SEPARATE FINANCIAL
STATEMENTS
2024
1 AUDITORS' REPORT | 2 |
2 SEPARATE FINANCIAL STATEMENTS | 13 |
3 DIRECTORS' REPORT | 112 |
AUDITORS'
REPORT
PHARMA MAR Separate Financial Statements 2024 3
Auditors' Report | 4 |
Independent Auditor's Report
on the Annual Accounts
(Translation from the original in Spanish. In the event of discrepancy, the Spanish-language version prevails.)
To the shareholders of Pharma Mar, S.A.
REPORT ON THE ANNUAL ACCOUNTS
Opinion __________________________________________________________________
We have audited the annual accounts of Pharma Mar, S.A. (the "Company"), which comprise the balance sheet at 31 December 2024, and the income statement, statement of changes in equity and statement of cash flows for the year then ended, and notes.
In our opinion, the accompanying annual accounts give a true and fair view, in all material respects, of the equity and financial position of the Company at 31 December 2024, and of its financial performance and its cash flows for the year then ended in accordance with the applicable financial reporting framework (specified in note 2 to the annual accounts) and, in particular, with the accounting principles and criteria set forth therein.
Basis for Opinion _________________________________________________________
We conducted our audit in accordance with prevailing legislation regulating the audit of accounts in Spain. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Annual Accounts section of our report.
We are independent of the Company in accordance with the ethical requirements, including those regarding independence, that are relevant to our audit of the annual accounts pursuant to the legislation regulating the audit of accounts in Spain. We have not provided any non-audit services, nor have any situations or circumstances arisen which, under the aforementioned regulations, have affected the required independence such that this has been compromised.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
KPMG Auditores S.L., a limited liability Spanish company and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
Paseo de la Castellana, 259C 28046 Madrid
On the Spanish Official Register of Auditors ("ROAC") with No. S0702, and the Spanish Institute of Registered Auditors' list of companies with No. 10.
Reg. Mer Madrid, T. 11.961, F. 90, Sec. 8, H. M -188.007, Inscrip. 9 N.I.F. B-78510153
PHARMA MAR Separate Financial Statements 2024 5
2
(Translation from the original in Spanish. In the event of discrepancy, the Spanish-language version prevails.)
Key Audit Matters ________________________________________________________
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the annual accounts of the current period. These matters were addressed in the context of our audit of the annual accounts as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Recognition and recoverability of deferred tax assets
See notes 2.2, 4.11 and 22 to the annual accounts
Key audit matter
How the matter was addressed in our audit
As indicated in note 22 to the accompanying annual accounts, at 31 December 2024 the Company has recognised deferred tax assets for a total of Euros 36,058 thousand, which primarily correspond to available deductions generated for research and development and unused tax loss carryforwards to be applied to corporate income tax by the Spanish tax group.
The recognition and recoverability of these deferred tax assets is analysed on an annual basis by the Company's management and Directors in line with the best estimate of taxable profits for the next five years, which is deemed to be the reasonably foreseeable horizon. As part of their assessment, the Company's management and Directors analyse whether the deductions could be converted into a receivable from the taxation authorities (monetisation) in the future, for the purposes of considering it in assessing their recoverability.
The analysis of the initial recognition and recoverability of deferred tax assets is considered a key audit matter due to the significance of the amount of deferred tax assets recognised and because estimating future taxable profits requires a significant degree of judgement.
Our audit procedures included the following:
- Assessing the design and implementation of certain key controls linked to the process of recognising and measuring deferred tax assets.
- Assessing the reasonableness of the criteria and the main assumptions considered by the Spanish tax group in estimating the future taxable profits necessary for offset.
- Assessing the reasonableness of the amounts to be offset in the estimated period of time, in accordance with applicable tax legislation.
- Analysing the consistency of forecast results which served as a basis for analysing the recoverability of the deferred tax assets with the business plan approved by the Company's management and Directors.
- In addition, we assessed whether the disclosures in the consolidated annual accounts meet the requirements of the financial reporting framework applicable to the Company.
Auditors' Report | 6 |
3
(Translation from the original in Spanish. In the event of discrepancy, the Spanish-language version prevails.)
Recognition of revenue
See notes 2.2, 4.14 and 23.1 to the annual accounts
Key audit matter
How the matter was addressed in our audit
The Company's activity, as indicated in note 1 to the accompanying annual accounts, consists mainly of the research, development and marketing of bioactive principles, especially those of marine origin, for application in human medicine, particularly in anti-tumour, anti-viral, immunomodulatory and tropical disease areas.
As indicated in note 4.14 to the accompanying annual accounts, the Company recognises revenue when control of the goods or services is transferred to customers. At that point, revenue is recognised as the amount of the consideration to which the Group expects to be entitled in exchange for the transfer of the goods and services promised under contracts with customers. Specifically:
- Revenue from the sale of products is recognised at the time control of the asset is transferred to the customer, which generally occurs when the goods are delivered to the end customer.
- Revenues from licensing, development and similar agreements are recognised on an accruals basis for the various performance obligations identified, which have been previously priced in the contract analysis process, as well as for the achievement of milestones.
- Royalty revenues are recognised in accordance with the agreed percentage of sales achieved by the counterparty to the arrangement at a given point in time.
Due to the significance of the amount of revenues and the possibility of revenue being recognised in an incorrect period, we have considered this a key audit matter.
Our audit procedures included the following:
- Obtaining an understanding of the revenue recognition process and assessing the design and implementation of key controls related to the process for recognising revenues near the reporting date.
- Testing using computer-assisted audit techniques enabling us to assess the existence and accuracy of a large volume revenue transactions during the year, individually matching the revenue to the accounts receivable and cash received in the audited period.
- Tests of detail on revenues from licensing, development and other similar transactions, checking, based on the analysis of revenues according to the performance obligations identified and the price associated with each of them, whether the revenues recognised in 2024 correspond to the obligations satisfied in the period and to the achievement of possible milestones included in the licensing contracts.
- Tests of detail on revenues from royalties, checking whether the revenues recognised in 2024 reflect the percentage agreed between the parties of the amount of sales that the counterparty to the agreement has made in the licensed territory.
- External confirmation for a sample of outstanding invoices, performing alternative procedures, where applicable, based on delivery notes, contracts or evidence of subsequent collection.
PHARMA MAR Separate Financial Statements 2024 7
4
(Translation from the original in Spanish. In the event of discrepancy, the Spanish-language version prevails.)
Recognition of revenue
See notes 2.2, 4.14 and 23.1 to the annual accounts
Key audit matter
How the matter was addressed in our audit
- Tests of detail on a selection of revenue transactions either shortly before or shortly after the reporting date, reviewing delivery notes or contracts to check whether the transactions were recognised in the appropriate period.
- We also assessed whether the disclosures in the annual accounts meet the requirements of the financial reporting framework applicable to the Company.
Valuation of investments in and loans to Group companies and associates
See notes 2.2, 4.6.4, 11.3 and 14.2 to the annual accounts
Key audit matter
How the matter was addressed in our audit
As indicated in notes 11 and 14 to the accompanying annual accounts, at 31 December 2024, the Company has non-current financial investments in Group companies and associates and non-current loans to Group companies amounting to Euros 97,643 thousand and Euros 4,314 thousand, respectively, of which Euros 94,807 thousand and Euros 4,314 thousand, respectively, comprise the net investment in and the loan extended to Sylentis, S.A.U.
In accordance with accounting criteria, the Company performs an annual assessment of the existence of objective evidence of impairment of investments in Group companies and associates and loans to Group companies, and estimates their recoverable amount at the reporting date of those entities for which there is objective evidence of impairment. The annual impairment test was performed on Sylentis, S.A.U., recording impairment in 2024 in the amount of Euros 5,910 thousand.
Our audit procedures included the following:
- Assessing the design and implementation of certain key controls linked to the process of estimating the recoverable amount of investments in and loans to Group companies and associates.
- Evaluating the criteria used by the Company in the process of assessing the existence of objective evidence of impairment of the investments in and loans to Group companies and associates.
- With the assistance of our specialists, assessing the reasonableness of the methodology used in the recoverable amount calculation performed by the independent expert, as well as the key assumptions used, including the evaluation of the sensitivity of the recoverable amount estimates to reasonably possible changes in the key assumptions.
Auditors' Report | 8 |
5
(Translation from the original in Spanish. In the event of discrepancy, the Spanish-language version prevails.)
Valuation of investments in and loans to Group companies and associates
See notes 2.2, 4.6.4, 11.3 and 14.2 to the annual accounts
Key audit matter
How the matter was addressed in our audit
The Company estimates the recoverable amount of these assets by applying valuation techniques, supported by an independent expert, that require a high degree of judgement by the Company's management and Directors, and the use of estimates that include relevant assumptions subject to uncertainty.
Due to the significance of the carrying amount of the assets, the high degree of judgement and the uncertainty associated with estimating the recoverable amount of these assets, we have considered this to be a key audit matter.
Moreover, we evaluated the competence, objectivity and conclusions of the independent expert engaged by Company management.
- We also assessed whether the disclosures in the annual accounts meet the requirements of the financial reporting framework applicable to the Company.
Other Matter _____________________________________________________________
On 28 February 2024 other auditors issued their unqualified auditor's report on the annual accounts for 2023.
Other Information: Directors' Report _______________________________________
Other information solely comprises the 2024 directors' report, the preparation of which is the responsibility of the Company's Directors and which does not form an integral part of the annual accounts.
Our audit opinion on the annual accounts does not encompass the directors' report. Our responsibility regarding the information contained in the directors' report is defined in the legislation regulating the audit of accounts, as follows:
- Determine, solely, whether the non-financial information statement and certain information included in the Annual Corporate Governance Report and the Annual Report on Directors' Remuneration, as specified in the Spanish Audit Law, have been provided in the manner stipulated in the applicable legislation, and if not, to report on this matter.
- Assess and report on the consistency of the rest of the information included in the directors' report with the annual accounts, based on knowledge of the entity obtained during the audit of the aforementioned annual accounts. Also, assess and report on whether the content and presentation of this part of the directors' report are in accordance with applicable legislation. If, based on the work we have performed, we conclude that there are material misstatements, we are required to report them.
PHARMA MAR Separate Financial Statements 2024 9
6
(Translation from the original in Spanish. In the event of discrepancy, the Spanish-language version prevails.)
Based on the work carried out, as described above, we have observed that the information mentioned in section a) above has been provided in the manner stipulated in the applicable legislation, that the rest of the information contained in the directors' report is consistent with that disclosed in the annual accounts for 2024, and that the content and presentation of the report are in accordance with applicable legislation.
Directors' and Audit Committee's Responsibility for the Annual Accounts ____
The Directors are responsible for the preparation of the accompanying annual accounts in such a way that they give a true and fair view of the equity, financial position and financial performance of the Company in accordance with the financial reporting framework applicable to the entity in Spain, and for such internal control as they determine is necessary to enable the preparation of annual accounts that are free from material misstatement, whether due to fraud or error.
In preparing the annual accounts, the Directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
The audit committee is responsible for overseeing the preparation and presentation of the annual accounts.
Auditor's Responsibilities for the Audit of the Annual Accounts______________
Our objectives are to obtain reasonable assurance about whether the annual accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with prevailing legislation regulating the audit of accounts in Spain will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual accounts.
As part of an audit in accordance with prevailing legislation regulating the audit of accounts in Spain, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the annual accounts, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control.
Auditors' Report | 10 |
7
(Translation from the original in Spanish. In the event of discrepancy, the Spanish-language version prevails.)
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors.
- Conclude on the appropriateness of the Directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the annual accounts or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the annual accounts, including the disclosures, and whether the annual accounts represent the underlying transactions and events in a manner that achieves a true and fair view.
We communicate with Pharma Mar, S.A.'s audit committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the entity's audit committee with a statement that we have complied with the ethical requirements regarding independence, and to communicate with them all matters that may reasonably be thought to bear on our independence, and where applicable, safeguarding measures adopted to eliminate or reduce the threat.
From the matters communicated to the audit committee of the entity, we determine those that were of most significance in the audit of the annual accounts of the current period and which are therefore the key audit matters.
We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
European Single Electronic Format ________________________________________
We have examined the digital file of Pharma Mar, S.A. for 2024 in European Single Electronic Format (ESEF) comprising an XHTML file with the annual accounts for the aforementioned year, which will form part of the annual financial report.
The Directors of Pharma Mar, S.A. are responsible for the presentation of the 2024 annual financial report in accordance with the format requirements stipulated in Commission Delegated Regulation (EU) 2019/815 of 17 December 2018 (hereinafter the "ESEF Regulation"). In this regard, they have incorporated the Annual Corporate Governance Report and the Annual Report on Directors' Remuneration by means of a reference thereto in the directors' report.