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Table of Contents
Condensed Consolidated
Interim Financial Statements as of
30 June 2022 and for the six months
ended 30 June 2022 and 30 June 2021
Table of Contents
| Unaudited Condensed Consolidated Interim Statements of Profit or Loss and Other Comprehensive Income or Loss | 3 | |||
| Unaudited Condensed Consolidated Interim Statement of Financial Position | 4 - 5 | |||
| Unaudited Condensed Consolidated Interim Statements of Cash Flows | 6 - 7 | |||
| Unaudited Condensed Consolidated Interim Statements of Changes in Equity | 8 | |||
| Notes to the Unaudited Condensed Consolidated Interim Financial Statements | 9 - 27 |
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Unaudited Condensed Consolidated Interim Statements of Profit or Loss and Other
Comprehensive Income or Loss
| USD in thousands, except for per share amounts | Notes | Six months ended 30 June 2022 | Six months ended 30 June 2021 | |||||||
| Product revenue | 5 | 3,932 | ||||||||
| License and other revenue | 5 | 36,186 | 2,008 | |||||||
| Other income | 142 | 348 | ||||||||
| Cost of product revenue | (17,813 | ) | ||||||||
| Research and development expenses | (86,884 | ) | (90,403 | ) | ||||||
| General and administrative expenses | 1.1 | (139,147 | ) | (86,360 | ) | |||||
| Operating loss | (203,584 | ) | (174,407 | ) | ||||||
| Share of net loss of joint venture | 21 | (1,266 | ) | (837 | ) | |||||
| Finance income | 6 | 50,968 | 4 | |||||||
| Finance costs | 6 | (52,406 | ) | (123,575 | ) | |||||
| Exchange rate differences | 4,744 | (3,611 | ) | |||||||
| Gain on extinguishment of financial liabilities | 2,561 | |||||||||
| Non-operating profit / (loss) | 2,040 | (125,458 | ) | |||||||
| Loss before taxes | (201,544 | ) | (299,865 | ) | ||||||
| Income tax benefit | 7 | 17,073 | 25,918 | |||||||
| Loss for the period | (184,471 | ) | (273,947 | ) | ||||||
| Other comprehensive income / (loss) | ||||||||||
| Item that will be reclassified to profit or loss in subsequent periods: | ||||||||||
| Exchange rate differences on translation of foreign operations | (4,243 | ) | 243 | |||||||
| Total comprehensive loss | (188,714 | ) | (273,704 | ) | ||||||
| Loss per share | ||||||||||
| Basic and diluted loss for the period per share | 8 | (1.02 | ) | (2.77 | ) |
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Interim Financial
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Unaudited Condensed Consolidated Interim Statement of Financial
| USD in thousands | Notes | 30 June 2022 | 31 December 2021 | |||||||||
| Non-current assets | ||||||||||||
| Property, plant and equipment | 9 | 87,411 | 78,530 | |||||||||
| Right-of-use assets | 10 | 131,069 | 126,801 | |||||||||
| Goodwill | 11,436 | 12,367 | ||||||||||
| Other intangible assets | 11 | 22,857 | 21,509 | |||||||||
| Contract assets | 5 | 14,838 | 1,479 | |||||||||
| Investment in joint venture | 21 | 51,334 | 55,307 | |||||||||
| Other long-term assets | 3,915 | 1,663 | ||||||||||
| Restricted cash | 12 | 25,001 | 10,087 | |||||||||
| Deferred tax assets | 7 | 187,976 | 170,418 | |||||||||
| Total non-current assets | 535,837 | 478,161 | ||||||||||
| Current assets | ||||||||||||
| Inventories | 13 | 54,664 | 39,058 | |||||||||
| Trade receivables | 5,304 | 29,396 | ||||||||||
| Contract assets | 5 | 24,998 | 17,959 | |||||||||
| Other current assets | 14 | 23,758 | 14,736 | |||||||||
| Receivables from related parties | 19 | 1,498 | 1,111 | |||||||||
| Cash and cash equivalents | 12 | 128,438 | 17,556 | |||||||||
| Total current assets | 238,660 | 119,816 | ||||||||||
| Total assets | 774,497 | 597,977 |
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Interim Financial
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Unaudited Condensed Consolidated Interim Statement of Financial Position
| USD in thousands | Notes | 30 June 2022 | 31 December 2021 | |||||||||
| Equity | ||||||||||||
| Share capital | 15 | 2,076 | 135 | |||||||||
| Share premium | 15 | 1,026,282 | 1,000,118 | |||||||||
| Translation reserve | 426 | 4,669 | ||||||||||
| Accumulated deficit | (1,325,005 | ) | (1,140,534 | ) | ||||||||
| Total equity | (296,221 | ) | (135,612 | ) | ||||||||
| Non-current liabilities | ||||||||||||
| Borrowings | 16 | 438,187 | 398,140 | |||||||||
| Derivative financial liabilities | 22 | 197,470 | ||||||||||
| Other long-term liability to related party | 19 | 7,440 | 7,440 | |||||||||
| Lease liabilities | 10 | 115,304 | 114,845 | |||||||||
| Long-term incentive plan | 17 | 4,408 | 56,334 | |||||||||
| Contract liabilities | 5 | 29,982 | 44,844 | |||||||||
| Deferred tax liability | 141 | 150 | ||||||||||
| Total non-current liabilities | 792,932 | 621,753 | ||||||||||
| Current liabilities | ||||||||||||
| Trade and other payables | 13 | 44,726 | 28,587 | |||||||||
| Lease liabilities | 10 | 7,282 | 7,295 | |||||||||
| Current maturities of borrowings | 16 | 120,836 | 2,771 | |||||||||
| Liabilities to related parties | 19 | 4,738 | 638 | |||||||||
| Contract liabilities | 5 | 32,328 | 29,692 | |||||||||
| Taxes payable | 1,047 | 841 | ||||||||||
| Other current liabilities | 20 | 66,829 | 42,012 | |||||||||
| Total current liabilities | 277,786 | 111,836 | ||||||||||
| Total liabilities | 1,070,718 | 733,589 | ||||||||||
| Total equity and liabilities | 774,497 | 597,977 |
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Interim Financial
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Unaudited Condensed Consolidated Interim Statements of Cash
| USD in thousands | Notes | Six months ended 30 June 2022 | Six months ended 30 June 2021 | |||||||||
| Cash flows from operating activities | ||||||||||||
| Loss for the period | (184,471 | ) | (273,947 | ) | ||||||||
| Adjustments for non-cash items: | ||||||||||||
| Gain on extinguishment of SARs liability | 17 | (4,803 | ) | |||||||||
| Share listing expense | 1.1 | 83,411 | ||||||||||
| Long-term incentive plan | 17 | 5,555 | 61,201 | |||||||||
| Depreciation and amortization | 9,977 | 8,928 | ||||||||||
| Impairment of property, plant and equipment | 2,066 | |||||||||||
| Impairment of other intangible assets | 3,993 | |||||||||||
| Share of net loss of joint venture | 21 | 1,266 | 837 | |||||||||
| Finance income | 6 | (50,968 | ) | (4 | ) | |||||||
| Finance costs | 6 | 52,406 | 123,575 | |||||||||
| Gain on extinguishment of financial liabilities | (2,561 | ) | ||||||||||
| Exchange rate difference | (4,744 | ) | 3,611 | |||||||||
| Income tax benefit | 7 | (17,073 | ) | (25,918 | ) | |||||||
| Operating cash flow before movement in working capital | (109,444 | ) | (98,219 | ) | ||||||||
| Increase in inventories | (15,606 | ) | (10,276 | ) | ||||||||
| (Increase) / decrease in trade receivables | 24,092 | (5,149 | ) | |||||||||
| Increase in net liabilities with related parties | 2,825 | 2,756 | ||||||||||
| (Increase) / decrease in contract assets | (20,398 | ) | 20,491 | |||||||||
| Increase in other assets | (11,384 | ) | (5,504 | ) | ||||||||
| Increase in trade and other payables | 17,408 | 7,712 | ||||||||||
| Increase / (decrease) in contract liabilities | (12,226 | ) | 23,989 | |||||||||
| Increase / (decrease) in other liabilities | (6,963 | ) | 1,032 | |||||||||
| Cash used in operations | (131,696 | ) | (63,168 | ) | ||||||||
| Interest received | 8 | 4 | ||||||||||
| Interest paid | (9,220 | ) | (21,570 | ) | ||||||||
| Income tax paid | (248 | ) | ||||||||||
| Net cash used in operating activities | (141,156 | ) | (84,734 | ) | ||||||||
| Cash flows from investing activities | ||||||||||||
| Acquisition of property, plant and equipment | (17,660 | ) | (6,606 | ) | ||||||||
| Disposal of property, plant and equipment | 379 | |||||||||||
| Acquisition of intangible assets | (9,309 | ) | (366 | ) | ||||||||
| Restricted cash in connection with the amended bond agreement | 12 | (14,914 | ) | |||||||||
| Net cash used in investing activities | (41,504 | ) | (6,972 | ) |
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Unaudited Condensed Consolidated Interim Statements of Cash Flows
| Cash flows from financing activities | ||||||||||
| Repayments of borrowings | 16 | (1,414 | ) | (36,115 | ) | |||||
| Repayments of principal portion of lease liabilities | 10 | (5,033 | ) | (3,016 | ) | |||||
| Proceeds from the Capital Reorganization | 1.1 | 9,827 | ||||||||
| Gross proceeds from the PIPE Financing | 1.1 | 174,930 | ||||||||
| Gross PIPE Financing fees paid | 1.1 | (5,561 | ) | |||||||
| Proceeds from loans from related parties | 16 | 110,000 | ||||||||
| Proceeds from new borrowings | 16 | 10,786 | 114,282 | |||||||
| Net proceeds on issue of equity shares | 15 | 26,850 | ||||||||
| Net cash generated from financing activities | 293,535 | 102,001 | ||||||||
| Increase in cash and cash equivalents | 110,875 | 10,295 | ||||||||
| Cash and cash equivalents at the beginning of the period | 17,556 | 31,689 | ||||||||
| Effect of movements in exchange rates on cash held | 7 | 2 | ||||||||
| Cash and cash equivalents at the end of the period | 12 | 128,438 | 41,986 |
Supplemental cash flow disclosures (Note 23)
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Interim Financial Statements
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Unaudited Condensed Consolidated Interim Statements of Changes in Equity
| USD in thousands | Share capital | Share premium | Translation reserve | Accumulated deficit | Total equity | |||||||||||||||
| At 1 January 2021 | 73 | 166,740 | 4,974 | (1,039,030 | ) | (867,243 | ) | |||||||||||||
| Loss for the period | (273,947 | ) | (273,947 | ) | ||||||||||||||||
| Foreign currency translation differences | 243 | 243 | ||||||||||||||||||
| Total comprehensive income / (loss) | 243 | (273,947 | ) | (273,704 | ) | |||||||||||||||
| Increase in share capital | 6 | 127,520 | 127,526 | |||||||||||||||||
| At 30 June 2021 | 79 | 294,260 | 5,217 | (1,312,977 | ) | (1,013,421 | ) | |||||||||||||
| At 1 January 2022 | 135 | 1,000,118 | 4,669 | (1,140,534 | ) | (135,612 | ) | |||||||||||||
| Loss for the period | (184,471 | ) | (184,471 | ) | ||||||||||||||||
| Foreign currency translation differences | (4,243 | ) | (4,243 | ) | ||||||||||||||||
| Total comprehensive loss | (4,243 | ) | (184,471 | ) | (188,714 | ) | ||||||||||||||
| PIPE Financing | 175 | 169,193 | 169,368 | |||||||||||||||||
| Settlement of SARs with shares | 35 | 30,267 | 30,302 | |||||||||||||||||
| Capital Reorganization | 1,731 | (173,296 | ) | (171,565 | ) | |||||||||||||||
| At 30 June 2022 | 2,076 | 1,026,282 | 426 | (1,325,005 | ) | (296,221 | ) |
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Interim Financial
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Notes to the Unaudited Condensed Consolidated Interim Financial Statements
1. General information
Alvotech (the Parent or the Company or Alvotech ), previously known as Alvotech Lux Holdings S.A.S., the
surviving company after the Business Combination (as defined below) with, among other parties, Alvotech Holdings S.A. (the Predecessor ), is a Luxembourg public limited company (soci t anonyme) incorporated and existing
under the laws of the Grand Duchy of Luxembourg, having its registered office at 9, rue de Bitbourg, L-1273 Luxembourg, Grand Duchy of Luxembourg and is registered with the Luxembourg Trade and Companies
Register under number B 258884. The Company was incorporated on 23 August 2021. These unaudited condensed consolidated interim financial statements were approved by the Group s Board of Directors, and authorized for issue, on 31 August 2022.
The Company and its subsidiaries (collectively referred to as the Group ) are a global biotech company specialized in the
development and manufacture of biosimilar medicines for patients worldwide. The Group has commercialized a certain biosimilar product and has multiple biosimilar molecules.
1.1 Capital Reorganization
15 June 2022 (the Closing Date ), the Company consummated the capital reorganization with Alvotech Holdings and OACB (the Business Combination or Capital Reorganization ) pursuant to the business combination
agreement, dated as of 7 December 2021, as amended by an amendment agreement dated 18 April 2022 and 7 June 2022 (the Business Combination Agreement ), by and among the Company, Oaktree Acquisition Corp. II
( OACB ) and the Predecessor. The closing of the Business Combination resulted in the following transactions:
Concurrently with the execution of the Business Combination Agreement, OACB and Alvotech entered into subscription agreements
( Subscription Agreements ) with certain investors (the PIPE Financing ). On 15 June 2022, immediately prior to the closing of the Business Combination, the PIPE Financing was closed, pursuant to the Subscription
Agreements, in which subscribers collectively subscribed for 17,493,000 Ordinary Shares at $10.00 per share for an aggregate subscription price equal to $174.9 million.
The Business Combination was accounted for as a capital reorganization. Under this method of accounting, OACB was treated as the
acquired company for financial reporting purposes, with Alvotech Holdings S.A. being the accounting acquirer and accounting predecessor. Accordingly, the capital reorganization was treated as the equivalent of Alvotech issuing shares at
the closing of the Business Combination for the net assets of OACB as of the Closing Date, accompanied by a recapitalization. The capital reorganization, which was not within the scope of IFRS 3 since OACB did not meet the definition of a business
in accordance with that guidance, was accounted for within the scope of IFRS 2. In accordance with IFRS 2, Alvotech recorded a one-time non-cash share listing expense of
$83.4 million, recognized as a general and administrative expense, based on the excess of the fair value of Alvotech shares issued, at the Closing Date, over the fair value of OACB s identifiable net assets acquired. The fair value of
shares issued was estimated based on a market price of $9.38 per share as of 15 June 2022.
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Notes to the Unaudited Condensed Consolidated Interim Financial Statements
| Shares | (in 000s) | |||||||
| OACB Shareholders | ||||||||
| Class A Shareholders | 976,505 | |||||||
| Class B Shareholders | 5,000,000 | |||||||
| OACB Earn Out Shares | 1,250,000 | |||||||
| Total Alvotech Shares issued to OACB shareholders | 7,226,505 | |||||||
| Fair value of Shares issued to OACB as of 15 June 2022 | $ | 56,060 | ||||||
| Fair value of OACB Earn Out Shares issued to OACB as of 15 June 2022 | 9,100 | |||||||
| Estimated fair market value | 65,160 | |||||||
| Adjusted net liabilities of OACB as of 15 June 2022 | (18,251 | ) | ||||||
| Difference being the share listing expense | 83,411 |
In connection with the Business Combination and PIPE Financing, the Company incurred $26.6 million of
transaction costs, which represent legal, financial advisory, and other professional fees in connection with the Business Combination and PIPE Financing, during the six months ended 30 June 2022. Of this amount, $5.6 million represented
equity issuance costs related to PIPE Financing that were capitalized in share premium. The remaining $21.0 million was recognized as general and administrative expense.
1.2 Information about shareholders
Significant shareholders of the Company are Aztiq Pharma Partners S. r.l. ( Aztiq ) and Alvogen Lux Holdings S. r.l.
( Alvogen ), with 40.5% and 35.5% ownership interest as of 30 June 2022, respectively. The remaining 24.0% ownership interest is held by various shareholders, with no single shareholder holding more than 3.0% ownership interest as of
1.3 Impact of COVID-19, the Russia and Ukraine Conflict, and Economic
With the ongoing COVID-19 pandemic, the Group created a
COVID-19 task force which implemented a business continuity plan to address and mitigate the impact of the pandemic on the Group s business and operations across sites. As a result, in the short-term, the
pandemic has not had a material impact on the Group s financial condition, results of operations, the timelines for biosimilar product development, expansion efforts or the Group s operations as a whole. However, the extent to which the
pandemic will impact the Group s business, biosimilar product development and expansion efforts, corporate development objectives and the value of and market for the Ordinary Shares will depend on future developments that are highly uncertain
and cannot be predicted with confidence at this time, such as the ultimate direction of the pandemic, emergence and spread of new variants of the disease, travel restrictions, quarantines, social distancing, business closure requirements and the
effectiveness of other actions taken globally to contain and treat the disease. The global economic slowdown, the overall disruption of global supply chains and distribution systems, the effects of this on the work of appropriate regulatory
authorities in different regions and the other risks and uncertainties associated with the pandemic could have a material adverse effect on the Group s business, financial condition, results of operations and growth prospects.
In February and March 2022, Russia began a military invasion of Ukraine. The global response to this invasion could have an adverse impact on
the Group s business, including the Group s ability to market and sell products in Europe, by creating disruptions in global supply chain, and potentially having an adverse impact on the global economy, European economy, financial markets,
energy markets, currency rates, and otherwise. Currently, the conflict has not had a material impact on the Group s financial condition, results of operations, the timelines for biosimilar product development, expansion efforts or the
Group s operations as a whole.
The Company believes that inflation will have a general impact on the business in line with overall
price increases, increases in the cost of borrowing, and operating in an inflationary economy. We cannot predict the timing, strength, or duration of any inflationary period or economic slowdown or its ultimate impact on the Company. If the
conditions in the general economy significantly deviate from present levels and continue to deteriorate it could have a material adverse effect on the Group s business, financial condition, results of operations and growth prospects.
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Notes to the Unaudited Condensed Consolidated Interim Financial Statements
The Group has primarily funded its operations with proceeds from the issuance of equity and the issuance of loans and borrowings to both
related parties and third parties. The Group has also incurred recurring losses since its inception, including net losses of $184.5 million and $273.9 million for the six months ended 30 June 2022 and 2021, respectively, and had an
accumulated deficit of $1,325.0 million as of 30 June 2022. The Group has not generated positive operational cash flow, largely due to the continued focus on biosimilar product development and expansion efforts.
As of 30 June 2022, the Group has cash and cash equivalents, excluding restricted cash, of $128.4 million and net current assets
less current liabilities of ($39.1) million. The closing of the Business Combination and the PIPE Financing provided the Group with gross proceeds of $184.7 million that is expected to be used to finance the continuing development and
commercialization of its biosimilar products. In advance of the closing of the Business Combination and in preparation for redemptions of OACB Ordinary Shares as further described below, the Company has secured a Standby Equity Purchase Agreement
( SEPA ) facility from YA II PN, Ltd ( Yorkville ) for up to $150.0 million. The Company also continues to finalize the terms of a debt facility with Sculptor Capital Investments, LLC ( Sculptor ). The debt
facility is currently expected to provide Alvotech with funding between $75.0 million and $125.0 million. Negotiations remain ongoing, which may impact the final terms of the facility. The two facilities are intended to replace redemptions
by OACB shareholders that occurred as part of the Business Combination.
Additionally, the Group expects to continue to source its
financing during the development of its biosimilar products from new and existing out-license contracts with customers.
Furthermore, while the COVID-19 pandemic has not and is not expected to have a material financial or
operational impact on the Group, the pandemic may significantly impact the Group s business, biosimilar product development and expansion efforts, corporate development objectives and the value of and market for the Ordinary Shares. In light of
these conditions and events, management evaluated whether there is substantial doubt about the Group s ability to continue as a going concern within one year after the date that the unaudited condensed consolidated interim financial statements
As such, the unaudited condensed consolidated interim financial statements have been prepared on a going concern basis.
Management continues to pursue the funding plans as described above, however there is no assurance that the Group will be successful in obtaining sufficient funding on terms acceptable to the Group to fund continuing operations, if at all. If
financing is obtained, the terms of such financing may adversely affect the holdings or the rights of the Group s shareholders. The ability to obtain funding, therefore, is outside of management s control and is a material uncertainty that
may cast significant doubt upon the Group s ability to continue as a going concern.
The unaudited condensed consolidated interim financial statements of the Group as of and for the six months ended 30 June 2022 have been
prepared in accordance and in compliance with International Accounting Standard 34 Interim Financial Reporting (IAS 34) as issued by the International Accounting Standards Board (IASB).