              0  

Exchange differences

     -1        -6        -4        -11  
  

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2021

     -492        -1 272        -661        -2 426  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

Net value

in thousands of euros

   Fixtures and
fittings
     Plant, machinery
and equipment
     Other tangible
fixed assets
     Total  

December 31, 2019

     1 194        1 654        1 045        3 893  

December 31, 2020

     1 039        1 466        922        3 427  

December 31, 2021

     884        1 582        795        3 261  

During the two years, no signs of deterioration were found.

2.4    Rights of Use associated with Leases

The following is a breakdown of the rights of use associated with leases:

 

Gross value

in thousands of euros

   Real estate
property
     Others      Total  

December 31, 2019

     12 222        1 549        13 771  
  

 

 

    

 

 

    

 

 

 

Initial application of IFRS 16

     146        719        865  

Acquisitions

     20           20  

Sales / Scrapping

     -44        -149        -193  

Redeployment

           0  

Exchange differences

     -62        -0        -62  
  

 

 

    

 

 

    

 

 

 

December 31, 2020

     12 282        2 119        14 401  
  

 

 

    

 

 

    

 

 

 

Acquisitions

     566        575        1 141  

Sales / Scrapping

     -58        -404        -462  

Redeployment

           0  

Exchange differences

     70           70  
  

 

 

    

 

 

    

 

 

 

December 31, 2021

     12 860        2 290        15 150  
  

 

 

    

 

 

    

 

 

 

 

27


Amortization

in thousands of euros

   Real estate
property
     Others      Total  

December 31, 2019

     -1 675        -622        -2 297  
  

 

 

    

 

 

    

 

 

 

Allowances

     -1 823        -597        -2 419  

Opening adjustment

     -18        1        -17  

Write-back on disposals/scrapping

     44        137        181  

Redeployment

           0  

Exchange differences

     24        1        25  
  

 

 

    

 

 

    

 

 

 

December 31, 2020

     -3 448        -1 080        -4 528  
  

 

 

    

 

 

    

 

 

 

Allowances

     -1 772        -607        -2 379  

Write-back on disposals/scrapping

     47        404        451  

Redeployment

           0  

Exchange differences

     -39           -39  
  

 

 

    

 

 

    

 

 

 

December 31, 2021

     -5 212        -1 283        -6 496  
  

 

 

    

 

 

    

 

 

 

Net value

in thousands of euros

   Real estate
property
     Others      Total  

December 31, 2019

     10 547        927        11 474  

December 31, 2020

     8 834        1 039        9 873  

December 31, 2021

     7 648        1 006        8 654  

2.5     Current and non-current financial assets

The following is a breakdown of current and non-current financial assets:

 

     December 31, 2021      December 31, 2020  

in thousands of euros

   Non-current
financial
assets
     Current
financial
assets
     Non-current
financial assets
     Current
financial
assets
 

Deposits and guarantees

     688           485     

Others

     85           90     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     773        0        575        0  
  

 

 

    

 

 

    

 

 

    

 

 

 

2.6     Inventories

The breakdown of Inventories is as follows:

 

in thousands of euros

   December 31, 2021      December 31, 2020  

Inventories of raw materials and active ingredients

     5 041        4 772  

Inventories of intermediate and finished products

     6 074        1 081  

Merchandise inventories

     13 469        26 663  
  

 

 

    

 

 

 

Gross value

     24 585        32 516  

Provisions for impairment

     -1 859        -974  
  

 

 

    

 

 

 

Net value

     22 726        31 543  
  

 

 

    

 

 

 

 

28


Financial year 2020:

The increase in the gross value of inventories is mostly attributable to a drop in sales as a result of the health crisis, which has resulted in an increase in stocks.

Other factors support the increase in inventory:

 

   

Compeed’s market penetration in the United States is lower than projected;

 

   

Compeed packaging was modified in Germany, and there remained stocks of the old packaging as of December 31, 2020;

 

   

At the start of 2020, the Compeed Cold Sore product was reintroduced to the market;

 

   

The Compeed Cold Sore product was reintroduced to the market at the start of 2020; due to delivery delays, products in the “Endocrinology” and “Women’s Health” sectors are back over the safety stock level.

The inventory impairment applies to both Goods and Finished Goods stocks (mainly 290 thousand euros for Mederma, 371 thousand euros for Compeed, 126 thousand euros for Metopirone and 93 thousand euros for ella).

Financial year 2021:

Improved sales performance, as well as better inventory control and procurement, are primarily responsible for the decrease in the gross value of stocks. As a result, inventory is reduced.

Changes in inventory schedule:

 

in thousands of euros

   Net stock as
at 31 December
2020
     Variations in
stock
     Net final stock as
at 31 December
2021
 

Raw materials and active ingredients

     4 772        268        5 041  

Stocks of intermediate products

     930        1 399        2 329  

Stocks of finished products and goods purchased

     25 841        -10 484        15 357  
  

 

 

    

 

 

    

 

 

 

Total

     31 543        -8 817        22 726  
  

 

 

    

 

 

    

 

 

 

2.7     Trade and other receivables

This item can be analyzed as follows:

 

in thousands of euros

   December 31, 2021      December 31, 2020  

Accounts receivable

     55 003        51 322  

Provisions for impairment

     -1 404        -2 898  
  

 

 

    

 

 

 

Net value

     53 599        48 423  
  

 

 

    

 

 

 

Financial year 2020:

The change in trade receivables of - 28,202 thousand euros is mainly attributable to the decrease in Compeed and ella sales.

 

29


The decrease in impairment (- 414 thousand euros) results mainly from:

 

   

The reversal of the impairment provision for HRA Rare Diseases customers who are handled by our custodian CSP (- 369 thousand euros);

 

   

The settlement of invoices received from the Tunisian Pharmacie Centrale from 2016 to 2017 (- 348 thousand euros);

 

   

Orient UPO has received payment of invoices for 2019 from its Lebanese partner Union Pharma (- 332 thousand euros);

 

   

As a result of the Esmya dispute with Taiwanese partner Orient Europharma (+ 126 thousand euros), an impairment loss was incurred;

 

   

As a result of the dispute with the partner Brands 2 Africa (+ 128 thousand euros), an impairment was determined;

 

   

An impairment loss was recorded as a result of the late payment of invoices by the partner Brand Solutions Australia (+ 389 thousand euros) at the end of 2019 and February 2020.

Financial year 2021:

The increase in sales is primarily responsible for the change in trade receivables of + 3,681 thousand euros.

It should be highlighted that the average collection period for receivables has consistently decreased, owing mostly to the HRA Pharma Iberia entity, but also to late payment of invoices from the rare diseases sector’s distributor in the United States.

Trade receivables must be paid within a year.

2.8     Other receivables

Other receivables can be broken down as follows:

 

in thousands of euros

   December 31, 2021      December 31, 2020  

Tax receivable

     7 233        5 842  

Other tax receivables

     2 972        274  

VAT receivables

     9 213        11 479  

Suppliers receivables

     1 780        1 976  

Receivables on disposal of fixed assets

     —          —    

Other operating receivables

     115        88  
  

 

 

    

 

 

 

Net value

     21 313        19 659  
  

 

 

    

 

 

 

Financial year 2020:

The VAT adjustment made in 2020 on invoicing for 2018 and 2019 between Laboratoire HRA Pharma and HRA Pharma Deutschland (5,050 thousand euros) and Laboratoire HRA Pharma and HRA Pharma UK (+8,130 thousand euros) is primarily responsible for the change in the VAT item of +8,130 thousand euros (3,142 thousand euros).

Financial year 2021:

The change in “Other tax receivables” is due to a €2 million credit position following the URSSAF’s audit of HRA Pharma France’s pharmaceutical taxes.

 

30


2.9     Cash and cash equivalents

 

In thousands of euros

   December 31, 2021      December 31, 2020  

Cash

     40 573        18 157  

Cash in vault

     2        6  
  

 

 

    

 

 

 

Net value

     40 575        18 163  
  

 

 

    

 

 

 

Cash and cash equivalents include cash on hand.

Financial year 2020:

We recorded an increase in our cash position of 1.9 M€; this can be explained by the following events:

 

   

sharp decline in activity (-47% on 2020 EBITDA vs. 2019) offset by good management of our WCR (+€12.7m on 2020);

 

   

20 million: increase in our senior debt to guarantee liquidity following the situation generated by Covid-19;

 

   

8 million: new loan from BPI;

 

   

35 million: repayment of the Revolving Credit Facility (0 RCF debt to date).

Financial year 2021:

Timing of payment has improved for the Group, with receivables collection periods falling from 90 to 78 days.

2.10     Share capital

Astorg and its co-investors Goldman Sachs Merchant Banking Division control the bulk of the Company’s capital through HERA Lux, the majority shareholder; as of April 1, 2021, the shareholders have changed ownership of their investment in the HRA Pharma Group. Since April 1, 2021, a new holding company has been established in Luxembourg, and the HERA shares have been owned by HRA Newco, which is held by HRA Lux.

This transfer solely affects HERA’s ordinary and preference shares, not the convertible bonds, which remain in the hands of HERA Lux.

The following is the breakdown of the share capital:

 

Breakdown of share capital

   number of
ordinary shares
     number of
preferential shares
     total number of
shares
     Face value     Share capital  

December 31, 2019

     3 815 756        32 046 612        35 862 368        €      35 862 368  € 

December 31, 2020

     3 815 756        32 046 612        35 862 368        €      35 862 368  € 

December 31, 2021

     3 815 756        32 046 612        35 862 368        €      35 862 368  € 

Ordinary shares

The ordinary shares are classified as equity instruments.

 

31


Preferential shares

Preferential shares are classified as equity instruments.

Preferential shares entitle their holders to a cumulative preferential dividend subject to the existence of distributable cash and the decision of the Company’s general meeting to distribute preferential dividends.

2.10.1    Share-based payments - Stock options and free shares

As of December 31, 2021, the instruments issued are as follows:

 

Type of instrument

   Free Ordinary
Shares
     Free Preferential
Shares
     Stock Option      Total  

Number

     16 912        269 442        —          286 354  

Stock-based compensation instruments are recognized as employee benefits expense, with a corresponding entry to equity, at the fair value of the instruments awarded at the grant date, in accordance with IFRS 2. The cost of this investment is spread out throughout the vesting period.

No movement has been recorded in 2021 on these plans.

Valuation of share-based payment transactions to be integrated:

The Black-Scholes option pricing model is used to determine the fair value of stock options issued to employees.

The share price on the valuation date, the instrument’s exercise price, estimated volatility, the weighted average life of the instruments, expected dividends, and the risk-free interest rate are all inputs to the valuation (based on government bonds). The transaction’s service and performance conditions, which are not market factors, are not taken into account for determining fair value.

2.10.2    Non-controlling interests

In April 2020, Laboratoire HRA Pharma signed an agreement with Profex, a Chinese partner, for the development of Compeed and Mederma product marketing in China. According to these agreements, Profex owns 33% of HRA Pharma Hong Kong’s capital, while Laboratoire HRA Pharma owns the remaining 67%.

Profex and Laboratoire HRA Pharma have a shareholders’ agreement that gives Laboratoire HRA Pharma a call option on Profex’s shares. This call option can be exercised in a variety of circumstances, including a change of control of the Company, and at different valuations depending on the results of the activities in China and when the option is executed.

Profex also has the right to sell its shares to Laboratoire HRA Pharma in exceptional circumstances, such as if Laboratoire HRA is intentionally in breach of its own contractual commitments. The price at which this right can be exercised varies based on the outcomes of relevant operations in China and the date on which this right is exercised, if at all.

In light of the foregoing, the Group concludes Profex’s entitlement to sell its shares to Laboratoire HRA Pharma is contingent on factors that are wholly within the Group’s control. At the balance sheet date, the Group had not recognized any financial liability related to Profex’s right to sell its shares to Laboratoire HRA Pharma.

 

32


2.11     Provisions for employee benefits

Changes in provisions for employee benefits over the two financial periods were as follows:

 

In thousands of euros

   Provisions for staff benefits  

December 31, 2019

     1 914  
  

 

 

 

Expenses

     507  

Reclassification

  

Unused reversals

     -154  
  

 

 

 

December 31, 2020

     2 266  
  

 

 

 

Expenses

     311  

Reclassification

  

Unused reversals

     -137  
  

 

 

 

December 31, 2021

     2 441  
  

 

 

 

The item Provisions for employee benefits breaks down as follows:

 

In thousands of euros

   December 31, 2021      December 31, 2020  

France

     2 441        2 266  
  

 

 

    

 

 

 

Total

     2 441        2 266  
  

 

 

    

 

 

 

Employee benefits provisions concern the French companies Héra S.A.S., Laboratoire HRA Pharma S.A.S., HRA Pharma France S.A.S., and HRA Pharma Rare Diseases S.A.S. They primarily pertain to provisions for retirement indemnities for Group employees.

At this time, no funds have been set up to satisfy these obligations.

The following are the primary actuarial assumptions that were used:

 

France

   December 31, 2021      December 31, 2020  

Discount rate

     0,80%        0,35%  

Gross average growth rate of payroll inflation

     3,00%        1,75%  

Average remaining working life of employees (in years)

     23,6            23,8      

Employer’s social security rates

     45%        45%  

The present value of the commitment is broken down as follows:

 

In thousands of euros

   December 31, 2021      December 31, 2020  

Total current value of liabilities at the beginning of the year

     2 266        1 914  
  

 

 

    

 

 

 

Current service cost

     407        556  

Interest expense

     10        12  

Actuarial gains and losses (Change in method - Equity)

     -397        —    

Actuarial gains and losses

     154        -216  
  

 

 

    

 

 

 

Total current value of commitments at year-end

     2 441        2 266  
  

 

 

    

 

 

 

The cost over each financial year can be broken down as follows:

 

In thousands of euros

   December 31, 2021      December 31, 2020  

Current service cost

     407        556  

Interest expense

     10        12  
  

 

 

    

 

 

 

Cost for the period

     418        568  
  

 

 

    

 

 

 

 

33


No social security contributions have been paid for the years 2020 and 2021.

2.12    Provisions

Changes in provisions during the two years were as follows:

 

In thousands of euros

   Provisions for contingencies  

December 31, 2019

     1 434  
  

 

 

 

Expenses

  

Reclassification

  

Reversals used

     -540  

Unused reversals

     -559  
  

 

 

 

December 31, 2020

     335  
  

 

 

 

Dotations

     781  

Reclassement

  

Reversals used

     -212  

Unused reversals

     -83  
  

 

 

 

December 31, 2021

     821  
  

 

 

 

Financial year 2020:

A reversal of the provision in the amount of 648 thousand euros was recorded following the resolution of the disagreement with Perrigo, the Portuguese distributor; the agreement with the Tax Authorities on the tax audit resulted in the reversal of the provision created in 2019 in 2020. (383 thousand euros).

Financial year 2021:

For the research tax credit, a provision of 559,000 euros has been made for tax risks related to Laboratoire HRA Pharma’s tax audit for the years 2014 to 2016.

A provision for litigation with our partner SANOVA has also been recognized for the year 2021 in the amount of 150 thousand euros.

2.12.1    Provisions for tax liabilities

Several audits of some Group firms’ finances took place in 2021 or proceeded throughout the year:

 

   

Firstly, two audits were carried out by URSSAF on the social security charges of Hera and HRA Pharma Rare Diseases. These two audits resulted in adjustments of less than 50 thousand euros.

 

   

Laboratoire HRA Pharma underwent a tax examination, which resulted in a correction that had no impact on the Group’s consolidated finances.

 

   

A URSSAF audit of the pharmaceutical taxes owed by HRA Pharma France results in a repayment of 2,360 thousand euros in favor of the company.

 

   

Laboratoire HRA Pharma has been in a dispute with the French tax authorities since May 2017 as a result of an audit covering the period from January 1, 2014 to March 31, 2016. The corporation was contesting an adjustment of €1,924 thousand and €1,059 thousand, respectively, relating to the imposition of withholding tax on sums received as salary for two employees and on the research tax credit.

 

34


On April 10, 2020, HSBC bank issued a 1,924,000 deposit for direct taxes to guarantee tax payment.

The corporation is still in litigation with the Administrative Court about withholding tax, but the French tax authorities have agreed to a significant reduction in the amount claimed for research tax credit to 559 thousand euros after a hearing before the research tax credit committee. The company has agreed to accept this adjustment because it expects to recover more than 330 thousand euros over the fiscal year from April 1, 2016 to December 31, 2016.

 

   

An audit of HRA Pharma Iberia’s general accounting for the years 2017, 2018, 2019, and 2020 is still underway.

The Spanish government has not made any claims as of today.

2.13    Borrowings and financial debts

The breakdown between current and non-current financial liabilities is shown below:

 

            December 31, 2021                    December 31, 2020         

In thousands of euros

   Portion due
within one year
     Portion due
between 1 and
5 years
     Portion due
after 5 years
     Total      Portion due
within one year
     Portion due
between 1 and
5 years
     Portion due
after 5 years
     Total  

Convertible bonds and interest on convertible bonds

        303 226        53 177        356 403              323 263        323 263  

Bonds and interest on bonds

        486 276           486 276           484 129           484 129  

Other bank loans

        13           13           8 000           8 000  

Revolving credit

              0                 0  

Accrued interest on other bank loans

              0        21              21  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Loans and financial debts

     0        789 515        53 177        842 692        21        492 129        323 263        815 414  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Convertible obligations

Proceeds from the convertible bond issue (244,232,178 bonds with a par value of €1 issued on February 18, 2016 and 99,564,440 bonds with a par value of €1 issued on September 20, 2017) amounted to €343.8 million.

The convertible bonds subscribed in 2016 and 2017, were partially redeemed in fiscal 2019, for €52.6 million and €60.4 million respectively.

At the end of the two fiscal years, the amounts of these convertible bonds were €177.1 million and €35.8 million respectively. Interest on convertible bonds are capitalized and amount to €143.5 million.

Bonds

This item corresponds to four bonds: two issued on September 20, 2017 for a term of 7 years and bearing interest at a 3-month Euribor + margin of 3.5%, for amounts net of transaction costs of €80.7 million and €301 million, a third issued on March 14, 2018 for an amount net of transaction costs of €30.8 million, and a fourth issued on June 27, 2019 for a term of 6 years and 1 month and bearing interest at a 3-month Euribor + margin of 3.5%, for an amount net of transaction costs of €45.7 million.

On March 26, 2020, an additional loan of €20 million was secured for a term of 4 years and 6 months, with interest calculated at 3-month Euribor + 3.5% margin for a net value of €19.6 million.

Various hedging contracts have been drawn up by the company to cover the 3-month Euribor until December 2022.

Covenants are in place for these loans.

These obligations were fulfilled on December 31, 2021. For the next 12 months, the company expects to fulfill them.

 

35


Hedging Instruments

The Company and HRA Pharma have entered into interest rate cap agreements with Société Générale and Goldman Sachs to hedge against rising interest rates on the interest flows linked with its variable rate financing.

Portions of the Goldman Sachs hedges will expire at the end of June 2020 and again in June 2021.

Credit Revolving

In 2017, the Group established a €40 million revolving credit facility, which was increased to €60 million in June 2019; since then, the Group has made various withdrawals and repayments.

The Group had no withdrawals on this credit at the end of the two fiscal years and a financing reserve of €60 million.

Other loans

On September 28, 2020, a new loan (Club BPI) for €8 million was signed with the partner BPI for a three-year term. The conditions are as follows: the interest rate is 3-month Euribor+1.1%, plus a commitment fee of 0.95%.

This loan was fully repaid and the contract terminated on December 31, 2021 without penalty.

Currency hedging

HRA Pharma has also hedged against potential foreign exchange risks by entering into forward exchange contracts on the GBP and USD currencies with HSBC and Société Générale banks.

2.13.1     Changes in financial liabilities

 

In thousands of euros

   Convertible
bonds
     Bond issues      Borrowing from
credit
institutions
     Interest
accrued on
borrowing
     Total  

December 31, 2019

     208 858        462 429        35 000        84 377        790 664  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

New loans

        20 000        8 000        28 213        56 213  

Changes in fair value

     1 838        1 700              3 538  

Reclassification

                 0  

Repayments

           -35 000           -35 000  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2020

     210 695        484 129        8 000        112 590        815 414  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

New loans

           10 000        30 923        40 923  

Changes in fair value

     2 230        2 147              4 377  

Reclassification

                 0  

Repayments

           -18 000        -22        -18 022  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2021

     212 925        486 276        0        143 491        842 692  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The initial terms of the loans contracted with credit institutions are presented below:

 

Bank

   Date of signature
of the loan
agreement
  Nominal amount
(in €)
   Term   

Reference rate

Convertible Bonds

   févr-16   244 232 178    10 years    9%

Convertible Bonds

   sept-17   99 564 440    10 years    9%

Senior Bond

   sept-17   83 180 811    7 years    Euribor with a margin of 3.5%

Senior Bond

   sept-17   310 819 189    7 years    Euribor with a margin of 3.5%.

Senior Bond

   mars-18   31000 000    78 months    Euribor with a margin of 3.5%.

Second Lien

   juin-19   48 000 000    73 months    Euribor with a margin of 8,25%

Senior Bond

   mars-20   20 000 000    54 months    Euribor with a margin of 3,5%

BPI Club Loan

   sept-20   8 000 000    36 months    Euribor with a margin of 1,1%

 

36


Loans can be repaid early without penalty at the company’s choice; this was the case with the €8 million BPI loan, which was repaid early on December 15, 2021.

2.14     Lease liabilities

The breakdown between current and non-current rental liabilities is as follows:

 

     December 31, 2021      December 31, 2020  

In thousands of euros

   Portion due
within one year
     Portion due
between 1 and
5 years
     Portion due
after 5 years
     Total      Portion due
within one year
     Portion due
between 1 and
5 years
     Portion due
after 5 years
     Total  

Leasehold debts - Real estate

     1 827        5 429        1 441        8 697        1 772        5 512        2 730        10 014  

Leasehold debts - Movable property

     514        489           1 002        524        517        0        1 040  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Leasehold debts

     2 341        5 917        1 441        9 699        2 296        6 029        2 730        11 055  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Low-value asset contracts and short-term contracts have no significant costs.

2.15     Other debts

 

     December 31, 2021      December 31, 2020  

in thousands of euros

   Current portion      Non-current
portion
     Total      Current portion      Non-current
portion
     Total  

Liabilities on fixed assets

     3 298           3 298        —             0  

Payables to employees

     8 920           8 920        5 529           5 529  

Social security debts

     1 324           1 324        1 239           1 239  

Current tax liability

     147           147        575           575  

Other tax liabilities

     463           463        696           696  

Collected VAT

     4 266           4 266        4 610           4 610  

Customers - Credit notes to be issued

     10 197           10 197        6 372           6 372  

Other liabilities

     400           400        413           413  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     29 015        0        29 015        19 434        0        19 434  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The accrual for paid vacations and bonuses, as well as the accompanying social security costs, profit-sharing, and donations owed to various social organizations, are all included in the social security liabilities.

Financial year 2020:

Credit notes to be issued on French companies include the partner Céolia for the product Metopirone Japan (927 thousand euros), the partner Takeda for the products Norlevo and ella Sweden, Denmark and Norway (68 thousand euros), the product Ketoconazole (227 thousand euros) and for the product Compeed (547 thousand euros). Credit notes to be issued on overseas subsidiaries mostly concern the goods ella (1,905 thousand euros, including 1,579 thousand euros in the United States), Mederma US (1,367 thousand euros), and Compeed (827 thousand euros of which 726 thousand euros in the UK).

During the first half of 2019, an agreement was reached with the partner Preglem (Gédéon Richter Group) that resulted in the latter paying 3,561 thousand euros in royalties on previous years’ sales made by Preglem, particularly in France, the amount of which was in dispute with the French government. Preglem notified us that the dispute had been settled with a result in favor of the French State and asked us to issue a credit note of 2,468 thousand euros as a reduction of the amount received following the above-mentioned agreement. This credit note was issued in the first half of 2020, which explains in part the significant decrease in the item “Trade accounts receivable - Credit notes”.

Following Esmya’s exit from the market, it was deemed that the €7 million residual debt, which represented the last component of the royalty for the license of Preglem’s know-how, could no longer be offset by milestone payments.

 

37


As a result, the €7 million debt was eliminated after Preglem-Richter confirmed the foregoing in a letter dated November 17, 2020.

Financial year 2021:

The increase in “Customers - Credit notes to be issued” is due to a change in the classification of the rebates on sales from “Trade accounts payable” to this item.

2.16    Deferred income

 

     December 31, 2021             December 31, 2020         

in thousands of euros

   Current
portion
     Non-current
portion
     Total      Current
portion
     Non-current
portion
     Total  

Deferred income / Downpayments

     119        565        684        106        462        568  

Deferred income relating to the research tax credit for capitalized expenses

     18        101        119        85        163        248  

Other

           0              0  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total deferred income

     137        666        803        191        625        816  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Financial year 2020:

Advance payments received by the Group in relation of license agreements, but whose recognition is deferred, totaled 568 thousand euros as of December 31, 2020.

Financial year 2021:

Advance payments received by the Group in relation of license agreements, but whose recognition is deferred, totaled 684 thousand euros as of December 31, 2021.

 

in thousands of euros

   Beginning of
the year
     Receipts      Revenue
recognized during
the period
    

 

 

December 31, 2019

     4 653           -3 909        744  

December 31, 2020

     744           -176        568  

December 31, 2021

     568        273        -158        684  

Financial year 2020:

As of December 31, 2020, no payments under license agreements were received as revenue.

As of December 31, 2020, the amount of “downpayments” recorded as revenue is 176 thousand euros.

Financial year 2021:

A total of 273 thousand euro payments has been received under license agreements signed in 2021.

At December 31, 2021, the amount of “downpayments” recorded as revenue was 158 thousand euros.

 

38


2.17     Fair value table

The following table presents the book values and fair values of financial assets and liabilities and their level in the fair value hierarchy:

 

     Balance sheet
value at
12/31/2021
     Fair value      Level 1 -
stock market
price
     Level 2 -
observable
data
     Level 3 -
unobservable
data
 

Financial assets measured at amortized cost

              

Trade and other receivables

     53 599        53 599           53 599     

Financial assets measured at fair value

              

Financial assets

     782        782           782     

Derivative asset instruments

     63        63           63     

Cash and cash equivalents

     40 575        40 575           40 575     

Financial liabilities measured at amortized cost

              

Borrowings and financial debts

     842 692        963 284           963 284     

Financial liabilities measured at fair value

              

Derivative liability instruments

     952        952           952     

3    NOTES TO THE STATEMENT OF PROFIT AND LOSS

3.1    Revenue from ordinary activities

The breakdown of revenues from ordinary activities between the two areas is as follows:

 

     December 31, 2021      December 31, 2020  

In thousands of euros

   CHC      RX      Services      Total      CHC      RX      Services      Total  

Turnover

     212 127        43 630        166        255 923        156 852        44 279        411        201 542  

Royalties and license fees

     826        -221           605        545        839           1 384  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Revenue from Ordinary Activities

     212 954        43 409        166        256 529        157 397        45 118        411        202 926  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Financial year 2020:

The Group’s revenue from ordinary activities, which is made up 99% of pharmaceutical items, declined by 20% in fiscal year 2020 as a result of the current health crisis.

Compeed (- 39%) and ella (- 28%), both from the Consumer Healthcare segment, were the most impacted.

On the other hand, the Metopirone product, in the segment “RX” experienced substantial growth (+ 33%), driven primarily by the North America zone (+1,446 thousand euros, or + 59%) and the Asia zone (+ 445 thousand euros, or + 18%).

Financial year 2021:

Despite a context still affected by the crisis linked to the Covid-19 pandemic, the Group’s revenue from ordinary activities, 99.8% of which is made up of pharmaceutical products, increased by 27% in the 2021 financial year.

We saw a rebound in activity, with sales of Compeed products up 48.2%, the “Women Health” section up 23.5%, and Mederma products up 25.7%.

While Covid-19 had no effect on the “rare diseases” section in 2020, it did in 2021, when many patients were unable to enter hospitals due to the priority given to Covid-19.

 

39


3.2    Operating expenses

Financial year 2020:

The “Covid-19” global pandemic had a huge impact on the company.

The Group has reduced its variable costs, particularly promotional expenses, in order to mitigate the impact of Covid-19 on its profitability.

The significance of “research and development costs” has stayed unchanged.

The costs of management and support services, as well as all Group infrastructure costs, are included in general and administrative expenses.

Financial year 2021:

The global “Covid-19” pandemic has had an impact on the business. The Group has attempted to mitigate the impact of Covid-19 on its profitability by slashing variable costs, particularly promotional costs.

The Group’s operating expenses (excluding “Other Operating Expenses and Revenues”) to Ordinary Revenue ratio has decreased slightly (47.1% vs. 49.3%), owing to lower “Marketing and sales expenses” (30.3% vs. 31.1%) and “Research and development expenses” (3.5% vs. 4.6%).

While significant promotional expenses were spent, such as those for the launch of Hana in the United Kingdom or the investment in TV commercials in the United States for Compeed and Méderma, the “Marketing and sales expenses” item has a ratio of 30.3% compared to the Ordinary Revenue, i.e. -2.5% compared to December 2020.

The costs of management and support services, as well as all of the Group’s infrastructure costs, are included in general and administrative expenses.

As a result of various tax audits, there was an increase in consultation fees.

3.2.1     Staff costs

The personnel expenses recorded in the income statement include the following items:

 

In thousands of euros

   December 31, 2021      December 31, 2020  

Wages and salaries

     21 902        20 864  

Social security costs

     10 264        9 691  

Social benefits (bonuses, annual leave, benefits....)

     5 122        4 406  

Retirement provision

     496        556  

Profit-sharing - Incentives

     1 225        116  
  

 

 

    

 

 

 

Total

     39 009        35 634  
  

 

 

    

 

 

 

Bonuses for 2021 were accrued on a 100% basis, opposed to 50% in 2020.

 

40


The income statement breaks down these expenses as follows:

 

In thousands of euros

   December 31, 2021      December 31, 2020  

Cost of sales

     3 876        3 671  

Marketing and sales costs

     13 206        11 443  

Administrative costs

     17 213        14 942  

Research and development costs

     4 657        4 224  

Other operating costs

     57        338  

Non-routine costs (*)

     1        1 016  
  

 

 

    

 

 

 

Total

     39 009        35 634  
  

 

 

    

 

 

 

 

(*)

In fiscal year 2020, we find mainly salaries + employer’s contributions (159 thousand euros), bonuses + employer’s contributions (475 thousand euros) and vacation pay + employer’s contributions (336 thousand euros).

3.2.2     Headcount

The Group had 250 employees at December 31, 2021, compared with 240 at December 31, 2020. The number of employees at the end of the years is broken down as follows:

 

     December 31, 2021      December 31, 2020  

Cost of sales

     30        31  

Marketing and selling expenses

     89        78  

Administrative costs

     97        97  

Research and development costs

     33        34  
  

 

 

    

 

 

 

Total

     250        240  
  

 

 

    

 

 

 

It should be mentioned that a new profit-sharing agreement for the period of January 1, 2020 to December 31, 2022 was signed on July 27, 2020 at the UES level, which includes Laboratoire HRA Pharma, HRA Pharma France, and HRA Pharma Rare Diseases.

On July 28, 2020, a new agreement was reached for Héra, also for a three-year period.

3.3     Other operating income and expenses

Financial year 2020:

Other operating income and expenses (- €9.6 million) correspond mainly to:

Operating income from “commercial activities”:

 

   

taxes (totaling €1.2 million) (including the Safeguard Clause Tax, the Social Solidarity Contribution, the Tax on the Promotion of Medical Devices, and the New Contribution Tax on Sales);

 

   

realized foreign exchange gains and losses on trade receivables and payables (expense of €0.7 million) and unrealized foreign exchange gains and losses (expense of €0.6 million);

 

   

Following the signing of a contract with SWIXX, the Compeed product distributor in Russia, €1.25 million will be paid to them (50%in December 2020 and 50% in July 2021) to help their advertising effort and, following Covid-19, to destroy any obsolete stock they may have.

Operating income related to “general expenses”:

 

   

depreciation of leases due to the application of IFRS 16 (amount of €2.4 million);

 

   

taxes (including the Territorial Economic Contribution, i.e. a total expense of €1.3 million).

 

41


Financial year 2021:

Other operating income and expenses (- €0,3 million) correspond mainly to:

Operating income from “commercial activities”:

 

   

taxes (totaling €0.5 million) (including the Safeguard Clause Tax, the Social Solidarity Contribution, the Tax on the Promotion of Medical Devices, and the New Contribution Tax on Sales);

 

   

realized foreign exchange gains and losses on trade receivables and payables (revenue of €0.5 million) and unrealized foreign exchange gains and losses (revenue of €0.3 million);

 

   

Adjustments to taxes on the promotion of medical devices paid from 2018 to 2020 (total revenue of €2.4 million).

Operating income related to “general expenses”:

 

   

depreciation of leases due to the application of IFRS 16 (amount of €2.4 million);

 

   

Government assistance related to the impact of Covid-19 on the German subsidiary’s business resulted in a 545 thousand euros profit;

 

   

taxes (including the Territorial Economic Contribution, i.e. a total expense of €0.8 million).

3.4     Other income and expenses

Financial year 2020:

Other income and expenses (-€16.3 million) primarily consist of:

 

   

restructuring costs (-€2.3 million);

 

   

cancellation of Preglem debt following the withdrawal of Esmya from the market (+€7 million);

 

   

amortization of revalued intangible assets (€3.8 million);

 

   

depreciation of Esmya assets (€1.2 million);

 

   

disposal of Ellis fixed assets (-€7.9 million);

 

   

disposal of UPSI fixed assets (-€0.4 million);

 

   

compensation paid to the Greek partner Arriani for breach of contract (€1.5 million);

 

   

costs related to the Harvey operation (€0.5 million);

 

   

costs generated by the integration of the Compeed product (€1.2 million);

 

   

costs generated by the integration of the Mederma product (€0.7 million);

 

   

provision for customer impairment on Downpayment Esmya (€0.75 million);

 

   

disposal of revalued Mederma inventories (€0.9 million).

Financial year 2021:

Other income and expenses (-€4.6 million) primarily consist of:

 

   

amortization of intangible assets acquired as part of a business combination (-€1.2 million);

 

   

costs related to the PERRIGO transaction (€-1.2 million)

 

   

disposal of revalued Mederma inventories (-€0.4 million);

 

   

payment fraud of the Spanish supplier UM (-€0.5 million);

 

42


   

provisions for litigation (-€0.7 million);

 

   

provision for tax risk (-€0.5 million).

3.5     Financial result

Financial revenue and expenses can be broken down as shown in the table below:

 

In thousands of euros

   December 31, 2021      December 31, 2020  

Foreign exchange losses

     -1 879        -1 101  

Interest expense on loans

     -55 927        -53 395  

Financial expenses related to leases

     -166        -194  

Currency hedging

     -1 210        —    

Other financial expenses

     -378        -498  
  

 

 

    

 

 

 

Total financial expenses

     -59 559        -55 188  
  

 

 

    

 

 

 

Income from financial assets and cash investments

     2        —    

Foreign exchange gains

     2 022        787  

Disposal of financial liabilities related to leases

     11        12  

Currency hedging

     —          446  

Other financial revenues

     170        6  
  

 

 

    

 

 

 

Total Financial Revenues

     2 205        1 251  
  

 

 

    

 

 

 

Total financial income

     -57 354        -53 937  
  

 

 

    

 

 

 

Foreign exchange gains and losses relate to financial transactions.

Financial year 2020:

Interest on convertible bonds (€30.1 million), bonds (€21.8 million), and the revolving credit facility (€1.4 million) make up the bulk of net financial income.

Financial year 2021:

Net financial income consists mainly of interest on convertible bonds (€33.1 million), on bonds (€22.0 million) and on the revolving credit facility (€0.7 million).

3.6     Income tax

3.6.1     Breakdown of tax expense

 

In thousands of euros

   December 31, 2021      31 décembre 2020  

Taxes payable

     -250        -303  

Deferred taxes

     -2 622        6 741  
  

 

 

    

 

 

 

Total

     -2 872        6 439  
  

 

 

    

 

 

 

 

43


Under current French regulations, tax losses can be carried forward indefinitely.

3.6.2     Reconciliation between actual and notional tax

 

In thousands of euros

   December 31, 2021     31 décembre 2020  

Pre-tax income of consolidated companies

     -221       -33 648  

Income tax rate applicable to the parent company

     27,37     28,92
  

 

 

   

 

 

 

Theoretical tax (expense)/ income

     60       9 731  
  

 

 

   

 

 

 

Tax rate discrepancies between countries

     -3 036       -4 093  

Ongoing variations

     335       47  

Non-taxable tax credits

     603       566  

Recognition of tax loss carryforwards

     -60       232  

Non-recognition of losses carried forward

     -240       -11  

Other

     -535       -33  
  

 

 

   

 

 

 

Actual income tax (expense)/income

     -2 872       6 439  
  

 

 

   

 

 

 

Effective tax rate

     -1300     19,1

3.6.3     Breakdown of deferred tax assets and liabilities

 

In thousands of euros

   December 31, 2021     December 31, 2020  

Deferred tax assets:

    

Provisions for employee benefits

     631          585     

Inventory margins

     7 030       11 578  

Deferred revenue

     178       146  

Deferred tax assets/losses carried forward

     8 417       8 476  

Tax / accounting variances

     668       203  

Exclusivity rights related to the Compeed acquisition

     13 103       13 103  

Restatement of fees related to the acquisition of Lysodren

     90       90  

Restatement of fees related to the Méderma acquisition

     102       102  

Valuation of CAPs - Interest rate hedging

     43       191  

Valuation of CAPs - Currency hedging

     260       —    

Lease agreements

     97       85  

Various

     —         18  
  

 

 

   

 

 

 

Total deferred tax assets in the balance sheet

     30 618       34 577  
  

 

 

   

 

 

 

Deferred tax liabilities:

    

Lease agreements

     -4       -1  

PPA (Purchase Price Allocation) - Rebranding Compeed

     -92 902       -92 902  

PPA - Revaluation of fixed assets

     -958       -1 297  

PPA - Revaluation of Lysodren rights

     -9 276       -9 276  

PPA - Revaluation of Méderma brands

     -20 503       -20 503  

PPA - Revaluation of Méderma stocks

     —         -136  

Discounting of the Convertible Bonds

     -3 689       -4 299  

Bond issue - effective interest rate calculation

     -175       -157  

Valuation of CAPs - Interest rate hedging

     —         -11  

Valuation of CAPs - Currency hedging

     —         -75  
  

 

 

   

 

 

 

Total deferred tax liabilities in the balance sheet - Published

     -127 508       -128 658  
  

 

 

   

 

 

 

Net deferred taxes

     -96 889       -94 081  
  

 

 

   

 

 

 

 

44


3.7     Earnings per share

3.7.1     Basic earnings per share

The result attributable to equity holders and a weighted average number of shares outstanding over the two years are used to compute basic earnings per share.

 

     December 31, 2021      December 31, 2020  

Net income available to shareholders (in thousands of euros)

     -3 166        -27 241  

Weighted average number of shares issued during

     35 862 368        35 862 368  

Earnings per share

     -0,09        -0,76  

3.7.2     Diluted earnings per share

Diluted earnings per share are calculated on the basis of earnings attributable to equity holders and a weighted average number of ordinary shares outstanding, adjusted for the effects of all potential dilutive shares.

Instruments giving deferred rights to capital (Free Shares, SO or BSPCE) are considered to be anti-dilutive as they result in an increase in earnings per share from continuing operations. Thus, the diluted earnings per share are identical to the basic earnings per share.

4     RELATED PARTIES

Transactions with key executives, directors, supervisory board members and strategic committee members:

Financial year 2020:

 

In thousands of euros

 

Related companies

  December 31, 2020  
Agreements authorized by the company’s General Meeting of May 24, 2012    

Contribution to the HRA Pharma Foundation

      150  

Scientific Board

  André Ulmann, Chairman of the Strategic Committee of the company and Director of Cemag     100  
Agreements authorized by the general meeting of the company on July 1, 2016    

Strategic advisory services to the Supervisory Board of Hera

  David Colpman, Member of the Supervisory Board and Director of Consulting Colpman Ltd     101  

Financial year 2021:

 

In thousands of euros

 

Related companies

  December 31, 2021  
Agreements authorized by the company’s General Meeting of May 24, 2012    

Contribution to the HRA Pharma Foundation

      30  

Scientific Board

  André Ulmann, Chairman of the Strategic Committee of the company and Director of Cemag     100  
Agreements authorized by the general meeting of the company on July 1, 2016    

Strategic advisory services to the Supervisory Board of Hera

  David Colpman, Member of the Supervisory Board and Director of Consulting Colpman Ltd     25  

 

45


Total remuneration of Hera’s management team:

Financial year 2020:

The total remuneration of the Hera Executive Leadership Team was 2 795 thousand euros. This broke down as 2 116 thousand euros in fixed compensation, 418 thousand euros in variable compensation and 261 thousand euros in various benefits in kind.

Financial year 2021:

The total remuneration of the Hera Executive Leadership Team was 3 269 thousand euros. This broke down as 2 158 thousand euros in fixed compensation, 850 thousand euros in variable compensation and 261 thousand euros in various benefits in kind.

5     LITIGATION

There are no pending litigations that are anticipated to have a major impact on the financial statements for the two financial years, other than those for which provisions have been made or that are stated in the notes to the financial accounts.

6     OFF-BALANCE SHEET COMMITMENTS

 

   

Héra and its subsidiary Laboratoire HRA Pharma have entered into a number of loans for an amount of €473 million and to secure these loans, Pledge Agreements were executed on September 20, 2017 relating to:

 

   

shares of Laboratoire HRA Pharma held by Héra;

 

   

intra-group receivables

 

   

Similarly, and still as a guarantee, Laboratoire HRA Pharma has entered into pledge agreements relating to:

 

   

its bank accounts;

 

   

the shares it holds in HRA Pharma France.

 

   

In the context of the partial transfer of assets relating to the “endocrinology” sector from Laboratoire HRA Pharma to HRA Pharma Rare Diseases, Laboratoire HRA Pharma has entered into pledge agreements relating to:

 

   

its bank accounts;

 

   

the shares it holds in HRA Rare Diseases.

 

   

A pledge agreement for the balance of the 3rd rank bank accounts was entered into on March 26, 2020 between HRA Pharma Rare Diseases and HSBC Corporate Trustee Company (UK).

 

46


7     FINANCIAL RISK MANAGEMENT

The Group is exposed to the following risks related to the use of financial instruments:

Credit risk

The risk of financial loss to the Group if a client or counterparty to a financial instrument fails to meet its contractual commitments is referred to as credit risk. Trade receivables and marketable securities are the main sources of this risk.

Liquidity risk

Liquidity risk refers to the possibility that the Group will have difficulty meeting its obligations when they become due. The Group’s strategy to managing liquidity risk is to ensure that, as far as feasible, it will always have enough liquidity to cover its liabilities when they are due, whether under normal or stressed conditions, without incurring unacceptable losses or harming its reputation.

The Group makes sure it has enough cash and bank accounts to cover its short-term needs.

The accounts have been prepared on a going concern basis.

Market risk

Market risk refers to the possibility that changes in market prices, such as foreign exchange rates, interest rates, and equity instrument prices, will have an impact on the Group’s earnings or the value of its financial assets. The goal of market risk management is to keep market risk exposures within acceptable bounds while maximizing the risk/reward trade-off.

Foreign exchange risk

The Group’s foreign exchange risk is reduced because research and development costs are incurred in the same currencies (USD, Euro) as the expected revenue streams (US and EU territory).

HRA Pharma has also hedged against foreign exchange risks by entering into forward exchange contracts on the GBP with HSBC bank.

Interest rate risk

The group is not significantly exposed to interest rate risk insofar as so-called “cap” hedging instruments have been contracted since 2017 at the time of the acquisition of the Compeed product portfolio.

Capital risk

The Company has the required resources to finance its activities as part of its capital management strategy, and it has no intention of exposing its shareholders to an undue dilution risk.

8     SUBSEQUENT EVENTS

On February 24, 2022, Russia, supported by Belarus, invaded Ukraine. Following this attack, a number of countries have declared sanctions against both Russia and Belarus and various Russian and Belarusian individuals and businesses. Access to the SWIFT international banking system has been suspended as part of these restrictions.

With the exception of ownership of certain trademarks and product registrations in these countries that have not been allocated a value in the Group’s accounts, the Group owns no assets in these countries and has no employees.

In 2021, the Group generated revenues of 2,305 thousand euros and an operating profit of almost 1,000 thousand euros in Russia. These results are generated exclusively by the Compeed brand. The Compeed brand is distributed in Russia by a Swiss company and all invoices are in euros. This distributor and its shareholders are not mentioned on any sanctions lists. The Group has no activity in Ukraine or in Belarus. The balance of receivables outstanding from this distributor at December 31 was 157 thousand euros.

 

47


Thus, the Group has no risk on the valuation of its assets and limited exposure on its revenues.

9     AUDITORS’ FEES

The fees paid to the Group’s statutory auditors amounted to:

Financial year 2020:

 

In thousands of euros

   KPMG      Naolys      TOTAL  

Audit of accounts

     393        36        429  

Other services than auditing

     75        —          75  
  

 

 

    

 

 

    

 

 

 

TOTAL

     468        36        504  
  

 

 

    

 

 

    

 

 

 

Financial year 2021:

 

In thousands of euros

   KPMG      Naolys      TOTAL  

Audit of accounts

     367        36        402  

Other services than auditing

     97        —          97  
  

 

 

    

 

 

    

 

 

 

TOTAL

     464        36        500  
  

 

 

    

 

 

    

 

 

 

 

48

Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION OF PERRIGO COMPANY PLC

On September 8, 2021, Perrigo Company PLC (“Perrigo” or the “Company”) announced its intention to acquire Héra SAS (“Héra”), a leading global consumer self-care company, from funds affiliated with private equity firm Astorg and Goldman Sachs Asset Management (the “Proposed Acquisition”) in an all-cash transaction. Per the Securities Sale Agreement (the “Acquisition Agreement”), Perrigo will acquire the entire share capital of Héra for an aggregate estimated purchase price of approximately $2.1 billion, subject to certain adjustments set forth in the Acquisition Agreement. This includes the acquisition of HRA NewCo S.à.r.l., Héra Manco 1, Héra Manco 2, and Héra Manco 3 (collectively referred to as the “Holding Entities”) securities. Additionally, as part of the acquisition, Perrigo will fund the repurchase of Héra’s convertible bonds. In connection with the Proposed Acquisition, the Company expects to obtain or otherwise incur approximately $1,600 million of new financing, comprising a $300 million 5-year term loan A, an $800 million 7-year term loan B, and $500 million of additional unsecured debt (collectively, the “New Financing”), the proceeds of which, together with cash on hand, will be used to finance the Proposed Acquisition and to refinance certain existing indebtedness of the Parent and its subsidiaries (the “Proposed Refinancing”). In addition, in connection with the Proposed Refinancing, the Company also expects to replace its existing revolving credit facility with a new $1,000 million five-year revolving credit facility (the “New Revolving Credit Facility”). The Proposed Acquisition, the New Financing, the Proposed Refinancing and entering into the New Revolving Credit Facility are collectively referred to as the “Pro Forma Transactions.”

The following unaudited pro forma condensed combined financial information has been prepared using the acquisition method of accounting in accordance with the Financial Accounting Standards Board Accounting Standards Codification Topic 805, “Business Combinations” (“ASC 805”), and gives effect to the Pro Forma Transactions, inclusive of:

 

   

the conversion of Héra’s historical financial statements from Euros to U.S. Dollars;

 

   

the preliminary conversion of Héra’s historical financial statements prepared in accordance with the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (the “IASB”) to U.S. Generally Accepted Accounting Principles (“GAAP”);

 

   

certain reclassifications to conform Héra’s historical financial statement presentation to Perrigo’s presentation;

 

   

application of the acquisition method of accounting under the provisions of ASC 805, and to reflect the aggregate offer consideration of approximately $2.1 billion in exchange for 100% of Héra’s share capital;

 

   

proceeds and uses of the New Financing arrangements that are expected to be entered into in connection with the Proposed Acquisition and the Proposed Refinancing; and

 

   

transaction costs in connection with the Proposed Acquisition.


The following unaudited pro forma condensed combined financial information and related notes have been derived from and should be read in conjunction with (i) the historical consolidated financial statements of Perrigo and the related notes included in Perrigo’s Annual Report on Form 10-K for the year ended December 31, 2021 which was filed with the Securities and Exchange Commission (the “SEC”) on March 1, 2022, and (ii) the audited consolidated financial statements of Héra and the related notes as of and for the year ended December 31, 2021 included in this Current Report on Form 8-K. The Holding Entities have no material assets or results of operations; therefore, the Holding Entities’ historical financial information is not included in the unaudited pro forma condensed combined financial information.

The unaudited pro forma condensed combined balance sheet as of December 31, 2021 gives effect to the Pro Forma Transactions as if they occurred or had become effective on December 31, 2021. The unaudited pro forma condensed combined statement of operations for the fiscal year ended December 31, 2021 gives effect to the Pro Forma Transactions as if they occurred or had become effective on January 1, 2021. Further information about this basis of presentation is provided in Note 1.

The unaudited pro forma condensed combined financial information and related notes are being provided for illustrative purposes only and do not purport to represent what the Company’s actual results of operations or financial position would have been had the Pro Forma Transactions been completed on the dates indicated, nor are they necessarily indicative of the Company’s future results of operations or financial position as of any future date or for any future period. Future results may vary significantly from the results reflected due to various factors, including those discussed in Part I, Item 1A “Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

The pro forma adjustments are based upon available information and certain assumptions as described in the accompanying notes to the unaudited pro forma condensed combined financial information which management believes are reasonable under the circumstances. Actual results are likely to differ from these assumptions and these differences may be material. In addition, the unaudited pro forma combined financial information does not reflect any expected cost savings, operating synergies or revenue enhancements that the combined entity may achieve as a result of the Proposed Acquisition or the costs necessary to achieve any such cost savings, operating synergies or revenue enhancements. However, there can be no assurance that any of the expected cost savings, operating synergies or revenue enhancements, or other benefits of the Proposed Acquisition expected by management, will be achieved.

The unaudited pro forma condensed combined financial information has been prepared by us using the acquisition method of accounting in accordance with GAAP. Perrigo has been treated as the acquirer in the Proposed Acquisition for accounting purposes.

Management believes the fair values recognized for the assets acquired and liabilities assumed are based on reasonable estimates and assumptions. Definitive allocations will be performed and finalized by the Company, where necessary with the services of outside valuation specialists. Accordingly, the purchase price allocation and amortization adjustments reflected in the unaudited pro forma condensed combined financial information are preliminary and subject to revision based on a final determination of fair value. Management expects to finalize accounting for the business combination as soon as practicable after closing of the Proposed Acquisition, but in no event later than one year from closing.


Perrigo Company PLC

Unaudited Pro Forma Condensed Combined Balance Sheet

As of 12/31/2021

(In millions)

 

<
           Héra SAS     Transaction Accounting Adjustments  
     Historical
Perrigo
Company
PLC
    Historical
U.S. Dollars
(IFRS)1
    Pro Forma
Conversion
Adjustments

(Note 3)
          Pro
Forma

(U.S.
GAAP)
    Financing &
Re-Financing
Adjustments

(Note 4)2
    Acquisition
Adjustments

(Note 6)
          Pro Forma
Condensed
Combined
 

Assets

                  

Cash and cash equivalents

   $ 1,864.9     $ 46.2     $ —         $ 46.2     $ 564.1     $ (2,168.8     a   $ 306.4  

Accounts receivable, net

     652.9       63.0           63.0             715.9  

Inventories

     1,020.2       25.8           25.8         17.8       b     1,063.8  

Prepaid expenses and other current assets

     305.8       25.1           25.1         3.8       g     334.7  

Current assets held for sale

     16.1       —             —               16.1  
  

 

 

   

 

 

       

 

 

         

 

 

 

Total current assets

     3,859.9       160.1       —           160.1       564.1       (2,147.2       2,436.9  

Property, plant and equipment, net

     864.1       3.8           3.8             867.9  

Operating lease assets

     166.9       9.9       0.8       a     10.7             177.6  

Goodwill and indefinite-lived intangible assets

     3,004.7       602.2           602.2         286.0       c ), e)      3,892.9  

Definite-lived intangible assets, net

     2,146.1       585.1       (42.7     b     542.4         921.7       d     3,610.2  

Deferred income taxes

     6.5       0.5       (0.1     c     0.4             6.9  

Other non-current assets

     377.5       0.9           0.9       1.4           379.8  
  

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

 

Total non-current assets

     6,565.8       1,202.4       (42.0       1,160.4       1.4       1,207.7         8,935.3