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ORPH Orphazyme A/S

Filed: 2 Mar 21, 7:44am

Exhibit 99.3 ANNUAL REPORT 2020 Advancing Lleyton Coombes Lleyton is 14 years old and suffers from treatment in Niemann-Pick disease Type C (NPC). Here he is pictured on set of award-win- ning Niemann-Pick UK (NPUK) short film “Go Make Memories” (2019). Lleyton was the only live-action actor featured in neurodegenerative the production, with his story directly in- spiring the film along with many other members of the NPUK Community. © Copyright 2020 NPUK, this picture is rare diseases kindly lent to Orphazyme A/S by NPUKExhibit 99.3 ANNUAL REPORT 2020 Advancing Lleyton Coombes Lleyton is 14 years old and suffers from treatment in Niemann-Pick disease Type C (NPC). Here he is pictured on set of award-win- ning Niemann-Pick UK (NPUK) short film “Go Make Memories” (2019). Lleyton was the only live-action actor featured in neurodegenerative the production, with his story directly in- spiring the film along with many other members of the NPUK Community. © Copyright 2020 NPUK, this picture is rare diseases kindly lent to Orphazyme A/S by NPUK


TABLE OF CONTENTS 01. 03. ACCOMPLISHMENTS AND GOVERNANCE AND RESULTS 2020 SHARES At a Glance ....................................................... 3 Corporate Governance ................................. 23 2020 Achievements ...................................... 4 Corporate Social Responsibility ............... 26 Letter from the Chairman ........................... 5 Risk Management ........................................... 30 Key Figures ....................................................... 7 Shareholder Information ............................. 32 Financial Review ............................................. 8 Board of Directors ......................................... 34 Management .................................................... 37 FINANCIAL REVIEW Glossary .............................................................. 38 Page 8 Corporate Information ................................. 39 THE KIRK FAMILY JOURNEY IN NPC Page 12 04. FINANCIAL STATEMENTS Consolidated Financial Statements ........ 40 02. Consolidated Profit or Loss ........................ 42 Consolidated Financial Position ............... 43 OUR BUSINESS Consolidated Changes in Shareholders’ 2021 Outlook .................................................... 9 Equity .................................................................. 44 Priorities 2021 .................................................. 10 Consolidated Cash Flows ............................ 45 Why We Show Up ........................................... 11 Notes to Financial Statements .................. 46 The Kirk Family Journey in NPC* ............. 12 Parent Company Financial PIVOTAL READOUTS DUE PRIORITIES 2021 Product Pipeline .............................................. 13 Statements ....................................................... 82 Page 10 SPOTLIGHT ON Launch Preparations ..................................... 20 Statements and Signatures ......................... 94 LAUNCH PREPARATIONS Partnerships ..................................................... 22 Independent Auditors’ Report .................. 96 Page 20 *Picture kindly supplied to Orphazyme A/S by the Kirk Family Orphazyme Annual Report 2020 Table of Contents 2TABLE OF CONTENTS 01. 03. ACCOMPLISHMENTS AND GOVERNANCE AND RESULTS 2020 SHARES At a Glance ....................................................... 3 Corporate Governance .................................. 23 2020 Achievements ...................................... 4 Corporate Social Responsibility ............... 26 Letter from the Chairman ........................... 5 Risk Management ............................................ 30 Key Figures ....................................................... 7 Shareholder Information ............................. 32 Financial Review ............................................. 8 Board of Directors ......................................... 34 Management .................................................... 37 FINANCIAL REVIEW Glossary ............................................................. 38 Page 8 Corporate Information .................................. 39 THE KIRK FAMILY JOURNEY IN NPC Page 12 04. FINANCIAL STATEMENTS Consolidated Financial Statements ........ 40 02. Consolidated Profit or Loss ........................ 42 Consolidated Financial Position ................ 43 OUR BUSINESS Consolidated Changes in Shareholders’ 2021 Outlook .................................................... 9 Equity ................................................................. 44 Priorities 2021 ................................................... 10 Consolidated Cash Flows ............................ 45 Why We Show Up .......................................... 11 Notes to Financial Statements .................. 46 The Kirk Family Journey in NPC* ............. 12 Parent Company Financial PIVOTAL READOUTS DUE PRIORITIES 2021 Product Pipeline ............................................. 13 Statements ....................................................... 82 Page 10 SPOTLIGHT ON Launch Preparations ..................................... 20 Statements and Signatures ........................ 94 LAUNCH PREPARATIONS Partnerships ..................................................... 22 Independent Auditors’ Report ................... 96 Page 20 *Picture kindly supplied to Orphazyme A/S by the Kirk Family Orphazyme Annual Report 2020 Table of Contents 2


AT A GLANCE APPROACHING COMMERCIALIZATION: Pioneering the Heat-Shock Protein FIRST POTENTIAL APPROVAL IN 2021 response for neurodegenerative Completed important key regulatory filings in US and EU for arimoclomol in NPC during rare diseases 2020; eagerly awaiting decisions PIPELINE-IN-A-PRODUCT PIVOTAL ARIMOCLOMOL OPPORTUNITY RESULTS 2 DUE H1 2021 Arimoclomol’s current programs could target • First-in-class Heat-Shock Protein (HSP) amplifier patients in Amyotrophic Lateral Sclerosis (ALS) • Breakthrough Designation in NPC NPC, ALS, Inclusion Body Myositis (IBM) ~100K IBM, & Gaucher • Orphan Drug & Fast Track Designations in NPC, ALS, IBM EXPANDING OUR GLOBAL FOOTPRINT AHEAD OF LAUNCH DKK Global HQ: Copenhagen, Denmark US: Chicago, USA 727M International: CH, DE, FR 33 (USD 119M) Dual listing on Nasdaq: 141 FTEs in pre-launch ORPHA.CO | ORPH.US cash at year-end 2020 Total employees & commercial Orphazyme Annual Report 2020 At a Glance 3AT A GLANCE APPROACHING COMMERCIALIZATION: Pioneering the Heat-Shock Protein FIRST POTENTIAL APPROVAL IN 2021 response for neurodegenerative Completed important key regulatory filings in US and EU for arimoclomol in NPC during rare diseases 2020; eagerly awaiting decisions PIPELINE-IN-A-PRODUCT PIVOTAL ARIMOCLOMOL OPPORTUNITY RESULTS 2 DUE H1 2021 Arimoclomol’s current programs could target • First-in-class Heat-Shock Protein (HSP) amplifier patients in Amyotrophic Lateral Sclerosis (ALS) • Breakthrough Designation in NPC NPC, ALS, Inclusion Body Myositis (IBM) ~100K IBM, & Gaucher • Orphan Drug & Fast Track Designations in NPC, ALS, IBM EXPANDING OUR GLOBAL FOOTPRINT AHEAD OF LAUNCH DKK Global HQ: Copenhagen, Denmark US: Chicago, USA 727M International: CH, DE, FR 33 (USD 119M) Dual listing on Nasdaq: 141 FTEs in pre-launch ORPHA.CO | ORPH.US cash at year-end 2020 Total employees & commercial Orphazyme Annual Report 2020 At a Glance 3


ACHIEVEMENTS FEBRUARY JANUARY JANUARY 1 Launched US EAP for NPC Completed financing of approx. Positive arimoclomol open-label DKK 745 million (USD 110 million) Phase 2/3 extension data in NPC DKK 2020 SEPTEMBER JUNE MAY U.S. FDA acceptance and Priority Review Arimoclomol Phase 2 Gaucher disease data demon- U.S. Fast Track Designation for 2 of NDA for arimoclomol for NPC strating marked improvements in key clinical markers arimoclomol in ALS OCTOBER NOVEMBER NOVEMBER Completed global offering and U.S. IPO raising Submitted European Marketing Authorisation Established US main office in approx. DKK 534 million (USD 84 million) Application for arimoclomol for treatment of NPC Chicago, Illinois, USA $ 2021 1. Early Access Program 2. New Drug Application Orphazyme Annual Report 2020 Achievements 4ACHIEVEMENTS FEBRUARY JANUARY JANUARY 1 Launched US EAP for NPC Completed financing of approx. Positive arimoclomol open-label DKK 745 million (USD 110 million) Phase 2/3 extension data in NPC DKK 2020 SEPTEMBER JUNE MAY U.S. FDA acceptance and Priority Review Arimoclomol Phase 2 Gaucher disease data demon- U.S. Fast Track Designation for 2 of NDA for arimoclomol for NPC strating marked improvements in key clinical markers arimoclomol in ALS OCTOBER NOVEMBER NOVEMBER Completed global offering and U.S. IPO raising Submitted European Marketing Authorisation Established US main office in approx. DKK 534 million (USD 84 million) Application for arimoclomol for treatment of NPC Chicago, Illinois, USA $ 2021 1. Early Access Program 2. New Drug Application Orphazyme Annual Report 2020 Achievements 4


LETTER FROM THE CHAIRMAN BRINGING AN INNOVATIVE THERAPY TO PATIENTS IN URGENT NEED All of us at Orphazyme are inspired by the opportunity to profoundly impact the communities we serve. As we eagerly anticipate the first approval of our Heat-Shock Protein amplifier – arimoclomol – we are focused and ready to deliver this innovative treatment to the Niemann-Pick disease Type C (NPC) community and remain committed to expanding its potential in additional underserved diseases. Orphazyme Annual Report 2020 Letter from the Chairman 5LETTER FROM THE CHAIRMAN BRINGING AN INNOVATIVE THERAPY TO PATIENTS IN URGENT NEED All of us at Orphazyme are inspired by the opportunity to profoundly impact the communities we serve. As we eagerly anticipate the first approval of our Heat-Shock Protein amplifier – arimoclomol – we are focused and ready to deliver this innovative treatment to the Niemann-Pick disease Type C (NPC) community and remain committed to expanding its potential in additional underserved diseases. Orphazyme Annual Report 2020 Letter from the Chairman 5


communities underscore the sense of generation HSP amplifiers and lysosome This is a truly momentous time at Orphazyme. The urgency and commitment to progress arim- biology-targeted compounds. We are confi - company is poised to bring its innovative Heat-Shock oclomol as an innovative therapy for under- dent that these efforts will support the com - Protein (HSP) response therapy, arimoclomol, to the served diseases. Despite the challenges pany’s ambition to bring innovative new faced by all of us as a result of the ongoing therapies to patients. NPC community. Further, we are closer than ever before COVID-19 pandemic, the Orphazyme team in understanding the potential of arimoclomol in advanc- had a very productive 2020 and is closer On March 1, 2021, we announced Christophe than ever to delivering on its ambition to Bourdon will join Orphazyme as Chief Exec- ing care for people with other rare neurodegenerative bring arimoclomol to patients. utive Officer, starting April 1, 2021. Christo - diseases. The hard work of so many contributors helped phe has a strong track record in launching Now, with so much incredible momentum and commercializing rare and non-rare dis- Orphazyme achieve critical milestones that will shape the and a strong financial position, Orphazyme ease products in Europe and the United company’s future. looks forward with purpose and optimism to States, with recent senior positions at 2021 and beyond. Amgen and Alexion. We are delighted to have him lead the company into our next Orphazyme’s first priority for this year is to growth phase. deliver on its mission to serve the patient communities that have been eagerly await- I am privileged to have been involved in this ing new solutions. Should the company journey during my tenure as a member of • Orphazyme successfully completed the dual listing with Nasdaq Copenhagen receive regulatory approvals, it will have the the Board of Directors and as Chairman, submission of two key regulatory appli- and U.S. strengthens the company’s opportunity to bring arimoclomol to the since 2014, and to witness this successful cations to the U.S. Food and Drug financial position and supports its NPC communities in the U.S. and Europe. transition. On behalf of the Board of Direc- Administration (FDA) and the European expansion plans for the future The company has established an Early tors, I would like to thank our shareholders, Medicines Agency (EMA) for arimoclo- Access Program in the U.S., France, and employees, partners, and the many mem- mol in its first indication of NPC In December 2020, Orphazyme parted ways Germany to provide access for eligible bers of the community, including patients with former Chief Executive Officer, Kim patients until arimoclomol is approved. The and families, physicians and researchers, • Orphazyme advanced its promising Stratton. The Board appreciates Ms. Strat- company is exploring options to offer simi - and patient organizations, who have pro- pipeline programs with trial progress ton’s important contributions that have lar programs in additional countries in vided critical perspectives and guidance and data presentations that shape the helped put the company on track to becom- Europe. In line with the company’s growth that has shaped our journey. Without your community’s understanding of the ing a global commercial-stage company. plans, it will continue to invest in its manu- continued trust and support, none of this Heat-Shock Protein response. The Orphazyme is well-positioned for growth; in facturing and operational footprint. would be possible. potential of arimoclomol in new areas addition to its assets in development, the was reinforced by promising Phase 2 company has an executive team that brings Beyond NPC, Orphazyme is expecting data data in Gaucher disease and with the a wealth of rare disease experience across readouts from two pivotal trials of arimoclo- Best regards receipt of the FDA’s Fast Track Desig- geographies and expertise, spanning clinical mol in ALS and Inclusion Body Myositis nation for the treatment of Amyo- development to commercialization. Orpha- (IBM) during the first half of 2021. Further, trophic Lateral Sclerosis (ALS) zyme’s employees are connected by a set of Orphazyme continues to invest in its • All of this has been reinforced by a suc- core values focused on care, courage, perse- research on the Heat-Shock Protein cessful financing round and an initial verance, and integrity. The company’s close response and lysosome biology, where the Georges Gemayel public offering (IPO) in the U.S. This ties to the research, medical, and patient team is actively working to develop the next Chairman of the Board of Directors Orphazyme Annual Report 2020 Letter from the Chairman 6communities underscore the sense of generation HSP amplifiers and lysosome This is a truly momentous time at Orphazyme. The urgency and commitment to progress arim- biology-targeted compounds. We are confi - company is poised to bring its innovative Heat-Shock oclomol as an innovative therapy for under- dent that these efforts will support the com - Protein (HSP) response therapy, arimoclomol, to the served diseases. Despite the challenges pany’s ambition to bring innovative new faced by all of us as a result of the ongoing therapies to patients. NPC community. Further, we are closer than ever before COVID-19 pandemic, the Orphazyme team in understanding the potential of arimoclomol in advanc- had a very productive 2020 and is closer On March 1, 2021, we announced Christophe than ever to delivering on its ambition to Bourdon will join Orphazyme as Chief Exec- ing care for people with other rare neurodegenerative bring arimoclomol to patients. utive Officer, starting April 1, 2021. Christo - diseases. The hard work of so many contributors helped phe has a strong track record in launching Now, with so much incredible momentum and commercializing rare and non-rare dis- Orphazyme achieve critical milestones that will shape the and a strong financial position, Orphazyme ease products in Europe and the United company’s future. looks forward with purpose and optimism to States, with recent senior positions at 2021 and beyond. Amgen and Alexion. We are delighted to have him lead the company into our next Orphazyme’s first priority for this year is to growth phase. deliver on its mission to serve the patient communities that have been eagerly await- I am privileged to have been involved in this ing new solutions. Should the company journey during my tenure as a member of • Orphazyme successfully completed the dual listing with Nasdaq Copenhagen receive regulatory approvals, it will have the the Board of Directors and as Chairman, submission of two key regulatory appli- and U.S. strengthens the company’s opportunity to bring arimoclomol to the since 2014, and to witness this successful cations to the U.S. Food and Drug financial position and supports its NPC communities in the U.S. and Europe. transition. On behalf of the Board of Direc- Administration (FDA) and the European expansion plans for the future The company has established an Early tors, I would like to thank our shareholders, Medicines Agency (EMA) for arimoclo- Access Program in the U.S., France, and employees, partners, and the many mem- mol in its first indication of NPC In December 2020, Orphazyme parted ways Germany to provide access for eligible bers of the community, including patients with former Chief Executive Officer, Kim patients until arimoclomol is approved. The and families, physicians and researchers, • Orphazyme advanced its promising Stratton. The Board appreciates Ms. Strat- company is exploring options to offer simi - and patient organizations, who have pro- pipeline programs with trial progress ton’s important contributions that have lar programs in additional countries in vided critical perspectives and guidance and data presentations that shape the helped put the company on track to becom- Europe. In line with the company’s growth that has shaped our journey. Without your community’s understanding of the ing a global commercial-stage company. plans, it will continue to invest in its manu- continued trust and support, none of this Heat-Shock Protein response. The Orphazyme is well-positioned for growth; in facturing and operational footprint. would be possible. potential of arimoclomol in new areas addition to its assets in development, the was reinforced by promising Phase 2 company has an executive team that brings Beyond NPC, Orphazyme is expecting data data in Gaucher disease and with the a wealth of rare disease experience across readouts from two pivotal trials of arimoclo- Best regards receipt of the FDA’s Fast Track Desig- geographies and expertise, spanning clinical mol in ALS and Inclusion Body Myositis nation for the treatment of Amyo- development to commercialization. Orpha- (IBM) during the first half of 2021. Further, trophic Lateral Sclerosis (ALS) zyme’s employees are connected by a set of Orphazyme continues to invest in its • All of this has been reinforced by a suc- core values focused on care, courage, perse- research on the Heat-Shock Protein cessful financing round and an initial verance, and integrity. The company’s close response and lysosome biology, where the Georges Gemayel public offering (IPO) in the U.S. This ties to the research, medical, and patient team is actively working to develop the next Chairman of the Board of Directors Orphazyme Annual Report 2020 Letter from the Chairman 6


KEY FIGURES (TDKK) 2020 2019 2018 2017 2016 (TDKK) 2020 2019 2018 2017 2016 Statement of profit and loss and Cash flow statement other c omprehensive income Cash flow from operating activities (539,076) (326,818) (234,764) (95,426) (54,724) Research and development Cash flow from investing activities (5,101) (3,285) (2,346) (1,491) (238) expenses (361,284) (285,413) (196,525) (99,048) (55,817) Cash flow from financing activities 1,159,422 58,939 - 714,303 1,300 General and administrative expenses (247,250) (50,541) (35,127) (31,994) (7,703) Other Operating loss (608,534) (335,954) (231,652) (131,042) (63,520) 1 Share price (DKK) 67.10 72.40 43.35 76.00 - Net financial items (26,627) (7,043) (3,448) (662) 85 Total outstanding shares 34,697,703 19,984,799 19,939,564 19,928,184 3,360,541 Loss before tax (635,161) (342,997) (235,100) (131,704) (63,435) 2 Market capitalization (MDKK) 2,328.2 1,446.9 864.4 1,514.5 - Income tax benefit 1,915 5,500 5,500 5,500 5,500 3 Equity ratio 75.4% 29.3% 88.0% 92.9% 54.8% Net loss for the period (633,246) (337,497) (229,600) (126,204) (57,935) 4 Equity per share (DKK) 17.88 2.65 19.47 30.90 5.21 Total comprehensive loss (632,641) (337,430) (229,558) (126,204 (57,935) Average number of employees 117 74 46 26 17 Loss per share, basic (DKK) (22.32) (16.85)* (11.47)* (10.43) (5.89) Number of employees at the end of the year 141 86 57 34 21 Statement of financial position Intangible assets 12,454 10,539 10,744 9,853 - Right-of-use assets 14,859 13,903 - - - The comparatives figures for 2018-2015 have not been restated following the adoption of Property, plant, and equipment 4,687 3,685 1,940 1,851 1,225 IFRS 16 Leases on January 1, 2019 by use of the modified retrospective approach. Total non-current assets 38,829 32,529 17,965 14,864 4,047 Cash 726,929 123,588 394,706 631,735 14,349 (1) T here is no official share price for the reporting periods prior to 2017 since the Company only went public in 2017 (2) Other current assets 56,735 24,637 28,678 16,218 13,545 Mark et cap is calculated as the share price multiplied with the total outstanding shares as of the balance sheet date (3) E quity ratio is calculated as the equity divided by the total assets as of the balance sheet date Total assets 822,493 180,754 441,349 662,817 31,941 (4) E quity per share is calculated as the total equity divided by the total outstanding shares as of the balance sheet date Share capital 34,698 19,984 19,939 19,928 3,361 Total equity 620,525 52,969 388,249 615,702 17,509 Non-current borrowings 23,830 51,606 - - - Non-current lease liabilities 9,877 9,813 - - - Total current liabilities 166,627 65,988 52,995 47,115 14,432 * Adjusted retrospectively, see Note 4.3 in consolidated financial statements Orphazyme Annual Report 2020 Key Figures 7KEY FIGURES (TDKK) 2020 2019 2018 2017 2016 (TDKK) 2020 2019 2018 2017 2016 Statement of profit and loss and Cash flow statement other c omprehensive income Cash flow from operating activities (539,076) (326,818) (234,764) (95,426) (54,724) Research and development Cash flow from investing activities (5,101) (3,285) (2,346) (1,491) (238) expenses (361,284) (285,413) (196,525) (99,048) (55,817) Cash flow from financing activities 1,159,422 58,939 - 714,303 1,300 General and administrative expenses (247,250) (50,541) (35,127) (31,994) (7,703) Other Operating loss (608,534) (335,954) (231,652) (131,042) (63,520) 1 Share price (DKK) 67.10 72.40 43.35 76.00 - Net financial items (26,627) (7,043) (3,448) (662) 85 Total outstanding shares 34,697,703 19,984,799 19,939,564 19,928,184 3,360,541 Loss before tax (635,161) (342,997) (235,100) (131,704) (63,435) 2 Market capitalization (MDKK) 2,328.2 1,446.9 864.4 1,514.5 - Income tax benefit 1,915 5,500 5,500 5,500 5,500 3 Equity ratio 75.4% 29.3% 88.0% 92.9% 54.8% Net loss for the period (633,246) (337,497) (229,600) (126,204) (57,935) 4 Equity per share (DKK) 17.88 2.65 19.47 30.90 5.21 Total comprehensive loss (632,641) (337,430) (229,558) (126,204 (57,935) Average number of employees 117 74 46 26 17 Loss per share, basic (DKK) (22.32) (16.85)* (11.47)* (10.43) (5.89) Number of employees at the end of the year 141 86 57 34 21 Statement of financial position Intangible assets 12,454 10,539 10,744 9,853 - Right-of-use assets 14,859 13,903 - - - The comparatives figures for 2018-2015 have not been restated following the adoption of Property, plant, and equipment 4,687 3,685 1,940 1,851 1,225 IFRS 16 Leases on January 1, 2019 by use of the modified retrospective approach. Total non-current assets 38,829 32,529 17,965 14,864 4,047 Cash 726,929 123,588 394,706 631,735 14,349 (1) T here is no official share price for the reporting periods prior to 2017 since the Company only went public in 2017 (2) Other current assets 56,735 24,637 28,678 16,218 13,545 Mark et cap is calculated as the share price multiplied with the total outstanding shares as of the balance sheet date (3) E quity ratio is calculated as the equity divided by the total assets as of the balance sheet date Total assets 822,493 180,754 441,349 662,817 31,941 (4) E quity per share is calculated as the total equity divided by the total outstanding shares as of the balance sheet date Share capital 34,698 19,984 19,939 19,928 3,361 Total equity 620,525 52,969 388,249 615,702 17,509 Non-current borrowings 23,830 51,606 - - - Non-current lease liabilities 9,877 9,813 - - - Total current liabilities 166,627 65,988 52,995 47,115 14,432 * Adjusted retrospectively, see Note 4.3 in consolidated financial statements Orphazyme Annual Report 2020 Key Figures 7


FINANCIAL REVIEW INCOME STATEMENT organization as well as expenses related to losses of DKK 13.0 million primarily due to pared to DKK 53.0 million as of December The net loss for the financial year ended increased costs for being a listed company a decrease in the US dollar versus DKK, as 31, 2019. The increase mainly reflects the December 31, 2020 was DKK 633.2 million in the U.S. well as increased interest expenses related increase in cash. compared to DKK 337.5 million for the to the Loan Agreement with Kreos of DKK same period in 2019. The increased net loss Pre-launch expenses represented DKK 112.2 6.6 million. CASH FLOWS was primarily driven by a continued invest- million of the increase, which was mainly Cash flow from operating activities: ment in research and development activi- due to the escalation of commercial launch INCOME TAX BENEFIT Net cash used in operating activities for the ties, escalation of our commercial launch preparation activities, including the Income tax benefit for the year ended period ended December 31, 2020 was DKK preparations and strengthening of our strengthening of our U.S.-based and Swit- December 31, 2020 was DKK 1.9 million com - 539.1 million compared to DKK 326.8 million global team. zerland-based commercial team by hiring pared to DKK 5.5 million for the year ended in the year ended December 31, 2019. The 29 full-time employees. We also signifi - December 31, 2019. Income tax benefit for increased use of cash was primarily attribut- RESEARCH AND cantly increased our medical affairs activi - the two periods include a tax credit for able to the progression of clinical develop- DEVELOPMENT EXPENSES ties, particularly for NPC, as we further research and development costs at the appli- ment activities, in particular the clinical Research and development expenses for the engaged with the scientific community cable tax rate under the Danish Corporate pharmacology registration trials, as well as year ended December 31, 2020 were DKK through our communication and education Income Tax Act. The amount of the tax bene- commercial launch preparation activities. 361.3 million compared to DKK 285.4 million programs. fit in the year 2020 has been reduced by an for the year ended December 31, 2019. The income tax expense in our subsidiaries in the Cash flow from investing activities: increase of DKK 75.9 million was mainly Administrative expenses represented the U.S. and Switzerland. Our corporate income Net cash used in investing activities for the attributable to costs related to three clinical remaining DKK 84.5 million increase, which tax rate in Denmark was 22%. However, for period ended December 31, 2020 was DKK pharmacology registrational trials that was mainly due to share-based compensa- the year ended December 31, 2020 and 2019, 5.1 million compared to DKK 3.3 million in ramped up and took place mainly during tion expenses attributed to long-term incen- we did not recognize any deferred tax assets the year ended December 31, 2019. The 2020 in addition to increased clinical safety tive programs; audit, legal, investor rela- in Denmark considering uncertainties sur- increase was mainly due to the investment reporting activity in the ongoing clinical tri- tions, other external assistance engaged to rounding their potential utilization. in our new ERP system. als. In addition, our employee costs support us in the requirements of being a increased as a result of 12 more full-time listed entity in the U.S; and the hiring of 20 STATEMENT OF Cash flow from financing activities: research and development employees hired additional administrative, finance, legal and FINANCIAL POSITION Net cash provided by financing activities during 2020. IT full-time employees to support our grow- Cash: As of December 31, 2020, Orphazyme for the period ended December 31, 2020 ing organization. had cash of DKK 726.9 million compared to was DKK 1,159.4 million compared to DKK GENERAL AND DKK 123.6 million as of December 31, 2019. 58.9 for the year ended December 31, ADMINISTRATIVE EXPENSES NET FINANCIAL ITEMS The increase in cash was primarily due to net 2019. The increase of DKK 1,100.5 million General and administrative expenses for the Net financial expenses for the year ended proceeds from our directed issue and private reflects the net proceeds of DKK 694.2 year ended December 31, 2020 were DKK December 31, 2020 were DKK 26.6 million placement in February 2020 and our global million from our directed issue and private 247.3 million compared to DKK 50.5 million compared to DKK 7.0 million for the year offering and U.S. IPO in September 2020. placement in February 2020 and DKK for the year ended December 31, 2019. The ended December 31, 2019. The increase of 477.9 million from our global offering and increase of DKK 196.7 million was primarily DKK19.6 million was mainly related to an Equity: As of December 31, 2020, total U.S. listing in October 2020. due to the build-up of our commercial increase in net foreign currency exchange equity amounted to DKK 620.5 million com- Orphazyme Annual Report 2020 Financial Review 8FINANCIAL REVIEW INCOME STATEMENT organization as well as expenses related to losses of DKK 13.0 million primarily due to pared to DKK 53.0 million as of December The net loss for the financial year ended increased costs for being a listed company a decrease in the US dollar versus DKK, as 31, 2019. The increase mainly reflects the December 31, 2020 was DKK 633.2 million in the U.S. well as increased interest expenses related increase in cash. compared to DKK 337.5 million for the to the Loan Agreement with Kreos of DKK same period in 2019. The increased net loss Pre-launch expenses represented DKK 112.2 6.6 million. CASH FLOWS was primarily driven by a continued invest- million of the increase, which was mainly Cash flow from operating activities: ment in research and development activi- due to the escalation of commercial launch INCOME TAX BENEFIT Net cash used in operating activities for the ties, escalation of our commercial launch preparation activities, including the Income tax benefit for the year ended period ended December 31, 2020 was DKK preparations and strengthening of our strengthening of our U.S.-based and Swit- December 31, 2020 was DKK 1.9 million com - 539.1 million compared to DKK 326.8 million global team. zerland-based commercial team by hiring pared to DKK 5.5 million for the year ended in the year ended December 31, 2019. The 29 full-time employees. We also signifi - December 31, 2019. Income tax benefit for increased use of cash was primarily attribut- RESEARCH AND cantly increased our medical affairs activi - the two periods include a tax credit for able to the progression of clinical develop- DEVELOPMENT EXPENSES ties, particularly for NPC, as we further research and development costs at the appli- ment activities, in particular the clinical Research and development expenses for the engaged with the scientific community cable tax rate under the Danish Corporate pharmacology registration trials, as well as year ended December 31, 2020 were DKK through our communication and education Income Tax Act. The amount of the tax bene- commercial launch preparation activities. 361.3 million compared to DKK 285.4 million programs. fit in the year 2020 has been reduced by an for the year ended December 31, 2019. The income tax expense in our subsidiaries in the Cash flow from investing activities: increase of DKK 75.9 million was mainly Administrative expenses represented the U.S. and Switzerland. Our corporate income Net cash used in investing activities for the attributable to costs related to three clinical remaining DKK 84.5 million increase, which tax rate in Denmark was 22%. However, for period ended December 31, 2020 was DKK pharmacology registrational trials that was mainly due to share-based compensa- the year ended December 31, 2020 and 2019, 5.1 million compared to DKK 3.3 million in ramped up and took place mainly during tion expenses attributed to long-term incen- we did not recognize any deferred tax assets the year ended December 31, 2019. The 2020 in addition to increased clinical safety tive programs; audit, legal, investor rela- in Denmark considering uncertainties sur- increase was mainly due to the investment reporting activity in the ongoing clinical tri- tions, other external assistance engaged to rounding their potential utilization. in our new ERP system. als. In addition, our employee costs support us in the requirements of being a increased as a result of 12 more full-time listed entity in the U.S; and the hiring of 20 STATEMENT OF Cash flow from financing activities: research and development employees hired additional administrative, finance, legal and FINANCIAL POSITION Net cash provided by financing activities during 2020. IT full-time employees to support our grow- Cash: As of December 31, 2020, Orphazyme for the period ended December 31, 2020 ing organization. had cash of DKK 726.9 million compared to was DKK 1,159.4 million compared to DKK GENERAL AND DKK 123.6 million as of December 31, 2019. 58.9 for the year ended December 31, ADMINISTRATIVE EXPENSES NET FINANCIAL ITEMS The increase in cash was primarily due to net 2019. The increase of DKK 1,100.5 million General and administrative expenses for the Net financial expenses for the year ended proceeds from our directed issue and private reflects the net proceeds of DKK 694.2 year ended December 31, 2020 were DKK December 31, 2020 were DKK 26.6 million placement in February 2020 and our global million from our directed issue and private 247.3 million compared to DKK 50.5 million compared to DKK 7.0 million for the year offering and U.S. IPO in September 2020. placement in February 2020 and DKK for the year ended December 31, 2019. The ended December 31, 2019. The increase of 477.9 million from our global offering and increase of DKK 196.7 million was primarily DKK19.6 million was mainly related to an Equity: As of December 31, 2020, total U.S. listing in October 2020. due to the build-up of our commercial increase in net foreign currency exchange equity amounted to DKK 620.5 million com- Orphazyme Annual Report 2020 Financial Review 8


2021 OUTLOOK We expect 2021 to be a transformational year for Orphazyme with the anticipated approval and launch of arimoclomol in NPC DKK and two key readouts from our late-stage DKK clinical trials in IBM and ALS. The outcome and timing of these events are key factors OPERATING LOSS OPERATING EXPENSES CASH POSITION AT YEAR-END in driving our guidance for 2021, along with other assumptions and risks which are out- lined below. 100 – 150 DKK M 800 – 850 DKK M >350 DKK M 16 – 24 USD M* 130 – 138 USD M* > 57 USD M* Our 2021 outlook for operating loss, operat- ing expenses, and cash position includes the 2021 guidance 2021 guidance 2021 guidance following key assumptions: • The approval of arimoclomol for NPC in the U.S. by the PDUFA action date of Launch activities will be considerably influ - with regulators, we plan to accelerate our Should the Company find itself unable to June 17, 2021; enced by the roll-out of our commercial filing activities. attain funding, the Company may down-size • The grant of a Priority Review Voucher strategy and potential market entries. We or delay planned activities to allow funds to (PRV) upon such approval and our abil- are well-prepared to launch arimoclomol for Our R&D expenses include costs for last until December 31, 2021. Management ity to sell the PRV voucher at general- NPC within a narrow window of arimoclo- ongoing clinical trials including exten- therefore considers it appropriate to pre- ly-accepted market rates; mol being approved in the U.S. and our fore- sions and investment in our new molecu- pare these financial statements on a going • Initial revenues from arimoclomol in the cast assumes a gradual increase in sales lar entity program of next generation HSP concern basis. U.S. and named patient sales in certain through the second half of 2021, reaching amplifiers, which are currently in lead countries; DKK 60 - 120 million (~$10 - 20 million) in optimization. In addition to the key factors mentioned • Approval of arimoclomol for NPC in revenues by year-end. above, our outlook is subject to various Europe in Q4 2021; Management monitors the Company’s risks and uncertainties, including but not • Continued investments in our commer- Our outlook assumes that a PRV is funding risks and liquidity needs, with a limited to the timing of regulatory deci- cial infrastructure in the U.S. and granted and that we are able to sell the view to continue as a going concern. Sub- sions, the success of our commercial Europe to support product launches; voucher. The value of the PRVs sold during sequently, funding options are evaluated efforts and our development activities. • R&D expenses to support the advance- 2020 was between USD 95-110 million. on a continuous basis, including public or Further details on risks associated with our ment and completion of arimoclomol private debt and equity financing, in order business are outlined in the risk manage- clinical trials in IBM and ALS, including Our ALS and IBM trials for arimoclomol to ensure sufficient funding to continue ment section of this report on pages 30-31 data readout and preparations for filing, are expected to read out in H1 2021. ongoing clinical trials and commercial and in our Annual Report on Form 20-F if successful Depending on the results and discussions launch activities. filed with the SEC. *USD figures are for reference only; FX rate 1 DKK/0.16 USD Orphazyme Annual Report 2020 2021 Outlook 92021 OUTLOOK We expect 2021 to be a transformational year for Orphazyme with the anticipated approval and launch of arimoclomol in NPC DKK and two key readouts from our late-stage DKK clinical trials in IBM and ALS. The outcome and timing of these events are key factors OPERATING LOSS OPERATING EXPENSES CASH POSITION AT YEAR-END in driving our guidance for 2021, along with other assumptions and risks which are out- lined below. 100 – 150 DKK M 800 – 850 DKK M >350 DKK M 16 – 24 USD M* 130 – 138 USD M* > 57 USD M* Our 2021 outlook for operating loss, operat- ing expenses, and cash position includes the 2021 guidance 2021 guidance 2021 guidance following key assumptions: • The approval of arimoclomol for NPC in the U.S. by the PDUFA action date of Launch activities will be considerably influ - with regulators, we plan to accelerate our Should the Company find itself unable to June 17, 2021; enced by the roll-out of our commercial filing activities. attain funding, the Company may down-size • The grant of a Priority Review Voucher strategy and potential market entries. We or delay planned activities to allow funds to (PRV) upon such approval and our abil- are well-prepared to launch arimoclomol for Our R&D expenses include costs for last until December 31, 2021. Management ity to sell the PRV voucher at general- NPC within a narrow window of arimoclo- ongoing clinical trials including exten- therefore considers it appropriate to pre- ly-accepted market rates; mol being approved in the U.S. and our fore- sions and investment in our new molecu- pare these financial statements on a going • Initial revenues from arimoclomol in the cast assumes a gradual increase in sales lar entity program of next generation HSP concern basis. U.S. and named patient sales in certain through the second half of 2021, reaching amplifiers, which are currently in lead countries; DKK 60 - 120 million (~$10 - 20 million) in optimization. In addition to the key factors mentioned • Approval of arimoclomol for NPC in revenues by year-end. above, our outlook is subject to various Europe in Q4 2021; Management monitors the Company’s risks and uncertainties, including but not • Continued investments in our commer- Our outlook assumes that a PRV is funding risks and liquidity needs, with a limited to the timing of regulatory deci- cial infrastructure in the U.S. and granted and that we are able to sell the view to continue as a going concern. Sub- sions, the success of our commercial Europe to support product launches; voucher. The value of the PRVs sold during sequently, funding options are evaluated efforts and our development activities. • R&D expenses to support the advance- 2020 was between USD 95-110 million. on a continuous basis, including public or Further details on risks associated with our ment and completion of arimoclomol private debt and equity financing, in order business are outlined in the risk manage- clinical trials in IBM and ALS, including Our ALS and IBM trials for arimoclomol to ensure sufficient funding to continue ment section of this report on pages 30-31 data readout and preparations for filing, are expected to read out in H1 2021. ongoing clinical trials and commercial and in our Annual Report on Form 20-F if successful Depending on the results and discussions launch activities. filed with the SEC. *USD figures are for reference only; FX rate 1 DKK/0.16 USD Orphazyme Annual Report 2020 2021 Outlook 9


PRIORITIES 2021 2021 WILL BE A TRANSFORMA- Our top priority in the immediate term is Our commercial team is fully in place in the We look forward to announcing the out- TIONAL YEAR FOR ORPHAZYME, securing approval of arimoclomol in NPC in U.S. and we have almost completed our come of our pivotal trials in ALS and IBM. WITH POTENTIAL APPROVAL OF the U.S. and Europe, so we can serve the preparations for launch of arimoclomol in Positive results from these trials would rein- ARIMOCLOMOL IN NPC AND PIV- NPC patient community that has been Europe, where we expect to gain approval force our long-term strategy to expand ari- OTAL DATA READOUTS IN ALS eagerly awaiting a new treatment option for in Q4 2021. moclomol beyond NPC to additional neuro- AND IBM. this devastating disease. degenerative orphan diseases with significant unmet treatment needs. ALS: IBM: NPC: NPC: Phase 3 Phase 2/3 Potential U.S. Potential MAA top-line data top-line data approval and approval in EU launch Target PDUFA date: H1 2021 H1 2021 Q4 2021 June 17, 2021 Orphazyme Annual Report 2020 Priorities 2021 10PRIORITIES 2021 2021 WILL BE A TRANSFORMA- Our top priority in the immediate term is Our commercial team is fully in place in the We look forward to announcing the out- TIONAL YEAR FOR ORPHAZYME, securing approval of arimoclomol in NPC in U.S. and we have almost completed our come of our pivotal trials in ALS and IBM. WITH POTENTIAL APPROVAL OF the U.S. and Europe, so we can serve the preparations for launch of arimoclomol in Positive results from these trials would rein- ARIMOCLOMOL IN NPC AND PIV- NPC patient community that has been Europe, where we expect to gain approval force our long-term strategy to expand ari- OTAL DATA READOUTS IN ALS eagerly awaiting a new treatment option for in Q4 2021. moclomol beyond NPC to additional neuro- AND IBM. this devastating disease. degenerative orphan diseases with significant unmet treatment needs. ALS: IBM: NPC: NPC: Phase 3 Phase 2/3 Potential U.S. Potential MAA top-line data top-line data approval and approval in EU launch Target PDUFA date: H1 2021 H1 2021 Q4 2021 June 17, 2021 Orphazyme Annual Report 2020 Priorities 2021 10


We are fiercely committed to providing new therapeutic solutions for patients living with neurodegenerative diseases. WHY DO WE SHOW UP? It is an important question. We are all part of the Orphazyme team because of a shared energy and a shared vision. We are on the verge of making a real difference for people living with rare, orphan diseases. These are people who have waited far too long for an approved therapy. We get the chance to change that by supporting these patients, deepening our connection to them, and making sure they do not face #WhyWeShowUp their journey alone. This is #WhyWeShowUp. Even if we each show up for slightly different reasons, the important thing is that we do. Orphazyme Annual Report 2020 11We are fiercely committed to providing new therapeutic solutions for patients living with neurodegenerative diseases. WHY DO WE SHOW UP? It is an important question. We are all part of the Orphazyme team because of a shared energy and a shared vision. We are on the verge of making a real difference for people living with rare, orphan diseases. These are people who have waited far too long for an approved therapy. We get the chance to change that by supporting these patients, deepening our connection to them, and making sure they do not face #WhyWeShowUp their journey alone. This is #WhyWeShowUp. Even if we each show up for slightly different reasons, the important thing is that we do. Orphazyme Annual Report 2020 11


SPOTLIGHT THE KIRK FAMILY “ NPC is often difficult JOURNEY IN NPC to diagnose because symptoms and age of onset vary greatly by individual For years, Graham’s sister Paula had suf- Graham Kirk was an active 25-year-old, living a vibrant fered from a mysterious condition that life in Ireland; playing sports, starting his dream job, affected nearly every aspect of her wellbe - and dating the love of his life, Ciara. Ho wever, in ing – both physical and mental – and her health progressively worsened over time. September 2010, his life suddenly changed forever. NPC is often difficult to diagnose because Graham was diagnosed with Nieman-Pick disease symptoms and age of onset vary greatly by hold, the couple agreed that NPC would not Type C (NPC), a rare, neurodegenerative disease with individual, even for people in the same fam- define their lives; rather, together they no cure. NPC is a hereditary lysosomal disease that ily. When Paula finally received a diagnosis would make their decisions around it; of NPC, it was suggested by her doctor that embracing new experiences and building can affect the brain, nerves, spleen, and other organs, Graham also be tested, due to the genetic lasting memories. and can be fatal. nature of the condition. Today, Graham has reduced strength and Graham was shocked to learn that he, too, cramps in his hands, muscle spasms, and had NPC. At that time, an inability to move was recently prescribed hearing aids, but his eyes up and down were his only noticea- considers himself lucky that his symptoms ble symptoms. But he well understood the are manageable. Sadly, Paula passed away devastating effects of the disease as it pro - in 2012, and her family continues to advo- gresses. Paula’s condition profoundly cate for greater awareness and progress impacted their family’s life, which is a shared against NPC in her memory. And with new reality for many parents and family caregiv- innovation emerging, patients like Graham ers whose loved ones have NPC. around the world have hope for a brighter future. In the face of a daunting diagnosis, Graham and Ciara remained strong. Their first action Today, Graham and Ciara are married and was to seek support and information from quite busy raising three beautiful young Niemann-Pick UK, an organization working children. Graham is also a golfer, a devoted Graham Kirk diligently to raise awareness of NPC and friend, an uncle, and a godfather, who hap- and his family provide information, connection, and hope pens to live with NPC. The Kirks are living to those living with the disease. As they every day to the fullest and sharing their learned more about what the future might story to inspire others to do the same. Picture kindly supplied by the Kirk Family to Orphazyme A/S. Orphazyme Annual Report 2020 Patient Story 12SPOTLIGHT THE KIRK FAMILY “ NPC is often difficult JOURNEY IN NPC to diagnose because symptoms and age of onset vary greatly by individual For years, Graham’s sister Paula had suf- Graham Kirk was an active 25-year-old, living a vibrant fered from a mysterious condition that life in Ireland; playing sports, starting his dream job, affected nearly every aspect of her wellbe - and dating the love of his life, Ciara. Ho wever, in ing – both physical and mental – and her health progressively worsened over time. September 2010, his life suddenly changed forever. NPC is often difficult to diagnose because Graham was diagnosed with Nieman-Pick disease symptoms and age of onset vary greatly by hold, the couple agreed that NPC would not Type C (NPC), a rare, neurodegenerative disease with individual, even for people in the same fam- define their lives; rather, together they no cure. NPC is a hereditary lysosomal disease that ily. When Paula finally received a diagnosis would make their decisions around it; of NPC, it was suggested by her doctor that embracing new experiences and building can affect the brain, nerves, spleen, and other organs, Graham also be tested, due to the genetic lasting memories. and can be fatal. nature of the condition. Today, Graham has reduced strength and Graham was shocked to learn that he, too, cramps in his hands, muscle spasms, and had NPC. At that time, an inability to move was recently prescribed hearing aids, but his eyes up and down were his only noticea- considers himself lucky that his symptoms ble symptoms. But he well understood the are manageable. Sadly, Paula passed away devastating effects of the disease as it pro - in 2012, and her family continues to advo- gresses. Paula’s condition profoundly cate for greater awareness and progress impacted their family’s life, which is a shared against NPC in her memory. And with new reality for many parents and family caregiv- innovation emerging, patients like Graham ers whose loved ones have NPC. around the world have hope for a brighter future. In the face of a daunting diagnosis, Graham and Ciara remained strong. Their first action Today, Graham and Ciara are married and was to seek support and information from quite busy raising three beautiful young Niemann-Pick UK, an organization working children. Graham is also a golfer, a devoted Graham Kirk diligently to raise awareness of NPC and friend, an uncle, and a godfather, who hap- and his family provide information, connection, and hope pens to live with NPC. The Kirks are living to those living with the disease. As they every day to the fullest and sharing their learned more about what the future might story to inspire others to do the same. Picture kindly supplied by the Kirk Family to Orphazyme A/S. Orphazyme Annual Report 2020 Patient Story 12


PRODUCT PIPELINE ARIMOCLOMOL DESIGNATIONS STAGE DEVELOPMENT ANTICIPATED MILESTONE PC Ph1 Ph2 Ph3 Filed BTD** Orphan Fast Drug Track LYSOSOMAL STORAGE DISEASES NDA target PDUFA date # Niemann-Pick disease Type C* Filed in US and Europe June 17, 2021; submitted MAA to EMA Neurological Gaucher disease Ph 2*** (Top-line data reported) NEUROMUSCULAR DISORDERS Top-line results Amyotrophic Lateral Sclerosis Ph 3 (Registrational) H1 2021 Top-line results Inclusion Body Myositis Ph 2/3 (Registrational) H1 2021 * Early-access programs in the US, France and Germany ** Breakthrough Therapy Designation (BTD) *** Type 1 and Type 3 Gaucher disease # Rare Pediatric Disease Designation Orphazyme Annual Report 2020 Product Pipeline 13PRODUCT PIPELINE ARIMOCLOMOL DESIGNATIONS STAGE DEVELOPMENT ANTICIPATED MILESTONE PC Ph1 Ph2 Ph3 Filed BTD** Orphan Fast Drug Track LYSOSOMAL STORAGE DISEASES NDA target PDUFA date # Niemann-Pick disease Type C* Filed in US and Europe June 17, 2021; submitted MAA to EMA Neurological Gaucher disease Ph 2*** (Top-line data reported) NEUROMUSCULAR DISORDERS Top-line results Amyotrophic Lateral Sclerosis Ph 3 (Registrational) H1 2021 Top-line results Inclusion Body Myositis Ph 2/3 (Registrational) H1 2021 * Early-access programs in the US, France and Germany ** Breakthrough Therapy Designation (BTD) *** Type 1 and Type 3 Gaucher disease # Rare Pediatric Disease Designation Orphazyme Annual Report 2020 Product Pipeline 13


L e a r n m o r e a b o u t o u r s c i e n Arimoclomol selectively amplifies Heat-Shock Proteins (HSPs), the cell’s natural defense system HSPs help to protect cells under stress from the accumulation of misfolded proteins, aggregated proteins and dysfunctional lysosomes which could otherwise lead to toxicity and disease. Orphazyme Annual R Orphazyme Annual Report 20 eport 2020 20 Product Pipeline 14 14 c e a t w w w . o r p h a z y m e . c o mL e a r n m o r e a b o u t o u r s c i e n Arimoclomol selectively amplifies Heat-Shock Proteins (HSPs), the cell’s natural defense system HSPs help to protect cells under stress from the accumulation of misfolded proteins, aggregated proteins and dysfunctional lysosomes which could otherwise lead to toxicity and disease. Orphazyme Annual R Orphazyme Annual Report 20 eport 2020 20 Product Pipeline 14 14 c e a t w w w . o r p h a z y m e . c o m


ARIMOCLOMOL PIPELINE- IN-A-PRODUCT OPPORTUNITY ARIMOCLOMOL IS A FIRST-IN- Neurological CLASS HEAT-SHOCK AMPLIFIER Gaucher I & III WITH SIGNIFICANT POTENTIAL IN A RANGE OF DISORDERS. We are pioneering the use of a natural cellu- ALS lar defense system, the heat shock response, or Heat-Shock Protein (HSP) response, for the treatment of neurodegenerative orphan diseases. We believe arimoclomol is the first clinical IBM product to harness this mechanism for lys- osomal and neuromuscular disorders, and that it could have broad potential where misfolding and/or aggregation are hall- marks of disease. NPC NPC Arimoclomol is currently in clinical develop- ment in four indications, with readouts or potential approvals expected in three of these during 2021. If successful, arimoclomol ~ 2K patients ~ 100K patients could help address significant unmet medi - cal needs across a broad range of patients in the medium term. Phased neurodegenerative platform * Estimated patients represent U.S. and Europe combined and figures are rounded. Orphazyme Annual Report 2020 Product Pipeline 15 Estimated neurodegenerative market potential*ARIMOCLOMOL PIPELINE- IN-A-PRODUCT OPPORTUNITY ARIMOCLOMOL IS A FIRST-IN- Neurological CLASS HEAT-SHOCK AMPLIFIER Gaucher I & III WITH SIGNIFICANT POTENTIAL IN A RANGE OF DISORDERS. We are pioneering the use of a natural cellu- ALS lar defense system, the heat shock response, or Heat-Shock Protein (HSP) response, for the treatment of neurodegenerative orphan diseases. We believe arimoclomol is the first clinical IBM product to harness this mechanism for lys- osomal and neuromuscular disorders, and that it could have broad potential where misfolding and/or aggregation are hall- marks of disease. NPC NPC Arimoclomol is currently in clinical develop- ment in four indications, with readouts or potential approvals expected in three of these during 2021. If successful, arimoclomol ~ 2K patients ~ 100K patients could help address significant unmet medi - cal needs across a broad range of patients in the medium term. Phased neurodegenerative platform * Estimated patients represent U.S. and Europe combined and figures are rounded. Orphazyme Annual Report 2020 Product Pipeline 15 Estimated neurodegenerative market potential*


G N I D L O F S I PRODUCT PIPELINE MUTATIONS IN NPC PROTEIN NPC is a lysosomal storage disorder caused by mutations on one of two genes, NPC1 or NIEMANN-PICK NPC2. Approximately 95% of individuals with the disease have mutations in NPC1. DISEASE TYPE C Symptoms of NPC include: TREATMENT OPTIONS • Difficulties in swallowing OVERVIEW The majority of current treatment options • Loss of speech and cognition are palliative and are only directed towards • Motor coordination and ambulation issues Niemann-Pick disease Type C (NPC) is a rare, fatal neurodegenera- the specific symptoms apparent in each • Impairment of intellectual ability tive disease caused by genetic mutations that most often lead to individual (e.g. prescription of anti-seizure • Psychiatric disturbances misfolded variants of the NPC proteins. medications to prevent seizures). • Progressive memory loss Misfolded NPC protein does not function properly and is subject to Only one drug, Zavesca® (miglustat), is rapid degradation. As a consequence, lipids, that would normally currently marketed for NPC and only in 95% be cleared, build up in the lysosomes of cells throughout the body. certain jurisdictions outside the U.S., but individuals have mutations in NPC1 there is still a very large unmet need for Accumulation of lipids in the tissues and organs, including the new therapy in NPC. brain, leads to loss of cell function and organ damage. Neurologic involvement is common and results in progressive motor and cog- nitive impairment. REGULATORY STATUS Lysosomal Storage Disease Phase Upcoming milestones PREVALANCE Anticipated approval Niemann-Pick disease Filed NPC often appears in childhood but can appear at any age. Type C during 2021 The incidence of the disease is estimated to be 1 in 100,000 live births and it is estimated that there are ~1,800 patients Arimoclomol has completed a Phase 2/3 trial in patients with NPC and is currently under across U.S. and Europe. review with both the U.S. FDA and the European Medicines Agency. In more aggressive forms, NPC is frequently fatal by the time patients reach their twenties. EARLY ACCESS PROGRAM We commenced our US Early Access Program (EAP) in January 2020 and have received ~1,800 approvals to commence EAPs in Germany and in France. We are currently evaluating how to patients across U.S. and Europe* offer early access in additional countries over time. *Aptis partners Market Research for Orphazyme. Orphazyme Annual Report 2020 Product Pipeline 16 M N I E T O R PG N I D L O F S I PRODUCT PIPELINE MUTATIONS IN NPC PROTEIN NPC is a lysosomal storage disorder caused by mutations on one of two genes, NPC1 or NIEMANN-PICK NPC2. Approximately 95% of individuals with the disease have mutations in NPC1. DISEASE TYPE C Symptoms of NPC include: TREATMENT OPTIONS • Difficulties in swallowing OVERVIEW The majority of current treatment options • Loss of speech and cognition are palliative and are only directed towards • Motor coordination and ambulation issues Niemann-Pick disease Type C (NPC) is a rare, fatal neurodegenera- the specific symptoms apparent in each • Impairment of intellectual ability tive disease caused by genetic mutations that most often lead to individual (e.g. prescription of anti-seizure • Psychiatric disturbances misfolded variants of the NPC proteins. medications to prevent seizures). • Progressive memory loss Misfolded NPC protein does not function properly and is subject to Only one drug, Zavesca® (miglustat), is rapid degradation. As a consequence, lipids, that would normally currently marketed for NPC and only in 95% be cleared, build up in the lysosomes of cells throughout the body. certain jurisdictions outside the U.S., but individuals have mutations in NPC1 there is still a very large unmet need for Accumulation of lipids in the tissues and organs, including the new therapy in NPC. brain, leads to loss of cell function and organ damage. Neurologic involvement is common and results in progressive motor and cog- nitive impairment. REGULATORY STATUS Lysosomal Storage Disease Phase Upcoming milestones PREVALANCE Anticipated approval Niemann-Pick disease Filed NPC often appears in childhood but can appear at any age. Type C during 2021 The incidence of the disease is estimated to be 1 in 100,000 live births and it is estimated that there are ~1,800 patients Arimoclomol has completed a Phase 2/3 trial in patients with NPC and is currently under across U.S. and Europe. review with both the U.S. FDA and the European Medicines Agency. In more aggressive forms, NPC is frequently fatal by the time patients reach their twenties. EARLY ACCESS PROGRAM We commenced our US Early Access Program (EAP) in January 2020 and have received ~1,800 approvals to commence EAPs in Germany and in France. We are currently evaluating how to patients across U.S. and Europe* offer early access in additional countries over time. *Aptis partners Market Research for Orphazyme. Orphazyme Annual Report 2020 Product Pipeline 16 M N I E T O R P


N O I T A G E R G PRODUCT PIPELINE FAMILIAL AND SPORADIC ALS 90% AMYOTROPHIC The majority of cases of ALS have no identified genetic component (sporadic LATERAL SCLEROSIS ALS). 10% OVERVIEW TREATMENT OPTIONS Amongst familial ALS cases, 10% harbor Amyotrophic Lateral Sclerosis (ALS), also called Lou Gehrig’s disease, There are currently very limited treatment mutations in a SOD1 enzyme. is a rare neuromuscular disease which is rapidly progressive and options available to ALS patients, namely usually fatal within three to five years. The disease attacks the neurons Rilutek® (riluzole), which was approved responsible for controlling voluntary muscles, resulting in weakness in more than 20 years ago, and Radicava® Arimoclomol has so far been tested in two limbs and an effect on breathing, speaking, and swallowing, leading (edaravone), which is only available in Phase 2 ALS trials: ultimately to progressive disability and death. certain countries. One dose-ranging trial in The cause of neuron damage is unknown, but several theories exist, A high unmet medical need remains sporadic ALS including glutamate toxicity, protein misfolding, and oxidative stress. for new therapies for ALS patients. One trial in ALS caused by SOD1 mutations PREVALANCE Incidence of ALS in the U.S. is estimated to be two per 100,000 within the general population and prevalence is estimated to be TRIAL STATUS between five and seven cases within a population of 100,000 (ALS Neuromuscular disorders Phase Upcoming milestones association), equating to approximately 20,000 patients in the U.S. and 30,000 patients in Europe. Amyotrophic Lateral Expected top-line results in Ph 3 Sclerosis H1 2021 ~50,000 ALS patients in the U.S. and Europe* Orphazyme initiated a Phase 3 trial in August 2018 to support the application for a marketing 5,000 authorization in ALS. The trial is an 18-month, placebo-controlled trial including 245 patients. Diagnosed with ALS each year in the U.S. The primary endpoint is a combined assessment of function and survival (CAFS). *Estimated prevalence of between five and seven cases per 100,000; ALS association. Orphazyme Annual Report 2020 Product Pipeline 17 G A N I E T O R PN O I T A G E R G PRODUCT PIPELINE FAMILIAL AND SPORADIC ALS 90% AMYOTROPHIC The majority of cases of ALS have no identified genetic component (sporadic LATERAL SCLEROSIS ALS). 10% OVERVIEW TREATMENT OPTIONS Amongst familial ALS cases, 10% harbor Amyotrophic Lateral Sclerosis (ALS), also called Lou Gehrig’s disease, There are currently very limited treatment mutations in a SOD1 enzyme. is a rare neuromuscular disease which is rapidly progressive and options available to ALS patients, namely usually fatal within three to five years. The disease attacks the neurons Rilutek® (riluzole), which was approved responsible for controlling voluntary muscles, resulting in weakness in more than 20 years ago, and Radicava® Arimoclomol has so far been tested in two limbs and an effect on breathing, speaking, and swallowing, leading (edaravone), which is only available in Phase 2 ALS trials: ultimately to progressive disability and death. certain countries. One dose-ranging trial in The cause of neuron damage is unknown, but several theories exist, A high unmet medical need remains sporadic ALS including glutamate toxicity, protein misfolding, and oxidative stress. for new therapies for ALS patients. One trial in ALS caused by SOD1 mutations PREVALANCE Incidence of ALS in the U.S. is estimated to be two per 100,000 within the general population and prevalence is estimated to be TRIAL STATUS between five and seven cases within a population of 100,000 (ALS Neuromuscular disorders Phase Upcoming milestones association), equating to approximately 20,000 patients in the U.S. and 30,000 patients in Europe. Amyotrophic Lateral Expected top-line results in Ph 3 Sclerosis H1 2021 ~50,000 ALS patients in the U.S. and Europe* Orphazyme initiated a Phase 3 trial in August 2018 to support the application for a marketing 5,000 authorization in ALS. The trial is an 18-month, placebo-controlled trial including 245 patients. Diagnosed with ALS each year in the U.S. The primary endpoint is a combined assessment of function and survival (CAFS). *Estimated prevalence of between five and seven cases per 100,000; ALS association. Orphazyme Annual Report 2020 Product Pipeline 17 G A N I E T O R P


N O I T A G E R G PRODUCT PIPELINE CAUSE OF IBM In most cases, IBM progresses relent- lessly over 10-15 years until the patient INCLUSION BODY has lost mobility entirely and requires a wheelchair. MYOSITIS The cause of IBM is not fully known, but degenerative factors, i.e. the build-up of tangled and misfolded proteins (inclu- OVERVIEW TREATMENT OPTIONS sion bodies), play a major role. Inclusion Body Myositis (IBM, also referred to as sporadic IBM (sIBM)) The standard treatment option for IBM 10-15 years is an acquired, rare, and slowly progressive muscle disorder, which consists only of supportive therapy typically affects men and has an average age of onset after age 50. (physical, speech, and occupational). Until it is time for a wheelchair Many patients with IBM suffer from loss of fine motor skills such as There is currently no approved pharma- 5 years writing, grooming, and the ability to eat unaided, and it is associ- ceutical treatment for IBM. ated with significant morbidity, including a propensity to fall, diffi - May require walking stick as early as 5 culty swallowing, and severe disability. Up to three of every four years after symptom onset cases of IBM occur in men. PREVALANCE The prevalence of IBM has been estimated to be 4.6 per 100,000 people, equating to an estimated 40,000 individuals living with IBM TRIAL STATUS in the U.S. and Europe combined. Progressive muscle disorder Phase Upcoming milestones 4.6 per 100,000 Expected top-line results in Inclusion Body Myositis Ph 2/3 Estimated prevalance* H1 2021 A multicenter, randomized, double blind, placebo-controlled Phase 2/3 trial in patients with 40,000 IBM was initiated in August 2017. Intended to support the registration of arimoclomol for the Living with IBM in the U.S. and Europe treatment of IBM, this is a 20-month trial with IBMFRS (the Inclusion Body Myositis-Func- tional Rating Scale) as a primary endpoint. *Estimated prevalence of 4.6 per 100,000 people; Callan et al., Journal of Neuromuscular Diseases 4 (2017) Orphazyme Annual Report 2020 Product Pipeline 18 G A N I E T O R PN O I T A G E R G PRODUCT PIPELINE CAUSE OF IBM In most cases, IBM progresses relent- lessly over 10-15 years until the patient INCLUSION BODY has lost mobility entirely and requires a wheelchair. MYOSITIS The cause of IBM is not fully known, but degenerative factors, i.e. the build-up of tangled and misfolded proteins (inclu- OVERVIEW TREATMENT OPTIONS sion bodies), play a major role. Inclusion Body Myositis (IBM, also referred to as sporadic IBM (sIBM)) The standard treatment option for IBM 10-15 years is an acquired, rare, and slowly progressive muscle disorder, which consists only of supportive therapy typically affects men and has an average age of onset after age 50. (physical, speech, and occupational). Until it is time for a wheelchair Many patients with IBM suffer from loss of fine motor skills such as There is currently no approved pharma- 5 years writing, grooming, and the ability to eat unaided, and it is associ- ceutical treatment for IBM. ated with significant morbidity, including a propensity to fall, diffi - May require walking stick as early as 5 culty swallowing, and severe disability. Up to three of every four years after symptom onset cases of IBM occur in men. PREVALANCE The prevalence of IBM has been estimated to be 4.6 per 100,000 people, equating to an estimated 40,000 individuals living with IBM TRIAL STATUS in the U.S. and Europe combined. Progressive muscle disorder Phase Upcoming milestones 4.6 per 100,000 Expected top-line results in Inclusion Body Myositis Ph 2/3 Estimated prevalance* H1 2021 A multicenter, randomized, double blind, placebo-controlled Phase 2/3 trial in patients with 40,000 IBM was initiated in August 2017. Intended to support the registration of arimoclomol for the Living with IBM in the U.S. and Europe treatment of IBM, this is a 20-month trial with IBMFRS (the Inclusion Body Myositis-Func- tional Rating Scale) as a primary endpoint. *Estimated prevalence of 4.6 per 100,000 people; Callan et al., Journal of Neuromuscular Diseases 4 (2017) Orphazyme Annual Report 2020 Product Pipeline 18 G A N I E T O R P


G N I D L O F S I PRODUCT PIPELINE TYPES OF GAUCHER DISEASE There are three main subtypes of Gaucher disease distinguished, in part, by the pres- GAUCHER ence or absence of neurological symptoms such as muscle rigidity, loss of movement, DISEASE seizures, cognitive impairment. Type 1 is the most common form of Gau- cher disease, with an estimated 30% of OVERVIEW TREATMENT OPTIONS Type 1 patients going on to develop neu- rological symptoms later in life. Gaucher disease is an inherited metabolic disorder caused by The systemic symptoms of Gaucher dis- mutations in a protein called glucocerebrosidase, which leads to ease are generally treated by existing Type 2 present with acute neurological the accumulation of certain sugar-containing lipids. enzyme replacement therapy, or ERT, and symptoms substrate reduction therapy, or SRT. The usual symptoms of Gaucher disease include an abnormally Type 3 develop chronic neurological enlarged liver and/or spleen (hepatosplenomegaly), low levels of There is currently no available treatment disease circulating red blood cells (anemia), blood cells promoting clotting for neurological Gaucher disease. (thrombocytopenia), and skeletal abnormalities. 30% of Type 1 patients develop neurological symptoms PREVALANCE It is estimated that there are up to 15,000 Gaucher disease patients in the U.S. and Europe combined. Our focus is on TRIAL STATUS addressing patients with neurological Gaucher disease. Lysosomal Storage Disease Phase Upcoming milestones Explore pivotal-stage Gaucher disease Ph 2 15,000 patients across U.S. and Europe* In June 2020, results from a phase 2 study demonstrated marked improvements in key clini - cal markers, including liver and spleen size, over the initial six-month treatment period. *Estimated frequency of 1:40,000 - 60,000 live births; Siebert et al., Brain (2014) Orphazyme Annual Report 2020 Product Pipeline 19 M N I E T O R PG N I D L O F S I PRODUCT PIPELINE TYPES OF GAUCHER DISEASE There are three main subtypes of Gaucher disease distinguished, in part, by the pres- GAUCHER ence or absence of neurological symptoms such as muscle rigidity, loss of movement, DISEASE seizures, cognitive impairment. Type 1 is the most common form of Gau- cher disease, with an estimated 30% of OVERVIEW TREATMENT OPTIONS Type 1 patients going on to develop neu- rological symptoms later in life. Gaucher disease is an inherited metabolic disorder caused by The systemic symptoms of Gaucher dis- mutations in a protein called glucocerebrosidase, which leads to ease are generally treated by existing Type 2 present with acute neurological the accumulation of certain sugar-containing lipids. enzyme replacement therapy, or ERT, and symptoms substrate reduction therapy, or SRT. The usual symptoms of Gaucher disease include an abnormally Type 3 develop chronic neurological enlarged liver and/or spleen (hepatosplenomegaly), low levels of There is currently no available treatment disease circulating red blood cells (anemia), blood cells promoting clotting for neurological Gaucher disease. (thrombocytopenia), and skeletal abnormalities. 30% of Type 1 patients develop neurological symptoms PREVALANCE It is estimated that there are up to 15,000 Gaucher disease patients in the U.S. and Europe combined. Our focus is on TRIAL STATUS addressing patients with neurological Gaucher disease. Lysosomal Storage Disease Phase Upcoming milestones Explore pivotal-stage Gaucher disease Ph 2 15,000 patients across U.S. and Europe* In June 2020, results from a phase 2 study demonstrated marked improvements in key clini - cal markers, including liver and spleen size, over the initial six-month treatment period. *Estimated frequency of 1:40,000 - 60,000 live births; Siebert et al., Brain (2014) Orphazyme Annual Report 2020 Product Pipeline 19 M N I E T O R P


SPOTLIGHT LAUNCH PREPARATIONS OUR TOP PRIORITY IS TO ENSURE Our team has significant expertise in the Our U.S. team has been working closely with In Europe, we filed an MAA with EMA in WE ARE READY TO SERVE NPC rare disease field and is working at pace regulators throughout the ongoing FDA November 2020. We continued to build our PATIENTS WITHIN A NARROW globally on organizational readiness; market review process and, among other launch organization with the hiring of General Man- WINDOW OF ARIMOCLOMOL and patient access and stakeholder engage- preparations, has conducted extensive value agers for France/Benelux, DACH, and South- BEING APPROVED. ment and education to achieve this goal. and pricing research; engaged with payers; ern Europe and expanded our partnerships secured product supply and continued to with rare disease experts in RoW. We also We made substantial progress in 2020 in pre - bolster stakeholder engagement, disease increased our patient access efforts and reim - paring for potential approval of arimoclomol. awareness, and education efforts. bursement dialogue in key European markets In the U.S., we established a fit-for-purpose and continued our exchange with advisory commercial model, headquartered in Chicago, boards, KOLs, and healthcare providers. with nearly thirty industry experts. Stakeholder Engagement and Education Strong engagement with NPC medical and patient advocacy communities Market Readiness and Patient Access Focused on supporting patient access Organizational Readiness and delivering value Fit-for-purpose commercial model TM Not for promotional use. MIPLYFFA is a trademark or registered trademark of Orphazyme A/S. Arimoclomol is an investigational product candidate and is not approved for use by any regulatory agency for any therapeutic indication. Orphazyme Annual Report 2020 LAUNCH PREPARATIONS 20SPOTLIGHT LAUNCH PREPARATIONS OUR TOP PRIORITY IS TO ENSURE Our team has significant expertise in the Our U.S. team has been working closely with In Europe, we filed an MAA with EMA in WE ARE READY TO SERVE NPC rare disease field and is working at pace regulators throughout the ongoing FDA November 2020. We continued to build our PATIENTS WITHIN A NARROW globally on organizational readiness; market review process and, among other launch organization with the hiring of General Man- WINDOW OF ARIMOCLOMOL and patient access and stakeholder engage- preparations, has conducted extensive value agers for France/Benelux, DACH, and South- BEING APPROVED. ment and education to achieve this goal. and pricing research; engaged with payers; ern Europe and expanded our partnerships secured product supply and continued to with rare disease experts in RoW. We also We made substantial progress in 2020 in pre - bolster stakeholder engagement, disease increased our patient access efforts and reim - paring for potential approval of arimoclomol. awareness, and education efforts. bursement dialogue in key European markets In the U.S., we established a fit-for-purpose and continued our exchange with advisory commercial model, headquartered in Chicago, boards, KOLs, and healthcare providers. with nearly thirty industry experts. Stakeholder Engagement and Education Strong engagement with NPC medical and patient advocacy communities Market Readiness and Patient Access Focused on supporting patient access Organizational Readiness and delivering value Fit-for-purpose commercial model TM Not for promotional use. MIPLYFFA is a trademark or registered trademark of Orphazyme A/S. Arimoclomol is an investigational product candidate and is not approved for use by any regulatory agency for any therapeutic indication. Orphazyme Annual Report 2020 LAUNCH PREPARATIONS 20


We are proud to announce the global brand name for arimoclomol TM Not for promotional use. MIPLYFFA is a trademark or registered trademark of Orphazyme A/S. Arimoclomol is an investigational product candidate and is not approved for use by any regulatory agency for any therapeutic indication. Orphazyme Annual Report 2020 LAUNCH PREPARATIONS 21 21We are proud to announce the global brand name for arimoclomol TM Not for promotional use. MIPLYFFA is a trademark or registered trademark of Orphazyme A/S. Arimoclomol is an investigational product candidate and is not approved for use by any regulatory agency for any therapeutic indication. Orphazyme Annual Report 2020 LAUNCH PREPARATIONS 21 21


PARTNERSHIPS UNIVERSITY OF KANSAS AND UNIVERSITY COLLEGE LONDON License Agreement In October 2017, Orphazyme entered into a patent rights generated in the course of the 10 years from the first commercial sale in the trial (with a price per share calculated license agreement with University of Kansas on-going Phase 2/3 clinical trial of arimoclo- each country. The license agreement also based on the average closing price of the and UCL Business PLC (a wholly-owned mol for the treatment of IBM. provides that Orphazyme in consideration of shares on Nasdaq Copenhagen for the 30 subsidiary of University College London). the license shall issue bonus shares in favor days immediately prior to the date of issu- The license agreement grants Orphazyme Under the terms of the license agreement, of the University of Kansas and UCL Business ance). The shares shall be issued or delivered the global, royalty-bearing, exclusive license Orphazyme shall pay an aggregate low sin- PLC, for up to an aggregated value of USD on a yearly basis subject to certain reporting to develop and commercialize products gle-digit royalty of net sales of products 2.5 million in total depending on the size of requirements. As of December 31, 2020, under all data, know-how, inventions, and sold for the treatment of IBM for a period of the grants awarded to the universities under 58,090 bonus shares had been issued. UNIVERSITY OF MIAMI Exclusive License Agreement In September 2019, we entered into a global versity, and Massachusetts General Hospital agreed to future payments of certain license products or processes on a prod- royalty-bearing, exclusive license to all data, in a Phase 2 clinical trial of arimoclomol in fees, a milestone upon regulatory approval uct-by-product and country-by-country know-how, inventions, and technology gen- ALS with the A4V SOD1 mutation. Orpha- in ALS, and annual fees as well as a low sin- basis. Annual fees will be creditable against erated by University of Miami, Emory Uni- zyme paid USD 75K cash up-front and gle-digit royalty on net sales of licensed royalty and milestone payments. CYTRX Asset Purchase Agreement In May 2011, Orphazyme entered into an tractual rights and obligations relating to a and sales milestones and royalties on a spec- for the first product (arimoclomol) and Asset Purchase Agreement with the biop- portfolio of chemical compounds, including ified percentage of net sales of products $10.3 million for the second product devel- harmaceutical company CytRx. Pursuant to arimoclomol, to Orphazyme. Under the containing one of the compounds purchased. oped. For ALS or stroke products, the maxi- this agreement, CytRx irrevocably sold and terms of the agreement, Orphazyme paid mum aggregate amount of milestone pay- transferred certain preclinical and clinical USD 150K cash up-front and agreed to make The maximum aggregate amount of mile- ments per product is $23.8 million. Further data, patents, and other intellectual prop- future payments to CytRx contingent upon stone payments that may be triggered for details about our material agreements are erty rights, and other assets, including con- achievement of specified clinical, regulatory, non-ALS or stroke products is $12.1 million available in our filings with the SEC. Orphazyme Annual Report 2020 Partnerships 22PARTNERSHIPS UNIVERSITY OF KANSAS AND UNIVERSITY COLLEGE LONDON License Agreement In October 2017, Orphazyme entered into a patent rights generated in the course of the 10 years from the first commercial sale in the trial (with a price per share calculated license agreement with University of Kansas on-going Phase 2/3 clinical trial of arimoclo- each country. The license agreement also based on the average closing price of the and UCL Business PLC (a wholly-owned mol for the treatment of IBM. provides that Orphazyme in consideration of shares on Nasdaq Copenhagen for the 30 subsidiary of University College London). the license shall issue bonus shares in favor days immediately prior to the date of issu- The license agreement grants Orphazyme Under the terms of the license agreement, of the University of Kansas and UCL Business ance). The shares shall be issued or delivered the global, royalty-bearing, exclusive license Orphazyme shall pay an aggregate low sin- PLC, for up to an aggregated value of USD on a yearly basis subject to certain reporting to develop and commercialize products gle-digit royalty of net sales of products 2.5 million in total depending on the size of requirements. As of December 31, 2020, under all data, know-how, inventions, and sold for the treatment of IBM for a period of the grants awarded to the universities under 58,090 bonus shares had been issued. UNIVERSITY OF MIAMI Exclusive License Agreement In September 2019, we entered into a global versity, and Massachusetts General Hospital agreed to future payments of certain license products or processes on a prod- royalty-bearing, exclusive license to all data, in a Phase 2 clinical trial of arimoclomol in fees, a milestone upon regulatory approval uct-by-product and country-by-country know-how, inventions, and technology gen- ALS with the A4V SOD1 mutation. Orpha- in ALS, and annual fees as well as a low sin- basis. Annual fees will be creditable against erated by University of Miami, Emory Uni- zyme paid USD 75K cash up-front and gle-digit royalty on net sales of licensed royalty and milestone payments. CYTRX Asset Purchase Agreement In May 2011, Orphazyme entered into an tractual rights and obligations relating to a and sales milestones and royalties on a spec- for the first product (arimoclomol) and Asset Purchase Agreement with the biop- portfolio of chemical compounds, including ified percentage of net sales of products $10.3 million for the second product devel- harmaceutical company CytRx. Pursuant to arimoclomol, to Orphazyme. Under the containing one of the compounds purchased. oped. For ALS or stroke products, the maxi- this agreement, CytRx irrevocably sold and terms of the agreement, Orphazyme paid mum aggregate amount of milestone pay- transferred certain preclinical and clinical USD 150K cash up-front and agreed to make The maximum aggregate amount of mile- ments per product is $23.8 million. Further data, patents, and other intellectual prop- future payments to CytRx contingent upon stone payments that may be triggered for details about our material agreements are erty rights, and other assets, including con- achievement of specified clinical, regulatory, non-ALS or stroke products is $12.1 million available in our filings with the SEC. Orphazyme Annual Report 2020 Partnerships 22


CORPORATE GOVERNANCE SHAREHOLDERS In order to maintain the trust of the Compa- accounted for by the Chairman at the ny’s stakeholders, Orphazyme is committed annual general meeting and share-based to ensuring transparent and good corporate remuneration is offered to the Board of governance. As a Danish company listed on Directors and have a maturity of one year Nasdaq Copenhagen, Orphazyme is subject from the date of allocation. to the Danish Recommendations on Corpo- rate Governance. Orphazyme’s corporate governance state- BOARD OF DIRECTORS ment includes a summary of the Company’s The Recommendations on Corporate Gov- governance structure, a description of inter- Chairmanship Audit Nomination Remuneration ernance are best practice guidelines for the nal control and financial reporting proce- Committee Committee Committee management of companies admitted to dures, Orphazyme’s position on the Recom- trading on a regulated market. mendation on Corporate Governance as well as a complete list of the Company’s com- Orphazyme intends to comply with the Rec- ments to recommendations that the Com- ommendations on Corporate Governance in pany opted to deviate from. all material respects, however, due to the current size of the Company and the nature The corporate governance statement is of its present operations, the company has available on www.orphazyme.com EXECUTIVE MANAGEMENT opted to deviate from the recommendations in the following areas: Corporate Governance Statement • Orphazyme has decided to only publish annual reports and half-yearly financial reports; BOARD OF DIRECTORS • the annual report does not include infor- The Board of Directors is responsible for the mation on individual board members’ par- overall and strategic management and ORGANIZATION ticipation in board meetings; proper organization of Orphazyme’s busi- • the general conclusion of the latest evalu- ness and operations and it supervises the ation of the Board of Directors is not Company’s activities, management, and described in the annual report, but is organization. The Board of Directors Orphazyme Annual Report 2020 Corporate Governance 23CORPORATE GOVERNANCE SHAREHOLDERS In order to maintain the trust of the Compa- accounted for by the Chairman at the ny’s stakeholders, Orphazyme is committed annual general meeting and share-based to ensuring transparent and good corporate remuneration is offered to the Board of governance. As a Danish company listed on Directors and have a maturity of one year Nasdaq Copenhagen, Orphazyme is subject from the date of allocation. to the Danish Recommendations on Corpo- rate Governance. Orphazyme’s corporate governance state- BOARD OF DIRECTORS ment includes a summary of the Company’s The Recommendations on Corporate Gov- governance structure, a description of inter- Chairmanship Audit Nomination Remuneration ernance are best practice guidelines for the nal control and financial reporting proce- Committee Committee Committee management of companies admitted to dures, Orphazyme’s position on the Recom- trading on a regulated market. mendation on Corporate Governance as well as a complete list of the Company’s com- Orphazyme intends to comply with the Rec- ments to recommendations that the Com- ommendations on Corporate Governance in pany opted to deviate from. all material respects, however, due to the current size of the Company and the nature The corporate governance statement is of its present operations, the company has available on www.orphazyme.com EXECUTIVE MANAGEMENT opted to deviate from the recommendations in the following areas: Corporate Governance Statement • Orphazyme has decided to only publish annual reports and half-yearly financial reports; BOARD OF DIRECTORS • the annual report does not include infor- The Board of Directors is responsible for the mation on individual board members’ par- overall and strategic management and ORGANIZATION ticipation in board meetings; proper organization of Orphazyme’s busi- • the general conclusion of the latest evalu- ness and operations and it supervises the ation of the Board of Directors is not Company’s activities, management, and described in the annual report, but is organization. The Board of Directors Orphazyme Annual Report 2020 Corporate Governance 23


BOARD OF DIRECTORS Year of first Expiration charged with reviewing issues pertaining to The Board and Executive Management (1) Name Position Independent appointment of term their respective fields that are due to be assess risks on an on-going basis, including considered at board meetings. The Board of risks related to financial reporting, and Georges Gemayel Chairman Independent 2012 2021 Directors has decided to establish a Science assess measures to manage, reduce, or elim- Bo Jesper Hansen Deputy Chairman Independent 2010 2021 Committee with effect following the annual inate identified risks. The Audit Committee Martin Bonde Member Independent 2010 2021 general meeting 2021. reviews selected key risk areas on a fre- Sten Verland Member Independent 2010 2021 quent basis, including significant accounting Rémi Droller Member Independent 2015 2021 estimates and material changes to account- Committee Charters Martijn Kleijwegt Member Independent 2017 2021 ing policies. At least once a year, the Audit Committee oversees a review of current Catherine Moukheibir Member Independent 2017 2021 internal controls to determine whether they Anders Hedegaard Member Independent 2017 2021 Visit Orphazyme.com for more information are effective in relation to the risks identi - Carrolee Barlow Member Independent 2020 2021 and to view written charters. fied in the financial reporting process. (1) The Company has based its assessment of independence on the basis of criteria set out in the current Corporate Governance Recommendations (as defined below). INTERNAL CONTROLS AND Orphazyme has adopted and defined an FINANCIAL REPORTING internal control framework that identifies PROCEDURES key processes, inherent risks, and control As a foreign private issuer with American procedures in order to secure appropriate appoints and dismisses the members of the event of equal votes, the Chairman or, in his Depositary Shares listed on the Nasdaq accounting processes. The control proce- Executive Management, who are responsible absence, the Deputy Chairman shall have Global Select Market, we are required to dures include a variety of processes in for the day-to-day management of the the casting vote. The Board of Directors comply with the Sarbanes-Oxley Act. The order to prevent any misrepresentation, Company. conducts an annual evaluation of the effec - Board of Directors, the Audit Committee, significant errors, omissions, or fraudulent tiveness, performance, achievements, and and the Executive Management are respon- behaviour. The control procedures are MEETINGS competencies of the Board of Directors and sible for risk management and internal con- tested on a regular basis and reported to The Board of Directors normally holds at of the individual members as well as the col- trols into its financial reporting and the Audit Committee. least v fi e regular meetings annually, includ - laboration with the Executive Management. approve general policies in that regard. The ing a strategy review, plus ad-hoc meetings Audit Committee assists the Board of Orphazyme’s independent auditors are as required. Extraordinary board meetings The members of the Board of Directors Directors in overseeing the reporting pro- appointed for a term of one year by the are convened by the Chairman when neces- elected by the general meeting are elected cess and the most important risks involved shareholders at the Company’s annual gen- sary or when requested by a member of the for a term of one year. Members of the in this respect. The Executive Management eral meeting upon recommendation from Board of Directors, a member of the Execu- Board of Directors may be re-elected. is responsible for the effectiveness of the the Audit Committee. The Board of Direc- tive Management, or by the Company‘s internal controls and risk management and tors assesses the independence and com- auditor. The Board of Directors forms a quo- BOARD COMMITTEES for the implementation of such controls petencies and other matters pertaining to rum when more than half of its members are To support the Board of Directors in its aimed at mitigating the risk associated with the auditors. The framework for the audi- represented, including the Chairman or the duties, the Board of Directors has estab- the financial reporting. Orphazyme has tors’ compensation and duties, including Deputy Chairman. Resolutions of the Board lished and appointed an Audit Committee, internal control and financial reporting pro - audit and non-audit tasks, is agreed annu- of Directors are passed by a simple majority a Nomination Committee, and a Remunera- cedures aimed at enabling it to monitor its ally between the Board of Directors and of the votes present at the meeting. In the tion Committee. These committees are performance, operations, funding, and risk. the auditors based on recommendations from the Audit Committee. Orphazyme Annual Report 2020 Corporate Governance 24BOARD OF DIRECTORS Year of first Expiration charged with reviewing issues pertaining to The Board and Executive Management (1) Name Position Independent appointment of term their respective fields that are due to be assess risks on an on-going basis, including considered at board meetings. The Board of risks related to financial reporting, and Georges Gemayel Chairman Independent 2012 2021 Directors has decided to establish a Science assess measures to manage, reduce, or elim- Bo Jesper Hansen Deputy Chairman Independent 2010 2021 Committee with effect following the annual inate identified risks. The Audit Committee Martin Bonde Member Independent 2010 2021 general meeting 2021. reviews selected key risk areas on a fre- Sten Verland Member Independent 2010 2021 quent basis, including significant accounting Rémi Droller Member Independent 2015 2021 estimates and material changes to account- Committee Charters Martijn Kleijwegt Member Independent 2017 2021 ing policies. At least once a year, the Audit Committee oversees a review of current Catherine Moukheibir Member Independent 2017 2021 internal controls to determine whether they Anders Hedegaard Member Independent 2017 2021 Visit Orphazyme.com for more information are effective in relation to the risks identi - Carrolee Barlow Member Independent 2020 2021 and to view written charters. fied in the financial reporting process. (1) The Company has based its assessment of independence on the basis of criteria set out in the current Corporate Governance Recommendations (as defined below). INTERNAL CONTROLS AND Orphazyme has adopted and defined an FINANCIAL REPORTING internal control framework that identifies PROCEDURES key processes, inherent risks, and control As a foreign private issuer with American procedures in order to secure appropriate appoints and dismisses the members of the event of equal votes, the Chairman or, in his Depositary Shares listed on the Nasdaq accounting processes. The control proce- Executive Management, who are responsible absence, the Deputy Chairman shall have Global Select Market, we are required to dures include a variety of processes in for the day-to-day management of the the casting vote. The Board of Directors comply with the Sarbanes-Oxley Act. The order to prevent any misrepresentation, Company. conducts an annual evaluation of the effec - Board of Directors, the Audit Committee, significant errors, omissions, or fraudulent tiveness, performance, achievements, and and the Executive Management are respon- behaviour. The control procedures are MEETINGS competencies of the Board of Directors and sible for risk management and internal con- tested on a regular basis and reported to The Board of Directors normally holds at of the individual members as well as the col- trols into its financial reporting and the Audit Committee. least v fi e regular meetings annually, includ - laboration with the Executive Management. approve general policies in that regard. The ing a strategy review, plus ad-hoc meetings Audit Committee assists the Board of Orphazyme’s independent auditors are as required. Extraordinary board meetings The members of the Board of Directors Directors in overseeing the reporting pro- appointed for a term of one year by the are convened by the Chairman when neces- elected by the general meeting are elected cess and the most important risks involved shareholders at the Company’s annual gen- sary or when requested by a member of the for a term of one year. Members of the in this respect. The Executive Management eral meeting upon recommendation from Board of Directors, a member of the Execu- Board of Directors may be re-elected. is responsible for the effectiveness of the the Audit Committee. The Board of Direc- tive Management, or by the Company‘s internal controls and risk management and tors assesses the independence and com- auditor. The Board of Directors forms a quo- BOARD COMMITTEES for the implementation of such controls petencies and other matters pertaining to rum when more than half of its members are To support the Board of Directors in its aimed at mitigating the risk associated with the auditors. The framework for the audi- represented, including the Chairman or the duties, the Board of Directors has estab- the financial reporting. Orphazyme has tors’ compensation and duties, including Deputy Chairman. Resolutions of the Board lished and appointed an Audit Committee, internal control and financial reporting pro - audit and non-audit tasks, is agreed annu- of Directors are passed by a simple majority a Nomination Committee, and a Remunera- cedures aimed at enabling it to monitor its ally between the Board of Directors and of the votes present at the meeting. In the tion Committee. These committees are performance, operations, funding, and risk. the auditors based on recommendations from the Audit Committee. Orphazyme Annual Report 2020 Corporate Governance 24


AUDIT COMMITTEE members of the Audit Committee meet the ment, and to evaluate and make recom- appropriate plans and processes are in The Audit Committee reviews accounting independence requirement set out in the mendations for the remuneration of the place for nomination of candidates to the and audit matters that by decision of the Corporate Governance Recommendations. members of the Board of Directors and Executive Management. Board of Directors or the Audit Committee The Chief Executive Officer and/or the Chief the Executive Management. The Remuner- require a more thorough evaluation and Financial Officer and the Company’s exter - ation Committee shall annually evaluate the The Remuneration Committee shall consist assess the internal controls and risk manage- nal auditor shall participate in meetings of composition of the Executive Management. of no less than three members appointed by ment systems of Orphazyme. Its duties also the Audit Committee if requested by the This includes making recommendations for and among the Board of Directors. The include supervision of the Company’s audi- Audit Committee and the external auditor nomination or appointment of members of members of the Remuneration Committee tors and review of the audit process. In addi- shall attend at least one meeting per year or the Executive Management. Moreover, the meet the independence requirements set tion, the Chairwoman of the Audit Commit- the relevant part hereof where the Execu- Remuneration Committee shall assist the out in the Corporate Governance Recom- tee also monitors our Whistleblower Hotline. tive Management is not present. Board of Directors with ensuring that mendations. In accordance with the Recommendations NOMINATION COMMITTEE on Corporate Governance of the Danish The Nomination Committee shall assist the Committee on Corporate Governance issued Board of Directors with ensuring that COMMITTEE COMPOSITION in November 2017 (the ”Corporate Govern- appropriate plans and processes are in ance Recommendations“), the Company has place for the nomination of candidates to Name Audit Remuneration Nomination decided that the Chairman of the Board of the Board of Directors and the board com- Directors may not also be the Chairman of mittees. Moreover, the Nomination Commit- Georges Gemayel the Audit Committee and that the members tee shall evaluate the composition of the of the Audit Committee are required to Board of Directors. This includes making Bo Jesper Hansen meet the independence requirements set recommendations for nomination or out in the Corporate Governance Recom- appointment of members of (a) the Board Catherine Moukheibir mendations. of Directors and (b) the board committees established by the Board of Directors. Anders Hedegaard In addition, at least one member shall have accounting or audit qualifications and The Nomination Committee consists of no Martijn Kleijwegt between them, the members shall possess less than three members appointed by and such expertise and experience as to provide among the Board of Directors. The mem- Martin Bonde an updated insight into, and experience in, bers of the Nomination Committee meet the the financial, accounting, and audit aspects independence requirements set out in the Rémi Droller of companies with shares admitted to trad- Corporate Governance Recommendations. ing and official listing on a regulated market. Sten Verland REMUNERATION COMMITTEE The Audit Committee shall consist of no less The Remuneration Committee ensures Carrolee Barlow than three members appointed by and that the Company maintains a Remunera- among the Board of Directors, including the tion Policy for the members of the Board = Chairperson = Member Chairman of the Audit Committee. The of Directors and the Executive Manage- Orphazyme Annual Report 2020 Corporate Governance 25AUDIT COMMITTEE members of the Audit Committee meet the ment, and to evaluate and make recom- appropriate plans and processes are in The Audit Committee reviews accounting independence requirement set out in the mendations for the remuneration of the place for nomination of candidates to the and audit matters that by decision of the Corporate Governance Recommendations. members of the Board of Directors and Executive Management. Board of Directors or the Audit Committee The Chief Executive Officer and/or the Chief the Executive Management. The Remuner- require a more thorough evaluation and Financial Officer and the Company’s exter - ation Committee shall annually evaluate the The Remuneration Committee shall consist assess the internal controls and risk manage- nal auditor shall participate in meetings of composition of the Executive Management. of no less than three members appointed by ment systems of Orphazyme. Its duties also the Audit Committee if requested by the This includes making recommendations for and among the Board of Directors. The include supervision of the Company’s audi- Audit Committee and the external auditor nomination or appointment of members of members of the Remuneration Committee tors and review of the audit process. In addi- shall attend at least one meeting per year or the Executive Management. Moreover, the meet the independence requirements set tion, the Chairwoman of the Audit Commit- the relevant part hereof where the Execu- Remuneration Committee shall assist the out in the Corporate Governance Recom- tee also monitors our Whistleblower Hotline. tive Management is not present. Board of Directors with ensuring that mendations. In accordance with the Recommendations NOMINATION COMMITTEE on Corporate Governance of the Danish The Nomination Committee shall assist the Committee on Corporate Governance issued Board of Directors with ensuring that COMMITTEE COMPOSITION in November 2017 (the ”Corporate Govern- appropriate plans and processes are in ance Recommendations“), the Company has place for the nomination of candidates to Name Audit Remuneration Nomination decided that the Chairman of the Board of the Board of Directors and the board com- Directors may not also be the Chairman of mittees. Moreover, the Nomination Commit- Georges Gemayel the Audit Committee and that the members tee shall evaluate the composition of the of the Audit Committee are required to Board of Directors. This includes making Bo Jesper Hansen meet the independence requirements set recommendations for nomination or out in the Corporate Governance Recom- appointment of members of (a) the Board Catherine Moukheibir mendations. of Directors and (b) the board committees established by the Board of Directors. Anders Hedegaard In addition, at least one member shall have accounting or audit qualifications and The Nomination Committee consists of no Martijn Kleijwegt between them, the members shall possess less than three members appointed by and such expertise and experience as to provide among the Board of Directors. The mem- Martin Bonde an updated insight into, and experience in, bers of the Nomination Committee meet the the financial, accounting, and audit aspects independence requirements set out in the Rémi Droller of companies with shares admitted to trad- Corporate Governance Recommendations. ing and official listing on a regulated market. Sten Verland REMUNERATION COMMITTEE The Audit Committee shall consist of no less The Remuneration Committee ensures Carrolee Barlow than three members appointed by and that the Company maintains a Remunera- among the Board of Directors, including the tion Policy for the members of the Board = Chairperson = Member Chairman of the Audit Committee. The of Directors and the Executive Manage- Orphazyme Annual Report 2020 Corporate Governance 25


CORPORATE OUR CORE VALUES SOCIAL COURAGE To do what others have not. People living with diseases like NPC and ALS have waited long enough for someone to stand beside RESPONSIBILITY them in their fight. OUR BUSINESS OUR RESPONSIBILITY Orphazyme is a late-stage biopharmaceutical At Orphazyme, we are working towards a company pioneering the Heat-Shock Protein common vision: To profoundly impact the INTEGRITY (HSP) response for rare, neurodegenerative lives of patients with neurodegenerative Going the extra mile for those who need it. diseases. We are harnessing the amplification orphan diseases and their families. We share the energy, passion, and vision to of Heat-Shock Proteins, or HSPs, in order to make a meaningful difference for the rare develop and commercialize novel therapeu- Our team is connected by a set of core val- disease community. tics aimed at addressing unmet medical ues focused on care, courage, perseverance, needs in underserved diseases. and integrity. These core values underpin our corporate culture and guide our respon- Our product candidate, arimoclomol, is a sibility towards society, patients, employees, first-in-class Heat-Shock Protein amplifier, in and our stakeholders. CARE development for the treatment of Niemann- So that every day can be better than the Pick disease Type C (NPC), Inclusion Body Operating always with the highest ethical last. The treatments we develop are just the Myositis (IBM), Amyotrophic Lateral Sclero- standards, we strive to demonstrate respect start of our efforts to help people living with sis (ALS), and Gaucher disease. for key moral principles and comply with rare, orphan diseases. international regulations and good practice We are establishing our own commercial guidelines. As most of our business activi- organization to bring our products to mar- ties are outsourced, we work closely with ket, if approved, and use external suppliers our partners to ensure compliance with for manufacturing and supply. these regulations and guidelines. Below we PERSEVERANCE have described Orphazyme’s most signifi - Because bravery deserves company. People Our headquarters is in Copenhagen and we cant Corporate Social Responsibility (CSR) living with orphan diseases, their families, have subsidiaries in the U.S. and Switzer- risks and how we handle them. and their loved ones do not let odds get in land focused on facilitating our interactions their way. Neither do we. with key stakeholders including patients, healthcare providers, and payors. Orphazyme Annual Report 2020 CorporateSocial Responsibility 26 CORPORATE OUR CORE VALUES SOCIAL COURAGE To do what others have not. People living with diseases like NPC and ALS have waited long enough for someone to stand beside RESPONSIBILITY them in their fight. OUR BUSINESS OUR RESPONSIBILITY Orphazyme is a late-stage biopharmaceutical At Orphazyme, we are working towards a company pioneering the Heat-Shock Protein common vision: To profoundly impact the INTEGRITY (HSP) response for rare, neurodegenerative lives of patients with neurodegenerative Going the extra mile for those who need it. diseases. We are harnessing the amplification orphan diseases and their families. We share the energy, passion, and vision to of Heat-Shock Proteins, or HSPs, in order to make a meaningful difference for the rare develop and commercialize novel therapeu- Our team is connected by a set of core val- disease community. tics aimed at addressing unmet medical ues focused on care, courage, perseverance, needs in underserved diseases. and integrity. These core values underpin our corporate culture and guide our respon- Our product candidate, arimoclomol, is a sibility towards society, patients, employees, first-in-class Heat-Shock Protein amplifier, in and our stakeholders. CARE development for the treatment of Niemann- So that every day can be better than the Pick disease Type C (NPC), Inclusion Body Operating always with the highest ethical last. The treatments we develop are just the Myositis (IBM), Amyotrophic Lateral Sclero- standards, we strive to demonstrate respect start of our efforts to help people living with sis (ALS), and Gaucher disease. for key moral principles and comply with rare, orphan diseases. international regulations and good practice We are establishing our own commercial guidelines. As most of our business activi- organization to bring our products to mar- ties are outsourced, we work closely with ket, if approved, and use external suppliers our partners to ensure compliance with for manufacturing and supply. these regulations and guidelines. Below we PERSEVERANCE have described Orphazyme’s most signifi - Because bravery deserves company. People Our headquarters is in Copenhagen and we cant Corporate Social Responsibility (CSR) living with orphan diseases, their families, have subsidiaries in the U.S. and Switzer- risks and how we handle them. and their loved ones do not let odds get in land focused on facilitating our interactions their way. Neither do we. with key stakeholders including patients, healthcare providers, and payors. Orphazyme Annual Report 2020 CorporateSocial Responsibility 26


CSR REPORTING AREAS HUMAN RIGHTS Orphazyme conducts business in a highly RISK ANALYSIS Orphazyme acknowledges and supports the regulated industry. The company has Summary of estimated risk for key environmental and social factors: maintenance of internationally declared assessed its risks related to human rights human rights and bases its work on the UN as being limited. However, Orphazyme will VERY LIMITED Universal Declaration of Human Rights and continue to support and respect interna- the interpretation that it is the responsibility tionally declared human rights and does of the State to protect, and the companies’ not and will not employ child labor. responsibility to respect, these rights. Environment and climate Training of employees in relation Orphazyme conducts its business in accord- to whistleblower policy ance with the ethical and scientific princi - ples governing clinical research on human Reason: modest number of employees; use of external suppliers subjects, as set out in the Declaration of ANTI-CORRUPTION & BRIBERY Helsinki and the International Conference on Orphazyme is committed to maintaining Harmonization (ICH) guidelines on Good the highest standards of conduct and will LIMITED Clinical Practice (GCP). not tolerate the use of bribery or corrup- tion to achieve its business objectives. Our Orphazyme interprets human rights to com- policies on bribery and corruption are prise respect for diversity. The company clearly set out in our anti-corruption policy Social and employees promotes a diverse and inclusive workplace and our employee handbook and are rein- and has a diversity policy to increase the forced annually at mandatory meetings and diversity among members of the Board of during training. Directors of the company and other man- agement levels pursuant to section 139a of Employees must decline any expensive the Danish Companies Act and the Danish gifts, money, trips, or other such offerings Recommendations on Corporate Govern- from business contacts. This also includes Human rights ance. The Board of Directors’ target is to receiving services from suppliers without include at least two female board members paying for them. by the end of 2021. In 2020, Orphazyme expanded its Board of Directors to consist In 2021, Orphazyme expects to expand its of nine members, which is now comprised commitments in relation to anti-corruption of two women and seven men. Our diversity and bribery by adopting a specific policy policy further outlines our key goals. Fur- on gifts and entertainment to ensure ongo- Anti-corruption DKK thermore, the company has a whistleblower ing compliance with anti-corruption & brib- policy in place to allow reporting of poten- ery regulation within this area. tial violations of the respect for diversity in the workplace. Reason: business operates in a strictly regulated environment Orphazyme Annual Report 2020 CorporateSocial Responsibility 27CSR REPORTING AREAS HUMAN RIGHTS Orphazyme conducts business in a highly RISK ANALYSIS Orphazyme acknowledges and supports the regulated industry. The company has Summary of estimated risk for key environmental and social factors: maintenance of internationally declared assessed its risks related to human rights human rights and bases its work on the UN as being limited. However, Orphazyme will VERY LIMITED Universal Declaration of Human Rights and continue to support and respect interna- the interpretation that it is the responsibility tionally declared human rights and does of the State to protect, and the companies’ not and will not employ child labor. responsibility to respect, these rights. Environment and climate Training of employees in relation Orphazyme conducts its business in accord- to whistleblower policy ance with the ethical and scientific princi - ples governing clinical research on human Reason: modest number of employees; use of external suppliers subjects, as set out in the Declaration of ANTI-CORRUPTION & BRIBERY Helsinki and the International Conference on Orphazyme is committed to maintaining Harmonization (ICH) guidelines on Good the highest standards of conduct and will LIMITED Clinical Practice (GCP). not tolerate the use of bribery or corrup- tion to achieve its business objectives. Our Orphazyme interprets human rights to com- policies on bribery and corruption are prise respect for diversity. The company clearly set out in our anti-corruption policy Social and employees promotes a diverse and inclusive workplace and our employee handbook and are rein- and has a diversity policy to increase the forced annually at mandatory meetings and diversity among members of the Board of during training. Directors of the company and other man- agement levels pursuant to section 139a of Employees must decline any expensive the Danish Companies Act and the Danish gifts, money, trips, or other such offerings Recommendations on Corporate Govern- from business contacts. This also includes Human rights ance. The Board of Directors’ target is to receiving services from suppliers without include at least two female board members paying for them. by the end of 2021. In 2020, Orphazyme expanded its Board of Directors to consist In 2021, Orphazyme expects to expand its of nine members, which is now comprised commitments in relation to anti-corruption of two women and seven men. Our diversity and bribery by adopting a specific policy policy further outlines our key goals. Fur- on gifts and entertainment to ensure ongo- Anti-corruption DKK thermore, the company has a whistleblower ing compliance with anti-corruption & brib- policy in place to allow reporting of poten- ery regulation within this area. tial violations of the respect for diversity in the workplace. Reason: business operates in a strictly regulated environment Orphazyme Annual Report 2020 CorporateSocial Responsibility 27


CSR REPORTING AREAS Orphazyme has a whistleblower policy in disposal of hazardous substances. As such, We value diversity in gender, age, ethnic- WE ARE FOCUSED ON SUP- order to allow reporting of potential viola- use of hazardous substances is connected ity, nationality, religion, education, sexual PORTING THE UN SUSTAIN- tions of laws and serious violations of inter- with a very low and controlled risk. orientation, work history, opinions, and ABLE DEVELOPMENT nal policies and procedures, including fraud skills at all levels of our business. Our GOALS AND HAVE IDENTI- and anti-corruption. However, despite our very limited impact, recruitment process is focused on balanc- FIED SIX OF THESE GOALS we continue to focus on efficient manage - ing representation in our teams. Currently, WHERE WE SEE OUR WORK In 2021, Orphazyme will assess its whistle- ment of office materials and may update our staff consists of 65% females and 35% ADDING MOST VALUE blower scheme in order to ensure compli- our travel policies, based on our learnings males, including 57% female and 43% male ance with enhanced whistleblower regula- from working virtually during COVID-19, to employees at director level or above. Fur- tion as a consequence of EU Directive further reduce our impact. ther information on employee ratios can 2019/1937. be found on page 29. OUR PEOPLE AND No bribery and corruption violations EMPLOYEE-WELL BEING We operate an inclusive workplace and are identified or reported in 2020 A diverse, skilled, and healthy workforce is committed to ensuring an environment that crucial to the success of Orphazyme and is free of discrimination, harassment, and Training of employees in relation our ability to serve patients and the rare bullying. Our Workplace Assessment Survey to anti-corruption & bribery disease community. The health and safety is an important tool in identifying any issues of the employees is a high priority and and in monitoring employee satisfaction. Orphazyme continually works to ensure ENVIRONMENT & CLIMATE that all systems and processes live up to COVID-19 Orphazyme acknowledges the challenges international standards for laboratories. All During 2020, the COVID-19 pandemic has associated with climate change. employees working in the laboratories are put additional pressure on physical and men- trained in the systems, processes and man- tal health caused by health risks and lock- The company conducts its business in a datory and ongoing education in relation to downs. The Company has put great focus on highly regulated industry and climate and workplace safety. ensuring the health and well-being of our follows applicable rules on hazardous sub- employees during this time by introducing stances. However, considering the business Orphazyme conducts mandatory Health guidelines and instructions to those working of the company, Orphazyme’s general and Safety surveys (APVs) on a regular at home or needing to come into the work- potential impact on the environment and basis to assess the working environment at place and by providing personal protective climate is viewed as minimal. As such, spe- the company. The surveys address several equipment. These, along with other meas- cific environment and climate policies have aspects of the working environment such ures, seek to ensure the physical and psycho- not been developed at this time. Further- as psychological, ergonomics, and chemical logical health of our employees in connection more, Orphazyme keeps a record of all acci- working environment. with the pandemic and working from home. dents and have no records of spill of haz- ardous substances. The company has a Orphazyme offers health insurance to its We continuously monitor the pandemic and highly educated staff that follows estab - employees. its potential impact on our business and the lished procedures both during use and at health and well-being of our employees. Orphazyme Annual Report 2020 CorporateSocial Responsibility 28CSR REPORTING AREAS Orphazyme has a whistleblower policy in disposal of hazardous substances. As such, We value diversity in gender, age, ethnic- WE ARE FOCUSED ON SUP- order to allow reporting of potential viola- use of hazardous substances is connected ity, nationality, religion, education, sexual PORTING THE UN SUSTAIN- tions of laws and serious violations of inter- with a very low and controlled risk. orientation, work history, opinions, and ABLE DEVELOPMENT nal policies and procedures, including fraud skills at all levels of our business. Our GOALS AND HAVE IDENTI- and anti-corruption. However, despite our very limited impact, recruitment process is focused on balanc- FIED SIX OF THESE GOALS we continue to focus on efficient manage - ing representation in our teams. Currently, WHERE WE SEE OUR WORK In 2021, Orphazyme will assess its whistle- ment of office materials and may update our staff consists of 65% females and 35% ADDING MOST VALUE blower scheme in order to ensure compli- our travel policies, based on our learnings males, including 57% female and 43% male ance with enhanced whistleblower regula- from working virtually during COVID-19, to employees at director level or above. Fur- tion as a consequence of EU Directive further reduce our impact. ther information on employee ratios can 2019/1937. be found on page 29. OUR PEOPLE AND No bribery and corruption violations EMPLOYEE-WELL BEING We operate an inclusive workplace and are identified or reported in 2020 A diverse, skilled, and healthy workforce is committed to ensuring an environment that crucial to the success of Orphazyme and is free of discrimination, harassment, and Training of employees in relation our ability to serve patients and the rare bullying. Our Workplace Assessment Survey to anti-corruption & bribery disease community. The health and safety is an important tool in identifying any issues of the employees is a high priority and and in monitoring employee satisfaction. Orphazyme continually works to ensure ENVIRONMENT & CLIMATE that all systems and processes live up to COVID-19 Orphazyme acknowledges the challenges international standards for laboratories. All During 2020, the COVID-19 pandemic has associated with climate change. employees working in the laboratories are put additional pressure on physical and men- trained in the systems, processes and man- tal health caused by health risks and lock- The company conducts its business in a datory and ongoing education in relation to downs. The Company has put great focus on highly regulated industry and climate and workplace safety. ensuring the health and well-being of our follows applicable rules on hazardous sub- employees during this time by introducing stances. However, considering the business Orphazyme conducts mandatory Health guidelines and instructions to those working of the company, Orphazyme’s general and Safety surveys (APVs) on a regular at home or needing to come into the work- potential impact on the environment and basis to assess the working environment at place and by providing personal protective climate is viewed as minimal. As such, spe- the company. The surveys address several equipment. These, along with other meas- cific environment and climate policies have aspects of the working environment such ures, seek to ensure the physical and psycho- not been developed at this time. Further- as psychological, ergonomics, and chemical logical health of our employees in connection more, Orphazyme keeps a record of all acci- working environment. with the pandemic and working from home. dents and have no records of spill of haz- ardous substances. The company has a Orphazyme offers health insurance to its We continuously monitor the pandemic and highly educated staff that follows estab - employees. its potential impact on our business and the lished procedures both during use and at health and well-being of our employees. Orphazyme Annual Report 2020 CorporateSocial Responsibility 28


CSR REPORTING AREAS BUSINESS ETHICS Orphazyme has also adopted a Code of OUR COMMITMENT PROGRESS IN 2020 To ensure that business is conducted ethi- Business Conduct and Ethics, which con- We value personal development and pro- In 2020, the company upgraded its cally, fairly, and with integrity, Orphazyme tains guidelines which the company’s direc- vide opportunities for our employees to legal risk and compliance system. has adopted a Conflict of Interest Policy. tors, officers, and employees are expected participate in professional events and train- All employees are trained in Com- Orphazyme is committed to conducting to adhere to in the conduct of the Compa- ing courses aimed at strengthening core pany policies using our risk and business in a manner that ensures that no ny’s business. competencies. compliance system. As part of the Orphazyme representatives are influenced onboarding of new employees, they by undue personal interests. Orphazyme will continue its efforts in train - We promote the health of our employees receive training in the policies of ing its employees in conducting business and have a variety of initiatives in place the company. In case of a potential conflict of interest ethically, fairly, and with integrity. focused on general well-being, including Orphazyme representatives must receive all-staff town-hall meetings to foster approval and guidance from his or her Training of employees in business employee engagement, flexible working supervisor and Legal Aairs. ff ethics and conflict of interest. options, and “take-a-breather” sessions, focused on mindfulness. Access our Governance Documents EMPLOYEE NUMBER AND GENDER RATIOS BY LEVEL 6% 11% 27% 65% 57% 72% 22% 3% 4% 28% 78% 141 53 83 9 141 6% 35% 43% 20% 23% Orphazyme (total) Director level and above Below Director level Board of Directors Department Male Female Male Female Male Female Male Female Regulatory Clinical Commercial/Pre-launch Research CMC, QA, Controls Senior Management Administration Finance, legal, IT Orphazyme Annual Report 2020 CorporateSocialR esponsibility 29CSR REPORTING AREAS BUSINESS ETHICS Orphazyme has also adopted a Code of OUR COMMITMENT PROGRESS IN 2020 To ensure that business is conducted ethi- Business Conduct and Ethics, which con- We value personal development and pro- In 2020, the company upgraded its cally, fairly, and with integrity, Orphazyme tains guidelines which the company’s direc- vide opportunities for our employees to legal risk and compliance system. has adopted a Conflict of Interest Policy. tors, officers, and employees are expected participate in professional events and train- All employees are trained in Com- Orphazyme is committed to conducting to adhere to in the conduct of the Compa- ing courses aimed at strengthening core pany policies using our risk and business in a manner that ensures that no ny’s business. competencies. compliance system. As part of the Orphazyme representatives are influenced onboarding of new employees, they by undue personal interests. Orphazyme will continue its efforts in train - We promote the health of our employees receive training in the policies of ing its employees in conducting business and have a variety of initiatives in place the company. In case of a potential conflict of interest ethically, fairly, and with integrity. focused on general well-being, including Orphazyme representatives must receive all-staff town-hall meetings to foster approval and guidance from his or her Training of employees in business employee engagement, flexible working supervisor and Legal Aairs. ff ethics and conflict of interest. options, and “take-a-breather” sessions, focused on mindfulness. Access our Governance Documents EMPLOYEE NUMBER AND GENDER RATIOS BY LEVEL 6% 11% 27% 65% 57% 72% 22% 3% 4% 28% 78% 141 53 83 9 141 6% 35% 43% 20% 23% Orphazyme (total) Director level and above Below Director level Board of Directors Department Male Female Male Female Male Female Male Female Regulatory Clinical Commercial/Pre-launch Research CMC, QA, Controls Senior Management Administration Finance, legal, IT Orphazyme Annual Report 2020 CorporateSocialR esponsibility 29


RISK MANAGEMENT RISKS THAT THREATEN THE ACHIEVEMENT OF OUR KEY OBJECTIVES Key objective Key objective Key objective To successfully commercialize our product candidate To successfully conduct and complete clinical trials of arim- To use our expertise, including proprietary know-how, to in key markets. oclomol and gain regulatory approvals required for com- select and develop new molecular entities (NMEs) for other mercialization. rare, neurodegenerative diseases. Risks that threaten the achievement of our key objectives Commercial risks include, but are not limited to: Our ability to Risks that threaten the achievement of our key objectives Risks that threaten the achievement of our key objectives obtain and maintain orphan designation/status, which will pro- Designing and conducting clinical trials is complex, costly, To a large extent, our success depends on our ability to obtain vide us with marketing exclusivity; our ability to establish our and time-consuming and neither the results nor timing can and maintain patents and other intellectual property rights for own commercialization capabilities, including sales and mar- be predicted with any certainty. Our clinical trials have been our products. Our IP is the basis for our current products and keting expertise in core markets; our ability to partner with and may continue to be affected by the Covid-19 pandemic, any potential new leads, and thus any threats to our IP rights third parties for distribution and/or commercialization; compe- and the CRO’s who help conduct our trials, may also be could be detrimental to our future pipeline of product candi- tition from other companies developing treatments for similar impacted. There is a risk that results may not confirm previ - dates. diseases, which could render our products obsolete or limit ous results, or will produce adverse or inconclusive results; our ability to generate revenues; our ability to gain sufficient the FDA or other regulatory authorities may not consider the Our actions to mitigate the risks payor coverage and reimbursement; market acceptance by endpoints of our clinical trials to predict or provide clinically We are developing a suite of new molecular entities (NMEs) physicians & payors and issues with product manufacturing, meaningful results or demonstrate sufficient evidence to gain and have attracted highly talented resources to continue to including third-party CMOs, availability, and supply. requisite regulatory approvals. Furthermore additional clini- develop and explore new leads. In addition, we are consistently cal trials or data may be required to obtain such approvals, monitoring our IP in order to not only protect our rights and Our actions to mitigate the risks resulting in increased costs, significant delays to filing with minimize legal claims, but also strengthen our rights and cur- In anticipation of potential regulatory authorizations, we have the authorities, filing a narrower indication than anticipated rent technology platform. We believe that our patent portfolio accelerated our pre-commercialization and launch activities or the abandonment of efforts to commercialize one or more has a wide scope of protection and geographical coverage. and assess risks on an ongoing basis. Our commercial struc- of the Company’s product candidates. ture and operations are currently focused on NPC and on building an organization comprised of highly qualified talent Our actions to mitigate the risks with experience in the oversight and execution of product We make every effort to design and plan our clinical trials in launches and commercial enterprises in the rare disease space. the most diligent manner and perform them under strict regu- Our management team has a highly successful track record of latory guidelines. Professional organizations (CROs) run our launching and commercializing rare disease products across trials and we conduct inspections and internal quality audits to the United States and international markets. maximize quality, safety and efficacy. We frequently interact with regulatory authorities to ensure we are advancing our programs in the most appropriate and expedient manner. Orphazyme Annual Report 2020 Risk Management 30RISK MANAGEMENT RISKS THAT THREATEN THE ACHIEVEMENT OF OUR KEY OBJECTIVES Key objective Key objective Key objective To successfully commercialize our product candidate To successfully conduct and complete clinical trials of arim- To use our expertise, including proprietary know-how, to in key markets. oclomol and gain regulatory approvals required for com- select and develop new molecular entities (NMEs) for other mercialization. rare, neurodegenerative diseases. Risks that threaten the achievement of our key objectives Commercial risks include, but are not limited to: Our ability to Risks that threaten the achievement of our key objectives Risks that threaten the achievement of our key objectives obtain and maintain orphan designation/status, which will pro- Designing and conducting clinical trials is complex, costly, To a large extent, our success depends on our ability to obtain vide us with marketing exclusivity; our ability to establish our and time-consuming and neither the results nor timing can and maintain patents and other intellectual property rights for own commercialization capabilities, including sales and mar- be predicted with any certainty. Our clinical trials have been our products. Our IP is the basis for our current products and keting expertise in core markets; our ability to partner with and may continue to be affected by the Covid-19 pandemic, any potential new leads, and thus any threats to our IP rights third parties for distribution and/or commercialization; compe- and the CRO’s who help conduct our trials, may also be could be detrimental to our future pipeline of product candi- tition from other companies developing treatments for similar impacted. There is a risk that results may not confirm previ - dates. diseases, which could render our products obsolete or limit ous results, or will produce adverse or inconclusive results; our ability to generate revenues; our ability to gain sufficient the FDA or other regulatory authorities may not consider the Our actions to mitigate the risks payor coverage and reimbursement; market acceptance by endpoints of our clinical trials to predict or provide clinically We are developing a suite of new molecular entities (NMEs) physicians & payors and issues with product manufacturing, meaningful results or demonstrate sufficient evidence to gain and have attracted highly talented resources to continue to including third-party CMOs, availability, and supply. requisite regulatory approvals. Furthermore additional clini- develop and explore new leads. In addition, we are consistently cal trials or data may be required to obtain such approvals, monitoring our IP in order to not only protect our rights and Our actions to mitigate the risks resulting in increased costs, significant delays to filing with minimize legal claims, but also strengthen our rights and cur- In anticipation of potential regulatory authorizations, we have the authorities, filing a narrower indication than anticipated rent technology platform. We believe that our patent portfolio accelerated our pre-commercialization and launch activities or the abandonment of efforts to commercialize one or more has a wide scope of protection and geographical coverage. and assess risks on an ongoing basis. Our commercial struc- of the Company’s product candidates. ture and operations are currently focused on NPC and on building an organization comprised of highly qualified talent Our actions to mitigate the risks with experience in the oversight and execution of product We make every effort to design and plan our clinical trials in launches and commercial enterprises in the rare disease space. the most diligent manner and perform them under strict regu- Our management team has a highly successful track record of latory guidelines. Professional organizations (CROs) run our launching and commercializing rare disease products across trials and we conduct inspections and internal quality audits to the United States and international markets. maximize quality, safety and efficacy. We frequently interact with regulatory authorities to ensure we are advancing our programs in the most appropriate and expedient manner. Orphazyme Annual Report 2020 Risk Management 30


In addition to risks threatening the achievement of our key objectives, we are exposed to pervasive risks that threaten our business. PERVASIVE RISKS THAT THREATEN OUR BUSINESS Pervasive risk Pervasive risk Pervasive risk Lack of sufficient financing. Non-compliance with legislation and industry standards. Attraction and retention of talent. How the risk threatens our business How the risk threatens our business How the risk threatens our business We have not received approval for any product candidate for We are subject to regulatory and legislative obligations in The success of our company depends on our ability to attract, commercial sale and, as a result, have incurred significant order to conduct business. These requirements are subject to integrate, manage, and retain qualified personnel or key financial losses, and may continue to incur significant financial change and if we do not remain abreast of the regulations and employees. Failure to do so could have a material adverse losses in the future, which makes it difficult to assess the actively work to comply, we are at risk of either losing or not effect on the Company’s business, results of operations, cash future viability of the Company. Furthermore, in order to exe- obtaining required approvals or we may receive penalties, flows, financial condition, and/or prospects . The market for cute our strategy, we may need to raise additional capital in fines, or suspension of our approvals or registrations. There is qualified personnel is competitive and the Company may not the future and such funding may not be available on favorable also a risk that cybersecurity attacks could compromise data succeed in recruiting personnel to, for instance, commercialize terms. Failure to generate or secure sufficient financial privacy or cause interruption to our operations. Our business its products as currently envisaged, or it may fail to effectively resources could have a material adverse effect on the Compa - operations and current and future relationships with health- replace current personnel who depart with qualified or effec- ny’s business and/or prospects. care professionals, principal investigators, consultants, cus- tive successors. Our employees may not be able to come to tomers and third-party payors in the United States and else- work as a result of COVID-19. Our actions to mitigate the risks where may be subject, directly or indirectly, to applicable In 2020, we raised additional capital through a directed anti-kickback, fraud and abuse, false claims, physician pay- Our actions to mitigate the risks share issue and private placement (February) and a suc- ment transparency, health information privacy and security We believe we have established an attractive workplace at cessful global offering and IPO in the US (September), and other healthcare laws and regulations, which could expose Orphazyme, underpinned by high ethical standards. We are which further strengthened our balance sheet. Our existing us to substantial penalties. committed to maintaining a working environment that is cash, together with potential revenue from monetization of diverse, free of discrimination, harassment, and bullying. We a Priority Review Voucher and income from arimoclomol, if Our actions to mitigate the risks have established initiatives that provide opportunities for per- approved, is expected to be sufficient to support our opera - Our organization has increased regulatory resources to facili- sonal and professional development, improved health-wellbe- tions into 2022. Further details on our Outlook can be found tate interactions with regulators, actively monitor the current ing, work-life flexibility, and a participation in the overall suc - on page 9. Our financial situation and risks are assessed on regulatory environment and ensure our compliance. We have cess of Orphazyme through our long-term incentive plans. an ongoing basis and reported to the Audit Committee and implemented new IT-security procedures in order to reduce the the Board of Directors. risk of cybercrime. We have internal training requirements for all employees and contracting external suppliers, we ensure they have adequate measures in place to comply with relevant regulatory requirements. Orphazyme Annual Report 2020 Risk Management 31In addition to risks threatening the achievement of our key objectives, we are exposed to pervasive risks that threaten our business. PERVASIVE RISKS THAT THREATEN OUR BUSINESS Pervasive risk Pervasive risk Pervasive risk Lack of sufficient financing. Non-compliance with legislation and industry standards. Attraction and retention of talent. How the risk threatens our business How the risk threatens our business How the risk threatens our business We have not received approval for any product candidate for We are subject to regulatory and legislative obligations in The success of our company depends on our ability to attract, commercial sale and, as a result, have incurred significant order to conduct business. These requirements are subject to integrate, manage, and retain qualified personnel or key financial losses, and may continue to incur significant financial change and if we do not remain abreast of the regulations and employees. Failure to do so could have a material adverse losses in the future, which makes it difficult to assess the actively work to comply, we are at risk of either losing or not effect on the Company’s business, results of operations, cash future viability of the Company. Furthermore, in order to exe- obtaining required approvals or we may receive penalties, flows, financial condition, and/or prospects . The market for cute our strategy, we may need to raise additional capital in fines, or suspension of our approvals or registrations. There is qualified personnel is competitive and the Company may not the future and such funding may not be available on favorable also a risk that cybersecurity attacks could compromise data succeed in recruiting personnel to, for instance, commercialize terms. Failure to generate or secure sufficient financial privacy or cause interruption to our operations. Our business its products as currently envisaged, or it may fail to effectively resources could have a material adverse effect on the Compa - operations and current and future relationships with health- replace current personnel who depart with qualified or effec- ny’s business and/or prospects. care professionals, principal investigators, consultants, cus- tive successors. Our employees may not be able to come to tomers and third-party payors in the United States and else- work as a result of COVID-19. Our actions to mitigate the risks where may be subject, directly or indirectly, to applicable In 2020, we raised additional capital through a directed anti-kickback, fraud and abuse, false claims, physician pay- Our actions to mitigate the risks share issue and private placement (February) and a suc- ment transparency, health information privacy and security We believe we have established an attractive workplace at cessful global offering and IPO in the US (September), and other healthcare laws and regulations, which could expose Orphazyme, underpinned by high ethical standards. We are which further strengthened our balance sheet. Our existing us to substantial penalties. committed to maintaining a working environment that is cash, together with potential revenue from monetization of diverse, free of discrimination, harassment, and bullying. We a Priority Review Voucher and income from arimoclomol, if Our actions to mitigate the risks have established initiatives that provide opportunities for per- approved, is expected to be sufficient to support our opera - Our organization has increased regulatory resources to facili- sonal and professional development, improved health-wellbe- tions into 2022. Further details on our Outlook can be found tate interactions with regulators, actively monitor the current ing, work-life flexibility, and a participation in the overall suc - on page 9. Our financial situation and risks are assessed on regulatory environment and ensure our compliance. We have cess of Orphazyme through our long-term incentive plans. an ongoing basis and reported to the Audit Committee and implemented new IT-security procedures in order to reduce the the Board of Directors. risk of cybercrime. We have internal training requirements for all employees and contracting external suppliers, we ensure they have adequate measures in place to comply with relevant regulatory requirements. Orphazyme Annual Report 2020 Risk Management 31


SHAREHOLDER INFORMATION OWNERSHIP each of the exchanges on which we are MAJOR SHAREHOLDERS Orphazyme is dual-listed on Nasdaq Copen- listed. As of December 31, 2020, the number hagen (since November 16, 2017) under the of registered Shareholders totalled 14,599 Major shareholder Company address Share capital % ticker symbol ORPHA and on Nasdaq Global shareholders holding a total of 27,817,294 1 LSP V Coöperatieve U.A. Johannes Vermeer, Plein 9, 1071 DV 7.8% Select Market in the US (since September shares, representing 80% of the total share Amsterdam, Netherlands 29, 2020) under the ticker symbol ORPH. capital of 34,697,703. As of December 31, 2020, 522,143 shares were represented by We conduct our communication in accord- American Depositary Shares (ADS). In Feb- Sunstone Life Science Store Strandstræde 18A, st., 5.2% Ventures Fund II K/S 1255 København K ance with the applicable rules and regula- ruary 2021, there was a capital increase of tions set forth by the Danish Financial 170,131 ordinary shares related to the issue Supervisory Authority, the U.S. Securities of Matching Shares and the issue of bonus Coöperatieve Aescap Venture I U.A. Barbara Strozzilaan 101, 1083 HN 5.1% Amsterdam, Netherlands and Exchange Commission (“SEC”), and shares to Kansas Life Sciences Development Company, Inc., resulting in a total share cap- 1 ital of 34,948,387 as of March 2, 2021, the Orpha Pooling B.V. is an investment vehicle 88.2% owned by LSP V Coöperatieve U.A. and 11.8% owned by ALS Invest 2 B.V. LSP Management B.V. is the director of LSP V Coöperatieve U.A and the director of Orpha Pooling B.V. and exercises voting date of this annual report. rights on behalf of Orpha Pooling B.V. All shareholders have the same rights, including in respect of eligibility to receive $ dividends and participate in share buybacks, governed under Danish law. ADS holders will not have shareholder rights and may not 18% be able to exercise their right to vote the accordance with the provisions of the use all available financial resources as well shares underlying the ADSs. ADS holders deposit agreement, Further information as revenue, if any, for purposes of the Com- ownership by major have the contractual rights of an ADS about ADS holder rights can be found at pany’s current and future business. As of the shareholders holder, as provided in the deposit agree- https://orphazyme.gcs-web.com/ads-faqs date hereof, the Company does not expect ment among the Company, the depositary and in our filings with the SEC. to make dividend payments within the fore- and holders and beneficial owners of ADSs seeable future. Dual-listed from time to time. As a result, ADS holders Orphazyme has not declared or made any Nasdaq Copenhagen, Denmark may only exercise voting rights with respect dividend payments for the last two financial Nasdaq Global Select, US to the shares underlying the ADSs in years. Currently, the Company intends to Orphazyme Annual Report 2020 Shareholder Information 32SHAREHOLDER INFORMATION OWNERSHIP each of the exchanges on which we are MAJOR SHAREHOLDERS Orphazyme is dual-listed on Nasdaq Copen- listed. As of December 31, 2020, the number hagen (since November 16, 2017) under the of registered Shareholders totalled 14,599 Major shareholder Company address Share capital % ticker symbol ORPHA and on Nasdaq Global shareholders holding a total of 27,817,294 1 LSP V Coöperatieve U.A. Johannes Vermeer, Plein 9, 1071 DV 7.8% Select Market in the US (since September shares, representing 80% of the total share Amsterdam, Netherlands 29, 2020) under the ticker symbol ORPH. capital of 34,697,703. As of December 31, 2020, 522,143 shares were represented by We conduct our communication in accord- American Depositary Shares (ADS). In Feb- Sunstone Life Science Store Strandstræde 18A, st., 5.2% Ventures Fund II K/S 1255 København K ance with the applicable rules and regula- ruary 2021, there was a capital increase of tions set forth by the Danish Financial 170,131 ordinary shares related to the issue Supervisory Authority, the U.S. Securities of Matching Shares and the issue of bonus Coöperatieve Aescap Venture I U.A. Barbara Strozzilaan 101, 1083 HN 5.1% Amsterdam, Netherlands and Exchange Commission (“SEC”), and shares to Kansas Life Sciences Development Company, Inc., resulting in a total share cap- 1 ital of 34,948,387 as of March 2, 2021, the Orpha Pooling B.V. is an investment vehicle 88.2% owned by LSP V Coöperatieve U.A. and 11.8% owned by ALS Invest 2 B.V. LSP Management B.V. is the director of LSP V Coöperatieve U.A and the director of Orpha Pooling B.V. and exercises voting date of this annual report. rights on behalf of Orpha Pooling B.V. All shareholders have the same rights, including in respect of eligibility to receive $ dividends and participate in share buybacks, governed under Danish law. ADS holders will not have shareholder rights and may not 18% be able to exercise their right to vote the accordance with the provisions of the use all available financial resources as well shares underlying the ADSs. ADS holders deposit agreement, Further information as revenue, if any, for purposes of the Com- ownership by major have the contractual rights of an ADS about ADS holder rights can be found at pany’s current and future business. As of the shareholders holder, as provided in the deposit agree- https://orphazyme.gcs-web.com/ads-faqs date hereof, the Company does not expect ment among the Company, the depositary and in our filings with the SEC. to make dividend payments within the fore- and holders and beneficial owners of ADSs seeable future. Dual-listed from time to time. As a result, ADS holders Orphazyme has not declared or made any Nasdaq Copenhagen, Denmark may only exercise voting rights with respect dividend payments for the last two financial Nasdaq Global Select, US to the shares underlying the ADSs in years. Currently, the Company intends to Orphazyme Annual Report 2020 Shareholder Information 32


INVESTOR RELATIONS SHARE PERFORMANCE COMPARISON 2020 (DECEMBER 31, 2019 = 0%) Orphazyme’s Investor Relations’ primary % 100 goal is to ensure relevant, accurate, and timely communication of information to our 90 stakeholders. We provide both company 80 announcements (containing potentially share-sensitive information) and investor 70 news (pertaining to interesting news that is 60 deemed not share-sensitive) through the 50 appropriate channels. 40 Additionally, we file annual and half-year 30 reports, host analyst and investor calls/ 20 meetings and maintain an informative and transparent website where visitors can find 10 relevant materials such as announcements, 0 financial reports, SEC filings, corporate documents, company policies, etc. Orpha- -10 zyme maintains an active dialogue with the -20 sell-side and is currently followed by six -30 analysts, as highlighted below. A list of our covering analysts is also available via our -40 Investor Relations website. JANUARY DECEMBER Orphazyme A/S NASDAQ / Biotechnology OMX Copenhagen Mid Cap ? COVERING ANALYSTS FINANCIAL CALENDAR QUESTIONS? PLEASE CONTACT: USA Europe Annual General Meeting: Thursday, March 25, 2021 Anders Vadsholt, Chief Financial Offic er Bank of America - Tazeen Ahmad Danske Equities - Thomas Bowers Interim Report H1 2021: Tuesday, August 24, 2021 afv@orphazyme.com Cowen - Ritu Baral Oddo BHF - Martial Descoutures Guggenheim - Yatin Suneja Redeye - Anders Hedlund Orphazyme Annual Report 2020 Shareholder Information 33INVESTOR RELATIONS SHARE PERFORMANCE COMPARISON 2020 (DECEMBER 31, 2019 = 0%) Orphazyme’s Investor Relations’ primary % 100 goal is to ensure relevant, accurate, and timely communication of information to our 90 stakeholders. We provide both company 80 announcements (containing potentially share-sensitive information) and investor 70 news (pertaining to interesting news that is 60 deemed not share-sensitive) through the 50 appropriate channels. 40 Additionally, we file annual and half-year 30 reports, host analyst and investor calls/ 20 meetings and maintain an informative and transparent website where visitors can find 10 relevant materials such as announcements, 0 financial reports, SEC filings, corporate documents, company policies, etc. Orpha- -10 zyme maintains an active dialogue with the -20 sell-side and is currently followed by six -30 analysts, as highlighted below. A list of our covering analysts is also available via our -40 Investor Relations website. JANUARY DECEMBER Orphazyme A/S NASDAQ / Biotechnology OMX Copenhagen Mid Cap ? COVERING ANALYSTS FINANCIAL CALENDAR QUESTIONS? PLEASE CONTACT: USA Europe Annual General Meeting: Thursday, March 25, 2021 Anders Vadsholt, Chief Financial Offic er Bank of America - Tazeen Ahmad Danske Equities - Thomas Bowers Interim Report H1 2021: Tuesday, August 24, 2021 afv@orphazyme.com Cowen - Ritu Baral Oddo BHF - Martial Descoutures Guggenheim - Yatin Suneja Redeye - Anders Hedlund Orphazyme Annual Report 2020 Shareholder Information 33


BOARD OF DIRECTORS GEORGES GEMAYEL BO JESPER HANSEN CATHERINE MOUKHEIBIR Chairman of the Board Deputy Chairman of the Board Member since: 2012 (Chairman, 2014) Member since: 2010 (Deputy Chairman, 2017) Member since: 2017 Born in: 1960 Born in: 1958 Born in: 1959 Nationality: American Nationality: Danish Nationality: American, Lebanese, British Committees: Nomination (Chairman) Committees: Remuneration (Chairman) Committees: Audit (Chairman) Special competencies: Special competencies: Special competencies: Dr Gemayel has significant management and executive experience Dr Hansen has extensive experience in orphan drugs, both from the Ms Moukheibir has in-depth experience in the pharmaceutical and from the global pharmaceutical industry. He holds a Master's and operations and supervisory point of view and has broad and current banking industries and a successful track-record in leading Audit PhD in Pharmacology from Paris-Sud University and a Docteur d’Ex- know-how of the biotechnology environment. He holds an MD and a Commitees of publicly-traded companies. She holds a Master's ercice en Pharmacie, St. Joseph University. PhD in Medicine from the University of Copenhagen. degree in Economics and an MBA, both from Yale. Current positions: Current positions: Current positions: Chairman of the Board of Laborie Inc., Innoventa Medica ApS, Karo Non-Executive Board Member and Chair of the Audit Committee at Chairman of the Board of Dynacure, Enterome SA, and OxThera AB, Pharma AB; member of the Board of Ascelia Pharma AB and Reap- CMR Surgical. Member of the Board of Directors of Ironwood Phar- and a member of the Board of Directors of Supernus Pharmaceuti- plix A/S. Venture Partner at Wellington Partners; Advisory Consult- maceuticals, Inc. and Kymab. cals Inc. (publ). ant for Aescap 2.0, Nordic Capital, EQT AB and Broad Street Princi- pal Investments Europe Ltd. & senior business advisor for HBM Ventures Ltd. Orphazyme Annual Report 2020 Board of Directors 34BOARD OF DIRECTORS GEORGES GEMAYEL BO JESPER HANSEN CATHERINE MOUKHEIBIR Chairman of the Board Deputy Chairman of the Board Member since: 2012 (Chairman, 2014) Member since: 2010 (Deputy Chairman, 2017) Member since: 2017 Born in: 1960 Born in: 1958 Born in: 1959 Nationality: American Nationality: Danish Nationality: American, Lebanese, British Committees: Nomination (Chairman) Committees: Remuneration (Chairman) Committees: Audit (Chairman) Special competencies: Special competencies: Special competencies: Dr Gemayel has significant management and executive experience Dr Hansen has extensive experience in orphan drugs, both from the Ms Moukheibir has in-depth experience in the pharmaceutical and from the global pharmaceutical industry. He holds a Master's and operations and supervisory point of view and has broad and current banking industries and a successful track-record in leading Audit PhD in Pharmacology from Paris-Sud University and a Docteur d’Ex- know-how of the biotechnology environment. He holds an MD and a Commitees of publicly-traded companies. She holds a Master's ercice en Pharmacie, St. Joseph University. PhD in Medicine from the University of Copenhagen. degree in Economics and an MBA, both from Yale. Current positions: Current positions: Current positions: Chairman of the Board of Laborie Inc., Innoventa Medica ApS, Karo Non-Executive Board Member and Chair of the Audit Committee at Chairman of the Board of Dynacure, Enterome SA, and OxThera AB, Pharma AB; member of the Board of Ascelia Pharma AB and Reap- CMR Surgical. Member of the Board of Directors of Ironwood Phar- and a member of the Board of Directors of Supernus Pharmaceuti- plix A/S. Venture Partner at Wellington Partners; Advisory Consult- maceuticals, Inc. and Kymab. cals Inc. (publ). ant for Aescap 2.0, Nordic Capital, EQT AB and Broad Street Princi- pal Investments Europe Ltd. & senior business advisor for HBM Ventures Ltd. Orphazyme Annual Report 2020 Board of Directors 34


BOARD OF DIRECTORS RÉMI DROLLER STEN VERLAND MARTIJN KLEIJWEGT Member since: 2015 Member since: 2010 Member since: 2017 Born in: 1975 Born in: 1957 Born in: 1955 Nationality: French Nationality: Danish Nationality: Dutch Committees: Remuneration Committees: Nomina tion, Audit Committees: A udit Special competencies: Special competencies: Special competencies: Mr Droller has extensive experience as a biotechnology investor and a Dr Verland is a serial entrepreneur in biotechnology companies and Mr Kleijwegt has extensive experience as a major European ven- proven track-record in negotiating several successful transactions. He has extensive investment and managerial experience. He holds a ture-capital investor as well as in-depth experience from the phar- holds a Master's in Molecular Biology from Université Pierre et Marie Master's in Biology and Mathematics and a PhD in Immunology from maceutical industry. He holds a Master’s degree in Economics from Curie and a Master's in Finance and Management of Innovation from the University of Copenhagen. the University of Amsterdam. AgroParisTech. Current positions: Current positions: Current positions: Co-Founder and Board Member at Sunstone Capital A/S, Board Mem- Founder and Managing Partner at LSP Management Group BV and Managing Partner of Kurma Partners SA and member of the Board of ber and General Partner at Sunstone Life Science Ventures A/S, Board a member of the Board of Directors of AM Pharma BV, Kiadis Directors of Dynacure SAS, ImCheck Therapeutics SAS, OxThera AB, Member of STipe Therapeutics ApS, Anergis SA, MinervaX ApS, Pharma N.V. (publ), OxThera AB, Eloxx Pharmaceuticals Ltd., Arvelle AM Pharma BV, Flamingo Therapeutics BV, Vico Therapeutics BV, and OxThera AB, the Danish VC and PE Association (DVCA), Board Mem- Therapeutics BV, Vico Therapeutics Holding BV, and Pharvaris BV. Pharvaris BV. ber and Executive Management in certain Sunstone Group companies; member of the Executive Management at Verland Capital ApS, Ver- land Holding ApS, Verland Holding II ApS, and Genobiotix ApS. Orphazyme Annual Report 2020 Board of Directors 35BOARD OF DIRECTORS RÉMI DROLLER STEN VERLAND MARTIJN KLEIJWEGT Member since: 2015 Member since: 2010 Member since: 2017 Born in: 1975 Born in: 1957 Born in: 1955 Nationality: French Nationality: Danish Nationality: Dutch Committees: Remuneration Committees: Nomina tion, Audit Committees: A udit Special competencies: Special competencies: Special competencies: Mr Droller has extensive experience as a biotechnology investor and a Dr Verland is a serial entrepreneur in biotechnology companies and Mr Kleijwegt has extensive experience as a major European ven- proven track-record in negotiating several successful transactions. He has extensive investment and managerial experience. He holds a ture-capital investor as well as in-depth experience from the phar- holds a Master's in Molecular Biology from Université Pierre et Marie Master's in Biology and Mathematics and a PhD in Immunology from maceutical industry. He holds a Master’s degree in Economics from Curie and a Master's in Finance and Management of Innovation from the University of Copenhagen. the University of Amsterdam. AgroParisTech. Current positions: Current positions: Current positions: Co-Founder and Board Member at Sunstone Capital A/S, Board Mem- Founder and Managing Partner at LSP Management Group BV and Managing Partner of Kurma Partners SA and member of the Board of ber and General Partner at Sunstone Life Science Ventures A/S, Board a member of the Board of Directors of AM Pharma BV, Kiadis Directors of Dynacure SAS, ImCheck Therapeutics SAS, OxThera AB, Member of STipe Therapeutics ApS, Anergis SA, MinervaX ApS, Pharma N.V. (publ), OxThera AB, Eloxx Pharmaceuticals Ltd., Arvelle AM Pharma BV, Flamingo Therapeutics BV, Vico Therapeutics BV, and OxThera AB, the Danish VC and PE Association (DVCA), Board Mem- Therapeutics BV, Vico Therapeutics Holding BV, and Pharvaris BV. Pharvaris BV. ber and Executive Management in certain Sunstone Group companies; member of the Executive Management at Verland Capital ApS, Ver- land Holding ApS, Verland Holding II ApS, and Genobiotix ApS. Orphazyme Annual Report 2020 Board of Directors 35


BOARD OF DIRECTORS ANDERS HEDEGAARD CARROLEE BARLOW MARTIN BONDE Member since: 20 17 Member since: 20 20 Member since: 20 10 Born in: 1960 Born in: 1963 Born in: 1963 Nationality: Danish Nationality: American Nationality: Danish Committees: Remuneration Committees: None Committees: Nomination Special competencies: Special competencies: Special competencies: Mr Hedegaard has extensive knowledge of the healthcare industry, Carrolee holds a PhD in Molecular and Development Biology from the Dr Bonde has executive experience and in-depth knowledge of the both in product development and commercialization. Master of Sci- Karolinska Medical Nobel Institution, an MD from the University of Utah biotechnology environment in the Nordic countries. He holds a Grad- ence in Chemical Engineerng and Biochemistry from the Technical School of Medicine and a BA in English from the University of Utah. uate Diploma in Business Administration from Copenhagen Business University of Denmark. School, an MSc. and a PhD in Chemical Engineering from the Techni- Current positions: cal University of Denmark. Current positions: Chief Medical Officer of E-Scape Bio, Inc. since January 2019. In the Anders Hedegaard is currently Chief Executive Officer of Rodenstock past five years, Dr Barlow has served as Chief Executive Officer and Current positions: Group and Chairman of the Board of Directors of ALK-Abelló A/S. Member of the Board of Directors of the Parkinson’s Institute and Chief Executive Officer of Inthera Bioscience AG; member of the Clinical Center. Dr Barlow is currently a member of the Board of Board of Directors of BioInnovation Institute Fonden, BII Holdings Directors of Supernus Pharmaceuticals and is a member of the scien- A/S, Visiopharm A/S, Chief Executive Officer of Bohrs Tower ApS as tific and/or clinical advisory boards of Neurametrix Inc., Kainos Medi - well as a member of the Board of Directors and the Executive Man- cine and the Silverstein Foundation. agement of Biotopix ApS. Orphazyme Annual Report 2020 Board of Directors 36BOARD OF DIRECTORS ANDERS HEDEGAARD CARROLEE BARLOW MARTIN BONDE Member since: 20 17 Member since: 20 20 Member since: 20 10 Born in: 1960 Born in: 1963 Born in: 1963 Nationality: Danish Nationality: American Nationality: Danish Committees: Remuneration Committees: None Committees: Nomination Special competencies: Special competencies: Special competencies: Mr Hedegaard has extensive knowledge of the healthcare industry, Carrolee holds a PhD in Molecular and Development Biology from the Dr Bonde has executive experience and in-depth knowledge of the both in product development and commercialization. Master of Sci- Karolinska Medical Nobel Institution, an MD from the University of Utah biotechnology environment in the Nordic countries. He holds a Grad- ence in Chemical Engineerng and Biochemistry from the Technical School of Medicine and a BA in English from the University of Utah. uate Diploma in Business Administration from Copenhagen Business University of Denmark. School, an MSc. and a PhD in Chemical Engineering from the Techni- Current positions: cal University of Denmark. Current positions: Chief Medical Officer of E-Scape Bio, Inc. since January 2019. In the Anders Hedegaard is currently Chief Executive Officer of Rodenstock past five years, Dr Barlow has served as Chief Executive Officer and Current positions: Group and Chairman of the Board of Directors of ALK-Abelló A/S. Member of the Board of Directors of the Parkinson’s Institute and Chief Executive Officer of Inthera Bioscience AG; member of the Clinical Center. Dr Barlow is currently a member of the Board of Board of Directors of BioInnovation Institute Fonden, BII Holdings Directors of Supernus Pharmaceuticals and is a member of the scien- A/S, Visiopharm A/S, Chief Executive Officer of Bohrs Tower ApS as tific and/or clinical advisory boards of Neurametrix Inc., Kainos Medi - well as a member of the Board of Directors and the Executive Man- cine and the Silverstein Foundation. agement of Biotopix ApS. Orphazyme Annual Report 2020 Board of Directors 36


MANAGEMENT EXECUTIVE KEY PRESIDENT MANAGEMENT EMPLOYEES ORPHAZYME US, INC ANDERS VADSHOLT THOMAS KIRKEGAARD JENSEN, PHD THOMAS BLAETTLER, MD MOLLY PAINTER Interim Chief Executive Officer and Chief Scientific Officer, Co-Founder Chief Medical Officer President, US Chief Financial Officer Thomas joined the Company as Co-Founder and Thomas joined Orphazyme in November 2016 as Molly joined Orphazyme in January 2020 as Presi - Chief Executive Officer in 2009 and became Chief Chief Medical Officer. dent, Orphazyme US, Inc. Anders joined Orphazyme in May 2016 as Chief Scientific Officer in March 2010. Financial Officer. He has served as Interim Chief Thomas has 13+ years’ experience in neuroscience Molly brings 20+ years’ general management Executive Officer since December 2020. Thomas is currently a member of the Executive development. Previously at Roche, Bristol-Myers experience at leading global pharmaceutical and Management of Dare to Dream ApS, an expert Squibb, and Novartis. biotech companies including J&J, Baxalta, Shire, Anders has 20+ years’ experience from biotech reviewer for the European Research Council and a and most recently Takeda. and corporate finance. Previously at Topotarget, member of the Advisory Board for the Rare Disease Thomas Blaettler holds a Doctorate in Medicine BankInvest Biomedical Venture, 7TM Pharma, and Report. from the University of Zürich and a Medical School Molly has dedicated a significant portion of her Carnegie. Certificate Swiss State Examination from the Medi - career focused on rare disease. Thomas holds a BSc in Biochemistry, an MSc in cal School of the University of Zürich. He is a Anders is currently a member of the Board of Human Biology and a PhD in Medicine from the board-certified neurologist by the Swiss Medical Molly is currently on the Board of Directors of the Directors at OxThera AB and Owner of Alpha University of Copenhagen. Association (the Foederation Medicorum Helveti- Healthcare Businesswomen’s Association. Healthcare Investments ApS. corum). Molly has a BSc in Communication from Miami Anders holds a BSc in Corporate Law from the University and an MBA from Northwestern Univer- University of Aalborg, an MBA in Finance and sity Kellogg School of Management. Strategy from the University of Melbourne, and an MSc in Corporate Law and Economics from Copenhagen Business School. Born in: 1977 Born in: 1967 Born in: 1976 Born in: 1969 Nationality: Danish Nationality: Swiss and Danish Nationality: American Nationality: Danish Orphazyme Annual Report 2020 Management 37MANAGEMENT EXECUTIVE KEY PRESIDENT MANAGEMENT EMPLOYEES ORPHAZYME US, INC ANDERS VADSHOLT THOMAS KIRKEGAARD JENSEN, PHD THOMAS BLAETTLER, MD MOLLY PAINTER Interim Chief Executive Officer and Chief Scientific Officer, Co-Founder Chief Medical Officer President, US Chief Financial Officer Thomas joined the Company as Co-Founder and Thomas joined Orphazyme in November 2016 as Molly joined Orphazyme in January 2020 as Presi - Chief Executive Officer in 2009 and became Chief Chief Medical Officer. dent, Orphazyme US, Inc. Anders joined Orphazyme in May 2016 as Chief Scientific Officer in March 2010. Financial Officer. He has served as Interim Chief Thomas has 13+ years’ experience in neuroscience Molly brings 20+ years’ general management Executive Officer since December 2020. Thomas is currently a member of the Executive development. Previously at Roche, Bristol-Myers experience at leading global pharmaceutical and Management of Dare to Dream ApS, an expert Squibb, and Novartis. biotech companies including J&J, Baxalta, Shire, Anders has 20+ years’ experience from biotech reviewer for the European Research Council and a and most recently Takeda. and corporate finance. Previously at Topotarget, member of the Advisory Board for the Rare Disease Thomas Blaettler holds a Doctorate in Medicine BankInvest Biomedical Venture, 7TM Pharma, and Report. from the University of Zürich and a Medical School Molly has dedicated a significant portion of her Carnegie. Certificate Swiss State Examination from the Medi - career focused on rare disease. Thomas holds a BSc in Biochemistry, an MSc in cal School of the University of Zürich. He is a Anders is currently a member of the Board of Human Biology and a PhD in Medicine from the board-certified neurologist by the Swiss Medical Molly is currently on the Board of Directors of the Directors at OxThera AB and Owner of Alpha University of Copenhagen. Association (the Foederation Medicorum Helveti- Healthcare Businesswomen’s Association. Healthcare Investments ApS. corum). Molly has a BSc in Communication from Miami Anders holds a BSc in Corporate Law from the University and an MBA from Northwestern Univer- University of Aalborg, an MBA in Finance and sity Kellogg School of Management. Strategy from the University of Melbourne, and an MSc in Corporate Law and Economics from Copenhagen Business School. Born in: 1977 Born in: 1967 Born in: 1976 Born in: 1969 Nationality: Danish Nationality: Swiss and Danish Nationality: American Nationality: Danish Orphazyme Annual Report 2020 Management 37


GLOSSARY Amyotrophic Lateral Sclerosis (ALS) Fast-Track Designation Inclusion Body Myositis (IBM) Rare Pediatric Disease Designation Also called Lou Gehrig’s disease; a rare neu- FDA designation that is intended to facili- An acquired, rare, and slowly-progressing The Rare Pediatric Disease Designation is romuscular disease, which is rapidly pro- tate the development and expedite review protein-aggregation disease. granted by the FDA to drugs that have a gressive and fatal, usually within two to five of drugs for serious diseases with an unmet potential to treat rare pediatric diseases. years. medical need, getting new drugs to patients Marketing Authorization Application (MAA) Orphazyme has received such a designation earlier. A submission to apply for marketing for arimoclomol for NPC. The designation Breakthrough Therapy Designation (BTD) approval for a drug from EMA. entails the potential receipt of a so-called FDA designation that is intended to expe- Gaucher disease Priority Voucher upon marketing authoriza- dite the development and review of drugs An inherited metabolic disorder caused by New Drug Application (NDA) tion, if certain criteria are met. The voucher to treat serious and life-threatening diseases mutations in a protein called glucocerebro- A submission to apply for marketing can be redeemed to provide Priority Review in cases where preliminary evidence shows sidase, which leads to the accumulation of approval for a drug from the FDA. of a subsequent NDA for a different product. that the drug may provide substantial certain sugar-containing lipids. improvements over available therapy. Niemann-Pick disease Type C (NPC) US Food and Drug Administration (FDA) Heat-Shock Proteins A rare, inherited, progressive, and often fatal US regulatory agency responsible for ensur- Early Access Program (EAP) Heat-Shock Proteins (HSPs) are molecular neurodegenerative disease. ing the safety, efficac y and security of Provides patients with serious, life-threaten- chaperones constituting a natural system human and veterinary drugs, biological ing diseases or conditions with unmet medi- that makes other proteins work correctly Orphan Drug Designation products and medical devices. cal needs access to investigational drugs and guard against toxicity arising from mis- This program provides orphan status to before they are approved. folded proteins and dysfunctional cellular drugs and biologics, which are defined as recycling systems. those intended for the safe and effective European Medicines Agency (EMA) treatment, diagnosis or prevention of rare Regulatory agency in Europe that facilitates diseases. development and access to medicines, eval- uates applications for marketing authoriza- tion and monitors the safety of medicines. Orphazyme Annual Report 2020 Glossary 38GLOSSARY Amyotrophic Lateral Sclerosis (ALS) Fast-Track Designation Inclusion Body Myositis (IBM) Rare Pediatric Disease Designation Also called Lou Gehrig’s disease; a rare neu- FDA designation that is intended to facili- An acquired, rare, and slowly-progressing The Rare Pediatric Disease Designation is romuscular disease, which is rapidly pro- tate the development and expedite review protein-aggregation disease. granted by the FDA to drugs that have a gressive and fatal, usually within two to five of drugs for serious diseases with an unmet potential to treat rare pediatric diseases. years. medical need, getting new drugs to patients Marketing Authorization Application (MAA) Orphazyme has received such a designation earlier. A submission to apply for marketing for arimoclomol for NPC. The designation Breakthrough Therapy Designation (BTD) approval for a drug from EMA. entails the potential receipt of a so-called FDA designation that is intended to expe- Gaucher disease Priority Voucher upon marketing authoriza- dite the development and review of drugs An inherited metabolic disorder caused by New Drug Application (NDA) tion, if certain criteria are met. The voucher to treat serious and life-threatening diseases mutations in a protein called glucocerebro- A submission to apply for marketing can be redeemed to provide Priority Review in cases where preliminary evidence shows sidase, which leads to the accumulation of approval for a drug from the FDA. of a subsequent NDA for a different product. that the drug may provide substantial certain sugar-containing lipids. improvements over available therapy. Niemann-Pick disease Type C (NPC) US Food and Drug Administration (FDA) Heat-Shock Proteins A rare, inherited, progressive, and often fatal US regulatory agency responsible for ensur- Early Access Program (EAP) Heat-Shock Proteins (HSPs) are molecular neurodegenerative disease. ing the safety, efficac y and security of Provides patients with serious, life-threaten- chaperones constituting a natural system human and veterinary drugs, biological ing diseases or conditions with unmet medi- that makes other proteins work correctly Orphan Drug Designation products and medical devices. cal needs access to investigational drugs and guard against toxicity arising from mis- This program provides orphan status to before they are approved. folded proteins and dysfunctional cellular drugs and biologics, which are defined as recycling systems. those intended for the safe and effective European Medicines Agency (EMA) treatment, diagnosis or prevention of rare Regulatory agency in Europe that facilitates diseases. development and access to medicines, eval- uates applications for marketing authoriza- tion and monitors the safety of medicines. Orphazyme Annual Report 2020 Glossary 38


CORPORATE INFORMATION COMMERCIAL BANKERS LEGAL COUNSEL INDEPENDENT AUDITORS Danske Bank Gorrissen Federspiel, EY Godkendt Revisionspartnerselskab Holmens Kanal 2-12 Advokatpartnerselskab Dirch Passers Allé 36 DK-1092 Copenhagen K Axeltorv 2 DK-2000 Frederiksberg DK-1609 Copenhagen V Nordea Vesterbrogade 8 Cooley LLP DK-1620 Copenhagen 55 Hudson Yards New York, NY 10001 BNY Mellon USA 240 Greenwich St New York, NY 10286 USA Disclaimer Annual report This annual report may contain certain forward-looking statements, including in respect of the anticipated commercialization of arimoclomol. This annual report will be available on Although the Company believes its expectations are based on reasonable assumptions, all statements other than statements of historical fact www.orphazyme.com and printed copies included in this company announcement about future events are subject to (i) change without notice and (ii) factors beyond the Company’s are available upon request. control. These statements may include, without limitation, any statements preceded by, followed by, or including words such as “target,” “be - lieve,” “expect,” “aim,” “intend,” “may,” “anticipate,” “estimate,” “plan,” “project,” “will,” “can have,” “likely,” “should,” “would,” “could”, and other words and terms of similar meaning or the negative thereof. Forward-looking statements are subject to inherent risks and uncertainties beyond Annual General Meeting the Company’s control that could cause the Company’s actual results, performance, or achievements to be materially different from the expect - The Annual General Meeting will be held on ed results, performance, or achievements expressed or implied by such forward-looking statements, including the risk that applicable regulato- March 25, 2021 at 5.00 PM CET at: ry authorities fail to approve arimoclomol on the anticipated timeline or at all. Except as required by law, the Company assumes no obligation COBIS, Ole Maaløes Vej 3, to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future. DK-2200 Copenhagen N Orphazyme Annual Report 2020 Corporate Information 39CORPORATE INFORMATION COMMERCIAL BANKERS LEGAL COUNSEL INDEPENDENT AUDITORS Danske Bank Gorrissen Federspiel, EY Godkendt Revisionspartnerselskab Holmens Kanal 2-12 Advokatpartnerselskab Dirch Passers Allé 36 DK-1092 Copenhagen K Axeltorv 2 DK-2000 Frederiksberg DK-1609 Copenhagen V Nordea Vesterbrogade 8 Cooley LLP DK-1620 Copenhagen 55 Hudson Yards New York, NY 10001 BNY Mellon USA 240 Greenwich St New York, NY 10286 USA Disclaimer Annual report This annual report may contain certain forward-looking statements, including in respect of the anticipated commercialization of arimoclomol. This annual report will be available on Although the Company believes its expectations are based on reasonable assumptions, all statements other than statements of historical fact www.orphazyme.com and printed copies included in this company announcement about future events are subject to (i) change without notice and (ii) factors beyond the Company’s are available upon request. control. These statements may include, without limitation, any statements preceded by, followed by, or including words such as “target,” “be - lieve,” “expect,” “aim,” “intend,” “may,” “anticipate,” “estimate,” “plan,” “project,” “will,” “can have,” “likely,” “should,” “would,” “could”, and other words and terms of similar meaning or the negative thereof. Forward-looking statements are subject to inherent risks and uncertainties beyond Annual General Meeting the Company’s control that could cause the Company’s actual results, performance, or achievements to be materially different from the expect - The Annual General Meeting will be held on ed results, performance, or achievements expressed or implied by such forward-looking statements, including the risk that applicable regulato- March 25, 2021 at 5.00 PM CET at: ry authorities fail to approve arimoclomol on the anticipated timeline or at all. Except as required by law, the Company assumes no obligation COBIS, Ole Maaløes Vej 3, to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future. DK-2200 Copenhagen N Orphazyme Annual Report 2020 Corporate Information 39


2020 Consolidated Financial Statements2020 Consolidated Financial Statements


TABLE OF CONTENTS FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statements of Profit or Loss and Other Comprehensive Income . . . . . . . . . . . . . 42 Consolidated Statements of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Consolidated Statements of Changes in Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Section 1 Basis of Preparation and Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 2 Result of the Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . 50 Section 3 Assets and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Section 4 Other Disclosures . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 Parent Company Financial Statements 82 Statements and Signatures 94 Independent Auditor’s Report 96 Orphazyme Annual Report 2020 41TABLE OF CONTENTS FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statements of Profit or Loss and Other Comprehensive Income . . . . . . . . . . . . . 42 Consolidated Statements of Financial Position . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Consolidated Statements of Changes in Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Consolidated Statements of Cash Flows . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Section 1 Basis of Preparation and Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 2 Result of the Year . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Section 3 Assets and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . 61 Section 4 Other Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 Parent Company Financial Statements 82 Statements and Signatures 94 Independent Auditor’s Report 96 Orphazyme Annual Report 2020 41


CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the years ended December 31 (DKK 000), EXCEPT PER SHARE AND SHARE DATA Note 2020 2019 2018 Research and development expenses 2.1, 2.2 (361,284) (285,413) (196,525) General and administrative expenses 2.3 (247,250) (50,541) (35,127) Operating loss (608,534) (335,954) (231,652) Financial income 2.6 2,444 316 5 Financial expenses 2.6 (29,071) (7,359) (3,453) Loss before tax (635,161) (342,997) (235,100) Income tax benefit 2.7 1,915 5,500 5,500 Net loss for the year (633,246) (337,497) (229,600) Items that will be reclassified subsequently to the Statement of Profit or Loss: Exchange difference from translation of foreign operations net of tax DKK 0 605 67 42 Total comprehensive loss (632,641) (337,430) (229,558) Weighted-average shares outstanding 28,366,469 20,024,692 20,008,827 Loss per share, basic and diluted 4.3 (22.32) (16.87) (11.49) The accompanying notes form an integral part of these consolidated financial statements. Orphazyme Annual Report 2020 Group Financial Statements 42CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the years ended December 31 (DKK 000), EXCEPT PER SHARE AND SHARE DATA Note 2020 2019 2018 Research and development expenses 2.1, 2.2 (361,284) (285,413) (196,525) General and administrative expenses 2.3 (247,250) (50,541) (35,127) Operating loss (608,534) (335,954) (231,652) Financial income 2.6 2,444 316 5 Financial expenses 2.6 (29,071) (7,359) (3,453) Loss before tax (635,161) (342,997) (235,100) Income tax benefit 2.7 1,915 5,500 5,500 Net loss for the year (633,246) (337,497) (229,600) Items that will be reclassified subsequently to the Statement of Profit or Loss: Exchange difference from translation of foreign operations net of tax DKK 0 605 67 42 Total comprehensive loss (632,641) (337,430) (229,558) Weighted-average shares outstanding 28,366,469 20,024,692 20,008,827 Loss per share, basic and diluted 4.3 (22.32) (16.87) (11.49) The accompanying notes form an integral part of these consolidated financial statements. Orphazyme Annual Report 2020 Group Financial Statements 42


CONSOLIDATED STATEMENTS OF FINANCIAL POSITION As of December 31 ASSETS (DKK 000) Note 2020 2019 EQUITY AND LIABILITIES (DKK 000) Note 2020 2019 Non-current assets Equity Intangible assets 3.1 12,454 10,539 Share capital 4.2 34,698 19,984 Right-of-use assets 3.2 14,859 13,903 Share premium 4.2 2,082,254 924,021 Property, plant, and equipment 3.3 4,687 3,685 Other reserves 6,494 7,982 Corporation tax receivable 2.7 2,750 2,750 Accumulated deficit (1,502,921) (899,018) Deferred tax assets 2.7 2,065 - Total equity 620,525 52,969 Prepayments and deposits 3.4 2,014 1,652 Total non-currents assets 38,829 32,529 Non-current liabilities Borrowings 3.6 23,830 51,606 Current assets Lease liabilities 3.2 9,877 9,813 Corporation tax receivable 2.7 5,500 5,500 Other non-current liabilities 3.6 1,634 378 Prepayments and other receivables 3.4 51,235 19,137 Total non-current liabilities 35,341 61,797 Cash 3.7 726,929 123,588 Total current assets 783,664 148,225 Current liabilities Total assets 822,493 180,754 Current borrowings 3.6 33,349 12,813 Current lease liabilities 3.2 3,657 2,876 Trade payables and accruals 3.6 72,135 32,390 Tax payables 4,159 - Other liabilities 3.6 53,327 17,909 Total current liabilities 166,627 65,988 Total equity and liabilities 822,493 180,754 The accompanying notes form an integral part of these consolidated financial statements. Orphazyme Annual Report 2020 Group Financial Statements 43CONSOLIDATED STATEMENTS OF FINANCIAL POSITION As of December 31 ASSETS (DKK 000) Note 2020 2019 EQUITY AND LIABILITIES (DKK 000) Note 2020 2019 Non-current assets Equity Intangible assets 3.1 12,454 10,539 Share capital 4.2 34,698 19,984 Right-of-use assets 3.2 14,859 13,903 Share premium 4.2 2,082,254 924,021 Property, plant, and equipment 3.3 4,687 3,685 Other reserves 6,494 7,982 Corporation tax receivable 2.7 2,750 2,750 Accumulated deficit (1,502,921) (899,018) Deferred tax assets 2.7 2,065 - Total equity 620,525 52,969 Prepayments and deposits 3.4 2,014 1,652 Total non-currents assets 38,829 32,529 Non-current liabilities Borrowings 3.6 23,830 51,606 Current assets Lease liabilities 3.2 9,877 9,813 Corporation tax receivable 2.7 5,500 5,500 Other non-current liabilities 3.6 1,634 378 Prepayments and other receivables 3.4 51,235 19,137 Total non-current liabilities 35,341 61,797 Cash 3.7 726,929 123,588 Total current assets 783,664 148,225 Current liabilities Total assets 822,493 180,754 Current borrowings 3.6 33,349 12,813 Current lease liabilities 3.2 3,657 2,876 Trade payables and accruals 3.6 72,135 32,390 Tax payables 4,159 - Other liabilities 3.6 53,327 17,909 Total current liabilities 166,627 65,988 Total equity and liabilities 822,493 180,754 The accompanying notes form an integral part of these consolidated financial statements. Orphazyme Annual Report 2020 Group Financial Statements 43


CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY Other reserves Foreign currency Share-based compensation Share Share translation – acquisition of Accumulated (DKK 000) Notes capital premium reserve intangible assets deficit Total Balance as of December 31, 2017 19,928 924,021 0 9,972 (338,219) 615,702 Net loss for the year (229,600) (229,600) Other comprehensive income (loss) 42 - 42 Total other comprehensive income (loss) 42 - (229,600) 229,600) Transactions with owners: Capital increase in connection with issuance of bonus shares 3.1 11 (902) 891 - Share-based compensation expense 2.5 - 2,105 2,105 Total transactions with owners 11 - - (902) 2,996 2,105 Balance as of December 31, 2018 19,939 924,021 42 9,070 (564,823) 388,249 Net loss for the year (337,497) (337,497) Other comprehensive income (loss) 67 - 67 Total other comprehensive income (loss) 67 - (337,497) (337,430 Transactions with owners: Capital increase in connection with issuance of bonus shares 3.1 26 (1,197) 1,171 - Issuance of Matching Shares, net of costs 2.5 19 19 Share-based compensation expense 2.5 - 2,131 2,131 Total transactions with owners 45 - - (1,197) 3,302 2,150 Balance as of December 31, 2019 19,984 924,021 109 7,873 (899,018) 52,969 Net loss for the year (633,246) (633,246) Other comprehensive income (loss) 605 605 Total other comprehensive income 605 - (631,317) (632,641) Transactions with owners: - Capital increase in connection with issuance of bonus shares 3.1 21 (2,094) 2,073 - Capital increase in connection with exercise of RSUs 4.2 13 717 730 Capital increase in connection with private placement 4.2 7,033 738,458 745,491 Transaction costs in connection with private placement (51,243) (51,243) Capital increase in connection with U.S. listing 4.2 7,616 526,918 534,534 Transaction costs in connection with U.S. listing (56,616) (56,616) Issuance of Matching Shares, net of costs 2.5 31 31 Share-based compensation expense 2.5 27,270 27,270 Total transactions with owners 14,714 1,158,234 - (2,094) 29,343 1,200,19 Balance as of December 31, 2020 34,698 2,082,254 714 5,780 (1,502,921) 620,525 Orphazyme Annual Report 2020 Group Financial Statements The accompanying notes form an integral part of these consolidated financial statements. 44CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY Other reserves Foreign currency Share-based compensation Share Share translation – acquisition of Accumulated (DKK 000) Notes capital premium reserve intangible assets deficit Total Balance as of December 31, 2017 19,928 924,021 0 9,972 (338,219) 615,702 Net loss for the year (229,600) (229,600) Other comprehensive income (loss) 42 - 42 Total other comprehensive income (loss) 42 - (229,600) 229,600) Transactions with owners: Capital increase in connection with issuance of bonus shares 3.1 11 (902) 891 - Share-based compensation expense 2.5 - 2,105 2,105 Total transactions with owners 11 - - (902) 2,996 2,105 Balance as of December 31, 2018 19,939 924,021 42 9,070 (564,823) 388,249 Net loss for the year (337,497) (337,497) Other comprehensive income (loss) 67 - 67 Total other comprehensive income (loss) 67 - (337,497) (337,430 Transactions with owners: Capital increase in connection with issuance of bonus shares 3.1 26 (1,197) 1,171 - Issuance of Matching Shares, net of costs 2.5 19 19 Share-based compensation expense 2.5 - 2,131 2,131 Total transactions with owners 45 - - (1,197) 3,302 2,150 Balance as of December 31, 2019 19,984 924,021 109 7,873 (899,018) 52,969 Net loss for the year (633,246) (633,246) Other comprehensive income (loss) 605 605 Total other comprehensive income 605 - (631,317) (632,641) Transactions with owners: - Capital increase in connection with issuance of bonus shares 3.1 21 (2,094) 2,073 - Capital increase in connection with exercise of RSUs 4.2 13 717 730 Capital increase in connection with private placement 4.2 7,033 738,458 745,491 Transaction costs in connection with private placement (51,243) (51,243) Capital increase in connection with U.S. listing 4.2 7,616 526,918 534,534 Transaction costs in connection with U.S. listing (56,616) (56,616) Issuance of Matching Shares, net of costs 2.5 31 31 Share-based compensation expense 2.5 27,270 27,270 Total transactions with owners 14,714 1,158,234 - (2,094) 29,343 1,200,19 Balance as of December 31, 2020 34,698 2,082,254 714 5,780 (1,502,921) 620,525 Orphazyme Annual Report 2020 Group Financial Statements The accompanying notes form an integral part of these consolidated financial statements. 44


CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, (DKK 000) Note 2020 2019 2018 Net loss (633,246) (337,497) (229,600) Reversal of non-cash items: Equity-settled share-based compensation expense 2.5 28,105 2,549 2,105 Depreciation and amortization 3.1, 3.2, 3.3 5,200 3,803 1,366 Financial income 2.6 (2,444) (316) (5) Financial expenses 2.6 29,071 7,359 3,453 Income tax benefit 2.7 (1,915) (5,500) (5,500) Exchange rate adjustments - - (491) Change in working capital: Change in prepayments, deposits, and other receivables 3.4 (33,662) 4,920 (14,578) Change in trade payables, accruals, and other liabilities 3.6 76,424 (2,844) 5,943 Corporation taxes received 2.7 5,500 5,500 5,500 Corporation taxes paid 2.7 (1,431) - - Interest received 45 388 5 Interest paid (10,723) (5,181) (2,962) Net cash used in operating activities (539,076) (326,818) (234,764) Investing activities Purchase of intangible assets 3.1 (2,736) (508) (1,603) Purchase of property, plant, and equipment 3.3 (2,365) (2,777) (743) Net cash used in investing activities (5,101) (3,285) (2,346) Financing activities Proceeds from borrowings 3.6 - 62,758 - Repayment of borrowings (10,535) - - Repayment of lease obligations 3.2 (2,970) (3,838) - Proceeds from issuance of shares 2.5 1,280,786 19 - Transaction costs related to issuance of shares (107,859) - - Net cash provided by financing activities 1,159,422 58,939 - Net change in cash 615,245 (271,164) (237,110) Effects of changes in exchange rates (11,904) 46 81 Cash at the beginning of the year 123,588 394,706 631,735 Cash at the end of the year 726,929 123,588 394,706 The accompanying notes form an integral part of these consolidated financial statements. Orphazyme Annual Report 2020 Group Financial Statements 45CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, (DKK 000) Note 2020 2019 2018 Net loss (633,246) (337,497) (229,600) Reversal of non-cash items: Equity-settled share-based compensation expense 2.5 28,105 2,549 2,105 Depreciation and amortization 3.1, 3.2, 3.3 5,200 3,803 1,366 Financial income 2.6 (2,444) (316) (5) Financial expenses 2.6 29,071 7,359 3,453 Income tax benefit 2.7 (1,915) (5,500) (5,500) Exchange rate adjustments - - (491) Change in working capital: Change in prepayments, deposits, and other receivables 3.4 (33,662) 4,920 (14,578) Change in trade payables, accruals, and other liabilities 3.6 76,424 (2,844) 5,943 Corporation taxes received 2.7 5,500 5,500 5,500 Corporation taxes paid 2.7 (1,431) - - Interest received 45 388 5 Interest paid (10,723) (5,181) (2,962) Net cash used in operating activities (539,076) (326,818) (234,764) Investing activities Purchase of intangible assets 3.1 (2,736) (508) (1,603) Purchase of property, plant, and equipment 3.3 (2,365) (2,777) (743) Net cash used in investing activities (5,101) (3,285) (2,346) Financing activities Proceeds from borrowings 3.6 - 62,758 - Repayment of borrowings (10,535) - - Repayment of lease obligations 3.2 (2,970) (3,838) - Proceeds from issuance of shares 2.5 1,280,786 19 - Transaction costs related to issuance of shares (107,859) - - Net cash provided by financing activities 1,159,422 58,939 - Net change in cash 615,245 (271,164) (237,110) Effects of changes in exchange rates (11,904) 46 81 Cash at the beginning of the year 123,588 394,706 631,735 Cash at the end of the year 726,929 123,588 394,706 The accompanying notes form an integral part of these consolidated financial statements. Orphazyme Annual Report 2020 Group Financial Statements 45


SECTION 1 1.1 CORPORATE INFORMATION BASIS OF Orphazyme A/S (the “Company”) is a late- Information on COVID-19 stage biopharmaceutical company harness- Our business, operations and clinical studies ing the amplification of Heat Shock Proteins, were, of course, impacted by the effects of PREP ARATION or HSPs, in order to develop and commer- COVID-19. Although our clinical studies con- cialize novel therapeutics for the treatment tinued without interruption during 2020, of neurodegenerative orphan diseases. The there weredelays and increased total costs Company is headquartered in Copenhagen, arising from the implications of COVID-19; AND SIGNIFICANT Denmark and is publicly traded on Nasdaq namely, increased home nursing costs and Copenhagen. In September 2020, the Com- direct-to-patient shipments of our drug pany listed American Depositary Shares product for both our clinical studies as well ACCOUNTING (ADSs) on the Nasdaq Global Select Market as our early access program in the U.S. and raised gross proceeds of USD 83.7 mil- However, we have not recognized any write- lion (DKK 534.5 million). offs, impairments of assets, or losses due to POLICIES onerous contracts. In April 2018, a wholly-owned subsidiary, Orphazyme U.S., Inc., was incorporated in The COVID-19 pandemic is also having an Delaware, USA and in March 2020, a whol- effect on other aspects of our business, Section 1 provides a summary of the significant accounting policies ly-owned subsidiary, Orphazyme Schweiz including: our third-party manufacturers, GmbH, was incorporated in Zug, Switzer- and other third parties; albeit with no mate- applied by the Group, Management’s key accounting estimates and land (together with Orphazyme A/S, “Orp- rial effect or impact. The COVID-19 pan - judgements, and new IFRS standards applicable to the Group. hazyme” or “the Group”). By establishing demic may, in the long-term, affect the pro - A detailed description of accounting policies and key accounting local subsidiaries, the Company aims to ductivity of our staff; our ability to attract, estimates and judgements related to specific financial statement directly support the U.S. and European mar- integrate, manage and retain qualified per - line items is presented in each note to the relevant line item. kets and establish closer relationships with sonnel or key employees; our global supply the medical, patient, and financial communi - chains and relationships with vendors and ties as Orphazyme expands its development other parties; significant disruption of global programs and global reach. financial markets; and reduced ability to secure additional funding. We continuously In this section These consolidated financial statements monitor the COVID-19 pandemic and its were approved and authorized for issuance potential impact on our business and 1.1 Corporate information 46 by the Board of Directors on March 2, 2021. financials. 1.2 Basis of Preparation 47 1.3 Significant Accounting Policies 47 1.4 Significant A ccounting Estimates and Judgements 48 1.5 New IFRS standars applicable to The Gr49 oup Orphazyme Annual Report 2020 Group Financial Statements 46SECTION 1 1.1 CORPORATE INFORMATION BASIS OF Orphazyme A/S (the “Company”) is a late- Information on COVID-19 stage biopharmaceutical company harness- Our business, operations and clinical studies ing the amplification of Heat Shock Proteins, were, of course, impacted by the effects of PREP ARATION or HSPs, in order to develop and commer- COVID-19. Although our clinical studies con- cialize novel therapeutics for the treatment tinued without interruption during 2020, of neurodegenerative orphan diseases. The there weredelays and increased total costs Company is headquartered in Copenhagen, arising from the implications of COVID-19; AND SIGNIFICANT Denmark and is publicly traded on Nasdaq namely, increased home nursing costs and Copenhagen. In September 2020, the Com- direct-to-patient shipments of our drug pany listed American Depositary Shares product for both our clinical studies as well ACCOUNTING (ADSs) on the Nasdaq Global Select Market as our early access program in the U.S. and raised gross proceeds of USD 83.7 mil- However, we have not recognized any write- lion (DKK 534.5 million). offs, impairments of assets, or losses due to POLICIES onerous contracts. In April 2018, a wholly-owned subsidiary, Orphazyme U.S., Inc., was incorporated in The COVID-19 pandemic is also having an Delaware, USA and in March 2020, a whol- effect on other aspects of our business, Section 1 provides a summary of the significant accounting policies ly-owned subsidiary, Orphazyme Schweiz including: our third-party manufacturers, GmbH, was incorporated in Zug, Switzer- and other third parties; albeit with no mate- applied by the Group, Management’s key accounting estimates and land (together with Orphazyme A/S, “Orp- rial effect or impact. The COVID-19 pan - judgements, and new IFRS standards applicable to the Group. hazyme” or “the Group”). By establishing demic may, in the long-term, affect the pro - A detailed description of accounting policies and key accounting local subsidiaries, the Company aims to ductivity of our staff; our ability to attract, estimates and judgements related to specific financial statement directly support the U.S. and European mar- integrate, manage and retain qualified per - line items is presented in each note to the relevant line item. kets and establish closer relationships with sonnel or key employees; our global supply the medical, patient, and financial communi - chains and relationships with vendors and ties as Orphazyme expands its development other parties; significant disruption of global programs and global reach. financial markets; and reduced ability to secure additional funding. We continuously In this section These consolidated financial statements monitor the COVID-19 pandemic and its were approved and authorized for issuance potential impact on our business and 1.1 Corporate information 46 by the Board of Directors on March 2, 2021. financials. 1.2 Basis of Preparation 47 1.3 Significant Accounting Policies 47 1.4 Significant A ccounting Estimates and Judgements 48 1.5 New IFRS standars applicable to The Gr49 oup Orphazyme Annual Report 2020 Group Financial Statements 46


1.2 BASIS OF PREPARATION 1.3 SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements of the Materiality A detailed description of accounting poli- gains and losses on transactions between Group have been prepared in accordance The consolidated financial statements are cies and significant accounting estimates the consolidated companies are eliminated. with International Financial Reporting prepared based on the concept of material- and judgements related to specific financial Standards (IFRS) as issued by the Interna- ity, which considers both quantitative and statement line items is presented in each Translation of foreign currencies tional Accounting Standards Board (IASB) qualitative factors. Items that are consid- note to the relevant line item. The consoli- Items included in the financial statements of and in accordance with IFRS as endorsed by ered individually significant or are required dated financial statements have been pre - each of the Orphazyme entities are meas- the EU and further requirements in the Dan- under the minimum presentation require- pared on a historical cost basis except for ured using the currency of the primary eco- ish Financial Statements Act. All entities in ments of IFRS are presented separately. If share-based compensation and the embed- nomic environment in which the entity oper- the Orphazyme Group follow the same items are individually immaterial, they are ded derivative in our borrowings, which is ates, or functional currency. On initial Group accounting policies. aggregated with other items of similar measured at fair value. recognition, transactions denominated in nature in the financial statements or in the foreign currencies are recorded using the The consolidated financial statements have notes. Principles of consolidation foreign exchange spot rate at the transac- been prepared on a going concern basis The consolidated financial statements of the tion date. For monetary assets and liabili- and are presented in Danish Kroner, or DKK, Group include the financial statements of ties, differences arising between the foreign which is both the functional and presenta- the parent company, Orphazyme A/S (the exchange spot rates at the transaction date tion currency of the Company. The func- “Parent Company”), Orphazyme US, Inc. and the date of settlement or period-end tional currency of Orphazyme US, Inc. is the and Orphazyme Schweiz GmbH, ful- exchange rates are recognized in the State- US dollar (USD) and the functional currency ly-owned subsidiaries over which the Parent ment of Profit or Loss as financial income or of Orphazyme Schweiz GmbH is the Swiss Company has control. A company controls financial expenses. On consolidation, the Franc (CHF). Where indicated, amounts are an entity when the company (i) is exposed assets and liabilities of Orphazyme US, Inc. rounded to the nearest thousand. to, or has rights to, variable returns from its and Orphazyme Schweiz GmbH are trans- involvement with the entity, (ii) has power lated from the subsidiary’s functional cur- over the entity (i.e. existing rights that give rency to DKK at the exchange rate in effect it the current ability to direct the activities at the balance sheet date and the Statement of the entity), and (iii) has the ability to use of Profit or Loss and Other Comprehensive its power to affect the returns of the entity. Income is translated from the subsidiary’s The Parent Company reassesses whether it functional currency to DKK at the date of controls an entity if facts and circumstances the underlying transaction or average indicate that there are changes to one or exchange rate of the period if there are no more of the three elements of control. Con- significant fluctuations in exchange rate solidation of an entity begins when the Par- throughout the period. The exchange rate ent Company obtains control and ceases differences arising on translation for consol - when the Parent Company has lost control idation are recognized in other comprehen- of the entity. On consolidation, intercom- sive income (loss). pany income and expenses, intercompany receivables, and payables, and unrealized Orphazyme Annual Report 2020 Group Financial Statements 471.2 BASIS OF PREPARATION 1.3 SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements of the Materiality A detailed description of accounting poli- gains and losses on transactions between Group have been prepared in accordance The consolidated financial statements are cies and significant accounting estimates the consolidated companies are eliminated. with International Financial Reporting prepared based on the concept of material- and judgements related to specific financial Standards (IFRS) as issued by the Interna- ity, which considers both quantitative and statement line items is presented in each Translation of foreign currencies tional Accounting Standards Board (IASB) qualitative factors. Items that are consid- note to the relevant line item. The consoli- Items included in the financial statements of and in accordance with IFRS as endorsed by ered individually significant or are required dated financial statements have been pre - each of the Orphazyme entities are meas- the EU and further requirements in the Dan- under the minimum presentation require- pared on a historical cost basis except for ured using the currency of the primary eco- ish Financial Statements Act. All entities in ments of IFRS are presented separately. If share-based compensation and the embed- nomic environment in which the entity oper- the Orphazyme Group follow the same items are individually immaterial, they are ded derivative in our borrowings, which is ates, or functional currency. On initial Group accounting policies. aggregated with other items of similar measured at fair value. recognition, transactions denominated in nature in the financial statements or in the foreign currencies are recorded using the The consolidated financial statements have notes. Principles of consolidation foreign exchange spot rate at the transac- been prepared on a going concern basis The consolidated financial statements of the tion date. For monetary assets and liabili- and are presented in Danish Kroner, or DKK, Group include the financial statements of ties, differences arising between the foreign which is both the functional and presenta- the parent company, Orphazyme A/S (the exchange spot rates at the transaction date tion currency of the Company. The func- “Parent Company”), Orphazyme US, Inc. and the date of settlement or period-end tional currency of Orphazyme US, Inc. is the and Orphazyme Schweiz GmbH, ful- exchange rates are recognized in the State- US dollar (USD) and the functional currency ly-owned subsidiaries over which the Parent ment of Profit or Loss as financial income or of Orphazyme Schweiz GmbH is the Swiss Company has control. A company controls financial expenses. On consolidation, the Franc (CHF). Where indicated, amounts are an entity when the company (i) is exposed assets and liabilities of Orphazyme US, Inc. rounded to the nearest thousand. to, or has rights to, variable returns from its and Orphazyme Schweiz GmbH are trans- involvement with the entity, (ii) has power lated from the subsidiary’s functional cur- over the entity (i.e. existing rights that give rency to DKK at the exchange rate in effect it the current ability to direct the activities at the balance sheet date and the Statement of the entity), and (iii) has the ability to use of Profit or Loss and Other Comprehensive its power to affect the returns of the entity. Income is translated from the subsidiary’s The Parent Company reassesses whether it functional currency to DKK at the date of controls an entity if facts and circumstances the underlying transaction or average indicate that there are changes to one or exchange rate of the period if there are no more of the three elements of control. Con- significant fluctuations in exchange rate solidation of an entity begins when the Par- throughout the period. The exchange rate ent Company obtains control and ceases differences arising on translation for consol - when the Parent Company has lost control idation are recognized in other comprehen- of the entity. On consolidation, intercom- sive income (loss). pany income and expenses, intercompany receivables, and payables, and unrealized Orphazyme Annual Report 2020 Group Financial Statements 47


1.3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)1.4 SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENT S Statement of cash flows Cash flows from investing activities shows The use of reasonable estimates and judge- • Es timate of research and development The statement of cash flows is presented payments related primarily to the purchase ments is an essential part of the preparation expenses associated with clinical trials using the indirect method and shows cash of licenses and property, plant, and of the consolidated financial statements. (Note 2.2) and related prepayments flows resulting from operating activities, equipment. Given the uncertainties inherent in the (Note 3.4) and accruals (Note 3.6) investing activities, financing activities, and Group’s business activities, Management • Es timate of inputs and assumptions used the Group’s cash at the beginning and end Cash flows from financing activities shows must make certain significant accounting in share-based compensation valuation of the year, including any effects of proceeds from share issuance, borrowings, estimates and judgements, which affect the models (Note 2.5) exchange rate changes. net of transaction costs, repayment of debt, application of accounting policies and • Es timate of the fair value of licenses and lease payments. therefore the reported amounts of assets, (Note 3.1) Cash flows used in operating activities con- liabilities, revenue, expenses, and disclo- • Es timate relating to the incremental bor- verts items in the Statement of Profit or Segment information sures in the consolidated financial state - rowing rate to measure lease liabilities Loss from the accrual basis of accounting to Although Orphazyme established a US sub- ments. The significant accounting estimates (Note 3.2) the cash basis of accounting. Non-cash sidiary in 2018 and a Swiss subsidiary in and judgements identified are those that • Judgement and es timate relating to pre- items such as foreign exchange gains and 2020, the Group is managed and operated have a significant risk of resulting in a mate - launch drug product inventory (Note 3.5) losses, depreciation, amortization, and as one business unit that is reflected in the rial adjustment to the consolidated financial • Judgement r egarding the recognition of changes in working capital are reversed internal reporting. No separate lines of busi- statements. Management bases its esti- deferred tax assets related to taxable from the net loss for the year and actual ness or separate business entities have been mates on historical experience, assumptions, losses to be carried forward (Note 2.7) cash receipts and payments are included. identified with respect to any product can - and information currently available and • Judgement r egarding management’s didate or geographical market and no seg- deemed to be reasonable at the time the assessment of the company’s ability to ment information is currently disclosed in consolidated financial statements are pre - continue as a going concern (Note 4.1) the Group’s internal reporting. For the years pared. However, actual amounts may differ ended December 31, 2020, 2019, and 2018, from the estimated amounts as more Please refer to the specific referenced notes the Group generated no revenue and all detailed information becomes available. for further information on the significant material non-current assets are located in Estimates and assumptions are reviewed on accounting estimates and judgements as Denmark. an ongoing basis and, if necessary, changes well as assumptions applied. are recognized in the period in which the estimate is revised. Management has made significant accounting estimates and judge - ments in the following areas, which are fur- ther presented in each note to the relevant financial statement line items: Orphazyme Annual Report 2020 Group Financial Statements 48 1.3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)1.4 SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENT S Statement of cash flows Cash flows from investing activities shows The use of reasonable estimates and judge- • Es timate of research and development The statement of cash flows is presented payments related primarily to the purchase ments is an essential part of the preparation expenses associated with clinical trials using the indirect method and shows cash of licenses and property, plant, and of the consolidated financial statements. (Note 2.2) and related prepayments flows resulting from operating activities, equipment. Given the uncertainties inherent in the (Note 3.4) and accruals (Note 3.6) investing activities, financing activities, and Group’s business activities, Management • Es timate of inputs and assumptions used the Group’s cash at the beginning and end Cash flows from financing activities shows must make certain significant accounting in share-based compensation valuation of the year, including any effects of proceeds from share issuance, borrowings, estimates and judgements, which affect the models (Note 2.5) exchange rate changes. net of transaction costs, repayment of debt, application of accounting policies and • Es timate of the fair value of licenses and lease payments. therefore the reported amounts of assets, (Note 3.1) Cash flows used in operating activities con- liabilities, revenue, expenses, and disclo- • Es timate relating to the incremental bor- verts items in the Statement of Profit or Segment information sures in the consolidated financial state - rowing rate to measure lease liabilities Loss from the accrual basis of accounting to Although Orphazyme established a US sub- ments. The significant accounting estimates (Note 3.2) the cash basis of accounting. Non-cash sidiary in 2018 and a Swiss subsidiary in and judgements identified are those that • Judgement and es timate relating to pre- items such as foreign exchange gains and 2020, the Group is managed and operated have a significant risk of resulting in a mate - launch drug product inventory (Note 3.5) losses, depreciation, amortization, and as one business unit that is reflected in the rial adjustment to the consolidated financial • Judgement r egarding the recognition of changes in working capital are reversed internal reporting. No separate lines of busi- statements. Management bases its esti- deferred tax assets related to taxable from the net loss for the year and actual ness or separate business entities have been mates on historical experience, assumptions, losses to be carried forward (Note 2.7) cash receipts and payments are included. identified with respect to any product can - and information currently available and • Judgement r egarding management’s didate or geographical market and no seg- deemed to be reasonable at the time the assessment of the company’s ability to ment information is currently disclosed in consolidated financial statements are pre - continue as a going concern (Note 4.1) the Group’s internal reporting. For the years pared. However, actual amounts may differ ended December 31, 2020, 2019, and 2018, from the estimated amounts as more Please refer to the specific referenced notes the Group generated no revenue and all detailed information becomes available. for further information on the significant material non-current assets are located in Estimates and assumptions are reviewed on accounting estimates and judgements as Denmark. an ongoing basis and, if necessary, changes well as assumptions applied. are recognized in the period in which the estimate is revised. Management has made significant accounting estimates and judge - ments in the following areas, which are fur- ther presented in each note to the relevant financial statement line items: Orphazyme Annual Report 2020 Group Financial Statements 48


1.5 NEW IFRS STANDARDS APPLICABLE TO THE GROUP The Group applied for the first-time certain are directly affected by interest rate bench - Conceptual Framework for Financial Report- a practical expedient, a lessee may elect not standards and amendments which are effec - mark reform. A hedging relationship is ing issued on 29 March 2018 to assess whether a Covid-19 related rent tive for annual periods beginning on or after affected if the reform gives rise to uncer - concession from a lessor is a lease modifica - January 1, 2020. The Group has not early tainty about the timing and/or amount of The Conceptual Framework is not a stand- tion. A lessee that makes this election adopted any other standard, interpretation benchmark-based cash flows of the hedged ard, and none of the concepts contained accounts for any change in lease payments or amendment that has been issued but is item or the hedging instrument. These therein override the concepts or require- resulting from the Covid-19 related rent con- not yet effective. amendments have no impact on the consoli- ments in any standard. The purpose of the cession the same way it would account for dated financial statements of the Group as Conceptual Framework is to assist the IASB the change under IFRS 16, if the change Amendments to IFRS 3 Definition of a it does not have any interest rate hedge in developing standards, to help preparers were not a lease modification. The amend - busines s relationships. develop consistent accounting policies ment applies to annual reporting periods where there is no applicable standard in beginning on or after 1 June 2020. Earlier The amendments to IFRS 3 Business Combi- Amendments to IAS 1 and IAS 8 Definition of place and to assist all parties to understand application is permitted. This amendment nations clarifies that to be considered a Material and interpret the standards. This will affect had no impact on the consolidated financial business, an integrated set of activities and those entities which developed their statements of the Group. assets must include, at a minimum, an input The amendments provide a new definition accounting policies based on the Concep- and a substantive process that, together, of material that states, “information is mate- tual Framework. The revised Conceptual New IFRS standards not yet effective significantly contribute to the ability to cre - rial if omitting, misstating or obscuring it Framework includes some new concepts, ate output. Furthermore, it clarifies that a could reasonably be expected to influence updated definitions and recognition criteria The IASB has issued a number of new business can exist without including all of decisions that the primary users of general for assets and liabilities and clarifies some standards and updated some existing stand- the inputs and processes needed to create purpose financial statements make on the important concepts. These amendments ards, which are effective for accounting outputs. These amendments had no impact basis of those financial statements, which had no impact on the consolidated financial periods beginning January 1, 2021 or later. on the consolidated financial statements of provide financial information about a spe - statements of the Group. Therefore, they are not incorporated in the Group, but may impact future periods cific reporting entity.” The amendments these consolidated financial statements. should the Group enter into any business clarify that materiality will depend on the Amendments to IFRS 16 Covid-19 Related There are no standards presently known combinations. nature or magnitude of information, either Rent Concessions that are not yet effective and that would be individually or in combination with other expected to have a material impact on our Amendments to IFRS 7, IFRS 9 and IAS 39 information, in the context of the financial On May 28, 2020, the IASB issued Cov- current or future reporting periods. Interest Rate Benchmark Reform statements. A misstatement of information id-19-Related Rent Concessions - amend- is material if it could reasonably be ment to IFRS 16 Leases. The amendments The amendments to IFRS7, IFRS 9 and IAS expected to influence decisions made by provide relief to lessees from applying IFRS 39 Financial Instruments: Recognition and the primary users. These amendments had 16 guidance on lease modification account - Measurement provide a number of reliefs, no impact on the consolidated financial ing for rent concessions arising as a direct which apply to all hedging relationships that statements of the Group. consequence of the Covid-19 pandemic. As Orphazyme Annual Report 2020 Group Financial Statements 491.5 NEW IFRS STANDARDS APPLICABLE TO THE GROUP The Group applied for the first-time certain are directly affected by interest rate bench - Conceptual Framework for Financial Report- a practical expedient, a lessee may elect not standards and amendments which are effec - mark reform. A hedging relationship is ing issued on 29 March 2018 to assess whether a Covid-19 related rent tive for annual periods beginning on or after affected if the reform gives rise to uncer - concession from a lessor is a lease modifica - January 1, 2020. The Group has not early tainty about the timing and/or amount of The Conceptual Framework is not a stand- tion. A lessee that makes this election adopted any other standard, interpretation benchmark-based cash flows of the hedged ard, and none of the concepts contained accounts for any change in lease payments or amendment that has been issued but is item or the hedging instrument. These therein override the concepts or require- resulting from the Covid-19 related rent con- not yet effective. amendments have no impact on the consoli- ments in any standard. The purpose of the cession the same way it would account for dated financial statements of the Group as Conceptual Framework is to assist the IASB the change under IFRS 16, if the change Amendments to IFRS 3 Definition of a it does not have any interest rate hedge in developing standards, to help preparers were not a lease modification. The amend - busines s relationships. develop consistent accounting policies ment applies to annual reporting periods where there is no applicable standard in beginning on or after 1 June 2020. Earlier The amendments to IFRS 3 Business Combi- Amendments to IAS 1 and IAS 8 Definition of place and to assist all parties to understand application is permitted. This amendment nations clarifies that to be considered a Material and interpret the standards. This will affect had no impact on the consolidated financial business, an integrated set of activities and those entities which developed their statements of the Group. assets must include, at a minimum, an input The amendments provide a new definition accounting policies based on the Concep- and a substantive process that, together, of material that states, “information is mate- tual Framework. The revised Conceptual New IFRS standards not yet effective significantly contribute to the ability to cre - rial if omitting, misstating or obscuring it Framework includes some new concepts, ate output. Furthermore, it clarifies that a could reasonably be expected to influence updated definitions and recognition criteria The IASB has issued a number of new business can exist without including all of decisions that the primary users of general for assets and liabilities and clarifies some standards and updated some existing stand- the inputs and processes needed to create purpose financial statements make on the important concepts. These amendments ards, which are effective for accounting outputs. These amendments had no impact basis of those financial statements, which had no impact on the consolidated financial periods beginning January 1, 2021 or later. on the consolidated financial statements of provide financial information about a spe - statements of the Group. Therefore, they are not incorporated in the Group, but may impact future periods cific reporting entity.” The amendments these consolidated financial statements. should the Group enter into any business clarify that materiality will depend on the Amendments to IFRS 16 Covid-19 Related There are no standards presently known combinations. nature or magnitude of information, either Rent Concessions that are not yet effective and that would be individually or in combination with other expected to have a material impact on our Amendments to IFRS 7, IFRS 9 and IAS 39 information, in the context of the financial On May 28, 2020, the IASB issued Cov- current or future reporting periods. Interest Rate Benchmark Reform statements. A misstatement of information id-19-Related Rent Concessions - amend- is material if it could reasonably be ment to IFRS 16 Leases. The amendments The amendments to IFRS7, IFRS 9 and IAS expected to influence decisions made by provide relief to lessees from applying IFRS 39 Financial Instruments: Recognition and the primary users. These amendments had 16 guidance on lease modification account - Measurement provide a number of reliefs, no impact on the consolidated financial ing for rent concessions arising as a direct which apply to all hedging relationships that statements of the Group. consequence of the Covid-19 pandemic. As Orphazyme Annual Report 2020 Group Financial Statements 49


SECTION 2 2.1 RESEARCH AND DEVELOPMENT EXPENSES RESULT ACCOUNTING POLICIES Clinical trial costs are a significant compo - § nent of research and development Research expenses comprise of costs expenses. The Company’s clinical trials are OF THE YEAR incurred during the very early stages of the performed by third-party Contract Research drug development cycle from initial drug Organizations (CROs) and in order to esti- discovery until the drug is ready for admin- mate the amount of costs to charge to istration to humans. The activities initially expense Management has developed focus on identifying a single drug candidate expense models for each clinical trial based with a profile that will support a decision to on estimates and assumptions. Section 2 presents details related to Orphazyme’s initiate development activities. Before selec- Statement of Profit or Loss and Other tion of the final drug candidate, it is tested The clinical trials generally have three Comprehensive Income, including Research and in animals to gather efficacy, toxicity and distinctive stages. Development expenses and General and pharmacokinetic information. • S tart-up stage: initial setting up of the Administrative expenses, Government Grants, Development expenses comprise costs trial Employee costs, and Share-based Compensation incurred during the different phases of clini - • T reatment stage: site and trial manage- costs. The Group does not yet generate revenue. cal drug development starting in phase 1, ment during the dosing period In addition, this section comprises Financial when the drug is administered to humans • W rap-up stage: close down and report- Income, Financial Expenses, and Income Taxes. for the first time, through phases 2 and 3, ing of the trial and subsequent activities to obtain market- ing authorizations, which will permit Orpha- For each clinical trial for which information zyme to eventually market and sell the drug about the actual services delivered by the products. CRO are not provided on a regular current basis, the Company reviews the approved In line with industry practice, Orphazyme budgets for the clinical trial from the origi- expenses all research costs. Development nal executed agreements and categorizes costs that do not meet the definition of an the individual costs according to the three In this section asset are also expensed as incurred. Due to stages described above. The start-up activi- regulatory and other uncertainties inherent ties, which include site recruitment, regula- 2.1 Research and development expenses 50 in the development of new products, devel- tory applications and investigator meetings, 2.2 Government grants 52 opment costs do not qualify for capitaliza- usually are performed reasonably uniformly 2.3 Gener al and administrative expenses 52 tion as intangible assets until marketing throughout the start-up stage and the 2.4 Employee costs 53 approval by a regulatory authority is related costs are expensed ratably over this 2.5 Share-based compensation costs 53 obtained or highly probable. In addition, stage, which reflects the manner in which 2.6 Financial inc ome and financial expenses 59 pre-launch inventory costs are recognized related services are rendered by the CRO. 2.7 Income taxes 59 under Research and Development (see Note 3.5). Orphazyme Annual Report 2020 Group Financial Statements 50SECTION 2 2.1 RESEARCH AND DEVELOPMENT EXPENSES RESULT ACCOUNTING POLICIES Clinical trial costs are a significant compo - § nent of research and development Research expenses comprise of costs expenses. The Company’s clinical trials are OF THE YEAR incurred during the very early stages of the performed by third-party Contract Research drug development cycle from initial drug Organizations (CROs) and in order to esti- discovery until the drug is ready for admin- mate the amount of costs to charge to istration to humans. The activities initially expense Management has developed focus on identifying a single drug candidate expense models for each clinical trial based with a profile that will support a decision to on estimates and assumptions. Section 2 presents details related to Orphazyme’s initiate development activities. Before selec- Statement of Profit or Loss and Other tion of the final drug candidate, it is tested The clinical trials generally have three Comprehensive Income, including Research and in animals to gather efficacy, toxicity and distinctive stages. Development expenses and General and pharmacokinetic information. • S tart-up stage: initial setting up of the Administrative expenses, Government Grants, Development expenses comprise costs trial Employee costs, and Share-based Compensation incurred during the different phases of clini - • T reatment stage: site and trial manage- costs. The Group does not yet generate revenue. cal drug development starting in phase 1, ment during the dosing period In addition, this section comprises Financial when the drug is administered to humans • W rap-up stage: close down and report- Income, Financial Expenses, and Income Taxes. for the first time, through phases 2 and 3, ing of the trial and subsequent activities to obtain market- ing authorizations, which will permit Orpha- For each clinical trial for which information zyme to eventually market and sell the drug about the actual services delivered by the products. CRO are not provided on a regular current basis, the Company reviews the approved In line with industry practice, Orphazyme budgets for the clinical trial from the origi- expenses all research costs. Development nal executed agreements and categorizes costs that do not meet the definition of an the individual costs according to the three In this section asset are also expensed as incurred. Due to stages described above. The start-up activi- regulatory and other uncertainties inherent ties, which include site recruitment, regula- 2.1 Research and development expenses 50 in the development of new products, devel- tory applications and investigator meetings, 2.2 Government grants 52 opment costs do not qualify for capitaliza- usually are performed reasonably uniformly 2.3 Gener al and administrative expenses 52 tion as intangible assets until marketing throughout the start-up stage and the 2.4 Employee costs 53 approval by a regulatory authority is related costs are expensed ratably over this 2.5 Share-based compensation costs 53 obtained or highly probable. In addition, stage, which reflects the manner in which 2.6 Financial inc ome and financial expenses 59 pre-launch inventory costs are recognized related services are rendered by the CRO. 2.7 Income taxes 59 under Research and Development (see Note 3.5). Orphazyme Annual Report 2020 Group Financial Statements 50


2.1 RESEARCH AND DEVELOPMENT EXPENSES (CONTINUED) The start-up stage is followed by the treat- costs, are expensed as incurred, which is Research and development expenses ment stage, during which patients are typically when the service has been ren- include costs arising from research and clin- Estimate of research and development dosed with the drug under study and results dered or the goods delivered. ical development activities including expenses associated with clinical trials are monitored and measured. The costs employee costs for research and develop- Accounting for clinical trial costs incurred in this stage of the trial, which CROs invoice the Company upon the occur- ment personnel (i.e. salaries, bonuses, related to activities performed by comprises the major portion of the total rence of predetermined milestones (such as employer contributions to pension schemes, Contract Research Organizations cost of the clinical trial, is mainly driven by the enrollment of patients); however, the share-based compensation), legal expenses (CROs) and other external vendors the number of enrolled patients undergoing timing of these invoices and the Company’s related to the protection, defense and requires Management to make signifi - treatment. The Company estimates the related payments often do not correspond enforcement of the Company’s intellectual cant estimates regarding the timing of costs attributable to activities performed in directly to the level of performance of con- property, as well as depreciation of right-of- the expense recognition of these this stage of the trial on a per-patient basis. tracted activities. To the extent payments use assets associated with facilities and costs. The diverse nature of services These costs are expensed over the treat- are made by the Company in advance of the equipment used for research and develop- being provided by CROs, the different ment stage as patients are enrolled and related activities performed by the CROs, ment purposes. The following table presents compensation arrangements that undergo treatment, as reported by the CRO. they are included in prepayments to ven- research and development expenses recog- exist for each type of service, and the After the last patient has been treated, the dors (see Note 3.4) and expensed in accord- nized for the years ended December 31: limitation in the availability of infor- trial begins to be closed down and activities ance with the expense model discussed mation related to when certain clinical are performed related to data quality assur- above. To the extent that the payments are External costs comprise mainly expenses activities are performed add complex- ance and analysis. These activities are per- made by the Company following the perfor- related to third party vendors providing ser- ity to the estimation of the timing of formed reasonably uniformly throughout mance of the related activities, the expense vices related to our research and develop- expense recognition for services ren- the wrap-up stage and are expensed ratably is reflected as an accrual (see Note 3.6) in ment activities and facility costs. External dered by CROs and other vendors in over this last stage. Other costs, such as accordance with the expense model. costs in 2020 include expense from write- connection with clinical trials. In addi- central laboratory costs and drug supply down of pre-launch inventory of DKK 12.4m tion, the COVID-19 pandemic has (Note 3.5). increased the estimation uncertainty of clinical trial costs, in particular the timing of the expense recognition due (DKK 000) 2020 2019 2018 to potential delays in services being External costs 261,136 218,143 154,952 performed. Employee costs (Note 2.4) 96,108 64,167 40,281 Depreciation and amortization (Notes 3.1, 3.2, 3.3) 4,040 3,103 1,292 Total research and development expenses 361,284 285,413 196,525 Orphazyme Annual Report 2020 Group Financial Statements 512.1 RESEARCH AND DEVELOPMENT EXPENSES (CONTINUED) The start-up stage is followed by the treat- costs, are expensed as incurred, which is Research and development expenses ment stage, during which patients are typically when the service has been ren- include costs arising from research and clin- Estimate of research and development dosed with the drug under study and results dered or the goods delivered. ical development activities including expenses associated with clinical trials are monitored and measured. The costs employee costs for research and develop- Accounting for clinical trial costs incurred in this stage of the trial, which CROs invoice the Company upon the occur- ment personnel (i.e. salaries, bonuses, related to activities performed by comprises the major portion of the total rence of predetermined milestones (such as employer contributions to pension schemes, Contract Research Organizations cost of the clinical trial, is mainly driven by the enrollment of patients); however, the share-based compensation), legal expenses (CROs) and other external vendors the number of enrolled patients undergoing timing of these invoices and the Company’s related to the protection, defense and requires Management to make signifi - treatment. The Company estimates the related payments often do not correspond enforcement of the Company’s intellectual cant estimates regarding the timing of costs attributable to activities performed in directly to the level of performance of con- property, as well as depreciation of right-of- the expense recognition of these this stage of the trial on a per-patient basis. tracted activities. To the extent payments use assets associated with facilities and costs. The diverse nature of services These costs are expensed over the treat- are made by the Company in advance of the equipment used for research and develop- being provided by CROs, the different ment stage as patients are enrolled and related activities performed by the CROs, ment purposes. The following table presents compensation arrangements that undergo treatment, as reported by the CRO. they are included in prepayments to ven- research and development expenses recog- exist for each type of service, and the After the last patient has been treated, the dors (see Note 3.4) and expensed in accord- nized for the years ended December 31: limitation in the availability of infor- trial begins to be closed down and activities ance with the expense model discussed mation related to when certain clinical are performed related to data quality assur- above. To the extent that the payments are External costs comprise mainly expenses activities are performed add complex- ance and analysis. These activities are per- made by the Company following the perfor- related to third party vendors providing ser- ity to the estimation of the timing of formed reasonably uniformly throughout mance of the related activities, the expense vices related to our research and develop- expense recognition for services ren- the wrap-up stage and are expensed ratably is reflected as an accrual (see Note 3.6) in ment activities and facility costs. External dered by CROs and other vendors in over this last stage. Other costs, such as accordance with the expense model. costs in 2020 include expense from write- connection with clinical trials. In addi- central laboratory costs and drug supply down of pre-launch inventory of DKK 12.4m tion, the COVID-19 pandemic has (Note 3.5). increased the estimation uncertainty of clinical trial costs, in particular the timing of the expense recognition due (DKK 000) 2020 2019 2018 to potential delays in services being External costs 261,136 218,143 154,952 performed. Employee costs (Note 2.4) 96,108 64,167 40,281 Depreciation and amortization (Notes 3.1, 3.2, 3.3) 4,040 3,103 1,292 Total research and development expenses 361,284 285,413 196,525 Orphazyme Annual Report 2020 Group Financial Statements 51


2.2 GOVERNMENT GRANTS 2.3 GENERAL AND ADMINISTRATIVE EXPENSES ACCOUNTING POLICIES As of the year ended December 31, 2020, ACCOUNTING POLICIES pre-commercial activities in general and § § the total amount still receivable under these administrative expenses, such as the prepa- Government grants are recognized when grants is DKK 0.1 million (2019: DKK 0.4 mil- General and administrative expenses include ration of an Early Access Program for NPC, there is reasonable assurance that the fund- lion) and is classified as Current Other salaries for administrative employees and tradename costs, market and pricing studies ing will be received, and all underlying con- Receivables in the Statement of Financial Executive Management, remuneration to the and related costs. ditions will be fulfilled. Income from grants Position, as all remaining funding from Board of Directors, share-based compensa- is recognized in the Statement of Profit or grants is receivable within the next year tion costs, depreciation of right-of-use The following table presents general and Loss as a reduction of the related expenses (Note 3.4). One grant has been paid to Orp- assets associated with facilities not used for administrative expenses for the years ended being reimbursed in the period when the hazyme in advance and income in the research and development purposes, and December 31: related expenses are incurred. amount of DKK 0.0 million (2019: DKK 0.1 investor relations. In addition, we include million) related to this grant has been Government grants comprise research fund- deferred and presented in the Statement of (DKK 000) 2020 2019 2018 ing from the Danish government and the Financial Position as current other liabilities External costs 118,971 23,847 19,250 European Union. The grants received by (Note 3.6). All the grants received are sub- Employee costs (Note 2.4) 127,120 25,995 15,803 Orphazyme provide reimbursement for cer- ject to repayment clauses upon breach of Depreciation (Notes 3.2 and 3.3) 1,159 699 74 tain project-specific research and develop - conditions to maintain the terms under ment expenses, including wages and sala- which the grant was awarded. Orphazyme Total general and administrative expenses 247,250 50,541 35,127 ries. During the year ended December 31, has complied with and anticipates continu- 2020, Orphazyme has received DKK 0.0 ing to fully comply with all such terms. million (2019: DKK 0.1 million; 2018: DKK 2.1 External costs comprise expenses related to cal affairs activities to further engage with million) in government grant funding, which third party vendors providing assistance the scientific community through communi - was receivable as of December 31, 2019. with establishing a commercial organization cation and education programs. In addition, and the escalation of launch preparation external costs comprise expenses related to activities, including hiring a commercial administrative services such as legal and team in our subsidiaries in the U.S. and Swit- accounting support, IT, and investor zerland, market access activities, and medi- relations. Orphazyme Annual Report 2020 Group Financial Statements 522.2 GOVERNMENT GRANTS 2.3 GENERAL AND ADMINISTRATIVE EXPENSES ACCOUNTING POLICIES As of the year ended December 31, 2020, ACCOUNTING POLICIES pre-commercial activities in general and § § the total amount still receivable under these administrative expenses, such as the prepa- Government grants are recognized when grants is DKK 0.1 million (2019: DKK 0.4 mil- General and administrative expenses include ration of an Early Access Program for NPC, there is reasonable assurance that the fund- lion) and is classified as Current Other salaries for administrative employees and tradename costs, market and pricing studies ing will be received, and all underlying con- Receivables in the Statement of Financial Executive Management, remuneration to the and related costs. ditions will be fulfilled. Income from grants Position, as all remaining funding from Board of Directors, share-based compensa- is recognized in the Statement of Profit or grants is receivable within the next year tion costs, depreciation of right-of-use The following table presents general and Loss as a reduction of the related expenses (Note 3.4). One grant has been paid to Orp- assets associated with facilities not used for administrative expenses for the years ended being reimbursed in the period when the hazyme in advance and income in the research and development purposes, and December 31: related expenses are incurred. amount of DKK 0.0 million (2019: DKK 0.1 investor relations. In addition, we include million) related to this grant has been Government grants comprise research fund- deferred and presented in the Statement of (DKK 000) 2020 2019 2018 ing from the Danish government and the Financial Position as current other liabilities External costs 118,971 23,847 19,250 European Union. The grants received by (Note 3.6). All the grants received are sub- Employee costs (Note 2.4) 127,120 25,995 15,803 Orphazyme provide reimbursement for cer- ject to repayment clauses upon breach of Depreciation (Notes 3.2 and 3.3) 1,159 699 74 tain project-specific research and develop - conditions to maintain the terms under ment expenses, including wages and sala- which the grant was awarded. Orphazyme Total general and administrative expenses 247,250 50,541 35,127 ries. During the year ended December 31, has complied with and anticipates continu- 2020, Orphazyme has received DKK 0.0 ing to fully comply with all such terms. million (2019: DKK 0.1 million; 2018: DKK 2.1 External costs comprise expenses related to cal affairs activities to further engage with million) in government grant funding, which third party vendors providing assistance the scientific community through communi - was receivable as of December 31, 2019. with establishing a commercial organization cation and education programs. In addition, and the escalation of launch preparation external costs comprise expenses related to activities, including hiring a commercial administrative services such as legal and team in our subsidiaries in the U.S. and Swit- accounting support, IT, and investor zerland, market access activities, and medi- relations. Orphazyme Annual Report 2020 Group Financial Statements 52


2.4 EMPLOYEE COSTS 2.5 SHARE-BASED COMPENSATION COSTS ACCOUNTING POLICIES Employees are eligible to receive a discre- ACCOUNTING POLICIES In the event that equity instruments are § § tionary bonus subject to certain predefined granted conditionally upon an equal number Employee costs primarily comprise salaries, and individual goals as determined by the Equity-settled awards of equity instruments granted in prior peri- bonuses, social security contributions, Board of Directors. Employees are also eligi- Shares awarded under the long-term incen- ods not being exercised, they are treated as share-based compensation, vacation and ble to receive an extraordinary bonus at the tive program (“LTIP”) are equity-settled a new grant for the current period and a sick leave as well as the employer portion of discretion of the Board of Directors. awards. The fair value of these awards is modification of the equity instruments pension contributions. In addition, sever- determined at the date of grant, resulting in granted in the prior period. ance payments or termination benefits are The following table presents Employee a fixed fair value at grant date that is not also included under Employee Costs. The Costs, including remuneration to the Board adjusted for future changes in the fair value When the terms of an equity-settled award cost of these benefits is recognized as an of Directors and Executive Management, for of the awards that may occur over the ser- are modified, the minimum expense recog - expense as services are received. All the years ended December 31, 2020, 2019, vice period. The fair value of the LTIP nized is the grant date fair value of the employee pension plans are defined contri - and 2018. Refer to note 4.5 for more discus- awards has been determined using the Mon- unmodified award, provided that the origi - bution plans and not defined benefit plans. sion on remuneration of Board of Directors te-Carlo model. Further details of the valua- nal terms of the award are met. An addi- and Executive Management. tion models are presented below. tional expense, measured as at the date of modification, is recognized for any modifi - The fair value of equity-settled awards with cation that increases the total fair value of EMPLOYEE COSTS (DKK 000) 2020 2019 2018 service conditions and non-market perfor- the share-based payment transaction, or is Salaries 131,606 68,719 42,243 mance conditions is recognized as compen- otherwise beneficial to the employee. Cash bonus 40,481 8,707 4,583 sation expense pro rata over the service Where an award is cancelled by the entity Share-based compensation (Note 2.5) 27,258 2,405 2,145 period to the extent such awards are esti- or by the counterparty, any remaining fair mated to vest. The compensation expense is value of the award is expensed immediately Pensions 11,313 5,561 3,058 recognized together with a corresponding in the Statement of Profit or Loss. Other social security contributions 5,172 875 326 increase in equity over the period in which Other staff costs 3,083 862 966 the performance and/or service conditions Cash-settled awards Total employee costs excluding board remuneration 218,913 87,129 53,321 are fulfilled. The cumulative expense for the The phantom share-based incentive pro- Board remuneration 3,469 2,888 2,763 Board share-based compensation (Note 2.5) 846 145 - Group’s share-based compensation awards grams established by the Group are settled recognized at each reporting date until the in cash. The Restricted Share Units (RSU) Total employee costs 223,228 90,162 56,084 vesting date reflects the extent to which the awards to the board of directors may be Recognized as follows in the Statement of Profit or Loss: vesting period has expired and Manage- settled in cash or in shares, at the choice of Research and development expenses 96,108 64,167 40,281 ment’s best estimate of the number of the participant, and are such treated as General and administrative expenses 127,120 25,995 15,803 instruments that will ultimately vest. The cash-settled awards. A liability is recognized Total employee costs 223,228 90,162 56,084 expense or credit in the Statement of Profit for the fair value of cash-settled awards, or Loss for a period represents the move- measured initially and at each reporting Average number of full-time employees 117 74 46 ment in cumulative expense recognized as date up to and including the settlement Year-end number of full-time employees 141 86 57 at the beginning and end of that period. date, with changes recognized through Orphazyme Annual Report 2020 Group Financial Statements 532.4 EMPLOYEE COSTS 2.5 SHARE-BASED COMPENSATION COSTS ACCOUNTING POLICIES Employees are eligible to receive a discre- ACCOUNTING POLICIES In the event that equity instruments are § § tionary bonus subject to certain predefined granted conditionally upon an equal number Employee costs primarily comprise salaries, and individual goals as determined by the Equity-settled awards of equity instruments granted in prior peri- bonuses, social security contributions, Board of Directors. Employees are also eligi- Shares awarded under the long-term incen- ods not being exercised, they are treated as share-based compensation, vacation and ble to receive an extraordinary bonus at the tive program (“LTIP”) are equity-settled a new grant for the current period and a sick leave as well as the employer portion of discretion of the Board of Directors. awards. The fair value of these awards is modification of the equity instruments pension contributions. In addition, sever- determined at the date of grant, resulting in granted in the prior period. ance payments or termination benefits are The following table presents Employee a fixed fair value at grant date that is not also included under Employee Costs. The Costs, including remuneration to the Board adjusted for future changes in the fair value When the terms of an equity-settled award cost of these benefits is recognized as an of Directors and Executive Management, for of the awards that may occur over the ser- are modified, the minimum expense recog - expense as services are received. All the years ended December 31, 2020, 2019, vice period. The fair value of the LTIP nized is the grant date fair value of the employee pension plans are defined contri - and 2018. Refer to note 4.5 for more discus- awards has been determined using the Mon- unmodified award, provided that the origi - bution plans and not defined benefit plans. sion on remuneration of Board of Directors te-Carlo model. Further details of the valua- nal terms of the award are met. An addi- and Executive Management. tion models are presented below. tional expense, measured as at the date of modification, is recognized for any modifi - The fair value of equity-settled awards with cation that increases the total fair value of EMPLOYEE COSTS (DKK 000) 2020 2019 2018 service conditions and non-market perfor- the share-based payment transaction, or is Salaries 131,606 68,719 42,243 mance conditions is recognized as compen- otherwise beneficial to the employee. Cash bonus 40,481 8,707 4,583 sation expense pro rata over the service Where an award is cancelled by the entity Share-based compensation (Note 2.5) 27,258 2,405 2,145 period to the extent such awards are esti- or by the counterparty, any remaining fair mated to vest. The compensation expense is value of the award is expensed immediately Pensions 11,313 5,561 3,058 recognized together with a corresponding in the Statement of Profit or Loss. Other social security contributions 5,172 875 326 increase in equity over the period in which Other staff costs 3,083 862 966 the performance and/or service conditions Cash-settled awards Total employee costs excluding board remuneration 218,913 87,129 53,321 are fulfilled. The cumulative expense for the The phantom share-based incentive pro- Board remuneration 3,469 2,888 2,763 Board share-based compensation (Note 2.5) 846 145 - Group’s share-based compensation awards grams established by the Group are settled recognized at each reporting date until the in cash. The Restricted Share Units (RSU) Total employee costs 223,228 90,162 56,084 vesting date reflects the extent to which the awards to the board of directors may be Recognized as follows in the Statement of Profit or Loss: vesting period has expired and Manage- settled in cash or in shares, at the choice of Research and development expenses 96,108 64,167 40,281 ment’s best estimate of the number of the participant, and are such treated as General and administrative expenses 127,120 25,995 15,803 instruments that will ultimately vest. The cash-settled awards. A liability is recognized Total employee costs 223,228 90,162 56,084 expense or credit in the Statement of Profit for the fair value of cash-settled awards, or Loss for a period represents the move- measured initially and at each reporting Average number of full-time employees 117 74 46 ment in cumulative expense recognized as date up to and including the settlement Year-end number of full-time employees 141 86 57 at the beginning and end of that period. date, with changes recognized through Orphazyme Annual Report 2020 Group Financial Statements 53


2.5 SHARE-BASED COMPENSATION COSTS (CONTINUED) profit or loss at each reporting date. The fair that do not ultimately vest. If the RSUs are time of exercise compared to the offer ing will be subject to the participants hav- value is expensed over the period until vest- finally exercised, the related liability is price. The potential increase in the price of ing maintained ownership of their Invest- ing date with recognition of a correspond- reclassified as equity. Orphazyme’s shares will be calculated as ment Shares and continued employment ing liability. The fair value is determined the volume-weighted average share price during the one-year vesting period. By using the Monte-Carlo model, further details a) Long-term incentive program as quoted on Nasdaq Copenhagen during March 2019, all 19.175 Matching Shares of which are presented below. The fair value ( equity-settled) the 10 trading days preceding the vesting under the 2017 LTIP vested in full and were of the cash-settled awards, which vest sub- In connection with the completion of the date. The maximum allocation of Perfor- issued against a nominal payment of DKK 1 ject to obtaining a specified share price (i.e. Company’s initial public offering (IPO) on mance Shares will be six shares for the per share. market condition), is reported as compensa- Nasdaq Copenhagen in November 2017, the CEO and four shares for the other partici- tion expense regardless of whether the Executive Management and Key Employees pants multiplied by the number of Invest- In case of termination of a participant’s share price condition is met if all other vest- were offered to subscribe for Offer Shares ment Shares subscribed for in connection employment, the participant may be desig- ing conditions are met. For these awards, (“Investment Shares”) at the Offer Price for with the IPO. Performance Shares will be nated a Good Leaver, which entitles him to fair value is determined taking into account a maximum amount corresponding to allocated on a linear scale with maximum receive Matching Shares and Performance the probability of meeting the share price approximately 15% (CMO) and 20% (CEO, allocation triggered by an 80% increase in Shares as if the participant was still target. No expense is recognized for awards CFO, and CSO) of their respective current share price, whereas no Performance employed with the Group. annual base salaries. Shares will be allocated if the price of Orphazyme’s shares has increased 20% or In July 2019, the Company initiated a 2019 Under the post-IPO long-term incentive less at the end of the vesting period. long-term investment program (2019 LTIP) Estimate of inputs and assumptions program (2017 LTIP), the Executive Man- Among other things, vesting is also sub- for the Executive Management and certain used in share-based compensation agement as well as certain Key Employees ject to the participants having maintained Key Employees with the same terms and valuation models of Orphazyme have subscribed to 14,875 ownership of their Investment Shares and conditions as the 2017 LTIP, i.e. Matching Estimating the fair value of the Group’s ordinary shares (Investment Shares) at the continued employment. Based on the Shares vesting over one year and Perfor- share-based compensation programs offer price of DKK 80. In April 2018, a Key number of Investment Shares subscribed mance Shares vesting over four years. In requires determination of the most Employee subscribed to 4,300 Investment for, a total maximum of 86,700 Perfor - July 2020, 31,250 matching shares fully appropriate valuation model, which Shares at the then-current market price of mance Shares may be issued at the end of vested and were issued against a nominal depends on the terms and conditions DKK 67.5. the vesting period. payment of DKK 1 per share. The maximum of the respective award. This estimate number of Performance Shares that can also requires making assumptions to The participants in the 2017 LTIP may be In addition, subject to Board approval, the vest in July 2023 as part of the 2019 LTIP is determine the most appropriate inputs allocated a number of shares in Orpha- participants may also be allocated a num- 125.000. to the valuation model, including the zyme (“Performance Shares”) at a price ber of shares in Orphazyme (“Matching expected life of the award, expected per Performance Share of DKK 1 at the Shares”) at a price per Matching Share of In 2020, the Company initiated a 2020 volatility, dividend pay-out ratio, and end of a vesting period of four years from DKK 1 in connection with the first anniver - long-term investment program (2020 LTIP) risk-free interest rate. All references to Orphazyme’s first day of trading and offi - sary of the subscription date of the Invest- for the Executive Management and certain share price relate to the Company’s cial listing on Nasdaq Copenhagen. The ment Shares. The number of Matching other employeeswith the same terms and share price on Nasdaq Copenhagen. number of Performance Shares shall be Shares shall be equal to the number of conditions as the 2017 LTIP and the 2019 proportional to the potential increase in Investment Shares subscribed for and vest- LTIP. However, in case of termination of a the price of Orphazyme’s shares at the Orphazyme Annual Report 2020 Group Financial Statements 542.5 SHARE-BASED COMPENSATION COSTS (CONTINUED) profit or loss at each reporting date. The fair that do not ultimately vest. If the RSUs are time of exercise compared to the offer ing will be subject to the participants hav- value is expensed over the period until vest- finally exercised, the related liability is price. The potential increase in the price of ing maintained ownership of their Invest- ing date with recognition of a correspond- reclassified as equity. Orphazyme’s shares will be calculated as ment Shares and continued employment ing liability. The fair value is determined the volume-weighted average share price during the one-year vesting period. By using the Monte-Carlo model, further details a) Long-term incentive program as quoted on Nasdaq Copenhagen during March 2019, all 19.175 Matching Shares of which are presented below. The fair value ( equity-settled) the 10 trading days preceding the vesting under the 2017 LTIP vested in full and were of the cash-settled awards, which vest sub- In connection with the completion of the date. The maximum allocation of Perfor- issued against a nominal payment of DKK 1 ject to obtaining a specified share price (i.e. Company’s initial public offering (IPO) on mance Shares will be six shares for the per share. market condition), is reported as compensa- Nasdaq Copenhagen in November 2017, the CEO and four shares for the other partici- tion expense regardless of whether the Executive Management and Key Employees pants multiplied by the number of Invest- In case of termination of a participant’s share price condition is met if all other vest- were offered to subscribe for Offer Shares ment Shares subscribed for in connection employment, the participant may be desig- ing conditions are met. For these awards, (“Investment Shares”) at the Offer Price for with the IPO. Performance Shares will be nated a Good Leaver, which entitles him to fair value is determined taking into account a maximum amount corresponding to allocated on a linear scale with maximum receive Matching Shares and Performance the probability of meeting the share price approximately 15% (CMO) and 20% (CEO, allocation triggered by an 80% increase in Shares as if the participant was still target. No expense is recognized for awards CFO, and CSO) of their respective current share price, whereas no Performance employed with the Group. annual base salaries. Shares will be allocated if the price of Orphazyme’s shares has increased 20% or In July 2019, the Company initiated a 2019 Under the post-IPO long-term incentive less at the end of the vesting period. long-term investment program (2019 LTIP) Estimate of inputs and assumptions program (2017 LTIP), the Executive Man- Among other things, vesting is also sub- for the Executive Management and certain used in share-based compensation agement as well as certain Key Employees ject to the participants having maintained Key Employees with the same terms and valuation models of Orphazyme have subscribed to 14,875 ownership of their Investment Shares and conditions as the 2017 LTIP, i.e. Matching Estimating the fair value of the Group’s ordinary shares (Investment Shares) at the continued employment. Based on the Shares vesting over one year and Perfor- share-based compensation programs offer price of DKK 80. In April 2018, a Key number of Investment Shares subscribed mance Shares vesting over four years. In requires determination of the most Employee subscribed to 4,300 Investment for, a total maximum of 86,700 Perfor - July 2020, 31,250 matching shares fully appropriate valuation model, which Shares at the then-current market price of mance Shares may be issued at the end of vested and were issued against a nominal depends on the terms and conditions DKK 67.5. the vesting period. payment of DKK 1 per share. The maximum of the respective award. This estimate number of Performance Shares that can also requires making assumptions to The participants in the 2017 LTIP may be In addition, subject to Board approval, the vest in July 2023 as part of the 2019 LTIP is determine the most appropriate inputs allocated a number of shares in Orpha- participants may also be allocated a num- 125.000. to the valuation model, including the zyme (“Performance Shares”) at a price ber of shares in Orphazyme (“Matching expected life of the award, expected per Performance Share of DKK 1 at the Shares”) at a price per Matching Share of In 2020, the Company initiated a 2020 volatility, dividend pay-out ratio, and end of a vesting period of four years from DKK 1 in connection with the first anniver - long-term investment program (2020 LTIP) risk-free interest rate. All references to Orphazyme’s first day of trading and offi - sary of the subscription date of the Invest- for the Executive Management and certain share price relate to the Company’s cial listing on Nasdaq Copenhagen. The ment Shares. The number of Matching other employeeswith the same terms and share price on Nasdaq Copenhagen. number of Performance Shares shall be Shares shall be equal to the number of conditions as the 2017 LTIP and the 2019 proportional to the potential increase in Investment Shares subscribed for and vest- LTIP. However, in case of termination of a the price of Orphazyme’s shares at the Orphazyme Annual Report 2020 Group Financial Statements 54


2.5 SHARE-BASED COMPENSATION COSTS (CONTINUED) participant’s employment and designation November 2020, expected volatility was as a Good Leaver, the right to receive determined based on the historical volatil- Matching Shares and Performance Shares ity of comparable listed companies. The will be prorated and calculated through the Company does not plan to pay out divi- PROGRAM 2020 LTIP 2020 LTIP 2020 LTIP 2020 LTIP date of notice of termination. During 2020, dends in the foreseeable future. GRANT DATE Dec 2020 Oct 2020 Sep 2020 Aug 2020 awards were granted on four different grant dates shown in the table below. The following table presents the fair value Fair value at the measurement Matching Shares for all awards granted of each program and the inputs used in the date (DKK 000) 446 4,464 1,482 44,126 under the 2020 LTIP will fully vest in Janu - valuation models at the respective grant Dividen yield (%) - - - - ary 2021. The maximum number of Perfor- dates: Expected volatility (%) 45.9% 56.5% 56.1% 55.4% mance Shares that can vest in January Risk-free interest rate (%) (0.66%) (0.60%) (0.59%) (0.54%) 2024 as part of the 2020 LTIP is 489.757. Expected life of awards (years) 3.06 3.24 3.24 3.35 Weighted average share price The fair value of all the LTIP awards was (DKK) 56.30 68.50 83.50 90.10 estimated using a Monte-Carlo simulation model at the respective grant dates, con- sidering the terms and conditions on which PROGRAM 2019 LTIP 2017 LTIP GRANT DATE Aug 2019 Apr 2018 the awards were granted. Fair value at the measurement date (DKK 000) 6,214 714 The risk-free interest rate has been esti- Dividen yield (%) - - mated based on Danish government bonds Expected volatility (%) 51.8% 41.8% with similar maturities. As of November Risk-free interest rate (%) (0.70%) (0.28%) 2020, expected volatility has been deter - Expected life of awards (years) 3.42 3.58 mined based on the Company’s own histor- Weighted average share price (DKK) 62.6 67.5 ical volatility, as the Company has been publicly traded for three years. Before The following table presents the weighted average remaining contractual life in years of the LTIP awards outstanding at December 31: PROGRAM 2020 2019 2020 LTIP 3.0 - 2019 LTIP 2.7 3.7 2017 LTIP 0.9 1.9 Orphazyme Annual Report 2020 Group Financial Statements 552.5 SHARE-BASED COMPENSATION COSTS (CONTINUED) participant’s employment and designation November 2020, expected volatility was as a Good Leaver, the right to receive determined based on the historical volatil- Matching Shares and Performance Shares ity of comparable listed companies. The will be prorated and calculated through the Company does not plan to pay out divi- PROGRAM 2020 LTIP 2020 LTIP 2020 LTIP 2020 LTIP date of notice of termination. During 2020, dends in the foreseeable future. GRANT DATE Dec 2020 Oct 2020 Sep 2020 Aug 2020 awards were granted on four different grant dates shown in the table below. The following table presents the fair value Fair value at the measurement Matching Shares for all awards granted of each program and the inputs used in the date (DKK 000) 446 4,464 1,482 44,126 under the 2020 LTIP will fully vest in Janu - valuation models at the respective grant Dividen yield (%) - - - - ary 2021. The maximum number of Perfor- dates: Expected volatility (%) 45.9% 56.5% 56.1% 55.4% mance Shares that can vest in January Risk-free interest rate (%) (0.66%) (0.60%) (0.59%) (0.54%) 2024 as part of the 2020 LTIP is 489.757. Expected life of awards (years) 3.06 3.24 3.24 3.35 Weighted average share price The fair value of all the LTIP awards was (DKK) 56.30 68.50 83.50 90.10 estimated using a Monte-Carlo simulation model at the respective grant dates, con- sidering the terms and conditions on which PROGRAM 2019 LTIP 2017 LTIP GRANT DATE Aug 2019 Apr 2018 the awards were granted. Fair value at the measurement date (DKK 000) 6,214 714 The risk-free interest rate has been esti- Dividen yield (%) - - mated based on Danish government bonds Expected volatility (%) 51.8% 41.8% with similar maturities. As of November Risk-free interest rate (%) (0.70%) (0.28%) 2020, expected volatility has been deter - Expected life of awards (years) 3.42 3.58 mined based on the Company’s own histor- Weighted average share price (DKK) 62.6 67.5 ical volatility, as the Company has been publicly traded for three years. Before The following table presents the weighted average remaining contractual life in years of the LTIP awards outstanding at December 31: PROGRAM 2020 2019 2020 LTIP 3.0 - 2019 LTIP 2.7 3.7 2017 LTIP 0.9 1.9 Orphazyme Annual Report 2020 Group Financial Statements 55


2.5 SHARE-BASED COMPENSATION COSTS (CONTINUED) The exercise price for each LTIP award out- terms and conditions as the 2018 Phantom each calendar year of the four-year pro- standing as of December 31, 2020 was DKK Shares Program. In December 2020, Orp- gram, the participants will have earned 1 (2019: DKK 1). hazyme initiated a 2020 Phantom Shares phantom shares free of charge. Program with the same terms and condi- Executive Key Total Awards tions as the 2018 and 2019 Phantom Shares The entry price per phantom share for the (DKK 000) Management Employees awards exercisable Programs. 2018 and 2019 Phantom Programs was DKK Outstanding at December 31, 2017 9,000 5,875 14,875 - 61 and for the 2020 Phantom Program was Granted - 4,300 4,300 - The Phantom Shares Programs are based DKK 71.2. The entry price has been calcu - Exercised - - - - The table below summarizes the activity on the share price of the Company and lated on the basis of the volume-weighted Expired rela - ted to the LTIP a - wards for the y - ears - entitles the participants to a potential cash average closing price of Orphazyme’s share Forfeited ended Dec - ember 31: - - - bonus if there has been an increase of at on Nasdaq Copenhagen during a period of least 20% in Orphazyme’s share price com - 10 trading days prior to the introduction of Outstanding at December 31, 2018 9,000 10,175 19,175 14,875 pared to the entry price at the grant date. the respective Phantom Shares Program. Granted 6,250 25,000 31,250 - The Phantom Shares Programs will not The phantom shares will automatically be Exercised (9,000) (10,175) (19,175) - have any dilutive effect on the shareholders settled in cash at the end of January 2023 Expired - - - - of Orphazyme as the phantom shares do for the 2018 Phantom Shares Program, at Forfeited - - - - not constitute or qualify for actual shares in the end of January 2024 for the 2019 Phan- Outstanding at December 31, 2019 6,250 25,000 31,250 - Orphazyme. tom Shares Program and at the end of Jan- Granted 52,865 119,623 172,488 - uary 2024 for the 2020 Phantom Shares Exercised (6,250) (25,000) (31,250) - The overall objectives of the Phantom Program by subtracting the entry price per Expired - - - - Shares Programs are (i) to retain qualified share from the market price per share and Forfeited - (937) - - employees, (ii) to create long-term incen- multiplying the change by the total number Outstanding at December 31, 2020 52,865 118,686 172,488 172,488 tive for the participants, and (iii) to align of granted phantom shares, but only if Orp- the interests of the employees with those hazyme’s market price per share at that of Orphazyme’s shareholders. Each date exceeds the entry price per share by For the year ended December 31, 2020, b) Phantom share-based incentive pro- employee participating in the program at least 20%. The market price per share DKK 17.9 million (2019: DKK 2.1 million; gram (cash-settled) earns the right to a certain number of will be based on the volume-weighted 2018: DKK 2.1 million) was recognized as In June 2018, Orphazyme introduced a phantom shares per month, depending on average closing price of Orphazyme’s compensation expense related to the LTIP four-year phantom share-based incentive the employee’s position. Subject to any shares on Nasdaq Copenhagen during a awards, with DKK 6.3 million recognized as program (the “2018 Phantom Shares Pro- adjustments to the Phantom Shares Pro- period of 10 trading days prior to the set- research and development expenses and gram”) for all employees other than the grams made by the Board of Directors due tlement of the phantom shares. DKK 11.6 million recognized as general and Executive Management and Key Employees to, for example, changes in Orphazyme’s administrative expenses. Of the total under the LTIP. share capital structure or other significant The employee’s cash award for each pro- expense, DKK 8.2 million (2019: DKK 0.7 events, each employee will be eligible to gram is capped and cannot exceed a gross million; 2018: DKK 1.1 million) is attributed In August 2019, Orphazyme initiated a 2019 receive up to a total of 144 or 288 phantom amount of DKK 37,500 or DKK 75,000 per to the Executive Management. Phantom Shares Program with the same shares under the program. By the end of employee per program, depending on the Orphazyme Annual Report 2020 Group Financial Statements 562.5 SHARE-BASED COMPENSATION COSTS (CONTINUED) The exercise price for each LTIP award out- terms and conditions as the 2018 Phantom each calendar year of the four-year pro- standing as of December 31, 2020 was DKK Shares Program. In December 2020, Orp- gram, the participants will have earned 1 (2019: DKK 1). hazyme initiated a 2020 Phantom Shares phantom shares free of charge. Program with the same terms and condi- Executive Key Total Awards tions as the 2018 and 2019 Phantom Shares The entry price per phantom share for the (DKK 000) Management Employees awards exercisable Programs. 2018 and 2019 Phantom Programs was DKK Outstanding at December 31, 2017 9,000 5,875 14,875 - 61 and for the 2020 Phantom Program was Granted - 4,300 4,300 - The Phantom Shares Programs are based DKK 71.2. The entry price has been calcu - Exercised - - - - The table below summarizes the activity on the share price of the Company and lated on the basis of the volume-weighted Expired rela - ted to the LTIP a - wards for the y - ears - entitles the participants to a potential cash average closing price of Orphazyme’s share Forfeited ended Dec - ember 31: - - - bonus if there has been an increase of at on Nasdaq Copenhagen during a period of least 20% in Orphazyme’s share price com - 10 trading days prior to the introduction of Outstanding at December 31, 2018 9,000 10,175 19,175 14,875 pared to the entry price at the grant date. the respective Phantom Shares Program. Granted 6,250 25,000 31,250 - The Phantom Shares Programs will not The phantom shares will automatically be Exercised (9,000) (10,175) (19,175) - have any dilutive effect on the shareholders settled in cash at the end of January 2023 Expired - - - - of Orphazyme as the phantom shares do for the 2018 Phantom Shares Program, at Forfeited - - - - not constitute or qualify for actual shares in the end of January 2024 for the 2019 Phan- Outstanding at December 31, 2019 6,250 25,000 31,250 - Orphazyme. tom Shares Program and at the end of Jan- Granted 52,865 119,623 172,488 - uary 2024 for the 2020 Phantom Shares Exercised (6,250) (25,000) (31,250) - The overall objectives of the Phantom Program by subtracting the entry price per Expired - - - - Shares Programs are (i) to retain qualified share from the market price per share and Forfeited - (937) - - employees, (ii) to create long-term incen- multiplying the change by the total number Outstanding at December 31, 2020 52,865 118,686 172,488 172,488 tive for the participants, and (iii) to align of granted phantom shares, but only if Orp- the interests of the employees with those hazyme’s market price per share at that of Orphazyme’s shareholders. Each date exceeds the entry price per share by For the year ended December 31, 2020, b) Phantom share-based incentive pro- employee participating in the program at least 20%. The market price per share DKK 17.9 million (2019: DKK 2.1 million; gram (cash-settled) earns the right to a certain number of will be based on the volume-weighted 2018: DKK 2.1 million) was recognized as In June 2018, Orphazyme introduced a phantom shares per month, depending on average closing price of Orphazyme’s compensation expense related to the LTIP four-year phantom share-based incentive the employee’s position. Subject to any shares on Nasdaq Copenhagen during a awards, with DKK 6.3 million recognized as program (the “2018 Phantom Shares Pro- adjustments to the Phantom Shares Pro- period of 10 trading days prior to the set- research and development expenses and gram”) for all employees other than the grams made by the Board of Directors due tlement of the phantom shares. DKK 11.6 million recognized as general and Executive Management and Key Employees to, for example, changes in Orphazyme’s administrative expenses. Of the total under the LTIP. share capital structure or other significant The employee’s cash award for each pro- expense, DKK 8.2 million (2019: DKK 0.7 events, each employee will be eligible to gram is capped and cannot exceed a gross million; 2018: DKK 1.1 million) is attributed In August 2019, Orphazyme initiated a 2019 receive up to a total of 144 or 288 phantom amount of DKK 37,500 or DKK 75,000 per to the Executive Management. Phantom Shares Program with the same shares under the program. By the end of employee per program, depending on the Orphazyme Annual Report 2020 Group Financial Statements 56


2.5 SHARE-BASED COMPENSATION COSTS (CONTINUED) number of phantom shares allocated to the million; 2018: DKK 39 thousand) was recog- c) Restricted Share Units (cash-settled) gen during the ten trading days preceding respective employee under the program. nized as compensation expense related to According to the terms and conditions of the first day of the Exercise Period. Based on the number of participants in the the Phantom Shares Programs, with a corre- the Restricted Share Units program (RSU), Phantom Shares Programs as of December sponding amount recognized as a non-cur- directors may annually be granted a number In August 2019, Restricted Share Units (2019 31, 2020 and 2019, the programs are rent liability (Note 3.6). of RSUs with a value corresponding to up to RSUs) were granted to members of the expected to consist of up to a total of 41,351 50% of the participant’s fixed annual base Board of Directors. These RSUs fully vested and 12,750 phantom shares, respectively. The risk-free interest rate has been esti- fee as member of the Board of Directors, in March 2020. During 2020 certain board mated based on Danish government bonds not including committee membership fees. members exercised their RSUs. The remain- As of December 31, 2020, all phantom with similar maturities. As of November The value is calculated on the basis of the ing RSUs expire in March 2021 if not exer- shares granted under the Phantom Shares 2020, expected volatility has been deter - volume-weighted average share price of cised or paid out in cash. Also in March Program were only granted to employees of mined based on the Company’s own historic Orphazyme’s shares as quoted on Nasdaq 2020, the 2020 RSU program was Orphazyme. No phantom shares were for- volatility, as the Company has been publicly Copenhagen during the ten trading days announced, granting the Board of Directors feited or expired, and none of the phantom traded for three years. Before November preceding the grant date. The RSUs vest an aggregate of 15,177 RSUs under similar shares were eligible for exercise. 2020, expected volatility was determined from the grant date to the date of the next terms and conditions as the 2019 RSUs. based on the historical volatility of compa- annual general meeting. Upon vesting, RSUs As the Phantom Shares Programs are rable listed companies. may be exercised within a period of twelve In September 2020, a new RSU incentive cash-settled, the fair value of the phantom months from vesting (Exercise Period) at a program was announced (2020-2 RSU pro - shares granted as part of the program is esti- The following table presents the inputs to the price corresponding to the vol- gram), which comprised 22,993 RSUs in mated at each reporting date. For the year Monte-Carlo model used to estimate the fair ume-weighted average share price during total, including an on-boarding grant to a ended December 31, 2020, an aggregate values of the phantom shares as of year-end, the ten trading days preceding the grant new board member in accordance with the amount of DKK 0.1 million (2019: DKK 0.3 when the cash-settled programs are re-valued: date (Exercise Price). In the event of a par- Company’s remuneration policy. The ticipant’s resignation from the Board of 2020-2 RSU program runs in parallel with Directors, any unvested RSUs will lapse the 2020 RSU program and board members without any rights of compensation. A deci- can only exercise RSUs under one of the VALUATION DATE: December 31, 2020 December 31, 2019 sion not to be re-elected is not a resignation programs. In December 2020, 4,351 RSUs 2020 2019 2018 2019 2018 Program Program Program ProgramPr ogram Program from the Board of Directors. (2020-3 RSU program) were granted to the Fair value at valuation date Chairman of the Board as part of a consul- (DKK 000) 406 293 160 347 205 The RSUs are classified as a cash-settled tancy agreement (see Note 4.6). Dividend yield (%) - - - - - program, as the Board of Directors may Expected volatility (%) 47.1% 47.3% 54.3% 57.4% 57% choose to settle any vested RSUs in cash. In The fair value of all RSUs was calculated Risk-free interest rate (%) (0.59%) (0.61%) (0.61%) (0.50%) (0.63%) such event, the cash settlement amount is using a Black-Scholes valuation model with Expected life of awards (years) 4.08 3.08 2.08 4.00 3.08 based on the difference between the Exer - the inputs shown in the following table. As Weighted average share price cise Price and the volume-weighted average the RSUs may be settled in cash, we have (DKK) 67.10 67.10 67.10 72.40 68.60 share price as quoted on Nasdaq Copenha- re-valued them as of year-end with Orphazyme Annual Report 2020 Group Financial Statements 572.5 SHARE-BASED COMPENSATION COSTS (CONTINUED) number of phantom shares allocated to the million; 2018: DKK 39 thousand) was recog- c) Restricted Share Units (cash-settled) gen during the ten trading days preceding respective employee under the program. nized as compensation expense related to According to the terms and conditions of the first day of the Exercise Period. Based on the number of participants in the the Phantom Shares Programs, with a corre- the Restricted Share Units program (RSU), Phantom Shares Programs as of December sponding amount recognized as a non-cur- directors may annually be granted a number In August 2019, Restricted Share Units (2019 31, 2020 and 2019, the programs are rent liability (Note 3.6). of RSUs with a value corresponding to up to RSUs) were granted to members of the expected to consist of up to a total of 41,351 50% of the participant’s fixed annual base Board of Directors. These RSUs fully vested and 12,750 phantom shares, respectively. The risk-free interest rate has been esti- fee as member of the Board of Directors, in March 2020. During 2020 certain board mated based on Danish government bonds not including committee membership fees. members exercised their RSUs. The remain- As of December 31, 2020, all phantom with similar maturities. As of November The value is calculated on the basis of the ing RSUs expire in March 2021 if not exer- shares granted under the Phantom Shares 2020, expected volatility has been deter - volume-weighted average share price of cised or paid out in cash. Also in March Program were only granted to employees of mined based on the Company’s own historic Orphazyme’s shares as quoted on Nasdaq 2020, the 2020 RSU program was Orphazyme. No phantom shares were for- volatility, as the Company has been publicly Copenhagen during the ten trading days announced, granting the Board of Directors feited or expired, and none of the phantom traded for three years. Before November preceding the grant date. The RSUs vest an aggregate of 15,177 RSUs under similar shares were eligible for exercise. 2020, expected volatility was determined from the grant date to the date of the next terms and conditions as the 2019 RSUs. based on the historical volatility of compa- annual general meeting. Upon vesting, RSUs As the Phantom Shares Programs are rable listed companies. may be exercised within a period of twelve In September 2020, a new RSU incentive cash-settled, the fair value of the phantom months from vesting (Exercise Period) at a program was announced (2020-2 RSU pro - shares granted as part of the program is esti- The following table presents the inputs to the price corresponding to the vol- gram), which comprised 22,993 RSUs in mated at each reporting date. For the year Monte-Carlo model used to estimate the fair ume-weighted average share price during total, including an on-boarding grant to a ended December 31, 2020, an aggregate values of the phantom shares as of year-end, the ten trading days preceding the grant new board member in accordance with the amount of DKK 0.1 million (2019: DKK 0.3 when the cash-settled programs are re-valued: date (Exercise Price). In the event of a par- Company’s remuneration policy. The ticipant’s resignation from the Board of 2020-2 RSU program runs in parallel with Directors, any unvested RSUs will lapse the 2020 RSU program and board members without any rights of compensation. A deci- can only exercise RSUs under one of the VALUATION DATE: December 31, 2020 December 31, 2019 sion not to be re-elected is not a resignation programs. In December 2020, 4,351 RSUs 2020 2019 2018 2019 2018 Program Program Program ProgramPr ogram Program from the Board of Directors. (2020-3 RSU program) were granted to the Fair value at valuation date Chairman of the Board as part of a consul- (DKK 000) 406 293 160 347 205 The RSUs are classified as a cash-settled tancy agreement (see Note 4.6). Dividend yield (%) - - - - - program, as the Board of Directors may Expected volatility (%) 47.1% 47.3% 54.3% 57.4% 57% choose to settle any vested RSUs in cash. In The fair value of all RSUs was calculated Risk-free interest rate (%) (0.59%) (0.61%) (0.61%) (0.50%) (0.63%) such event, the cash settlement amount is using a Black-Scholes valuation model with Expected life of awards (years) 4.08 3.08 2.08 4.00 3.08 based on the difference between the Exer - the inputs shown in the following table. As Weighted average share price cise Price and the volume-weighted average the RSUs may be settled in cash, we have (DKK) 67.10 67.10 67.10 72.40 68.60 share price as quoted on Nasdaq Copenha- re-valued them as of year-end with Orphazyme Annual Report 2020 Group Financial Statements 57


2.5 SHARE-BASED COMPENSATION COSTS (CONTINUED) updated inputs and recognized a cumula- the 58,000 ordinary shares were issued to The following table presents the inputs to the Black-Scholes model used to estimate the fair tive share-based compensation expense in Ms. Stratton subsequent to December 31, value of the 2020 RSUs at December 31: the amount of DKK 0.8 million (2019: 0.1 2020 (see Note 4.8). December 31, million; 2018: 0) and a corresponding 2020 2019 short-term liability as of December 31, The shares were valued at grant date, Octo- 2020 2019 2020. The Exercise Period for all 2020 ber 2019, using a Monte Carlo model due to Program RSUs RSUs RSUs is one year and for valuation pur- the market conditions for vesting. The risk- Fair value at valuation date (DKK 000) 1,913 232 poses we have assumed exercise three free interest rate used in the model has Dividend yield (%) - - months upon full vesting. been estimated based on Danish govern- Expected volatility (%) 45.9% 45.9% ment bonds with similar maturities; Risk-free interest rate (%) (0.57%) (0.73%) As of December 31, 2020 no RSUs were expected volatility has been determined Expected life of awards (years) 0.50 0.25 forfeited or expired, and 5,781 RSUs were based on the historic volatility of compara- Weighted average share price (DKK) 67.10 72.4 eligible for exercise. ble listed companies; the expected life of the award was 3 years, equal to the term of d) Sign-on bonus shares to CEO the award; the estimated dividend yield was The following amounts were recognized as share-based compensation for the As part of the CEO service agreement, Kim zero; and the weighted average share price years ended December 31: Stratton was granted 58,000 ordinary shares, was DKK 55.60. The total valuation of the which would vest if the Company’s share award at grant date was DKK 1.9 million. (DKK 000) 2020 2019 2018 price increased to DKK 125 per share within The total share-based compensation Share-based compensation included in R&D 7,260 635 719 three years from the date of employment. expense was classified as administrative and Share-based compensation included in G&A 20,845 1,914 1,426 The total award consisted of (i) 6,000 shares it was recognized in full during 2020, as the Total share-based compensation expense recognized 28,105 2,549 2,145 provided that our share price increased to target prices were achieved in 2020. DKK 75 per share, (ii) 12,000 shares provided that our share price increased to DKK 100 e) Bonus shares issued to KLSDC and UCL per share, and (iii) 40,000 shares provided in connection with the license agreement that our share price increased to DKK 125 per Please see Note 3.1. share. The target prices were achieved and Orphazyme Annual Report 2020 Group Financial Statements 582.5 SHARE-BASED COMPENSATION COSTS (CONTINUED) updated inputs and recognized a cumula- the 58,000 ordinary shares were issued to The following table presents the inputs to the Black-Scholes model used to estimate the fair tive share-based compensation expense in Ms. Stratton subsequent to December 31, value of the 2020 RSUs at December 31: the amount of DKK 0.8 million (2019: 0.1 2020 (see Note 4.8). December 31, million; 2018: 0) and a corresponding 2020 2019 short-term liability as of December 31, The shares were valued at grant date, Octo- 2020 2019 2020. The Exercise Period for all 2020 ber 2019, using a Monte Carlo model due to Program RSUs RSUs RSUs is one year and for valuation pur- the market conditions for vesting. The risk- Fair value at valuation date (DKK 000) 1,913 232 poses we have assumed exercise three free interest rate used in the model has Dividend yield (%) - - months upon full vesting. been estimated based on Danish govern- Expected volatility (%) 45.9% 45.9% ment bonds with similar maturities; Risk-free interest rate (%) (0.57%) (0.73%) As of December 31, 2020 no RSUs were expected volatility has been determined Expected life of awards (years) 0.50 0.25 forfeited or expired, and 5,781 RSUs were based on the historic volatility of compara- Weighted average share price (DKK) 67.10 72.4 eligible for exercise. ble listed companies; the expected life of the award was 3 years, equal to the term of d) Sign-on bonus shares to CEO the award; the estimated dividend yield was The following amounts were recognized as share-based compensation for the As part of the CEO service agreement, Kim zero; and the weighted average share price years ended December 31: Stratton was granted 58,000 ordinary shares, was DKK 55.60. The total valuation of the which would vest if the Company’s share award at grant date was DKK 1.9 million. (DKK 000) 2020 2019 2018 price increased to DKK 125 per share within The total share-based compensation Share-based compensation included in R&D 7,260 635 719 three years from the date of employment. expense was classified as administrative and Share-based compensation included in G&A 20,845 1,914 1,426 The total award consisted of (i) 6,000 shares it was recognized in full during 2020, as the Total share-based compensation expense recognized 28,105 2,549 2,145 provided that our share price increased to target prices were achieved in 2020. DKK 75 per share, (ii) 12,000 shares provided that our share price increased to DKK 100 e) Bonus shares issued to KLSDC and UCL per share, and (iii) 40,000 shares provided in connection with the license agreement that our share price increased to DKK 125 per Please see Note 3.1. share. The target prices were achieved and Orphazyme Annual Report 2020 Group Financial Statements 58


2.6 FINANCIAL INCOME AND FINANCIAL EXPENSES 2.7 INCOME TAXES ACCOUNTING POLICIES est expense related to the Loan Agreement ACCOUNTING POLICIES Deferred tax is measured using the balance § § are also recognized as financial expenses. sheet liability method on all temporary dif- Financial income and expenses include inter- Income tax benefit includes the current ben - ferences between the carrying amount and est income and expense, gains and losses The following table presents the various efit due from the current period’s taxable the tax value of assets and liabilities, with due to changes in foreign exchange rates items of financial income and expense loss and deferred tax adjustments. The ben- the exception of temporary differences and other immaterial miscellaneous items. r ecognized for the years end December 31: efit is comprised primarily of refundable tax occurring at the time of acquisition and lia- credits for costs incurred in connection with bilities neither affecting the result of opera - Beginning January 1, 2019, interest expense research and development activities under tion nor the taxable income. related to the right-of-use assets and inter- the Danish Tax Credit Regime. Income tax expense relates to tax imposed on income As of December 31, 2020 and 2019, there recognized in our subsidiaries in the United were no tax audits in process nor has man- (DKK 000) 2020 2019 2018 States and Switzerland as a result of our agement been notified of any pending tax Interest income on cash balances 45 316 5 transfer pricing agreements. Corporation audit. Foreign currency exchange gains 1,649 - - tax receivable is recognized in the balance Gain on embedded call option (Note 3.6) 750 - - sheet as the tax benefit computed on the Total financial income 2,444 316 5 taxable loss for the year, adjusted for any changes to the prior year benefit due to Interest expense on Loan Agreement (Note 3.6) 9,921 3,239 - changes in the taxable loss of prior years Write-off of transaction costs for Loan Agreement tranche 2 and for any taxes already paid or refunded. (Note 3.6) - 1,678 - Loss on embedded call option (Note 3.6) - 354 - Interest expense on lease liabilities (Note 3.2) 567 351 - Loss on lease modification (Note 3.2) - 216 - Interest expense on cash balances 3,626 1,213 2,824 Foreign currency exchange loss 14,805 229 490 Bank fees and other charges 152 79 139 Total financial expenses 29,071 7,359 3,453 Orphazyme Annual Report 2020 Group Financial Statements 592.6 FINANCIAL INCOME AND FINANCIAL EXPENSES 2.7 INCOME TAXES ACCOUNTING POLICIES est expense related to the Loan Agreement ACCOUNTING POLICIES Deferred tax is measured using the balance § § are also recognized as financial expenses. sheet liability method on all temporary dif- Financial income and expenses include inter- Income tax benefit includes the current ben - ferences between the carrying amount and est income and expense, gains and losses The following table presents the various efit due from the current period’s taxable the tax value of assets and liabilities, with due to changes in foreign exchange rates items of financial income and expense loss and deferred tax adjustments. The ben- the exception of temporary differences and other immaterial miscellaneous items. r ecognized for the years end December 31: efit is comprised primarily of refundable tax occurring at the time of acquisition and lia- credits for costs incurred in connection with bilities neither affecting the result of opera - Beginning January 1, 2019, interest expense research and development activities under tion nor the taxable income. related to the right-of-use assets and inter- the Danish Tax Credit Regime. Income tax expense relates to tax imposed on income As of December 31, 2020 and 2019, there recognized in our subsidiaries in the United were no tax audits in process nor has man- (DKK 000) 2020 2019 2018 States and Switzerland as a result of our agement been notified of any pending tax Interest income on cash balances 45 316 5 transfer pricing agreements. Corporation audit. Foreign currency exchange gains 1,649 - - tax receivable is recognized in the balance Gain on embedded call option (Note 3.6) 750 - - sheet as the tax benefit computed on the Total financial income 2,444 316 5 taxable loss for the year, adjusted for any changes to the prior year benefit due to Interest expense on Loan Agreement (Note 3.6) 9,921 3,239 - changes in the taxable loss of prior years Write-off of transaction costs for Loan Agreement tranche 2 and for any taxes already paid or refunded. (Note 3.6) - 1,678 - Loss on embedded call option (Note 3.6) - 354 - Interest expense on lease liabilities (Note 3.2) 567 351 - Loss on lease modification (Note 3.2) - 216 - Interest expense on cash balances 3,626 1,213 2,824 Foreign currency exchange loss 14,805 229 490 Bank fees and other charges 152 79 139 Total financial expenses 29,071 7,359 3,453 Orphazyme Annual Report 2020 Group Financial Statements 59


2.7 INCOME TAXES (CONTINUED) The following table presents the total income tax benefit for the years ended December 31: Judgement regarding the recognition of deferred income tax asset related to (DKK 000) 2020 2019 2018 the deferred tax assets related to taxa- income in the United States is recovera- ble losses to be carried forward ble, as the US entity will continue to be Current tax benefit on net loss 136,845 75,459 51,722 Orphazyme is subject to income taxes in profitable and therefore will utilize the Adjustment prior years (1,065) - - Denmark, Switzerland and the U.S.A. The losses carried forward. Tax credit research and development expenses 5,500 5,500 5,500 Company recognizes deferred income tax Change in unrecognized deferred tax before tax credit (142,115) (74,961) (51,850) assets if it is probable that sufficient taxa - The Company’s tax losses can be carried Permanent differences 2,750 (498) 128 ble income will be available in the future forward infinitely subject to the general Total income tax benefit for the year 1,915 5,500 5,500 against which the temporary differences rules on limited deductibility due to own- and unused tax losses can be utilized. ership changes. In Denmark, the Compa- The following table presents the reconciliation of the effective tax rate to the statutory Significant judgment is required to deter - ny’s ability to use tax loss carry forwards c orporate income tax rate in Denmark. mine the amount of deferred tax assets in any one year is limited to 100% of the (DKK 000) 2020 2019 2018 that may be recognized, based upon the first DKK 8.4 million of taxable income likely timing and the level of future taxa- plus 60% of taxable income above DKK Net loss before tax (635,161) (342,997) (235,100) ble profits together with future tax plan - 8.4 million. Corporate income tax rate in Denmark 22% 22% 22% ning strategies. This judgment is made Computed income tax benefit 139,735 75,459 51,722 periodically after considering current For the years ended December 31, 2020, facts and circumstances, budgets and 2019, and 2018, the Company has unrec- Tax effect of: Adjustments prior years - business plans as well as the risks and ognized net tax loss carry-forwards in the (1,065) Other non-deductible expenses, including U.S. listing-related uncertainty associated with the Compa- Danish entity in the amount of DKK 877 costs and share-based compensation 2,750 (498) 128 ny’s ability to successfully commercialize million, DKK 425 million, and DKK 280 Effect of different tax rate (673) - - and defend its intellectual property. After million respectively. Deferred tax asset not recognized after tax credit (138,832) (69,461) (46,350) consideration of these factors, Manage- Total income tax benefit for the period 1,915 5,500 5,500 ment has concluded that as regulatory Management periodically evaluates posi- approval has not yet been obtained as of tions taken in tax returns with respect to December 31, 2020, the deferred income situations in which applicable tax regula- The following table presents the carrying amount of deferred tax in the Statement of tax assets related to taxable losses car- tions are subject to interpretation or Financial Position: ried forward in Denmark do not meet the uncertainty and establishes provisions, (DKK 000) 2020 2019 2018 criteria for being recognized as assets in where appropriate. To date, there have the Statement of Financial Position. How- not been any provisions established for Tax deductible losses 192,837 93,484 61,647 ever, Management has concluded that the uncertain tax positions. Deferred tax on intangible assets 112,192 74,050 35,887 Other temporary differences 8,174 758 738 313,203 168,292 98,272 Deferred tax asset not recognized 311,138 168,292 98,272 Carrying amount included in the Statement of Financial Position 2,065 - - Orphazyme Annual Report 2020 Group Financial Statements 602.7 INCOME TAXES (CONTINUED) The following table presents the total income tax benefit for the years ended December 31: Judgement regarding the recognition of deferred income tax asset related to (DKK 000) 2020 2019 2018 the deferred tax assets related to taxa- income in the United States is recovera- ble losses to be carried forward ble, as the US entity will continue to be Current tax benefit on net loss 136,845 75,459 51,722 Orphazyme is subject to income taxes in profitable and therefore will utilize the Adjustment prior years (1,065) - - Denmark, Switzerland and the U.S.A. The losses carried forward. Tax credit research and development expenses 5,500 5,500 5,500 Company recognizes deferred income tax Change in unrecognized deferred tax before tax credit (142,115) (74,961) (51,850) assets if it is probable that sufficient taxa - The Company’s tax losses can be carried Permanent differences 2,750 (498) 128 ble income will be available in the future forward infinitely subject to the general Total income tax benefit for the year 1,915 5,500 5,500 against which the temporary differences rules on limited deductibility due to own- and unused tax losses can be utilized. ership changes. In Denmark, the Compa- The following table presents the reconciliation of the effective tax rate to the statutory Significant judgment is required to deter - ny’s ability to use tax loss carry forwards c orporate income tax rate in Denmark. mine the amount of deferred tax assets in any one year is limited to 100% of the (DKK 000) 2020 2019 2018 that may be recognized, based upon the first DKK 8.4 million of taxable income likely timing and the level of future taxa- plus 60% of taxable income above DKK Net loss before tax (635,161) (342,997) (235,100) ble profits together with future tax plan - 8.4 million. Corporate income tax rate in Denmark 22% 22% 22% ning strategies. This judgment is made Computed income tax benefit 139,735 75,459 51,722 periodically after considering current For the years ended December 31, 2020, facts and circumstances, budgets and 2019, and 2018, the Company has unrec- Tax effect of: Adjustments prior years - business plans as well as the risks and ognized net tax loss carry-forwards in the (1,065) Other non-deductible expenses, including U.S. listing-related uncertainty associated with the Compa- Danish entity in the amount of DKK 877 costs and share-based compensation 2,750 (498) 128 ny’s ability to successfully commercialize million, DKK 425 million, and DKK 280 Effect of different tax rate (673) - - and defend its intellectual property. After million respectively. Deferred tax asset not recognized after tax credit (138,832) (69,461) (46,350) consideration of these factors, Manage- Total income tax benefit for the period 1,915 5,500 5,500 ment has concluded that as regulatory Management periodically evaluates posi- approval has not yet been obtained as of tions taken in tax returns with respect to December 31, 2020, the deferred income situations in which applicable tax regula- The following table presents the carrying amount of deferred tax in the Statement of tax assets related to taxable losses car- tions are subject to interpretation or Financial Position: ried forward in Denmark do not meet the uncertainty and establishes provisions, (DKK 000) 2020 2019 2018 criteria for being recognized as assets in where appropriate. To date, there have the Statement of Financial Position. How- not been any provisions established for Tax deductible losses 192,837 93,484 61,647 ever, Management has concluded that the uncertain tax positions. Deferred tax on intangible assets 112,192 74,050 35,887 Other temporary differences 8,174 758 738 313,203 168,292 98,272 Deferred tax asset not recognized 311,138 168,292 98,272 Carrying amount included in the Statement of Financial Position 2,065 - - Orphazyme Annual Report 2020 Group Financial Statements 60


SECTION 3 3.1 INTANGIBLE ASSETS ASSETS AND ACCOUNTING POLICIES § Estimate of the fair value of licenses Intangible assets comprise software develop- Licenses contains an agreement LIABILITIES ment costs and license rights to develop and entered into with the University of Kan- commercialize products and are acquired sas and University College London, in separately and measured on initial recogni- which the Company will obtain access tion at cost. Software assets consist of imple- to data and knowhow generated in the mentation costs to get ERP cloud computing course of research in connection with arrangements ready for use, as long as they the IBM trial. Consideration for the Section 3 presents details of the assets and meet the requirements of IAS 38, Intangible license is to be paid out by issuing new liabilities that form the basis of Orphazyme’s Assets. These cloud computing arrangements shares to the contract partners for a activities, including Licenses, Right-of-Use Assets begin to be amortized when they are ready value corresponding to the costs and Lease Liabilities, Property, Plant, and for intended use and are amortized over incurred during the preceding calendar seven years. year. The valuation of the license upon Equipment, Prepayments, Deposits, and Other the execution of the agreement Receivables, Financial Assets and Liabilities, For acquisition of intangible rights involving involves uncertainty and was estimated Cash, and Contractual Obligations and equity-settled share-based payment transac- by Management based on the Contingencies. tions, Management measures the fair value of expected costs over the contract the rights received and the corresponding period. In addition, the estimation of increase in equity by reference to the fair the duration of a license agreement at value of the rights received, unless that fair times involves uncertainty if termina- value cannot be estimated reliably. If Manage- tion is dependent on a time limit after ment cannot estimate reliably the fair value successful commercialization. Manage- of the rights received, it measures the fair ment has considered potential com- value and the corresponding increase in mercialization dates and will re-assess equity by reference to the fair value of the this estimate on an ongoing basis. In this section equity instruments granted. 3.1 Intangible assets 61 Following initial recognition, intangible assets useful economic life and assessed for impair- 3.2 Leases 63 are carried at cost less any accumulated ment whenever there is an indication that the 3.3 Property, plant, and equipment 66 amortization and accumulated impairment intangible asset may be impaired. 3.4 Pr epayments, deposits and other receivables 67 losses. The useful lives of intangible assets The amortization period and the amortization 3.5 Pre-launch inventories 68 are assessed as either finite or indefinite. method for an intangible asset with a finite 3.6 Financial assets and liabilities 68 Intangible assets with finite lives such as soft - useful life are reviewed at least at the end of 3.7 Cash 71 ware and license rights to develop and com- each reporting period. Changes in the 3.8 Commitments and contingencies 72 mercialize products are amortized over the expected useful life or the expected pattern Orphazyme Annual Report 2020 Group Financial Statements 61SECTION 3 3.1 INTANGIBLE ASSETS ASSETS AND ACCOUNTING POLICIES § Estimate of the fair value of licenses Intangible assets comprise software develop- Licenses contains an agreement LIABILITIES ment costs and license rights to develop and entered into with the University of Kan- commercialize products and are acquired sas and University College London, in separately and measured on initial recogni- which the Company will obtain access tion at cost. Software assets consist of imple- to data and knowhow generated in the mentation costs to get ERP cloud computing course of research in connection with arrangements ready for use, as long as they the IBM trial. Consideration for the Section 3 presents details of the assets and meet the requirements of IAS 38, Intangible license is to be paid out by issuing new liabilities that form the basis of Orphazyme’s Assets. These cloud computing arrangements shares to the contract partners for a activities, including Licenses, Right-of-Use Assets begin to be amortized when they are ready value corresponding to the costs and Lease Liabilities, Property, Plant, and for intended use and are amortized over incurred during the preceding calendar seven years. year. The valuation of the license upon Equipment, Prepayments, Deposits, and Other the execution of the agreement Receivables, Financial Assets and Liabilities, For acquisition of intangible rights involving involves uncertainty and was estimated Cash, and Contractual Obligations and equity-settled share-based payment transac- by Management based on the Contingencies. tions, Management measures the fair value of expected costs over the contract the rights received and the corresponding period. In addition, the estimation of increase in equity by reference to the fair the duration of a license agreement at value of the rights received, unless that fair times involves uncertainty if termina- value cannot be estimated reliably. If Manage- tion is dependent on a time limit after ment cannot estimate reliably the fair value successful commercialization. Manage- of the rights received, it measures the fair ment has considered potential com- value and the corresponding increase in mercialization dates and will re-assess equity by reference to the fair value of the this estimate on an ongoing basis. In this section equity instruments granted. 3.1 Intangible assets 61 Following initial recognition, intangible assets useful economic life and assessed for impair- 3.2 Leases 63 are carried at cost less any accumulated ment whenever there is an indication that the 3.3 Property, plant, and equipment 66 amortization and accumulated impairment intangible asset may be impaired. 3.4 Pr epayments, deposits and other receivables 67 losses. The useful lives of intangible assets The amortization period and the amortization 3.5 Pre-launch inventories 68 are assessed as either finite or indefinite. method for an intangible asset with a finite 3.6 Financial assets and liabilities 68 Intangible assets with finite lives such as soft - useful life are reviewed at least at the end of 3.7 Cash 71 ware and license rights to develop and com- each reporting period. Changes in the 3.8 Commitments and contingencies 72 mercialize products are amortized over the expected useful life or the expected pattern Orphazyme Annual Report 2020 Group Financial Statements 61


3.1 INTANGIBLE ASSETS (CONTINUED) of consumption of future economic benefits ria under IAS 38 is met. Management ing Phase 2/3 clinical trial on arimoclomol for Under the terms of the license agreement, embodied in the asset are considered to assesses that the consideration paid reflects the treatment of IBM worldwide. The total Orphazyme shall furthermore pay an aggre- modify the amortization period or method, as market expectations about the probability consideration for the license is to be paid out gate royalty of a low single-digit percentage appropriate, and are treated as changes in that future economic benefits will flow to the in bonus shares to KLSDC and UCL up to an of net sales of products sold for the treat- accounting estimates. The amortization Company. The acquired license is not being aggregate value of USD 2.5 million (DKK 15.8 ment of IBM. Orphazyme expects to gener- expense on intangible assets with finite lives amortized until approval of the underlying million), depending on the amount of grants ate income from such products sold for the is recognized in the Statement of Profit or asset has been received from regulatory awarded to KLSDC and UCL for use in the treatment of IBM which will exceed any roy- Loss in the expense category that is consist- authorities. trial. At the time the license agreement was alty payments due. Orphazyme has no lia- ent with the function of the intangible assets. executed, Management estimated the aggre- bilities prior to the occurrence of future The Asset Purchase Agreement further gate amount of the funding to be received by sales of products sold for the treatment of CytRx Asset Purchase Agreement includes sales milestones and royalty pay- KLSDC and UCL to be USD 1.6 million (DKK IBM and accordingly, neither such liabilities In May 2011, Orphazyme entered into an ments to be made by Orphazyme based on a 10 million), which has been recognized as an nor contingent considerations have been Asset Purchase Agreement with the US biop- specified percentage of any eventual net intangible asset (License) with a correspond- recognized as part of the rights acquired. harmaceutical company CytRx. Pursuant to sales of products containing one of the com- ing increase in equity reserves (Share-based this agreement, CytRx sold and transferred pounds purchased. In addition, under the compensation - acquisition of intangible The license is being amortized over the dura- certain preclinical and clinical data, patents terms of the Asset Purchase Agreement, the assets). tion of the license agreement, which has been and other intellectual property rights, and Company was assigned and became party to estimated to be approximately 14 years. The other assets, including contractual rights and a royalty agreement with ALS Charitable Consideration to KLSDC and UCL is payable remaining life of the license is 10.8 years. obligations relating to a portfolio of chemical Remainder Trust pursuant to which the Com- in shares of the Company (“Bonus Shares”) Amortization expense for the years ended compounds, including arimoclomol, to Orp- pany is obliged to pay a 1% royalty to the each January and is based on incurred costs December 31, 2020 and 2019 amounts to hazyme. Under the terms of the Asset Pur- ALS Charitable Remainder Trust on global reported by KLSDC and UCL for the previous DKK 0.7 million and DKK 0.7 million, respec- chase Agreement, Orphazyme agreed to net sales of products to treat ALS. Orpha- year. In January 2020, 20,650 (2019: 26,060) tively, and is recognized within research and make future payments to CytRx that were zyme has no liabilities prior to the occur- Bonus Shares were issued to KLSDC and UCL development expenses. contingent upon the achievement of speci- rence of future sales of products and accord- based on aggregate costs incurred by KLSDC fied clinical, regulatory, and sales milestones. ingly neither such liabilities nor contingent and UCL in the amount of USD 0.3 million License Agreement with the University of These payments are further disclosed in Note consideration have been recognized as part (DKK 2.2 million) (2018: USD 0.2 million (DKK Miami 3.8. of the license agreement. 1,197 million)). The Bonus Shares were In September 2019, the Company entered derived based on the average 30-day closing into an exclusive license agreement with the In 2016, the Company paid CytRx USD 0.1 License Agreement with KLSDC and UCL price of Orphazyme’s shares at the date of University of Miami. Pursuant to the exclusive million (DKK 0.6 million) for achievement of a In 2017, the Company entered into a license issuance. At the time of the share issuance license agreement, the Company was granted clinical milestone for the first product candi - agreement with KU Center for Technology the equity reserve was decreased by DKK 2.1 a global royalty-bearing, exclusive license to date. In August 2018, the Company made a Commercialization Inc., University of Kansas, million, which represents the market value of all data, know-how, inventions and technol- milestone payment of USD 250,000 (DKK 1.6 Kansas Life Sciences Development Company, the shares issued. See Note 4.8 for Bonus ogy generated by the University of Miami and million) upon the enrollment of the first Inc., (“KLSDC”) and UCL Business PLC Shares to be issued in 2021 related to the certain other institutions in a Phase 2 clinical patient in the ALS clinical trial. The Company (“UCL”) granting Orphazyme the right to incurred costs reported by KLSDC and UCL trial of arimoclomol in ALS with the A4V capitalizes amounts paid to CytRx as an develop and commercialize products under for the year 2020. SOD1 mutation to research, develop, make, acquired license right if the recognition crite- all data generated in the course of the on-go- use or sell certain pharmaceutical products or processes containing arimoclomol. Orphazyme Annual Report 2020 Group Financial Statements 623.1 INTANGIBLE ASSETS (CONTINUED) of consumption of future economic benefits ria under IAS 38 is met. Management ing Phase 2/3 clinical trial on arimoclomol for Under the terms of the license agreement, embodied in the asset are considered to assesses that the consideration paid reflects the treatment of IBM worldwide. The total Orphazyme shall furthermore pay an aggre- modify the amortization period or method, as market expectations about the probability consideration for the license is to be paid out gate royalty of a low single-digit percentage appropriate, and are treated as changes in that future economic benefits will flow to the in bonus shares to KLSDC and UCL up to an of net sales of products sold for the treat- accounting estimates. The amortization Company. The acquired license is not being aggregate value of USD 2.5 million (DKK 15.8 ment of IBM. Orphazyme expects to gener- expense on intangible assets with finite lives amortized until approval of the underlying million), depending on the amount of grants ate income from such products sold for the is recognized in the Statement of Profit or asset has been received from regulatory awarded to KLSDC and UCL for use in the treatment of IBM which will exceed any roy- Loss in the expense category that is consist- authorities. trial. At the time the license agreement was alty payments due. Orphazyme has no lia- ent with the function of the intangible assets. executed, Management estimated the aggre- bilities prior to the occurrence of future The Asset Purchase Agreement further gate amount of the funding to be received by sales of products sold for the treatment of CytRx Asset Purchase Agreement includes sales milestones and royalty pay- KLSDC and UCL to be USD 1.6 million (DKK IBM and accordingly, neither such liabilities In May 2011, Orphazyme entered into an ments to be made by Orphazyme based on a 10 million), which has been recognized as an nor contingent considerations have been Asset Purchase Agreement with the US biop- specified percentage of any eventual net intangible asset (License) with a correspond- recognized as part of the rights acquired. harmaceutical company CytRx. Pursuant to sales of products containing one of the com- ing increase in equity reserves (Share-based this agreement, CytRx sold and transferred pounds purchased. In addition, under the compensation - acquisition of intangible The license is being amortized over the dura- certain preclinical and clinical data, patents terms of the Asset Purchase Agreement, the assets). tion of the license agreement, which has been and other intellectual property rights, and Company was assigned and became party to estimated to be approximately 14 years. The other assets, including contractual rights and a royalty agreement with ALS Charitable Consideration to KLSDC and UCL is payable remaining life of the license is 10.8 years. obligations relating to a portfolio of chemical Remainder Trust pursuant to which the Com- in shares of the Company (“Bonus Shares”) Amortization expense for the years ended compounds, including arimoclomol, to Orp- pany is obliged to pay a 1% royalty to the each January and is based on incurred costs December 31, 2020 and 2019 amounts to hazyme. Under the terms of the Asset Pur- ALS Charitable Remainder Trust on global reported by KLSDC and UCL for the previous DKK 0.7 million and DKK 0.7 million, respec- chase Agreement, Orphazyme agreed to net sales of products to treat ALS. Orpha- year. In January 2020, 20,650 (2019: 26,060) tively, and is recognized within research and make future payments to CytRx that were zyme has no liabilities prior to the occur- Bonus Shares were issued to KLSDC and UCL development expenses. contingent upon the achievement of speci- rence of future sales of products and accord- based on aggregate costs incurred by KLSDC fied clinical, regulatory, and sales milestones. ingly neither such liabilities nor contingent and UCL in the amount of USD 0.3 million License Agreement with the University of These payments are further disclosed in Note consideration have been recognized as part (DKK 2.2 million) (2018: USD 0.2 million (DKK Miami 3.8. of the license agreement. 1,197 million)). The Bonus Shares were In September 2019, the Company entered derived based on the average 30-day closing into an exclusive license agreement with the In 2016, the Company paid CytRx USD 0.1 License Agreement with KLSDC and UCL price of Orphazyme’s shares at the date of University of Miami. Pursuant to the exclusive million (DKK 0.6 million) for achievement of a In 2017, the Company entered into a license issuance. At the time of the share issuance license agreement, the Company was granted clinical milestone for the first product candi - agreement with KU Center for Technology the equity reserve was decreased by DKK 2.1 a global royalty-bearing, exclusive license to date. In August 2018, the Company made a Commercialization Inc., University of Kansas, million, which represents the market value of all data, know-how, inventions and technol- milestone payment of USD 250,000 (DKK 1.6 Kansas Life Sciences Development Company, the shares issued. See Note 4.8 for Bonus ogy generated by the University of Miami and million) upon the enrollment of the first Inc., (“KLSDC”) and UCL Business PLC Shares to be issued in 2021 related to the certain other institutions in a Phase 2 clinical patient in the ALS clinical trial. The Company (“UCL”) granting Orphazyme the right to incurred costs reported by KLSDC and UCL trial of arimoclomol in ALS with the A4V capitalizes amounts paid to CytRx as an develop and commercialize products under for the year 2020. SOD1 mutation to research, develop, make, acquired license right if the recognition crite- all data generated in the course of the on-go- use or sell certain pharmaceutical products or processes containing arimoclomol. Orphazyme Annual Report 2020 Group Financial Statements 62


3.1 INTANGIBLE ASSETS (CONTINUED) 3.2 LEASES licensed processes on a product-by-product ACCOUNTING POLICIES lease liabilities recognized, initial direct costs § Under the terms of the exclusive license and country-by-country basis for a period of incurred, and lease payments made at or agreement, the Company made an up-front ten years thereafter unless the agreement is On January 1, 2019, Orphazyme adopted before the commencement date less any cash payment of $75,000 (DKK 0.5 million) terminated earlier. Any annual license fees IFRS 16, Leases, using the modified retro - lease incentives received. and further agreed to make certain future will be creditable against other payments spective method. At contract inception, the payments, including (i) a development mile- due in the same calendar year. Group assesses whether a contract is, or Right-of-use assets are depreciated on a stone payment of $1,150,000 (DKK 7.7 mil- contains, a lease. A contract is, or contains, straight-line basis over the shorter of the lion) upon receiving regulatory approval for a Orphazyme has no liabilities prior to the a lease if the contract conveys the right to lease term and the estimated useful life of pharmaceutical product containing arimoclo- occurrence of future sales of products and control the use of an identified asset for a the underlying asset. If ownership of the mol for which the intended indication is ALS accordingly neither such liabilities nor con- period of time in exchange for considera- leased asset transfers to the Group at the if the institution’s Phase 2 clinical trial results tingent consideration have been recognized tion. The Group is party to lease agreements end of the lease term or the cost reflects the were used in support of such regulatory as part of the license agreement. only in which it is a lessee and not a lessor. exercise of a purchase option, depreciation approval, (ii) annual license fees from 2023 is calculated using the estimated useful life until the earlier of 2033 or termination of the The up-front cash payment was capitalized As a lessee, the Group applies a single rec- of the asset, which for the operating equip- agreement for a maximum aggregate as an acquired license right, which is not ognition and measurement approach for all ment under lease is ten years. The right-of- amount of $570,000 (DKK 3.8 million), and, being amortized until approval of the under- leases, except for short-term leases and use assets are also subject to impairment. (iii) beginning on the date of first commercial lying asset has been received from regula- leases of low-value assets. At inception or sale by the Company, its affiliates or subli - tory authorities. on reassessment of a contract that contains Lease liabilities censees of a licensed product or licensed a lease component, the Group allocates the At the commencement date of the lease, process in a country, a low single-digit roy- The following table presents the cost and consideration in the contract to each lease the Group recognizes lease liabilities meas- alty on net sales of licensed products or respective amortization of software and component on the basis of their relative ured at the present value of lease payments licenses held by Orphazyme: stand-alone prices. to be made over the lease term. The lease DKK 000 Software Licenses Total payments include fixed payments less any Cost at December 31, 2018 - 11,575 11,575 The Group recognizes lease liabilities to lease incentives receivable, variable lease Additions - 508 508 make lease payments and right-of-use payments that depend on an index or a rate, Cost at December 31, 2019 - 12,083 12,083 assets representing the right to use the and amounts expected to be paid under Additions 2,736 - 2,736 underlying assets. residual value guarantees. The lease pay- Cost at December 31, 2020 2,736 12,083 14,819 ments also include the exercise price of a Right-of-use assets purchase option reasonably certain to be Accumulated amortization at December 31, 2018 - 831 831 The Group recognizes right-of-use assets at exercised by the Group and payments of Amortization expense - 713 713 the commencement date of the lease (i.e., penalties for terminating the lease, if the Accumulated amortization at December 31, 2019 - 1,544 1,544 the date the underlying asset is available for lease term reflects the Group exercising the Amortization expense 109 712 821 use). Right-of-use assets are measured at option to terminate. Variable lease pay- Accumulated amortization at December 31, 2020 109 2,256 2,365 cost, less any accumulated depreciation and ments that do not depend on an index or a impairment losses, and adjusted for any rate are recognized as expenses in the Net carrying value at remeasurement of lease liabilities. The cost period in which the event or condition that December 31, 2019 - 10,539 10,539 of right-of-use assets includes the amount of triggers the payment occurs. In calculating December 31, 2020 2,627 9,827 12,454 Orphazyme Annual Report 2020 Group Financial Statements 633.1 INTANGIBLE ASSETS (CONTINUED) 3.2 LEASES licensed processes on a product-by-product ACCOUNTING POLICIES lease liabilities recognized, initial direct costs § Under the terms of the exclusive license and country-by-country basis for a period of incurred, and lease payments made at or agreement, the Company made an up-front ten years thereafter unless the agreement is On January 1, 2019, Orphazyme adopted before the commencement date less any cash payment of $75,000 (DKK 0.5 million) terminated earlier. Any annual license fees IFRS 16, Leases, using the modified retro - lease incentives received. and further agreed to make certain future will be creditable against other payments spective method. At contract inception, the payments, including (i) a development mile- due in the same calendar year. Group assesses whether a contract is, or Right-of-use assets are depreciated on a stone payment of $1,150,000 (DKK 7.7 mil- contains, a lease. A contract is, or contains, straight-line basis over the shorter of the lion) upon receiving regulatory approval for a Orphazyme has no liabilities prior to the a lease if the contract conveys the right to lease term and the estimated useful life of pharmaceutical product containing arimoclo- occurrence of future sales of products and control the use of an identified asset for a the underlying asset. If ownership of the mol for which the intended indication is ALS accordingly neither such liabilities nor con- period of time in exchange for considera- leased asset transfers to the Group at the if the institution’s Phase 2 clinical trial results tingent consideration have been recognized tion. The Group is party to lease agreements end of the lease term or the cost reflects the were used in support of such regulatory as part of the license agreement. only in which it is a lessee and not a lessor. exercise of a purchase option, depreciation approval, (ii) annual license fees from 2023 is calculated using the estimated useful life until the earlier of 2033 or termination of the The up-front cash payment was capitalized As a lessee, the Group applies a single rec- of the asset, which for the operating equip- agreement for a maximum aggregate as an acquired license right, which is not ognition and measurement approach for all ment under lease is ten years. The right-of- amount of $570,000 (DKK 3.8 million), and, being amortized until approval of the under- leases, except for short-term leases and use assets are also subject to impairment. (iii) beginning on the date of first commercial lying asset has been received from regula- leases of low-value assets. At inception or sale by the Company, its affiliates or subli - tory authorities. on reassessment of a contract that contains Lease liabilities censees of a licensed product or licensed a lease component, the Group allocates the At the commencement date of the lease, process in a country, a low single-digit roy- The following table presents the cost and consideration in the contract to each lease the Group recognizes lease liabilities meas- alty on net sales of licensed products or respective amortization of software and component on the basis of their relative ured at the present value of lease payments licenses held by Orphazyme: stand-alone prices. to be made over the lease term. The lease DKK 000 Software Licenses Total payments include fixed payments less any Cost at December 31, 2018 - 11,575 11,575 The Group recognizes lease liabilities to lease incentives receivable, variable lease Additions - 508 508 make lease payments and right-of-use payments that depend on an index or a rate, Cost at December 31, 2019 - 12,083 12,083 assets representing the right to use the and amounts expected to be paid under Additions 2,736 - 2,736 underlying assets. residual value guarantees. The lease pay- Cost at December 31, 2020 2,736 12,083 14,819 ments also include the exercise price of a Right-of-use assets purchase option reasonably certain to be Accumulated amortization at December 31, 2018 - 831 831 The Group recognizes right-of-use assets at exercised by the Group and payments of Amortization expense - 713 713 the commencement date of the lease (i.e., penalties for terminating the lease, if the Accumulated amortization at December 31, 2019 - 1,544 1,544 the date the underlying asset is available for lease term reflects the Group exercising the Amortization expense 109 712 821 use). Right-of-use assets are measured at option to terminate. Variable lease pay- Accumulated amortization at December 31, 2020 109 2,256 2,365 cost, less any accumulated depreciation and ments that do not depend on an index or a impairment losses, and adjusted for any rate are recognized as expenses in the Net carrying value at remeasurement of lease liabilities. The cost period in which the event or condition that December 31, 2019 - 10,539 10,539 of right-of-use assets includes the amount of triggers the payment occurs. In calculating December 31, 2020 2,627 9,827 12,454 Orphazyme Annual Report 2020 Group Financial Statements 63


3.2 LEASES (CONTINUED) the present value of lease payments, the leases that have a lease term of 12 months or modification. Group uses its incremental borrowing rate less from the commencement date and do Estimate relating to the incremental at the lease commencement date because not contain a purchase option). It also The Group has lease contracts for its head- borrowing rate the interest rate implicit in the lease is not applies the lease of low-value assets recogni- quarters in Copenhagen and for machinery The Group cannot readily determine the readily determinable. After the commence- tion exemption to leases of office equipment used in its operations. The lease terms range interest rate implicit in its leases, there- ment date, the amount of lease liabilities is that are considered to be low value. Lease from three to five years. During 2019, the fore it uses its incremental borrowing increased to reflect the accretion of interest payments on short-term leases and leases of lease contract for its headquarters in rate to measure lease liabilities. This is and reduced for the lease payments made. low-value assets are recognized as expense Copenhagen was modified to include addi - the rate of interest that the Group In addition, the carrying amount of lease lia- on a straight-line basis over the lease term. tional space, a true-up to market value for would have to pay to borrow over a bilities is remeasured if there is a modifica - the lease as a whole, and an extension of similar term, and with a similar security, tion, a change in the lease term, a change in Lease modifications the whole lease term. The modification was the funds necessary to obtain an asset the lease payments (e.g., changes to future Lease modifications are accounted for at accounted for as a change in the scope of of a similar value to the right-of-use payments resulting from a change in an the effective date of modification, which is the existing lease and therefore the initial asset in a similar economic environ- index or rate used to determine such lease the date when both parties agree to the lease was remeasured on the effective date ment. As there are no observable rates payments) or a change in the assessment of lease modification. Modifications are of the modification at the weighted average available for such a rate, the Group esti- an option to purchase the underlying asset. accounted for either as a separate lease or incremental borrowing rate of 5.38%. The mates its incremental borrowing rate The Group’s non-current lease liabilities are as a remeasurement of the initial lease. A effect on the right-of-use assets, lease liabil - using observable inputs, such as market included as a separate line item on the modification is accounted for as a separate ities and the Statement of Profit or Loss is interest rates, and is required to make Group’s consolidated balance sheet and the lease if both of the following conditions are disclosed in the tables below. During 2020, certain entity-specific estimates. current portion of lease liabilities is included met: (a) the modification increases the the lease contract for its headquarters in in Other current liabilities. scope of the lease by adding the right to Copenhagen was modified to include addi - use one or more underlying assets; and (b) tional space, which was accounted for as a Short-term leases and leases of low-value the consideration for the lease increases by separate lease addition. Furthermore, in assets an amount equivalent to the stand-alone June 2020 the Company entered a new The Group applies the short-term lease rec- price for the underlying asset. For a modifi - lease contract for its US office premises that ognition exemption to its short-term leases cation that is not a separate lease, the lease expires September 2025. of machinery and equipment (i.e., those liability is remeasured using a discount rate determined at the effective date of the Orphazyme Annual Report 2020 Group Financial Statements 643.2 LEASES (CONTINUED) the present value of lease payments, the leases that have a lease term of 12 months or modification. Group uses its incremental borrowing rate less from the commencement date and do Estimate relating to the incremental at the lease commencement date because not contain a purchase option). It also The Group has lease contracts for its head- borrowing rate the interest rate implicit in the lease is not applies the lease of low-value assets recogni- quarters in Copenhagen and for machinery The Group cannot readily determine the readily determinable. After the commence- tion exemption to leases of office equipment used in its operations. The lease terms range interest rate implicit in its leases, there- ment date, the amount of lease liabilities is that are considered to be low value. Lease from three to five years. During 2019, the fore it uses its incremental borrowing increased to reflect the accretion of interest payments on short-term leases and leases of lease contract for its headquarters in rate to measure lease liabilities. This is and reduced for the lease payments made. low-value assets are recognized as expense Copenhagen was modified to include addi - the rate of interest that the Group In addition, the carrying amount of lease lia- on a straight-line basis over the lease term. tional space, a true-up to market value for would have to pay to borrow over a bilities is remeasured if there is a modifica - the lease as a whole, and an extension of similar term, and with a similar security, tion, a change in the lease term, a change in Lease modifications the whole lease term. The modification was the funds necessary to obtain an asset the lease payments (e.g., changes to future Lease modifications are accounted for at accounted for as a change in the scope of of a similar value to the right-of-use payments resulting from a change in an the effective date of modification, which is the existing lease and therefore the initial asset in a similar economic environ- index or rate used to determine such lease the date when both parties agree to the lease was remeasured on the effective date ment. As there are no observable rates payments) or a change in the assessment of lease modification. Modifications are of the modification at the weighted average available for such a rate, the Group esti- an option to purchase the underlying asset. accounted for either as a separate lease or incremental borrowing rate of 5.38%. The mates its incremental borrowing rate The Group’s non-current lease liabilities are as a remeasurement of the initial lease. A effect on the right-of-use assets, lease liabil - using observable inputs, such as market included as a separate line item on the modification is accounted for as a separate ities and the Statement of Profit or Loss is interest rates, and is required to make Group’s consolidated balance sheet and the lease if both of the following conditions are disclosed in the tables below. During 2020, certain entity-specific estimates. current portion of lease liabilities is included met: (a) the modification increases the the lease contract for its headquarters in in Other current liabilities. scope of the lease by adding the right to Copenhagen was modified to include addi - use one or more underlying assets; and (b) tional space, which was accounted for as a Short-term leases and leases of low-value the consideration for the lease increases by separate lease addition. Furthermore, in assets an amount equivalent to the stand-alone June 2020 the Company entered a new The Group applies the short-term lease rec- price for the underlying asset. For a modifi - lease contract for its US office premises that ognition exemption to its short-term leases cation that is not a separate lease, the lease expires September 2025. of machinery and equipment (i.e., those liability is remeasured using a discount rate determined at the effective date of the Orphazyme Annual Report 2020 Group Financial Statements 64


3.2 LEASES (CONTINUED) The following table presents the carrying amounts of right-of-use assets recognized and the The maturity analysis of lease liabilities is disclosed in Note 3.6. movements during the period: The following are the amounts recognized in the Statement of Profit or Loss: Office Operating (DKK 000) buildings equipment Total (DKK 000) 2020 2019 2018 At January 1, 2019 13,006 - 13,006 Depreciation expense of right-of-use assets (R&D) 2,441 1,847 - Additions - 4,008 4,008 Depreciation expense of right-of-use assets Depreciation expense (1,858) (200) (2,058) (G&A) 566 211 - Modifications (1,053) - (1,053) Interest expense on lease liabilities 567 351 - At December 31, 2019 10,095 3,808 13,903 Loss on lease modification - 216 - Additions 3,963 - 3,963 Total amount recognized in the Statement of Depreciation expense (2,606) (401) (3,007) Profit or Loss 3,574 2,625 - Exchange rate adjustments - - - At December 31, 2020 11,452 3,407 14,859 The following table presents the carrying amounts of lease liabilities and the movements during the period: (DKK 000) 2020 2019 At January 1, 2019 12,689 13,006 Additions 3,963 4,008 Accretion of interest 567 351 Payments (3,678) (3,838) Exchange rate adjustments (7) - Modifications - (838) At December 31, 2019 13,534 12,689 Current 3,657 2,876 Non-current 9,877 9,813 Orphazyme Annual Report 2020 Group Financial Statements 653.2 LEASES (CONTINUED) The following table presents the carrying amounts of right-of-use assets recognized and the The maturity analysis of lease liabilities is disclosed in Note 3.6. movements during the period: The following are the amounts recognized in the Statement of Profit or Loss: Office Operating (DKK 000) buildings equipment Total (DKK 000) 2020 2019 2018 At January 1, 2019 13,006 - 13,006 Depreciation expense of right-of-use assets (R&D) 2,441 1,847 - Additions - 4,008 4,008 Depreciation expense of right-of-use assets Depreciation expense (1,858) (200) (2,058) (G&A) 566 211 - Modifications (1,053) - (1,053) Interest expense on lease liabilities 567 351 - At December 31, 2019 10,095 3,808 13,903 Loss on lease modification - 216 - Additions 3,963 - 3,963 Total amount recognized in the Statement of Depreciation expense (2,606) (401) (3,007) Profit or Loss 3,574 2,625 - Exchange rate adjustments - - - At December 31, 2020 11,452 3,407 14,859 The following table presents the carrying amounts of lease liabilities and the movements during the period: (DKK 000) 2020 2019 At January 1, 2019 12,689 13,006 Additions 3,963 4,008 Accretion of interest 567 351 Payments (3,678) (3,838) Exchange rate adjustments (7) - Modifications - (838) At December 31, 2019 13,534 12,689 Current 3,657 2,876 Non-current 9,877 9,813 Orphazyme Annual Report 2020 Group Financial Statements 65


3.3 PROPERTY, PLANT, AND EQUIPMENT ACCOUNTING POLICIES Property, plant, and equipment is required § Furniture Leasehold and improve- to be tested for impairment when there are (DKK 000) equipment ments Total Property, plant, and equipment includes IT, impairment indicators present. Impairment lab and other equipment, furniture and tests are conducted at the individual asset Cost at December 31, 2018 4,419 402 4,821 leasehold improvements that are measured level, or at the lowest level for which sepa- Additions 1,113 1,664 2,777 at cost less accumulated depreciation and rately identifiable cash flows for groups of Disposals - - - impairment losses. Cost includes the acqui- assets exist. Impaired assets or asset groups Cost at December 31, 2019 5,532 2,066 7,598 sition price and costs directly related to the are written down to their recoverable Additions 1,840 525 2,365 acquisition until the time the asset is ready amount, which is the higher of the value in Cost at December 31, 2020 7,372 2,591 9,963 for use. The residual value of equipment is use and the net realizable value of the asset not material. Depreciation is calculated on a or asset group, with impairment charges Accumulated depreciation at December 31, 2018 2,761 120 2,881 straight-line basis over the expected useful allocated proportionately to the assets Depreciation expense 852 180 1,032 life of the asset, being 3-5 years for equip- within the impaired asset group. Accumulated depreciation at December 31, 2019 3,613 300 3,913 ment and furniture. Leasehold improve- Depreciation expense 1,004 367 1,371 ments are depreciated over the shorter of The following table presents the Company’s Exchange rate adjustments (8) - (8) the useful life of the improvement or the Property, plant and equipment as of the Accumulated depreciation at December 31, 2020 4,609 667 5,276 remaining lease term. The useful life of years presented: assets and method of depreciation are Net carrying value at reviewed by management at least each December 31, 2019 1,919 1,766 3,685 year-end or more often based on changes in December 31, 2020 2,763 1,924 4,687 facts and circumstances. Changes in useful lives or residual values are adjusted pro- spectively as changes in accounting esti- There has been no impairment of property, plant and equipment for the years ended December mates. In addition, the Company has fully 31, 2020 and 2019. Depreciation expense is included within operating loss as follows: depreciated equipment still in use. (DKK 000 ) 2020 2019 2018 Research and development expenses 887 544 580 General and administrative expenses 484 489 74 Total depreciation expense 1,371 1,033 654 Orphazyme Annual Report 2020 Group Financial Statements 663.3 PROPERTY, PLANT, AND EQUIPMENT ACCOUNTING POLICIES Property, plant, and equipment is required § Furniture Leasehold and improve- to be tested for impairment when there are (DKK 000) equipment ments Total Property, plant, and equipment includes IT, impairment indicators present. Impairment lab and other equipment, furniture and tests are conducted at the individual asset Cost at December 31, 2018 4,419 402 4,821 leasehold improvements that are measured level, or at the lowest level for which sepa- Additions 1,113 1,664 2,777 at cost less accumulated depreciation and rately identifiable cash flows for groups of Disposals - - - impairment losses. Cost includes the acqui- assets exist. Impaired assets or asset groups Cost at December 31, 2019 5,532 2,066 7,598 sition price and costs directly related to the are written down to their recoverable Additions 1,840 525 2,365 acquisition until the time the asset is ready amount, which is the higher of the value in Cost at December 31, 2020 7,372 2,591 9,963 for use. The residual value of equipment is use and the net realizable value of the asset not material. Depreciation is calculated on a or asset group, with impairment charges Accumulated depreciation at December 31, 2018 2,761 120 2,881 straight-line basis over the expected useful allocated proportionately to the assets Depreciation expense 852 180 1,032 life of the asset, being 3-5 years for equip- within the impaired asset group. Accumulated depreciation at December 31, 2019 3,613 300 3,913 ment and furniture. Leasehold improve- Depreciation expense 1,004 367 1,371 ments are depreciated over the shorter of The following table presents the Company’s Exchange rate adjustments (8) - (8) the useful life of the improvement or the Property, plant and equipment as of the Accumulated depreciation at December 31, 2020 4,609 667 5,276 remaining lease term. The useful life of years presented: assets and method of depreciation are Net carrying value at reviewed by management at least each December 31, 2019 1,919 1,766 3,685 year-end or more often based on changes in December 31, 2020 2,763 1,924 4,687 facts and circumstances. Changes in useful lives or residual values are adjusted pro- spectively as changes in accounting esti- There has been no impairment of property, plant and equipment for the years ended December mates. In addition, the Company has fully 31, 2020 and 2019. Depreciation expense is included within operating loss as follows: depreciated equipment still in use. (DKK 000 ) 2020 2019 2018 Research and development expenses 887 544 580 General and administrative expenses 484 489 74 Total depreciation expense 1,371 1,033 654 Orphazyme Annual Report 2020 Group Financial Statements 66


3.4 PREPAYMENTS, DEPOSITS, AND OTHER RECEIVABLES ACCOUNTING POLICIES The following items comprised non-current prepayments and deposits as of December 31: § Estimate of prepayments related to Prepayments clinical trial development costs Prepayments include advance payments As explained in Note 2.1, Orphazyme (DKK 000 ) 2020 2019 made to vendors that will be incurred and incurs substantial costs associated Deposits with vendors 500 295 expensed in subsequent financial reporting with clinical trials related to its devel- Prepayments to vendors 280 465 periods. When the period for full expense opment programs and there is a high Leasehold deposit 1,234 892 recognition is longer than one year from the degree of estimation involved in Total non-current prepayments and deposits 2,014 1,652 balance sheet date, the portion to be accounting for clinical trial develop- expensed subsequent to one year is classi- ment costs. In particular, certain CROs fied as non-current. and vendors are paid upfront in con- Non-current prepayments and deposits connection with a clinical trial, prepaid nection with clinical activities and mainly includes a deposit with a CRO for insurance, and the lease deposit on our Deposits Management is required to estimate advance payment of pass-through costs in headquarters in Copenhagen. Deposits include advance payments made the timing of the prepayment release to vendors to be settled upon completion of to expense. This expense for the year Current prepayments and other receivables are specified below: the underlying contract. When the contract is estimated by using an expense term is longer than one year from the bal- model, as described in Note 2.1. (DKK 000 ) 2020 2019 ance sheet date, the deposit is classified as Prepayments to vendors 38,281 13,355 non-current. Grant income receivable 81 357 The net amount of sales tax recoverable VAT receivable, net 10,333 2,521 Other receivables from, or payable to, the taxation authority is Other receivables include current and included as part of receivables or payables Foreign VAT receivable 1,304 1,304 non-current amounts due to the Company. in the Statement of Financial Position. Other current receivables 1,236 1,600 Total current prepayments and other receivables 51,235 19,137 Sales tax Expenses and assets are recognized net of Current prepayments to vendors include prepayments made to CROs for clinical trial costs of the amount of sales tax, except: DKK 5.2 million (2019: DKK 5.0 million). • when the sales tax incurr ed on a pur- chase of assets or services is not recover- able from the taxation authority, in which case, the sales tax is recognized as part of the cost of acquisition of the asset or as part of the expense item, as applicable • when r eceivables and payables are stated with the amount of sales tax included. Orphazyme Annual Report 2020 Group Financial Statements 673.4 PREPAYMENTS, DEPOSITS, AND OTHER RECEIVABLES ACCOUNTING POLICIES The following items comprised non-current prepayments and deposits as of December 31: § Estimate of prepayments related to Prepayments clinical trial development costs Prepayments include advance payments As explained in Note 2.1, Orphazyme (DKK 000 ) 2020 2019 made to vendors that will be incurred and incurs substantial costs associated Deposits with vendors 500 295 expensed in subsequent financial reporting with clinical trials related to its devel- Prepayments to vendors 280 465 periods. When the period for full expense opment programs and there is a high Leasehold deposit 1,234 892 recognition is longer than one year from the degree of estimation involved in Total non-current prepayments and deposits 2,014 1,652 balance sheet date, the portion to be accounting for clinical trial develop- expensed subsequent to one year is classi- ment costs. In particular, certain CROs fied as non-current. and vendors are paid upfront in con- Non-current prepayments and deposits connection with a clinical trial, prepaid nection with clinical activities and mainly includes a deposit with a CRO for insurance, and the lease deposit on our Deposits Management is required to estimate advance payment of pass-through costs in headquarters in Copenhagen. Deposits include advance payments made the timing of the prepayment release to vendors to be settled upon completion of to expense. This expense for the year Current prepayments and other receivables are specified below: the underlying contract. When the contract is estimated by using an expense term is longer than one year from the bal- model, as described in Note 2.1. (DKK 000 ) 2020 2019 ance sheet date, the deposit is classified as Prepayments to vendors 38,281 13,355 non-current. Grant income receivable 81 357 The net amount of sales tax recoverable VAT receivable, net 10,333 2,521 Other receivables from, or payable to, the taxation authority is Other receivables include current and included as part of receivables or payables Foreign VAT receivable 1,304 1,304 non-current amounts due to the Company. in the Statement of Financial Position. Other current receivables 1,236 1,600 Total current prepayments and other receivables 51,235 19,137 Sales tax Expenses and assets are recognized net of Current prepayments to vendors include prepayments made to CROs for clinical trial costs of the amount of sales tax, except: DKK 5.2 million (2019: DKK 5.0 million). • when the sales tax incurr ed on a pur- chase of assets or services is not recover- able from the taxation authority, in which case, the sales tax is recognized as part of the cost of acquisition of the asset or as part of the expense item, as applicable • when r eceivables and payables are stated with the amount of sales tax included. Orphazyme Annual Report 2020 Group Financial Statements 67


3.5 PRE-LAUNCH INVENTORY 3.6 FINANCIAL ASSETS AND LIABILITIES ACCOUNTING POLICIES ulatory approval for the product is obtained. ACCOUNTING POLICIES • L evel 3: Techniques that use inputs that § § A write-down is made against inventory, have a significant effect on the recorded The Company may scale-up and make com- and the cost is recognized in the statement Financial assets fair value that are not based on observa- mercial quantities of its product candidate of profit and loss and comprehensive Initial recognition and measurement ble market data. prior to the date it anticipates that such income as research and development costs. Financial assets that meet certain criteria product will receive final regulatory Once regulatory approval is obtained, the are classified at initial recognition as subse - Subsequent measurement approval. The scale-up and commercial pro- write-down is reversed, up to no more than quently measured at amortized cost, fair Historically, the Group’s receivables are due duction of pre-launch inventory involves the the original cost. value through other comprehensive income within a twelve-month period and therefore risk that such products may not be (OCI), or fair value through profit or loss. the impact of using the effective interest approved for marketing on a timely basis, or Pre-launch inventory intended for The Group does not hold any financial rate method on the Group’s financial state - ever. This risk notwithstanding, the Com- commercial sale assets meeting these classification criteria ments has been immaterial. pany may scale-up and build pre-launch As of December 31, 2020 and 2019, the except cash and certain types of other inventory of product that have not yet Company did not have pre-launch inventory receivables, which are valued at amortized Financial asset impairment received final regulatory approval when the that qualified for capitalization. As of cost. Generally, the Company’s financial The Group assesses at the end of each Company believes that such action is appro- December 31, 2020, the Company had pre- assets are available to support current oper- reporting period whether there has been priate in relation to the commercial value of launch inventory of approximately DKK ations and amounts expected to be realized objective evidence that a financial asset the product launch opportunity. 12.4m (2019: DKK 0) intended for commer- within the next twelve months are classified may be impaired. Impairment losses are rec- cial sale following regulatory approval of in the Statement of Financial Position as ognized if there is objective evidence of Inventory manufactured prior to regulatory arimoclomol for the treatment of Niemann- current assets. impairment and the evidence indicates that approval (pre-launch inventory) is capital- Pick Disease Type C (NPC). This amount is estimated future cash flows will be nega - ized but immediately provided for, until reg- fully provided for and recognized under The Group’s financial assets are recognized tively impacted. The Group did not assess research and development expenses in the initially at fair value plus, in the case of finan - an impairment of a financial asset for either statement of profit or loss and other com - cial assets not carried at fair value through of the years ended December 31, 2020 or prehensive loss along with the production profit and loss, transaction costs that are 2019. costs for drug substance and drug products attributable to the acquisition of the finan - used in clinical trials and early access pro- cial asset, if any. Financial instruments rec- Financial liabilities grams that are not eligible for reversal at a ognized at fair value are allocated to one of Borrowings later time. The provision for pre-launch the following valuation hierarchy levels: Financial liabilities, including borrowings, inventory intended for commercial sale fol- are initially measured at fair value less trans- lowing regulatory approval in the U.S. will • L evel 1: Quoted (unadjusted) prices in action costs incurred. Subsequently, bor- be reversed once regulatory approval is active markets for identical assets or rowings are measured at amortized cost. obtained. liabilities. Amortized cost is calculated as original cost • L evel 2: Other techniques for which all less instalments plus/less the accumulated inputs that have a significant effect on amortization of the difference between cost the recorded fair value are observable, and nominal value, so that the effective either directly or indirectly. interest rate is recognized in the income Orphazyme Annual Report 2020 Group Financial Statements 683.5 PRE-LAUNCH INVENTORY 3.6 FINANCIAL ASSETS AND LIABILITIES ACCOUNTING POLICIES ulatory approval for the product is obtained. ACCOUNTING POLICIES • L evel 3: Techniques that use inputs that § § A write-down is made against inventory, have a significant effect on the recorded The Company may scale-up and make com- and the cost is recognized in the statement Financial assets fair value that are not based on observa- mercial quantities of its product candidate of profit and loss and comprehensive Initial recognition and measurement ble market data. prior to the date it anticipates that such income as research and development costs. Financial assets that meet certain criteria product will receive final regulatory Once regulatory approval is obtained, the are classified at initial recognition as subse - Subsequent measurement approval. The scale-up and commercial pro- write-down is reversed, up to no more than quently measured at amortized cost, fair Historically, the Group’s receivables are due duction of pre-launch inventory involves the the original cost. value through other comprehensive income within a twelve-month period and therefore risk that such products may not be (OCI), or fair value through profit or loss. the impact of using the effective interest approved for marketing on a timely basis, or Pre-launch inventory intended for The Group does not hold any financial rate method on the Group’s financial state - ever. This risk notwithstanding, the Com- commercial sale assets meeting these classification criteria ments has been immaterial. pany may scale-up and build pre-launch As of December 31, 2020 and 2019, the except cash and certain types of other inventory of product that have not yet Company did not have pre-launch inventory receivables, which are valued at amortized Financial asset impairment received final regulatory approval when the that qualified for capitalization. As of cost. Generally, the Company’s financial The Group assesses at the end of each Company believes that such action is appro- December 31, 2020, the Company had pre- assets are available to support current oper- reporting period whether there has been priate in relation to the commercial value of launch inventory of approximately DKK ations and amounts expected to be realized objective evidence that a financial asset the product launch opportunity. 12.4m (2019: DKK 0) intended for commer- within the next twelve months are classified may be impaired. Impairment losses are rec- cial sale following regulatory approval of in the Statement of Financial Position as ognized if there is objective evidence of Inventory manufactured prior to regulatory arimoclomol for the treatment of Niemann- current assets. impairment and the evidence indicates that approval (pre-launch inventory) is capital- Pick Disease Type C (NPC). This amount is estimated future cash flows will be nega - ized but immediately provided for, until reg- fully provided for and recognized under The Group’s financial assets are recognized tively impacted. The Group did not assess research and development expenses in the initially at fair value plus, in the case of finan - an impairment of a financial asset for either statement of profit or loss and other com - cial assets not carried at fair value through of the years ended December 31, 2020 or prehensive loss along with the production profit and loss, transaction costs that are 2019. costs for drug substance and drug products attributable to the acquisition of the finan - used in clinical trials and early access pro- cial asset, if any. Financial instruments rec- Financial liabilities grams that are not eligible for reversal at a ognized at fair value are allocated to one of Borrowings later time. The provision for pre-launch the following valuation hierarchy levels: Financial liabilities, including borrowings, inventory intended for commercial sale fol- are initially measured at fair value less trans- lowing regulatory approval in the U.S. will • L evel 1: Quoted (unadjusted) prices in action costs incurred. Subsequently, bor- be reversed once regulatory approval is active markets for identical assets or rowings are measured at amortized cost. obtained. liabilities. Amortized cost is calculated as original cost • L evel 2: Other techniques for which all less instalments plus/less the accumulated inputs that have a significant effect on amortization of the difference between cost the recorded fair value are observable, and nominal value, so that the effective either directly or indirectly. interest rate is recognized in the income Orphazyme Annual Report 2020 Group Financial Statements 68


3.6 FINANCIAL ASSETS AND LIABILITIES (CONTINUED) statement over the loan period. Financial Accruals includes an amount of DKK 12.3 and the closing share price on the day liabilities are derecognized when settled. Estimate of accruals related to clini- million (2019: DKK 13.3 million) for clinical immediately preceding the date of the noti- cal trial development costs trial costs. fication applied to the aggregate amount of The Facilitation Fee in our Loan Agreement, As explained in Note 2.1, Orphazyme amounts borrowed. The variability arising defined below, is accounted for as an incurs substantial costs associated Kreos Debt Facility from the change in Orphazyme’s share price embedded derivative. The variability arising with clinical trials related to its devel- In August 2019, Orphazyme entered into a is not closely related to the host debt instru- from the change in Orphazyme’s share price opment programs and there is a high structured debt facility (“Loan Agreement”) ment characterized mainly by interest rate is not closely related to the host debt instru- degree of estimation involved in with Kreos Capital to secure funding of €9 and credit risk. Therefore, the embedded ment characterized mainly by interest rate accounting for clinical trial develop- million (Tranche 1”) to be repaid over for- equity-linked amount is separated from the and credit risk. Therefore, the embedded ment costs. As described in Note 2.1, ty-two months (“Loan Term”), with the first host debt instrument and accounted for as equity-linked amount is separated from the Management uses an expense model twelve months requiring interest only pay- an embedded written call option at fair host debt instrument and accounted for as to estimate the timing of expenses ments at nominal annual fixed interest rate value through profit and loss. an embedded written call option at fair recognition in each period and related of 9.75% and the remaining thirty months value through profit and loss. accruals at the end of the year. requiring equal installments comprising Fair value on inception of the Loan Agree- principal and interest. Early repayment of ment is included as part of the transaction The portion of the debt maturing after one the borrowed amounts may be made in costs. The call option is measured at fair year is presented as non-current debt and change in classification of a financial asset whole but not in part, with the repayment value at level 2 in the fair value hierarchy. the remainder as current debt. after initial recognition and measurements amount being equal to the principal out- as discussed herein. Financial assets are not standing plus the sum of all the interest The written call option is measured at fair Trade payables and accruals acquired for trading or speculative pur- repayments that would have been paid value using a Black-Scholes option valuation Trade payables and accruals relate to the poses, nor has the Group placed any assets throughout the remainder of the loan dis- model. In measuring the fair value, various Group’s purchase of products and services as security for loans at either December 31, counted at an annual rate of 4.0%. observable and unobservable inputs are from various vendors in the normal course 2020 or 2019. required. Observable input mainly relates to of business. In addition, the lender may, at any time in its the market price of Orphazyme’s shares, The Group’s financial liabilities comprise the sole discretion in eight years, depending on and risk-free interest rate. Unobservable Other liabilities following as of the years ended December 31: certain events defined in the Loan Agree - inputs mainly relate to the expected volatil- Other payables are measured at amortized ment, notify the Company that a Facilitation ity of Orphazyme’s share price, which was cost. The amount payable to employees for Fee is due and payable (“Notification”). determined based on the Company’s own (DKK 000) 2020 2019 the Phantom Shares Program (Note 2.5) is historical volatility, and the term. The table Borrowings 57,180 62,824 classified as non-current and is measured at The Facilitation Fee is an amount equal to below shows the inputs used in the valua- Lease liabilities fair value, at Level 2 in the fair value the greater of (i) 10% of the aggregate tion of the call option and the estimated fair (Note 3.2) 13,534 12,689 hierarchy. amount of the amount borrowed and (ii) the value at the date of the Loan Agreement Trade payables 29,937 1,093 percentage increase in the Company’s share and on December 31: Accruals 42,198 31,297 The Group’s financial assets include mainly price on Nasdaq Copenhagen between the Total liabilities cash (Note 3.7). The Group has no deriva- 30-day volume-weighted average share measured at tive financial assets nor has there been a price on the date of the Loan Agreement amortized cost 142,849 107,903 Orphazyme Annual Report 2020 Group Financial Statements 69 As of the year ended December 31, 2020, 3.6 FINANCIAL ASSETS AND LIABILITIES (CONTINUED) statement over the loan period. Financial Accruals includes an amount of DKK 12.3 and the closing share price on the day liabilities are derecognized when settled. Estimate of accruals related to clini- million (2019: DKK 13.3 million) for clinical immediately preceding the date of the noti- cal trial development costs trial costs. fication applied to the aggregate amount of The Facilitation Fee in our Loan Agreement, As explained in Note 2.1, Orphazyme amounts borrowed. The variability arising defined below, is accounted for as an incurs substantial costs associated Kreos Debt Facility from the change in Orphazyme’s share price embedded derivative. The variability arising with clinical trials related to its devel- In August 2019, Orphazyme entered into a is not closely related to the host debt instru- from the change in Orphazyme’s share price opment programs and there is a high structured debt facility (“Loan Agreement”) ment characterized mainly by interest rate is not closely related to the host debt instru- degree of estimation involved in with Kreos Capital to secure funding of €9 and credit risk. Therefore, the embedded ment characterized mainly by interest rate accounting for clinical trial develop- million (Tranche 1”) to be repaid over for- equity-linked amount is separated from the and credit risk. Therefore, the embedded ment costs. As described in Note 2.1, ty-two months (“Loan Term”), with the first host debt instrument and accounted for as equity-linked amount is separated from the Management uses an expense model twelve months requiring interest only pay- an embedded written call option at fair host debt instrument and accounted for as to estimate the timing of expenses ments at nominal annual fixed interest rate value through profit and loss. an embedded written call option at fair recognition in each period and related of 9.75% and the remaining thirty months value through profit and loss. accruals at the end of the year. requiring equal installments comprising Fair value on inception of the Loan Agree- principal and interest. Early repayment of ment is included as part of the transaction The portion of the debt maturing after one the borrowed amounts may be made in costs. The call option is measured at fair year is presented as non-current debt and change in classification of a financial asset whole but not in part, with the repayment value at level 2 in the fair value hierarchy. the remainder as current debt. after initial recognition and measurements amount being equal to the principal out- as discussed herein. Financial assets are not standing plus the sum of all the interest The written call option is measured at fair Trade payables and accruals acquired for trading or speculative pur- repayments that would have been paid value using a Black-Scholes option valuation Trade payables and accruals relate to the poses, nor has the Group placed any assets throughout the remainder of the loan dis- model. In measuring the fair value, various Group’s purchase of products and services as security for loans at either December 31, counted at an annual rate of 4.0%. observable and unobservable inputs are from various vendors in the normal course 2020 or 2019. required. Observable input mainly relates to of business. In addition, the lender may, at any time in its the market price of Orphazyme’s shares, The Group’s financial liabilities comprise the sole discretion in eight years, depending on and risk-free interest rate. Unobservable Other liabilities following as of the years ended December 31: certain events defined in the Loan Agree - inputs mainly relate to the expected volatil- Other payables are measured at amortized ment, notify the Company that a Facilitation ity of Orphazyme’s share price, which was cost. The amount payable to employees for Fee is due and payable (“Notification”). determined based on the Company’s own (DKK 000) 2020 2019 the Phantom Shares Program (Note 2.5) is historical volatility, and the term. The table Borrowings 57,180 62,824 classified as non-current and is measured at The Facilitation Fee is an amount equal to below shows the inputs used in the valua- Lease liabilities fair value, at Level 2 in the fair value the greater of (i) 10% of the aggregate tion of the call option and the estimated fair (Note 3.2) 13,534 12,689 hierarchy. amount of the amount borrowed and (ii) the value at the date of the Loan Agreement Trade payables 29,937 1,093 percentage increase in the Company’s share and on December 31: Accruals 42,198 31,297 The Group’s financial assets include mainly price on Nasdaq Copenhagen between the Total liabilities cash (Note 3.7). The Group has no deriva- 30-day volume-weighted average share measured at tive financial assets nor has there been a price on the date of the Loan Agreement amortized cost 142,849 107,903 Orphazyme Annual Report 2020 Group Financial Statements 69 As of the year ended December 31, 2020,


3.6 FINANCIAL ASSETS AND LIABILITIES (CONTINUED) The amounts disclosed in the table are the rying balances as the impact of discounting CALL OPTION ON FACILITATION FEE Dec 2020 Dec 2019 contractual undiscounted cash flows. Bal - is not significant. Fair value of call option 838 1,595 ances due within 12 months equal their car- Dividend yield (%) - - Expected volatility (%) 54% 57% Less Between Between Total Risk-free interest rate (%) (0.61)% (0.63)% than 1 and 2 2 and 5 contractual Carrying Expected life (years) 2.2 3.2 (DKK 000) 12 months years years cash flows amount Share price (DKK) 67.1 72.4 Non-derivatives Trade payables and accruals 72,135 — — 72,135 72,135 Borrowings 30,126 30,126 4,524 64,776 57,179 The change in fair value of the call option is amount of €0.4 million (DKK 2.5 million) as Lease liabilities 4,323 4,297 6,418 15,038 13,534 recognized as a finance income or expense a deposit for the last cash payment to be Total non-derivatives 106,584 34,423 10,942 151,949 142,848 in the statement of profit or loss. For the made on the borrowing (“Advance Derivatives (Borrowings) 838 838 838 year ended December 31, 2020, the Com- Payment”). Total derivatives 838 838 838 pany recognized a gain of DKK 0.8 million (2019: a loss of DKK 0.4 million). The total liability for the Loan Agreement is Non-cash changes being amortized net of the transaction costs, The structured debt facility included a the Facilitation Fee and the call option; and Adjust- potential second tranche available to Orp- it is being presented net of the Advance ments and Accu- Exchang- Dec 31, modifica - mulated erate ad- Dec 31, hazyme, however as of December 31, 2019 Payment. (DKK 000) 2019 Cash flow Additions tions interest justments 2020 conditions allowing for the drawdown of the Borrowings 62,824 (16,349) - 750 9,921 33 57,179 second tranche were not met and it expired Maturities of financial liabilities Lease liabilities 12,689 (3,678) 3,963 - 567 (7) 13,534 unused. In connection with the drawdown of The table below presents the Group’s finan - Total liabilities Tranche 1, Orphazyme incurred transaction cial liabilities by relevant maturity groupings from financing costs in the amount of €0.5 million (DKK 3.4 based on their contractual maturities for all activities 75,513 (20,027) 3,963 750 10,488 26 70,713 million). As the transaction costs secured a non-derivative financial liabilities and deriv - potential financing of two tranches, half of ative financial instruments for which the Non-cash changes the transaction costs, or €0.2 million (DKK contractual maturities are essential for an Adjust- 1.7 million) are being amortized with the first understanding of the timing of the cash ments and Accu- Exchang- tranche and upon expiration of the second flows. Dec 31, modifica - mulated erate ad- Dec 31, tranche, the other half of the transaction (DKK 000) 2018 Cash flow Additions tions interest justments 2019 costs were written off as finance expense in As the Facilitation Fee is due upon demand, Borrowings 61,543 (2,185) - (1,324) 4,917 (127) 62,824 the statement of profit or loss (Note 2.6). it is shown as current Borrowings under Lease liabilities - (3,838) 17,014 (838) 351 - 12,689 non-derivatives. The call option on the Facil- Total liabilities As part of the closing of the Loan Agree- itation Fee is shown as current under from financing ment, Orphazyme made a payment in the derivatives. activities 61,543 (6,023) 17,014 (2,162) 5,268 (127) 75,513 Orphazyme Annual Report 2020 Group Financial Statements 703.6 FINANCIAL ASSETS AND LIABILITIES (CONTINUED) The amounts disclosed in the table are the rying balances as the impact of discounting CALL OPTION ON FACILITATION FEE Dec 2020 Dec 2019 contractual undiscounted cash flows. Bal - is not significant. Fair value of call option 838 1,595 ances due within 12 months equal their car- Dividend yield (%) - - Expected volatility (%) 54% 57% Less Between Between Total Risk-free interest rate (%) (0.61)% (0.63)% than 1 and 2 2 and 5 contractual Carrying Expected life (years) 2.2 3.2 (DKK 000) 12 months years years cash flows amount Share price (DKK) 67.1 72.4 Non-derivatives Trade payables and accruals 72,135 — — 72,135 72,135 Borrowings 30,126 30,126 4,524 64,776 57,179 The change in fair value of the call option is amount of €0.4 million (DKK 2.5 million) as Lease liabilities 4,323 4,297 6,418 15,038 13,534 recognized as a finance income or expense a deposit for the last cash payment to be Total non-derivatives 106,584 34,423 10,942 151,949 142,848 in the statement of profit or loss. For the made on the borrowing (“Advance Derivatives (Borrowings) 838 838 838 year ended December 31, 2020, the Com- Payment”). Total derivatives 838 838 838 pany recognized a gain of DKK 0.8 million (2019: a loss of DKK 0.4 million). The total liability for the Loan Agreement is Non-cash changes being amortized net of the transaction costs, The structured debt facility included a the Facilitation Fee and the call option; and Adjust- potential second tranche available to Orp- it is being presented net of the Advance ments and Accu- Exchang- Dec 31, modifica - mulated erate ad- Dec 31, hazyme, however as of December 31, 2019 Payment. (DKK 000) 2019 Cash flow Additions tions interest justments 2020 conditions allowing for the drawdown of the Borrowings 62,824 (16,349) - 750 9,921 33 57,179 second tranche were not met and it expired Maturities of financial liabilities Lease liabilities 12,689 (3,678) 3,963 - 567 (7) 13,534 unused. In connection with the drawdown of The table below presents the Group’s finan - Total liabilities Tranche 1, Orphazyme incurred transaction cial liabilities by relevant maturity groupings from financing costs in the amount of €0.5 million (DKK 3.4 based on their contractual maturities for all activities 75,513 (20,027) 3,963 750 10,488 26 70,713 million). As the transaction costs secured a non-derivative financial liabilities and deriv - potential financing of two tranches, half of ative financial instruments for which the Non-cash changes the transaction costs, or €0.2 million (DKK contractual maturities are essential for an Adjust- 1.7 million) are being amortized with the first understanding of the timing of the cash ments and Accu- Exchang- tranche and upon expiration of the second flows. Dec 31, modifica - mulated erate ad- Dec 31, tranche, the other half of the transaction (DKK 000) 2018 Cash flow Additions tions interest justments 2019 costs were written off as finance expense in As the Facilitation Fee is due upon demand, Borrowings 61,543 (2,185) - (1,324) 4,917 (127) 62,824 the statement of profit or loss (Note 2.6). it is shown as current Borrowings under Lease liabilities - (3,838) 17,014 (838) 351 - 12,689 non-derivatives. The call option on the Facil- Total liabilities As part of the closing of the Loan Agree- itation Fee is shown as current under from financing ment, Orphazyme made a payment in the derivatives. activities 61,543 (6,023) 17,014 (2,162) 5,268 (127) 75,513 Orphazyme Annual Report 2020 Group Financial Statements 70


3.6 FINANCIAL ASSETS AND LIABILITIES (CONTINUED) 3.7 CASH Total current other liabilities are comprised ACCOUNTING POLICIES The Group’s cash balance denominated in § of the following as of the years ended foreign currencies were as follows as of the December 31: Cash includes cash on hand and in banks. years ended December 31: Please see Financial Risks discussed in (DKK 000) 2020 2019 Note 4.4. Deferred grant income - 95 Remuneration to the Board of Directors 2,840 1,535 (DKK 000) 2020 2019 Payroll and employee-related costs 50,487 16,279 DKK 483,862 89,155 Total current other liabilities 53,327 17,909 USD 241,353 14,309 EUR 644 20,083 In addition, the Group has the following CHF 18 - total other non-current liabilities as of the GBP 1,052 41 years ended December 31: Total cash 726,929 123,588 (DKK 000) 2020 2019 Accrual for milestone payment to vendor 1,179 65 Phantom shares liability to employees 455 313 Total non-current other liabilities 1,634 378 Orphazyme Annual Report 2020 Group Financial Statements 713.6 FINANCIAL ASSETS AND LIABILITIES (CONTINUED) 3.7 CASH Total current other liabilities are comprised ACCOUNTING POLICIES The Group’s cash balance denominated in § of the following as of the years ended foreign currencies were as follows as of the December 31: Cash includes cash on hand and in banks. years ended December 31: Please see Financial Risks discussed in (DKK 000) 2020 2019 Note 4.4. Deferred grant income - 95 Remuneration to the Board of Directors 2,840 1,535 (DKK 000) 2020 2019 Payroll and employee-related costs 50,487 16,279 DKK 483,862 89,155 Total current other liabilities 53,327 17,909 USD 241,353 14,309 EUR 644 20,083 In addition, the Group has the following CHF 18 - total other non-current liabilities as of the GBP 1,052 41 years ended December 31: Total cash 726,929 123,588 (DKK 000) 2020 2019 Accrual for milestone payment to vendor 1,179 65 Phantom shares liability to employees 455 313 Total non-current other liabilities 1,634 378 Orphazyme Annual Report 2020 Group Financial Statements 71


3.8 COMMITMENTS AND CONTINGENCIES Contractual commitments for candidate developed that is being devel- worldwide net sales of arimoclomol for the which consists of basic services and mainte- the ac quisition of intangible assets oped or labelled for the treatment or pre- treatment of ALS. nance, has a non-cancellable lease term of As disclosed in Note 3.1, under the terms of vention of ALS or stroke (ALS or stroke six months. At December 31, 2020, the non- the Asset Purchase Agreement with CytRx, products). Payments are triggered upon The first sales milestone is triggered on lease component established a contractual the Company agreed to make future pay- achieving certain key clinical or regulatory aggregated annual global net sales exceed- commitment of DKK 1.5 million (2019: DKK ments to CytRx that were contingent upon milestones. In August 2018, the Company ing USD 100 million. The aggregate mile- 0.5 million). the achievement of specified clinical, regula - made a milestone payment of USD 250,000 stone payment obligation may be up to USD tory, and sales milestones. The Company (DKK 1.6 million) upon the enrollment of the 50 million assuming aggregated annual Contractual obligations toward CROs has agreed to pay CytRx clinical and regula- first patient in the ALS Phase 3 clinical trial. global net sales in excess of USD 1 billion. In addition, the Group has contractual obli- tory milestone payments for the first two The maximum aggregate amount of mile- The Company has agreed to pay CytRx a gations related to contracts with CROs and product candidates being developed or stone payments that may be triggered per low teens double-digit royalty on net sales other vendors for research and develop- labeled for indications other than for the ALS or stroke product is USD 23.8 million of all products developed by the Company, ment activities that have been initiated and treatment or prevention of ALS or stroke assuming approval in the European Union its affiliates or licensees which are labeled are non-cancelable as of December 31, (non-ALS or stroke products). Payments are (or certain major European markets), the or prescribed for the treatment or preven- 2020. These establish contractual commit - triggered upon achieving certain key clinical United States and Japan. The milestone tion of ALS or stroke and a mid-single digit ments of approximately DKK 192 million or regulatory milestones. In 2016, the Com- obligations are payable only once per ALS royalty on net sales of all other products (2019: DKK 178 million). pany paid CytRx USD 0.1 million for achieve- or stroke product. A subsequent ALS or developed by the Company or its affiliates ment of a clinical milestone for the first stroke product may achieve an additional or licensees containing any of the com- Pledges and securities for loans product candidate. The maximum aggre- maximum aggregate amount of USD 23.8 pounds purchased from CytRx. Royalties In connection with a loan agreement in the gate amount of milestone payments that million in milestone payments, only if it con- accrue on a country-by-country and prod- amount up to €18.0 million entered into on may be triggered is USD 12.1 million for the tains a different compound than an ALS or uct-by-product basis until the latest of expi- August 27, 2019 with Kreos Capital VI (UK) first non-ALS or stroke product and USD stroke product previously achieving same ration of relevant patent claims in the coun- Ltd., the Company has granted security in 10.3 million for the second non-ALS or milestone but is for a different indication. try covering such product, expiry of favor of Kreos Capital VI (UK) Ltd. over (i) stroke product developed assuming (for regulatory exclusivity in the country for certain of its assets, including its intellectual both products) approval in the European The Asset Purchase Agreement further such product or ten years from the date of property rights, pursuant to a floating Union (or certain major European markets), includes sales milestones and royalty pay- the approval of the product in the country. charge agreement registered with the Dan- United States and Japan. A second non-ALS ments to be made by the Company based The royalty rates are subject to reductions ish personal register in the initial principal or stroke product is not considered a sec- on a specified percentage of any eventual for patent expiration, lack of regulatory amount of €9.0 million, (ii) its patents regis- ond product (and does not trigger mile- net sales of products containing one of the exclusivity, third party payments and tered in Germany, the UK and the US pursu- stone payments) unless it contains a differ - compounds purchased. In addition, under generic competition. ant to a patent pledge agreement and (iii) ent compound than the first non-ALS or the terms of the Asset Purchase Agreement, its shares in its US subsidiary, Orphazyme stroke product. the Company was assigned and became The Group has entered into an operating US, Inc. Furthermore, Orphazyme US, Inc. party to a royalty agreement with ALS Char- lease for its headquarters location in Den- has granted in favor of Kreos Capital VI The Company has also agreed to pay CytRx itable Remainder Trust pursuant to which mark. The lease component portion is (UK) Ltd. (i) a guarantee for the Company’s clinical and regulatory milestone payments the Company is obliged to pay a 1% royalty accounted for under IFRS 16 (see Note 3.2) obligations under the loan agreement pur- (payable one time only) for each product to the ALS Charitable Remainder Trust on and the non-lease component portion, suant to a guaranty agreement and (ii) Orphazyme Annual Report 2020 Group Financial Statements 723.8 COMMITMENTS AND CONTINGENCIES Contractual commitments for candidate developed that is being devel- worldwide net sales of arimoclomol for the which consists of basic services and mainte- the ac quisition of intangible assets oped or labelled for the treatment or pre- treatment of ALS. nance, has a non-cancellable lease term of As disclosed in Note 3.1, under the terms of vention of ALS or stroke (ALS or stroke six months. At December 31, 2020, the non- the Asset Purchase Agreement with CytRx, products). Payments are triggered upon The first sales milestone is triggered on lease component established a contractual the Company agreed to make future pay- achieving certain key clinical or regulatory aggregated annual global net sales exceed- commitment of DKK 1.5 million (2019: DKK ments to CytRx that were contingent upon milestones. In August 2018, the Company ing USD 100 million. The aggregate mile- 0.5 million). the achievement of specified clinical, regula - made a milestone payment of USD 250,000 stone payment obligation may be up to USD tory, and sales milestones. The Company (DKK 1.6 million) upon the enrollment of the 50 million assuming aggregated annual Contractual obligations toward CROs has agreed to pay CytRx clinical and regula- first patient in the ALS Phase 3 clinical trial. global net sales in excess of USD 1 billion. In addition, the Group has contractual obli- tory milestone payments for the first two The maximum aggregate amount of mile- The Company has agreed to pay CytRx a gations related to contracts with CROs and product candidates being developed or stone payments that may be triggered per low teens double-digit royalty on net sales other vendors for research and develop- labeled for indications other than for the ALS or stroke product is USD 23.8 million of all products developed by the Company, ment activities that have been initiated and treatment or prevention of ALS or stroke assuming approval in the European Union its affiliates or licensees which are labeled are non-cancelable as of December 31, (non-ALS or stroke products). Payments are (or certain major European markets), the or prescribed for the treatment or preven- 2020. These establish contractual commit - triggered upon achieving certain key clinical United States and Japan. The milestone tion of ALS or stroke and a mid-single digit ments of approximately DKK 192 million or regulatory milestones. In 2016, the Com- obligations are payable only once per ALS royalty on net sales of all other products (2019: DKK 178 million). pany paid CytRx USD 0.1 million for achieve- or stroke product. A subsequent ALS or developed by the Company or its affiliates ment of a clinical milestone for the first stroke product may achieve an additional or licensees containing any of the com- Pledges and securities for loans product candidate. The maximum aggre- maximum aggregate amount of USD 23.8 pounds purchased from CytRx. Royalties In connection with a loan agreement in the gate amount of milestone payments that million in milestone payments, only if it con- accrue on a country-by-country and prod- amount up to €18.0 million entered into on may be triggered is USD 12.1 million for the tains a different compound than an ALS or uct-by-product basis until the latest of expi- August 27, 2019 with Kreos Capital VI (UK) first non-ALS or stroke product and USD stroke product previously achieving same ration of relevant patent claims in the coun- Ltd., the Company has granted security in 10.3 million for the second non-ALS or milestone but is for a different indication. try covering such product, expiry of favor of Kreos Capital VI (UK) Ltd. over (i) stroke product developed assuming (for regulatory exclusivity in the country for certain of its assets, including its intellectual both products) approval in the European The Asset Purchase Agreement further such product or ten years from the date of property rights, pursuant to a floating Union (or certain major European markets), includes sales milestones and royalty pay- the approval of the product in the country. charge agreement registered with the Dan- United States and Japan. A second non-ALS ments to be made by the Company based The royalty rates are subject to reductions ish personal register in the initial principal or stroke product is not considered a sec- on a specified percentage of any eventual for patent expiration, lack of regulatory amount of €9.0 million, (ii) its patents regis- ond product (and does not trigger mile- net sales of products containing one of the exclusivity, third party payments and tered in Germany, the UK and the US pursu- stone payments) unless it contains a differ - compounds purchased. In addition, under generic competition. ant to a patent pledge agreement and (iii) ent compound than the first non-ALS or the terms of the Asset Purchase Agreement, its shares in its US subsidiary, Orphazyme stroke product. the Company was assigned and became The Group has entered into an operating US, Inc. Furthermore, Orphazyme US, Inc. party to a royalty agreement with ALS Char- lease for its headquarters location in Den- has granted in favor of Kreos Capital VI The Company has also agreed to pay CytRx itable Remainder Trust pursuant to which mark. The lease component portion is (UK) Ltd. (i) a guarantee for the Company’s clinical and regulatory milestone payments the Company is obliged to pay a 1% royalty accounted for under IFRS 16 (see Note 3.2) obligations under the loan agreement pur- (payable one time only) for each product to the ALS Charitable Remainder Trust on and the non-lease component portion, suant to a guaranty agreement and (ii) Orphazyme Annual Report 2020 Group Financial Statements 72


3.8 COMMITMENTS AND CONTINGENCIES (CONTINUED) security over certain of its assets, including review voucher is granted, the Company its intellectual property rights, pursuant to a may use the voucher for its own FDA security agreement governed under US law. approval processes or decide to sell the voucher to other biotech or pharmaceutical Contingent asset: Priority review voucher. companies. There is no established market The U.S. FDA has granted Orphazyme a rare for priority review vouchers and disclosed pediatric disease designation to arimoclo- sales prices may not be indicative of the mol as a treatment for Niemann-Pick dis- current value of vouchers, which may also ease Type C (NPC). Under the FDA’s rare fluctuate significantly. If a drug candidate pediatric disease priority review voucher receives Rare Pediatric Disease Designation program, upon the approval of a new drug before September 20, 2024, it is eligible to application for the treatment of a rare pedi- receive a voucher if it is approved before atric disease, the sponsor of such applica- September 30, 2026. Hence, it may be una- tion would be eligible for a rare pediatric vailable to the Company even if it meets all disease priority review voucher that can be of the requirements. Further, the potential used to obtain priority review for a subse- award of a voucher would trigger an obliga- quent new drug application. However, tion to market the relevant rare pediatric receiving a rare pediatric disease designa- disease product within one year from FDA tion for arimoclomol as a treatment for NPC approval or the FDA may revoke the does not automatically mean that the Com- voucher. Finally, a voucher award subjects pany will receive a priority review voucher the Company to post marketing reporting as priority review voucher is only awarded obligations to the FDA. following approval by the FDA of arimoclo- mol as a treatment for NPC. If a priority Orphazyme Annual Report 2020 Group Financial Statements 733.8 COMMITMENTS AND CONTINGENCIES (CONTINUED) security over certain of its assets, including review voucher is granted, the Company its intellectual property rights, pursuant to a may use the voucher for its own FDA security agreement governed under US law. approval processes or decide to sell the voucher to other biotech or pharmaceutical Contingent asset: Priority review voucher. companies. There is no established market The U.S. FDA has granted Orphazyme a rare for priority review vouchers and disclosed pediatric disease designation to arimoclo- sales prices may not be indicative of the mol as a treatment for Niemann-Pick dis- current value of vouchers, which may also ease Type C (NPC). Under the FDA’s rare fluctuate significantly. If a drug candidate pediatric disease priority review voucher receives Rare Pediatric Disease Designation program, upon the approval of a new drug before September 20, 2024, it is eligible to application for the treatment of a rare pedi- receive a voucher if it is approved before atric disease, the sponsor of such applica- September 30, 2026. Hence, it may be una- tion would be eligible for a rare pediatric vailable to the Company even if it meets all disease priority review voucher that can be of the requirements. Further, the potential used to obtain priority review for a subse- award of a voucher would trigger an obliga- quent new drug application. However, tion to market the relevant rare pediatric receiving a rare pediatric disease designa- disease product within one year from FDA tion for arimoclomol as a treatment for NPC approval or the FDA may revoke the does not automatically mean that the Com- voucher. Finally, a voucher award subjects pany will receive a priority review voucher the Company to post marketing reporting as priority review voucher is only awarded obligations to the FDA. following approval by the FDA of arimoclo- mol as a treatment for NPC. If a priority Orphazyme Annual Report 2020 Group Financial Statements 73


SECTION 4 4.1 CAPITAL MANAGEMENT OTHER For the purpose of the Group’s capital man- As of December 31, 2020, the Group held agement, capital includes issued capital, share cash totaling DKK 726.9 million (2019: DKK premium and all other equity reserves attrib- 123.6 million). Management monitors the DISCL OSURES utable to the equity holders of the Group. The Company’s funding risks and liquidity needs, primary objective of the Group’s capital man- with a view to continue as a going concern. agement is to maximize shareholder value Subsequently, funding options are evaluated while limiting the financial risk. The Board of on a continuous basis, including public or Directors’ policy is to maintain a strong capital private debt and equity financing in order to base in order to maintain investor, creditor ensure sufficient funding to continue ongo - Section 4 presents details of other disclosures and market confidence, and a continuous ing clinical trials and commercial launch relevant to the consolidated financial statements advancement of the Group’s intellectual prop- activities. Should the Company find itself of the Group, including Capital Management, erty, product pipeline, and business. unable to attain funding, the Company may Equity, Earnings per Share, Financial Risk, Related down-size or delay planned activities to The Company strengthened its cash posi- allow funds to last until December 31, 2021. Parties, Fees to Statutory Auditors, and Significant tion during 2020 by raising net proceeds of Management therefore considers it appro- Events after the Reporting Period. DKK 694.2 million from a directed issue and priate to prepare these financial statements private placement in February; and in Sep- on a going concern basis. tember by listing American Depositary Shares (ADSs) on the Nasdaq Global Select Market, whereby we raised net proceeds of DKK 477.9 million. In this section 4.1 Capital management 74 4.2 Equity 75 4.3 Loss per share 76 4.4 Financial risks 76 4.5 R emuneration of Board of Directors and Executive Management 7 7 4.6 Related parties 80 4.7 Fees to statutory auditors 81 4.8 Significant events after the reporting period 81 Orphazyme Annual Report 2020 Group Financial Statements 74SECTION 4 4.1 CAPITAL MANAGEMENT OTHER For the purpose of the Group’s capital man- As of December 31, 2020, the Group held agement, capital includes issued capital, share cash totaling DKK 726.9 million (2019: DKK premium and all other equity reserves attrib- 123.6 million). Management monitors the DISCL OSURES utable to the equity holders of the Group. The Company’s funding risks and liquidity needs, primary objective of the Group’s capital man- with a view to continue as a going concern. agement is to maximize shareholder value Subsequently, funding options are evaluated while limiting the financial risk. The Board of on a continuous basis, including public or Directors’ policy is to maintain a strong capital private debt and equity financing in order to base in order to maintain investor, creditor ensure sufficient funding to continue ongo - Section 4 presents details of other disclosures and market confidence, and a continuous ing clinical trials and commercial launch relevant to the consolidated financial statements advancement of the Group’s intellectual prop- activities. Should the Company find itself of the Group, including Capital Management, erty, product pipeline, and business. unable to attain funding, the Company may Equity, Earnings per Share, Financial Risk, Related down-size or delay planned activities to The Company strengthened its cash posi- allow funds to last until December 31, 2021. Parties, Fees to Statutory Auditors, and Significant tion during 2020 by raising net proceeds of Management therefore considers it appro- Events after the Reporting Period. DKK 694.2 million from a directed issue and priate to prepare these financial statements private placement in February; and in Sep- on a going concern basis. tember by listing American Depositary Shares (ADSs) on the Nasdaq Global Select Market, whereby we raised net proceeds of DKK 477.9 million. In this section 4.1 Capital management 74 4.2 Equity 75 4.3 Loss per share 76 4.4 Financial risks 76 4.5 R emuneration of Board of Directors and Executive Management 7 7 4.6 Related parties 80 4.7 Fees to statutory auditors 81 4.8 Significant events after the reporting period 81 Orphazyme Annual Report 2020 Group Financial Statements 74


4.2 EQUITY The transaction consisted of a directed issue In April 2020, the Company issued 5,378 The following table summarizes the Company’s share activity: and private placement of up to 3,961,264 new shares to board members following the Ordinary new shares of a nominal value of DKK 1 each exercise of fully vested RSUs under the 2019 shares (the “New Shares”) and private placement RSU program (see Note 2.5). December 31, 2017 19,928,184 of up to 3,071,673 existing shares of a nomi- nal value of DKK 1 each (the “Existing In July 2020, the Company issued 31,250 Issuance of bonus shares as part of license agreement (note 3.1) 11,380 Shares” and together with the New Shares, Matching Shares to participants in the 2019 December 31, 2018 19,939,564 the “Offer Shares”) at an offer price of DKK LTIP (see Note 2.5) 106 per Offer Share, as determined by the Issuance of bonus shares as part of license agreement (note 3.1) 26,060 Board of Directors of the Company through In September 2020, the Company listed Issuance of Matching Shares (Note 2.6) 19,175 a book-building process (the “Offering”). American Depositary Shares (ADSs) on the December 31, 2019 19,984,799 The New Shares will be issued without Nasdaq Global Select Market. In connection pre-emption rights for existing with this listing, we issued and sold Issuance of bonus shares as part of license agreement (note 3.1) 20,650 shareholders. 3,650,000 ordinary shares and 3,966,146 Issuance of Matching Shares (Note 2.6) 31,250 ADSs, each representing one ordinary share. Issuance of shares due to exercise of restricted share-units 11,921 The offering of Existing Shares was facili - Aggregate gross proceeds from the offering Issuance of shares related to directed issue and private placement, February 2020 7,032,937 tated by a share loan from Novo Holdings amounted to USD 87.8 million (DKK 534.5 Issuance of shares related to US listing, September 2020 7,616,146 A/S and Orpha Pooling B.V. (the “Lending million). Orphazyme incurred transaction December 31, 2020 34,697,703 Shareholders”) to the Company pursuant to costs in the amount of DKK 56.6 million in a stock lending and subscription agreement connection with the US listing, which were with an obligation for the Company to rede- accounted for as a deduction from equity. The Company has never declared or paid In January 2020, the Company issued liver new shares of an equivalent number as any cash dividends on its ordinary shares 20,650 (2019: 26,060) bonus shares to the Existing Shares borrowed by the Com- As a result of the above transactions, the and does not anticipate doing so in the KLSDC and UCL under the terms of the pany from each of the Lending Sharehold- total nominal share capital of the Company foreseeable future. The Company intends to license agreement discussed in Note 3.1. ers (the “Replacement Shares”), which were as of December 31, 2020 was DKK use all available financial resources as well issued without pre-emption rights for exist- 34,697,703, divided into 34,697,703 ordinary as revenue, if any, for purposes of the Com- In February 2020, the Company completed ing shareholders. The Lending Shareholders shares each with a nominal value of DKK 1. pany’s current and future business. an offering of 7,032,937 shares in a directed did not participate in the Offering and only issue and private placement and raised facilitated the loan of the Lending Shares In March 2019, the Company issued 19,175 gross proceeds of approximately DKK 745 for purposes of the Company’s offering of Matching Shares to participants in the 2017 million and net proceeds of approximately Existing Shares in the Offering. LTIP (see Note 2.5) DKK 694 million. Orphazyme Annual Report 2020 Group Financial Statements 754.2 EQUITY The transaction consisted of a directed issue In April 2020, the Company issued 5,378 The following table summarizes the Company’s share activity: and private placement of up to 3,961,264 new shares to board members following the Ordinary new shares of a nominal value of DKK 1 each exercise of fully vested RSUs under the 2019 shares (the “New Shares”) and private placement RSU program (see Note 2.5). December 31, 2017 19,928,184 of up to 3,071,673 existing shares of a nomi- nal value of DKK 1 each (the “Existing In July 2020, the Company issued 31,250 Issuance of bonus shares as part of license agreement (note 3.1) 11,380 Shares” and together with the New Shares, Matching Shares to participants in the 2019 December 31, 2018 19,939,564 the “Offer Shares”) at an offer price of DKK LTIP (see Note 2.5) 106 per Offer Share, as determined by the Issuance of bonus shares as part of license agreement (note 3.1) 26,060 Board of Directors of the Company through In September 2020, the Company listed Issuance of Matching Shares (Note 2.6) 19,175 a book-building process (the “Offering”). American Depositary Shares (ADSs) on the December 31, 2019 19,984,799 The New Shares will be issued without Nasdaq Global Select Market. In connection pre-emption rights for existing with this listing, we issued and sold Issuance of bonus shares as part of license agreement (note 3.1) 20,650 shareholders. 3,650,000 ordinary shares and 3,966,146 Issuance of Matching Shares (Note 2.6) 31,250 ADSs, each representing one ordinary share. Issuance of shares due to exercise of restricted share-units 11,921 The offering of Existing Shares was facili - Aggregate gross proceeds from the offering Issuance of shares related to directed issue and private placement, February 2020 7,032,937 tated by a share loan from Novo Holdings amounted to USD 87.8 million (DKK 534.5 Issuance of shares related to US listing, September 2020 7,616,146 A/S and Orpha Pooling B.V. (the “Lending million). Orphazyme incurred transaction December 31, 2020 34,697,703 Shareholders”) to the Company pursuant to costs in the amount of DKK 56.6 million in a stock lending and subscription agreement connection with the US listing, which were with an obligation for the Company to rede- accounted for as a deduction from equity. The Company has never declared or paid In January 2020, the Company issued liver new shares of an equivalent number as any cash dividends on its ordinary shares 20,650 (2019: 26,060) bonus shares to the Existing Shares borrowed by the Com- As a result of the above transactions, the and does not anticipate doing so in the KLSDC and UCL under the terms of the pany from each of the Lending Sharehold- total nominal share capital of the Company foreseeable future. The Company intends to license agreement discussed in Note 3.1. ers (the “Replacement Shares”), which were as of December 31, 2020 was DKK use all available financial resources as well issued without pre-emption rights for exist- 34,697,703, divided into 34,697,703 ordinary as revenue, if any, for purposes of the Com- In February 2020, the Company completed ing shareholders. The Lending Shareholders shares each with a nominal value of DKK 1. pany’s current and future business. an offering of 7,032,937 shares in a directed did not participate in the Offering and only issue and private placement and raised facilitated the loan of the Lending Shares In March 2019, the Company issued 19,175 gross proceeds of approximately DKK 745 for purposes of the Company’s offering of Matching Shares to participants in the 2017 million and net proceeds of approximately Existing Shares in the Offering. LTIP (see Note 2.5) DKK 694 million. Orphazyme Annual Report 2020 Group Financial Statements 75


4.3 LOSS PER SHARE 4.4 FINANCIAL RISKS Basic loss per share for the year is calcu- Shares discussed in Note 3.1 in the number The Group’s activities expose it to a number cross border transactions where the func- lated by dividing the net loss for the year by of weighted average shares outstanding for of financial risks whereby future events, tional currency of the respective group the weighted average number of ordinary the years ended December 31, 2020, 2019, which can be outside the control of the entity is not always used. Accordingly, shares outstanding during the year. The and 2018. This results in the comparative Group, could have a material effect on its future changes in the exchange rates of the diluted loss per share is calculated by divid- figures for 2019 and 2018 being updated financial position and results of operations. DKK against the EUR, the USD, the CHF ing the net loss for the year by the weighted accordingly. The known risks include foreign currency, and/or the GBP will expose the Group to average number of ordinary shares out- interest and credit risk and there could be currency gains or losses that will impact the standing during the period increased by the Basic and diluted loss per share for the other risks currently unknown to Manage- reported amounts of assets, liabilities, dilutive effect of the assumed issuance of years presented have been adjusted retro- ment. The Group has not historically hedged income and expenses and the impact could outstanding share-based awards. As a result spectively to include the 2019 Bonus Shares, its financial risks. be material. of the Group incurring losses for each of the the 2020 Bonus Shares and the 2021 Bonus years ended December 31, 2020, 2019 and Shares in the number of weighted average Liquidity Risk Interest Rate Risk 2018, the potential shares issuable related to shares outstanding for the years ended At December 31, 2020, the Group’s liquidity The Group’s interest rate risk is assessed to outstanding share-based awards have been December 31, 2020, 2019 and 2018. This risk was assessed to be high. Management be low. The Group has a borrowing on excluded from the calculation of diluted per results in the comparative figure for 2019 continuously assesses the Group’s capital which it incurs a fixed rate of interest (see share amounts, as the effect of such shares and 2018 being updated accordingly. structure in order to evaluate whether its Note 3.6). In addition, due to the current is anti-dilutive. liquidity reserves allow it to achieve its busi- interest level in Denmark, the Group incurs The following reflects the net loss attributa - ness objectives. At December 31, 2020, the negative interest on bank deposits. Basic and diluted loss per share for the ble to shareholders and share data used in available liquidity reserves were assessed to years presented have been adjusted retro- the basic and diluted earnings/(loss) per be sufficient to provide adequate funding to Credit Risk spectively to include the 2018 Bonus Shares, share computations for the years ended allow the Group to meet its planned operat- The Group’s credit risk is assessed to be low. the 2019 Bonus Shares and the 2020 Bonus December 31: ing activities, including increased levels of The Group’s credit risk is associated with research and development activities, in the cash held in banks. The Company does not normal course of business for the next trade financial assets for speculative pur - (DKK 000) 2020 2019 2018 twelve months. poses and invests with the objective of pre- serving capital. The Company’s cash is held Net loss for the year (DKK 000) (633,246) (337,497) (229,600) Foreign Currency Risk primarily at two banks in Denmark with Weighted-average shares outstanding 28,366,469 20,024,692 20,008,827 The Group’s foreign currency risk is Moody’s long-term credit ratings exceeding Loss per share (22.32) (16.85) (11.47) assessed to be high. The Group conducts of A1. Orphazyme Annual Report 2020 Group Financial Statements 764.3 LOSS PER SHARE 4.4 FINANCIAL RISKS Basic loss per share for the year is calcu- Shares discussed in Note 3.1 in the number The Group’s activities expose it to a number cross border transactions where the func- lated by dividing the net loss for the year by of weighted average shares outstanding for of financial risks whereby future events, tional currency of the respective group the weighted average number of ordinary the years ended December 31, 2020, 2019, which can be outside the control of the entity is not always used. Accordingly, shares outstanding during the year. The and 2018. This results in the comparative Group, could have a material effect on its future changes in the exchange rates of the diluted loss per share is calculated by divid- figures for 2019 and 2018 being updated financial position and results of operations. DKK against the EUR, the USD, the CHF ing the net loss for the year by the weighted accordingly. The known risks include foreign currency, and/or the GBP will expose the Group to average number of ordinary shares out- interest and credit risk and there could be currency gains or losses that will impact the standing during the period increased by the Basic and diluted loss per share for the other risks currently unknown to Manage- reported amounts of assets, liabilities, dilutive effect of the assumed issuance of years presented have been adjusted retro- ment. The Group has not historically hedged income and expenses and the impact could outstanding share-based awards. As a result spectively to include the 2019 Bonus Shares, its financial risks. be material. of the Group incurring losses for each of the the 2020 Bonus Shares and the 2021 Bonus years ended December 31, 2020, 2019 and Shares in the number of weighted average Liquidity Risk Interest Rate Risk 2018, the potential shares issuable related to shares outstanding for the years ended At December 31, 2020, the Group’s liquidity The Group’s interest rate risk is assessed to outstanding share-based awards have been December 31, 2020, 2019 and 2018. This risk was assessed to be high. Management be low. The Group has a borrowing on excluded from the calculation of diluted per results in the comparative figure for 2019 continuously assesses the Group’s capital which it incurs a fixed rate of interest (see share amounts, as the effect of such shares and 2018 being updated accordingly. structure in order to evaluate whether its Note 3.6). In addition, due to the current is anti-dilutive. liquidity reserves allow it to achieve its busi- interest level in Denmark, the Group incurs The following reflects the net loss attributa - ness objectives. At December 31, 2020, the negative interest on bank deposits. Basic and diluted loss per share for the ble to shareholders and share data used in available liquidity reserves were assessed to years presented have been adjusted retro- the basic and diluted earnings/(loss) per be sufficient to provide adequate funding to Credit Risk spectively to include the 2018 Bonus Shares, share computations for the years ended allow the Group to meet its planned operat- The Group’s credit risk is assessed to be low. the 2019 Bonus Shares and the 2020 Bonus December 31: ing activities, including increased levels of The Group’s credit risk is associated with research and development activities, in the cash held in banks. The Company does not normal course of business for the next trade financial assets for speculative pur - (DKK 000) 2020 2019 2018 twelve months. poses and invests with the objective of pre- serving capital. The Company’s cash is held Net loss for the year (DKK 000) (633,246) (337,497) (229,600) Foreign Currency Risk primarily at two banks in Denmark with Weighted-average shares outstanding 28,366,469 20,024,692 20,008,827 The Group’s foreign currency risk is Moody’s long-term credit ratings exceeding Loss per share (22.32) (16.85) (11.47) assessed to be high. The Group conducts of A1. Orphazyme Annual Report 2020 Group Financial Statements 76


4.4 FINANCIAL RISKS (CONTINUED)4.5 REMUNERATION OF BOARD OF DIRECTORS AND EXECUTIVE MANAGEMENT The Group has prepared a sensitivity analy- tions in the interest rate on its bank depos- Executive Management consists of the 2.5. As of December 31, 2020, 52,956 Per- sis in order to assess the potential impact its. Based on these analyses, if interest rates Company’s Chief Executive Officer and the formance Shares had vested as part of the on the Group’s net loss for possible fluctua - on our cash deposits would have fluctuated Chief Financial Officer, also the registered 2020 LTIP program. These awards will be tions in the EUR and USD exchange rates by +/- 1%, the impact on the Group’s net management of the Company. In July 2019, settled in January 2024 based on the devel - against the DKK and the impact for the pos- loss for the year ended December 31, 2020 Orphazyme announced that the Board of opment of the Company’s share price (Note sible fluctuations in the interest rate on bank would have been approximately DKK 36 Directors appointed Kim Stratton as the 2.5). deposits in Denmark and in the USA. The thousand (2019: DKK 8 thousand; 2018: DKK new Chief Executive Officer, succeeding As of December 31, 2020, the position of methods and assumptions used are consist- 20 thousand). Anders Hinsby on October 1, 2019. Chief Executive Officer was vacant. ent with prior year and consider increases and decreases in the Group’s three main The impact of currency fluctuations on the Ms. Stratton resigned from her position at The Executive Management is eligible to currencies, as well as reasonable fluctua - Group’s net loss is shown in the table below: Orphazyme on December 10, 2020. As part receive an annual performance-based cash of the separation agreement, Ms. Stratton bonus subject to certain predefined corpo - will continue to receive her monthly base rate and individual goals as determined by Effect Effect Effect salary during 2021 and on December 31, the Board of Directors on an annual basis. A Currency 2020 2019 2018 CURRENCY fluctuation TDKK TDKK TDKK 2021 she will receive severance pay equal to cash bonus received under the short-term one year’s base salary. Therefore as of incentive program may not exceed 100% of EUR +/- 2% 538 503 713 December 31, 2020, two times her base sal- the annual fixed salary of the participants. USD +/-10% 22,178 21 1,278 ary is additionally recognized as salary As part of the separation agreement, Ms. CHF +/-10% 611 - - expense. Subsequent to December 31, Stratton is entitled to the annual perfor- GBP +/-10% 199 461 218 2020, Ms. Stratton received 35,304 Match - mance-based cash bonus. The Executive ing Shares as part of the 2020 LTIP program Management is also eligible to receive an and will receive 58,000 ordinary shares as extraordinary bonus at the discretion of the part of the sign-on bonus described in Note Board of Directors. Orphazyme Annual Report 2020 Group Financial Statements 77 4.4 FINANCIAL RISKS (CONTINUED)4.5 REMUNERATION OF BOARD OF DIRECTORS AND EXECUTIVE MANAGEMENT The Group has prepared a sensitivity analy- tions in the interest rate on its bank depos- Executive Management consists of the 2.5. As of December 31, 2020, 52,956 Per- sis in order to assess the potential impact its. Based on these analyses, if interest rates Company’s Chief Executive Officer and the formance Shares had vested as part of the on the Group’s net loss for possible fluctua - on our cash deposits would have fluctuated Chief Financial Officer, also the registered 2020 LTIP program. These awards will be tions in the EUR and USD exchange rates by +/- 1%, the impact on the Group’s net management of the Company. In July 2019, settled in January 2024 based on the devel - against the DKK and the impact for the pos- loss for the year ended December 31, 2020 Orphazyme announced that the Board of opment of the Company’s share price (Note sible fluctuations in the interest rate on bank would have been approximately DKK 36 Directors appointed Kim Stratton as the 2.5). deposits in Denmark and in the USA. The thousand (2019: DKK 8 thousand; 2018: DKK new Chief Executive Officer, succeeding As of December 31, 2020, the position of methods and assumptions used are consist- 20 thousand). Anders Hinsby on October 1, 2019. Chief Executive Officer was vacant. ent with prior year and consider increases and decreases in the Group’s three main The impact of currency fluctuations on the Ms. Stratton resigned from her position at The Executive Management is eligible to currencies, as well as reasonable fluctua - Group’s net loss is shown in the table below: Orphazyme on December 10, 2020. As part receive an annual performance-based cash of the separation agreement, Ms. Stratton bonus subject to certain predefined corpo - will continue to receive her monthly base rate and individual goals as determined by Effect Effect Effect salary during 2021 and on December 31, the Board of Directors on an annual basis. A Currency 2020 2019 2018 CURRENCY fluctuation TDKK TDKK TDKK 2021 she will receive severance pay equal to cash bonus received under the short-term one year’s base salary. Therefore as of incentive program may not exceed 100% of EUR +/- 2% 538 503 713 December 31, 2020, two times her base sal- the annual fixed salary of the participants. USD +/-10% 22,178 21 1,278 ary is additionally recognized as salary As part of the separation agreement, Ms. CHF +/-10% 611 - - expense. Subsequent to December 31, Stratton is entitled to the annual perfor- GBP +/-10% 199 461 218 2020, Ms. Stratton received 35,304 Match - mance-based cash bonus. The Executive ing Shares as part of the 2020 LTIP program Management is also eligible to receive an and will receive 58,000 ordinary shares as extraordinary bonus at the discretion of the part of the sign-on bonus described in Note Board of Directors. Orphazyme Annual Report 2020 Group Financial Statements 77


4.5 REMUNERA TION OF BOARD OF DIRECTORS AND EXECUTIVE MANAGEMENT (CONTINUED) REMUNERATION TO INDIVIDUAL MEMBERS OF EXECUTIVE MANAGEMENT Remuneration paid to members of the Board Board remuneration is recognized as general of Directors is made up of board and com- and administrative expenses in the State- (DKK 000) 2020 2019 2018 mittee fees, a travel allowance, ad-hoc fees ment of Profit or Loss. The following table Anders Hinsby (former CEO) for additional services provided as described lists Board of Directors remuneration for the Salary - 2,424 1,917 in Note 4.6, and share-based compensation years ended December 31: Bonus - 1,038 723 related to the Restricted Share Units (RSUs) Share-based compensation - 294 676 as described in Note 2.5. Other employee benefits - 270 215 REMUNERATION TO INDIVIDUAL MEMBERS OF THE BOARD OF DIRECTORS Total - 4,026 3,531 (DKK 000) 2020 2019 2018 Kim Stratton Georges Gemayel (Chairman of the Board) (CEO through December 31, 2020) Board and committee fees 565 470 468 Salary* 11,001 962 - Ad hoc board fees 186 - - Bonus 3,500 1,025 - Travel allowance 27 64 47 Share-based compensation 7,359 - - Share-based compensation 161 28 - Other employee benefits 2,542 215 - Total 939 562 515 Total 24,402 2,202 - Bo Jesper Hansen (Deputy Chairman of the Board) Anders Vadsholt (Interim CEO and CFO) Board and committee fees 421 395 394 Salary 2,324 1,803 1,411 Ad hoc board fees 112 - - Bonus 2,491 1,250 450 Travel allowance 34 46 33 Share-based compensation 2,805 406 460 Share-based compensation 102 21 - Other employee benefits** 983 260 161 Total 669 462 427 Total 8,603 3,719 2,485 Martin Bonde Total remuneration to the Executive Management 33,005 9,947 6,016 Board and committee fees 276 259 258 Travel allowance - - - * Includes two times annual base salary as per separation agreement Share-based compensation 73 16 - ** Includes holiday allowance in the amount of DKK 0.7 million that is accounted for as a benefit to Mr. Vadsholt but will not Total 349 275 258 be paid out to him Martijn Kleijwegt Board and committee fees 304 285 284 Travel allowance 35 46 33 Share-based compensation 73 16 - Total 412 347 317 Orphazyme Annual Report 2020 Group Financial Statements 78 4.5 REMUNERA TION OF BOARD OF DIRECTORS AND EXECUTIVE MANAGEMENT (CONTINUED) REMUNERATION TO INDIVIDUAL MEMBERS OF EXECUTIVE MANAGEMENT Remuneration paid to members of the Board Board remuneration is recognized as general of Directors is made up of board and com- and administrative expenses in the State- (DKK 000) 2020 2019 2018 mittee fees, a travel allowance, ad-hoc fees ment of Profit or Loss. The following table Anders Hinsby (former CEO) for additional services provided as described lists Board of Directors remuneration for the Salary - 2,424 1,917 in Note 4.6, and share-based compensation years ended December 31: Bonus - 1,038 723 related to the Restricted Share Units (RSUs) Share-based compensation - 294 676 as described in Note 2.5. Other employee benefits - 270 215 REMUNERATION TO INDIVIDUAL MEMBERS OF THE BOARD OF DIRECTORS Total - 4,026 3,531 (DKK 000) 2020 2019 2018 Kim Stratton Georges Gemayel (Chairman of the Board) (CEO through December 31, 2020) Board and committee fees 565 470 468 Salary* 11,001 962 - Ad hoc board fees 186 - - Bonus 3,500 1,025 - Travel allowance 27 64 47 Share-based compensation 7,359 - - Share-based compensation 161 28 - Other employee benefits 2,542 215 - Total 939 562 515 Total 24,402 2,202 - Bo Jesper Hansen (Deputy Chairman of the Board) Anders Vadsholt (Interim CEO and CFO) Board and committee fees 421 395 394 Salary 2,324 1,803 1,411 Ad hoc board fees 112 - - Bonus 2,491 1,250 450 Travel allowance 34 46 33 Share-based compensation 2,805 406 460 Share-based compensation 102 21 - Other employee benefits** 983 260 161 Total 669 462 427 Total 8,603 3,719 2,485 Martin Bonde Total remuneration to the Executive Management 33,005 9,947 6,016 Board and committee fees 276 259 258 Travel allowance - - - * Includes two times annual base salary as per separation agreement Share-based compensation 73 16 - ** Includes holiday allowance in the amount of DKK 0.7 million that is accounted for as a benefit to Mr. Vadsholt but will not Total 349 275 258 be paid out to him Martijn Kleijwegt Board and committee fees 304 285 284 Travel allowance 35 46 33 Share-based compensation 73 16 - Total 412 347 317 Orphazyme Annual Report 2020 Group Financial Statements 78


4.5 REMUNERA TION OF BOARD OF DIRECTORS AND EXECUTIVE MANAGEMENT (CONTINUED) (DKK 000) 2020 2019 2018 Rémi Droller Board and committee fees 288 270 269 Travel allowance 25 46 33 Share-based compensation 73 16 - Total 386 332 302 Sten Verland Board and committee fees 327 309 307 Travel allowance 1 - - Share-based compensation 73 16 - Total 401 325 307 Anders Hedegaard Board and committee fees 288 270 269 Travel allowance 13 46 - Share-based compensation 73 16 - Total 374 332 269 Catherine Moukheibir Board and committee fees 355 336 335 Ad hoc boord fees 112 - - Travel allowance 23 46 33 Share-based compensation 73 16 - Total 563 398 368 Carrolee Barlow Board and committee fees 77 - - Travel allowance - - - Share-based compensation 145 - - Total 222 - - Total remuneration to the Board of Directors 4,315 3,033 2,763 Orphazyme Annual Report 2020 Group Financial Statements 79 4.5 REMUNERA TION OF BOARD OF DIRECTORS AND EXECUTIVE MANAGEMENT (CONTINUED) (DKK 000) 2020 2019 2018 Rémi Droller Board and committee fees 288 270 269 Travel allowance 25 46 33 Share-based compensation 73 16 - Total 386 332 302 Sten Verland Board and committee fees 327 309 307 Travel allowance 1 - - Share-based compensation 73 16 - Total 401 325 307 Anders Hedegaard Board and committee fees 288 270 269 Travel allowance 13 46 - Share-based compensation 73 16 - Total 374 332 269 Catherine Moukheibir Board and committee fees 355 336 335 Ad hoc boord fees 112 - - Travel allowance 23 46 33 Share-based compensation 73 16 - Total 563 398 368 Carrolee Barlow Board and committee fees 77 - - Travel allowance - - - Share-based compensation 145 - - Total 222 - - Total remuneration to the Board of Directors 4,315 3,033 2,763 Orphazyme Annual Report 2020 Group Financial Statements 79


4.6 RELATED PARTIES Orphazyme A/S, incorporated in Denmark, Shares were borrowed subject to an obli- As of December 31, 2020 and 2019, the Executive Management and members of the is the ultimate parent company of the gation for us to issue new ordinary shares Company did not have any amounts receiv- Board of Directors had the following share- Group, which wholly owns Orphazyme US, of an equivalent number as the Lending able from related parties and therefore holding in Orphazyme A/S for the years Inc and Orphazyme Switzerland GmbH. Shares placed in this private placement, or recorded no related impairment. The Com- ended December 31: These three entities are considered related the Listing Shares, and for Danske Bank pany has not granted any loans, guarantees, parties. Orphazyme A/S is not ultimately A/S to use the proceeds from the sale of or other commitments to or on behalf of controlled by any of its investors. Major Lending Shares in the private placement any of the members of the Board of Direc- investors owning more than 10% of the to subscribe for the Listing Shares and tors or Executive Management. For amounts Company are considered related parties. deliver the Listing Shares to the Orpha payable to the Board of Directors, please Pooling B.V. and Novo Holdings A/S. The see Note 3.6. Number of Number of Number of For the years ended December 31, 2020, Listing Shares were issued and delivered, shares owned shares owned shares owned 2019, and 2018 the following related party as agreed, on February 11, 2020 2020 2019 2018 transactions were identified: • A d-hoc fees paid to certain members of Kim Stratton 50,600 - - • R emuneration to Executive Management the Board of Directors in connection for Anders Vadsholt 143,156 132,595 127,806 (Note 4.5) their support during the US listing pro- Anders Hinsby (Former CEO) - 209,596 204,596 • R emuneration to the Board of Directors cess. Total ad-hoc fees amounted to EUR (Note 4.5) 55,000 (DKK 0.4 million). • P articipation of Executive Management • A d-hoc fees paid to the Chairman of the in the 2017 LTIP, the 2019 LTIP and the Board in connection with a consultancy December 31, December 31, December 2020 2019 31, 2018 2020 LTIP (Note 4.5) agreement for support during the interim • P articipation of the Board members in period until a new CEO is hired. As part Number of MEMBERS OF THE the RSU, program (Note 4.5) of this agreement, Orphazyme has paid Number of Number of Unexer Number of Number of Number of BOARD OF DIREC- shares Unvested -cised shares Unvested shares • Shar e lending arrangement in connection the Chairman of the Board an up-front TORS: owned RSUs 2020 RSUs 2019 owned RSUs 2019 owned with the directed issue and private place- payment of EUR 88,605 (DKK 0.7 mil - ment in February 2020 (Note 4.2). We lion) in December 2020. An additional Georges Gemayel 100,809 4,351 - 97,358 3,451 87,758 entered into a Stock Lending and Sub- payment of 100% of his aggregate annual Bo Jesper Hansen 143,234 2,689 - 100,545 2,689 79,945 scription Agreement on February 6, 2020 board and committee fees is payable in Martijn Kleijwegt - 1,927 1,927 - 1,927 - with Danske Bank A/S, Orpha Pooling B.V. June 2021. In addition to cash compen- Martin Bonde 47,936 1,927 - 46,009 1,927 46,009 and Novo Holdings A/S, pursuant to sation, the Chairman has been granted Rémi Droller - 1,927 1,927 - 1,927 - which we borrowed 3,071,673 existing 4.351 RSUs under the 2020-2 RSU pro- Sten Verland - 1,927 - - 1,927 - ordinary shares (the Lending Shares) from gram (see Note 3.5). The full remunera- Anders Hedegaard 15,677 1,927 - 13,750 1,927 6,250 Orpha Pooling B.V. and Novo Holdings tion to the Chairman of the Board under Catherine Moukheibir 7.980 1,927 1,927 7,980 1,927 7,980 A/S, major investors at the time, through this consultancy agreement is subject to Carrolee Barlow 4,391 - - - - - Danske Bank A/S as settlement agent in the approval of the shareholders at the order for us to place such ordinary shares Company’s annual general meeting in in a private placement. The Lending March 2021. Orphazyme Annual Report 2020 Group Financial Statements 804.6 RELATED PARTIES Orphazyme A/S, incorporated in Denmark, Shares were borrowed subject to an obli- As of December 31, 2020 and 2019, the Executive Management and members of the is the ultimate parent company of the gation for us to issue new ordinary shares Company did not have any amounts receiv- Board of Directors had the following share- Group, which wholly owns Orphazyme US, of an equivalent number as the Lending able from related parties and therefore holding in Orphazyme A/S for the years Inc and Orphazyme Switzerland GmbH. Shares placed in this private placement, or recorded no related impairment. The Com- ended December 31: These three entities are considered related the Listing Shares, and for Danske Bank pany has not granted any loans, guarantees, parties. Orphazyme A/S is not ultimately A/S to use the proceeds from the sale of or other commitments to or on behalf of controlled by any of its investors. Major Lending Shares in the private placement any of the members of the Board of Direc- investors owning more than 10% of the to subscribe for the Listing Shares and tors or Executive Management. For amounts Company are considered related parties. deliver the Listing Shares to the Orpha payable to the Board of Directors, please Pooling B.V. and Novo Holdings A/S. The see Note 3.6. Number of Number of Number of For the years ended December 31, 2020, Listing Shares were issued and delivered, shares owned shares owned shares owned 2019, and 2018 the following related party as agreed, on February 11, 2020 2020 2019 2018 transactions were identified: • A d-hoc fees paid to certain members of Kim Stratton 50,600 - - • R emuneration to Executive Management the Board of Directors in connection for Anders Vadsholt 143,156 132,595 127,806 (Note 4.5) their support during the US listing pro- Anders Hinsby (Former CEO) - 209,596 204,596 • R emuneration to the Board of Directors cess. Total ad-hoc fees amounted to EUR (Note 4.5) 55,000 (DKK 0.4 million). • P articipation of Executive Management • A d-hoc fees paid to the Chairman of the in the 2017 LTIP, the 2019 LTIP and the Board in connection with a consultancy December 31, December 31, December 2020 2019 31, 2018 2020 LTIP (Note 4.5) agreement for support during the interim • P articipation of the Board members in period until a new CEO is hired. As part Number of MEMBERS OF THE the RSU, program (Note 4.5) of this agreement, Orphazyme has paid Number of Number of Unexer Number of Number of Number of BOARD OF DIREC- shares Unvested -cised shares Unvested shares • Shar e lending arrangement in connection the Chairman of the Board an up-front TORS: owned RSUs 2020 RSUs 2019 owned RSUs 2019 owned with the directed issue and private place- payment of EUR 88,605 (DKK 0.7 mil - ment in February 2020 (Note 4.2). We lion) in December 2020. An additional Georges Gemayel 100,809 4,351 - 97,358 3,451 87,758 entered into a Stock Lending and Sub- payment of 100% of his aggregate annual Bo Jesper Hansen 143,234 2,689 - 100,545 2,689 79,945 scription Agreement on February 6, 2020 board and committee fees is payable in Martijn Kleijwegt - 1,927 1,927 - 1,927 - with Danske Bank A/S, Orpha Pooling B.V. June 2021. In addition to cash compen- Martin Bonde 47,936 1,927 - 46,009 1,927 46,009 and Novo Holdings A/S, pursuant to sation, the Chairman has been granted Rémi Droller - 1,927 1,927 - 1,927 - which we borrowed 3,071,673 existing 4.351 RSUs under the 2020-2 RSU pro- Sten Verland - 1,927 - - 1,927 - ordinary shares (the Lending Shares) from gram (see Note 3.5). The full remunera- Anders Hedegaard 15,677 1,927 - 13,750 1,927 6,250 Orpha Pooling B.V. and Novo Holdings tion to the Chairman of the Board under Catherine Moukheibir 7.980 1,927 1,927 7,980 1,927 7,980 A/S, major investors at the time, through this consultancy agreement is subject to Carrolee Barlow 4,391 - - - - - Danske Bank A/S as settlement agent in the approval of the shareholders at the order for us to place such ordinary shares Company’s annual general meeting in in a private placement. The Lending March 2021. Orphazyme Annual Report 2020 Group Financial Statements 80


4.7 FEES TO STATUTORY AUDITORS 4.8 SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD The following table presents the fees to our ment of Profit or Loss for the years ended In March 2021, Christophe Bourdon was in shares of the Company (“Bonus Shares”) independent statutory auditors, EY God- December 31. This note has been prepared appointed Chief Executive Officer, effective each January and is based on incurred costs kendt Revisionspartnerselskab (formerly in accordance with the requirements in the April 1, 2021. reported by KLSDC and UCL for the previ- Ernst & Young P/S), recognized in general Danish Financial Statements Act. ous year. As at December 31, 2020 the and administrative expenses in the State- In January 2021, the Matching Shares part of aggregate costs incurred by KLSDC and the 2020 LTIP program fully vested. As a UCL amounted to USD 0.5 million (DKK 3.2 result, 170,131 ordinary shares were issued to million) representing a total of 41,109 Bonus (TDKK) 2020 2019 2018 Executive Management and other employ- Shares (“2020 Bonus Shares”), may be Audit services 2,416 2,244 320 ees of Orphazyme against receipt of the issued to KLSDC and UCL in Q1-2021 based Audit-related services 803 882 156 nominal value of DKK 1 per ordinary share. on the average 30-day closing price of Orp- Other assistance 3,795 - 50 In addition, subsequent to year-end 58,000 hazyme’s shares. As an alternative to the ordinary shares were issued to our former share issuance, the cash equivalent of the Total fees to statutory auditors 7,014 3,126 526 CEO, Kim Stratton (see Note 4.5). value of the Bonus Shares may be paid instead. As elected by the respective par- Audit services Other assistance As described in Note 3.1, as part of the ties, KLSDC will receive 22,553 shares and Audit services consist of fees billed for pro- Other assistance consists of services pro- license agreement with KLSDC and UCL, UCL will receive an amount of USD 267,076 fessional services rendered by EY for the vided by EY for other permitted services, consideration to KLSDC and UCL is payable (DKK 1,636,869). audit of our annual consolidated financial including fees for work performed by EY in statements or services that are normally connection with the U.S. listing in Septem- provided by the accountant in connection ber 2020. with statutory and regulatory filings or engagements for those fiscal years. Pre-approval policies The Audit Committee assesses and pre-ap- Audit-Related services proves all services provided by the statutory Audit-related services consist of assurance auditors. The pre-approval includes the type and related services performed by EY that of service and a fee budget. are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit services”. Orphazyme Annual Report 2020 Group Financial Statements 814.7 FEES TO STATUTORY AUDITORS 4.8 SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD The following table presents the fees to our ment of Profit or Loss for the years ended In March 2021, Christophe Bourdon was in shares of the Company (“Bonus Shares”) independent statutory auditors, EY God- December 31. This note has been prepared appointed Chief Executive Officer, effective each January and is based on incurred costs kendt Revisionspartnerselskab (formerly in accordance with the requirements in the April 1, 2021. reported by KLSDC and UCL for the previ- Ernst & Young P/S), recognized in general Danish Financial Statements Act. ous year. As at December 31, 2020 the and administrative expenses in the State- In January 2021, the Matching Shares part of aggregate costs incurred by KLSDC and the 2020 LTIP program fully vested. As a UCL amounted to USD 0.5 million (DKK 3.2 result, 170,131 ordinary shares were issued to million) representing a total of 41,109 Bonus (TDKK) 2020 2019 2018 Executive Management and other employ- Shares (“2020 Bonus Shares”), may be Audit services 2,416 2,244 320 ees of Orphazyme against receipt of the issued to KLSDC and UCL in Q1-2021 based Audit-related services 803 882 156 nominal value of DKK 1 per ordinary share. on the average 30-day closing price of Orp- Other assistance 3,795 - 50 In addition, subsequent to year-end 58,000 hazyme’s shares. As an alternative to the ordinary shares were issued to our former share issuance, the cash equivalent of the Total fees to statutory auditors 7,014 3,126 526 CEO, Kim Stratton (see Note 4.5). value of the Bonus Shares may be paid instead. As elected by the respective par- Audit services Other assistance As described in Note 3.1, as part of the ties, KLSDC will receive 22,553 shares and Audit services consist of fees billed for pro- Other assistance consists of services pro- license agreement with KLSDC and UCL, UCL will receive an amount of USD 267,076 fessional services rendered by EY for the vided by EY for other permitted services, consideration to KLSDC and UCL is payable (DKK 1,636,869). audit of our annual consolidated financial including fees for work performed by EY in statements or services that are normally connection with the U.S. listing in Septem- provided by the accountant in connection ber 2020. with statutory and regulatory filings or engagements for those fiscal years. Pre-approval policies The Audit Committee assesses and pre-ap- Audit-Related services proves all services provided by the statutory Audit-related services consist of assurance auditors. The pre-approval includes the type and related services performed by EY that of service and a fee budget. are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit services”. Orphazyme Annual Report 2020 Group Financial Statements 81


2020 Parent Company Financial Statements2020 Parent Company Financial Statements


STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME PARENT COMPANY FOR THE YEARS ENDED DECEMBER 31 (DKK 000) Note 2020 2019 Research and development expenses 2.1 (362,413) (285,413) General and administrative expenses 2.2 (258,933) (49,682) Operating expenses (621,346) (335,095) Financial income 2.4 2,427 316 Financial expenses 2.4 (28,985) (7,359) Net loss before tax (647,905) (342,138) Income tax benefit 2.5 5,500 5,500 Net loss for the year (642,405) (336,638) Items that will be reclassified subsequently to the Statement of Profit or Loss: Exchange difference from translation of foreign operations (54) - Total comprehensive income (642,459) (336,638) Orphazyme Annual Report 2020 Parent Company Financial Statements 83STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME PARENT COMPANY FOR THE YEARS ENDED DECEMBER 31 (DKK 000) Note 2020 2019 Research and development expenses 2.1 (362,413) (285,413) General and administrative expenses 2.2 (258,933) (49,682) Operating expenses (621,346) (335,095) Financial income 2.4 2,427 316 Financial expenses 2.4 (28,985) (7,359) Net loss before tax (647,905) (342,138) Income tax benefit 2.5 5,500 5,500 Net loss for the year (642,405) (336,638) Items that will be reclassified subsequently to the Statement of Profit or Loss: Exchange difference from translation of foreign operations (54) - Total comprehensive income (642,459) (336,638) Orphazyme Annual Report 2020 Parent Company Financial Statements 83


STATEMENTS OF FINANCIAL POSITION PARENT COMPANY, AS OF DECEMBER 31 ASSETS (DKK 000) Note 2020 2019 EQUITY AND LIABILITIES (DKK 000) Note 2020 2019 Non-current assets Share capital 34,698 19,984 Right-of-use assets 2.7 12,862 13,903 Share premium 2,082,255 924,021 Intangible assets 2.6 10,681 10,539 Other reserves 5,674 7,822 Property, plant, and equipment 2.8 3,707 3,685 Accumulated deficit (1,511,221) (898,159) Investment in subsidiaries 2.9 139 - Total shareholders’ equity 611,406 53,668 Prepayments and deposits 2.10 1,666 1,652 Corporation tax receivable 2.5 2,750 2,750 Non-current liabilities Total non-currents assets 31,805 32,529 Borrowings 2.11 23,830 51,611 Lease liabilities 2.7 8,071 9,813 Current assets Other non-current liabilities* 1,634 378 Corporation tax receivable 2.5 5,500 5,500 Total non-current liabilities 33,535 61,802 Prepayments and other receivables 2.10 262,173 18,957 Cash 2.12 487,322 123,250 Current liabilities Total current assets 754,995 147,707 Current borrowings 2.11 33,349 12,808 TOTAL ASSETS 786,800 180,236 Lease liabilities 2.7 3,276 2,876 Trade payables and accruals 2.11 49,074 31,173 Other liabilities 2.11 56,160 17,909 Total current liabilities 141,859 64,766 Total liabilities 175,394 126,568 TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 786,800 180,236 Orphazyme Annual Report 2020 Parent Company Financial Statements 84STATEMENTS OF FINANCIAL POSITION PARENT COMPANY, AS OF DECEMBER 31 ASSETS (DKK 000) Note 2020 2019 EQUITY AND LIABILITIES (DKK 000) Note 2020 2019 Non-current assets Share capital 34,698 19,984 Right-of-use assets 2.7 12,862 13,903 Share premium 2,082,255 924,021 Intangible assets 2.6 10,681 10,539 Other reserves 5,674 7,822 Property, plant, and equipment 2.8 3,707 3,685 Accumulated deficit (1,511,221) (898,159) Investment in subsidiaries 2.9 139 - Total shareholders’ equity 611,406 53,668 Prepayments and deposits 2.10 1,666 1,652 Corporation tax receivable 2.5 2,750 2,750 Non-current liabilities Total non-currents assets 31,805 32,529 Borrowings 2.11 23,830 51,611 Lease liabilities 2.7 8,071 9,813 Current assets Other non-current liabilities* 1,634 378 Corporation tax receivable 2.5 5,500 5,500 Total non-current liabilities 33,535 61,802 Prepayments and other receivables 2.10 262,173 18,957 Cash 2.12 487,322 123,250 Current liabilities Total current assets 754,995 147,707 Current borrowings 2.11 33,349 12,808 TOTAL ASSETS 786,800 180,236 Lease liabilities 2.7 3,276 2,876 Trade payables and accruals 2.11 49,074 31,173 Other liabilities 2.11 56,160 17,909 Total current liabilities 141,859 64,766 Total liabilities 175,394 126,568 TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 786,800 180,236 Orphazyme Annual Report 2020 Parent Company Financial Statements 84


STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY PARENT COMPANY Share-based Foreign compensation currency - acquisition Share Share translation of intangible Accumulated (DKK 000) Note capital premium reserve assets deficit Total Balance as of December 31, 2018 19,939 924,021 (51) 9,070 (564,823) 388,156 Net loss for the period - - - - (336,638) (336,638) Other comprehensive loss for the period - - - - - - Total other comprehensive loss - - - - - (336,638) Transactions with owners: Issuance of Bonus Shares* 26 - - (1,197) 1,171 - Issuance of Matching Shares, net of costs* 19 - - - - 19 Share-based compensation expense* - - - - 2,131 2,131 December 31, 2019 19,984 924,021 (51) 7,873 (898,159) 53,668 Net loss for the period - - - - (642,405) (642,405) Other comprehensive loss for the period - - (54) - - (54) Total other comprehensive loss - - - - - (642,459) Transactions with owners*: Issuance of Bonus Shares to KLSDC and UCL 21 - - (2,094) 2,073 - Issuance of Shares due to exercise of RSUs 13 717 - - - 730 Issuance of LTIP Matching Shares 31 - - - - 31 Issuance of new shares in private placement 7,033 738,458 - - - 745,491 Transaction costs in connection with private placement - (51,243) - - - (51,243) Issuance of new shares in U.S. listing 7,616 526,918 - - - 534,534 Transaction costs in connection with U.S. listing - (56,616) - - - (56,616) Share-based payments costs for the period - - - - 27,270 27,270 December 31, 2020 34,698 2,082,255 (105) 5,779 (1,511,221) 611,406 *Please refer to respective notes in the Consolidated Financial Statements of the Group Orphazyme Annual Report 2020 Parent Company Financial Statements 85STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY PARENT COMPANY Share-based Foreign compensation currency - acquisition Share Share translation of intangible Accumulated (DKK 000) Note capital premium reserve assets deficit Total Balance as of December 31, 2018 19,939 924,021 (51) 9,070 (564,823) 388,156 Net loss for the period - - - - (336,638) (336,638) Other comprehensive loss for the period - - - - - - Total other comprehensive loss - - - - - (336,638) Transactions with owners: Issuance of Bonus Shares* 26 - - (1,197) 1,171 - Issuance of Matching Shares, net of costs* 19 - - - - 19 Share-based compensation expense* - - - - 2,131 2,131 December 31, 2019 19,984 924,021 (51) 7,873 (898,159) 53,668 Net loss for the period - - - - (642,405) (642,405) Other comprehensive loss for the period - - (54) - - (54) Total other comprehensive loss - - - - - (642,459) Transactions with owners*: Issuance of Bonus Shares to KLSDC and UCL 21 - - (2,094) 2,073 - Issuance of Shares due to exercise of RSUs 13 717 - - - 730 Issuance of LTIP Matching Shares 31 - - - - 31 Issuance of new shares in private placement 7,033 738,458 - - - 745,491 Transaction costs in connection with private placement - (51,243) - - - (51,243) Issuance of new shares in U.S. listing 7,616 526,918 - - - 534,534 Transaction costs in connection with U.S. listing - (56,616) - - - (56,616) Share-based payments costs for the period - - - - 27,270 27,270 December 31, 2020 34,698 2,082,255 (105) 5,779 (1,511,221) 611,406 *Please refer to respective notes in the Consolidated Financial Statements of the Group Orphazyme Annual Report 2020 Parent Company Financial Statements 85


STATEMENTS OF CASH FLOWS PARENT COMPANY, FOR THE YEARS ENDED DECEMBER 31 (DKK 000) Note 2020 2019 Net loss (642,405) (336,638) Adjustment for non-cash items: Share-based compensation expenses 2.3 20,823 2,550 Depreciation and amortization 2.6, 2.7, 2.8 4,742 5,010 Financial income 2.4 (2,427) (316) Financial expenses 2.4 28,985 7,359 Income tax benefit, net 2.5 (5,500) (5,500) Change in working capital: Change in prepayments, deposits, and other receivables 2.10 (32,552) 5,003 Change in trade payables, accruals, and other liabilities 2.11 49,502 (2,854) Change in intercompany payables 2.10 (211,878) (825) Change in intercompany receivables 7,907 - Exchange rate adjustments on intercompany balances (4,044) - Interest paid (10,639) (5,181) Interest received 28 388 Income taxes paid - - Income taxes received 5,500 5,500 Cash flow from operating activities (791,957) 707 Investment in intangble assets 2.6 (896) (508) Investment in property, plant, and equipment 2.8 (1,259) (2,777) Proceeds from sale of property, plant, and equipment - - Cash flow from investing activities (3,86) (3,285) Proceeds from issue of shares and exercise of RSUs 1,280,786 19 Transaction costs (107,859) - Proceeds from borrowings - 62,758 Repayment of borrowings (10,535) - Repayment of leasing liabilities 2.7 (2,913) (3,838) Cash flow from financing activities 1,159,478 58,939 Changes in cash and cash equivalents 365,366 56,361 Cash and cash equivalents at the beginning of the period 123,250 393,123 Exchange rate adjustments on cash and cash equivalents (1,294) (23) Cash and cash equivalents at the end of the period 487,322 123,250 Orphazyme Annual Report 2020 Parent Company Financial Statements 86STATEMENTS OF CASH FLOWS PARENT COMPANY, FOR THE YEARS ENDED DECEMBER 31 (DKK 000) Note 2020 2019 Net loss (642,405) (336,638) Adjustment for non-cash items: Share-based compensation expenses 2.3 20,823 2,550 Depreciation and amortization 2.6, 2.7, 2.8 4,742 5,010 Financial income 2.4 (2,427) (316) Financial expenses 2.4 28,985 7,359 Income tax benefit, net 2.5 (5,500) (5,500) Change in working capital: Change in prepayments, deposits, and other receivables 2.10 (32,552) 5,003 Change in trade payables, accruals, and other liabilities 2.11 49,502 (2,854) Change in intercompany payables 2.10 (211,878) (825) Change in intercompany receivables 7,907 - Exchange rate adjustments on intercompany balances (4,044) - Interest paid (10,639) (5,181) Interest received 28 388 Income taxes paid - - Income taxes received 5,500 5,500 Cash flow from operating activities (791,957) 707 Investment in intangble assets 2.6 (896) (508) Investment in property, plant, and equipment 2.8 (1,259) (2,777) Proceeds from sale of property, plant, and equipment - - Cash flow from investing activities (3,86) (3,285) Proceeds from issue of shares and exercise of RSUs 1,280,786 19 Transaction costs (107,859) - Proceeds from borrowings - 62,758 Repayment of borrowings (10,535) - Repayment of leasing liabilities 2.7 (2,913) (3,838) Cash flow from financing activities 1,159,478 58,939 Changes in cash and cash equivalents 365,366 56,361 Cash and cash equivalents at the beginning of the period 123,250 393,123 Exchange rate adjustments on cash and cash equivalents (1,294) (23) Cash and cash equivalents at the end of the period 487,322 123,250 Orphazyme Annual Report 2020 Parent Company Financial Statements 86


SECTION 1 1.1 CORPORATE 1.2 SIGNIFICANT INFORMATIONA CCOUNTING POLICIES APPLICABLE TO THE P ARENT COMPANY BASIS OF In April 2018, a wholly-owned subsidiary, The Parent Company applies the same PREPARATION Orphazyme U.S., Inc., was incorporated in accounting policies as disclosed in the Delaware, USA and in March 2020, a whol- Group’s consolidated financial statements. ly-owned subsidiary, Orphazyme Schweiz Therefore, only accounting policies specific GmbH, was incorporated in Zug, Switzer- to the Parent Company or that differ from land (together with Orphazyme A/S, “Orp- the accounting policies applied by the hazyme” or “the Group”). By establishing Group are disclosed in these notes to the The financial statements of Orphazyme A/S (the local subsidiaries, the Company aims to parent statements. If an accounting policy is “Parent Company”) have been prepared in accord- directly support the U.S. and European mar- not specifically mentioned, the Group ance with International Financial Reporting Stand- kets and establish closer relationships with accounting policy is applied. the medical, patient, and financial communi - ards, or IFRS, as adopted by the EU and additional ties as Orphazyme expands its development A description of Management’s key disclosure requirements under the Danish Financial programs and global reach. accounting estimates and judgements as Statements Act. well as new IFRS standards are disclosed in the Group financial statements and also The Parent Company financial statements of Orpha - apply to the Parent Company. zyme A/S for the year ended December 31, 2020 The Parent Company financial statements were approved by the Board of Directors on March 2, are presented in Danish Kroner, or DKK, 2021 and will be submitted to the shareholders of which is both the functional and presenta- Orphazyme A/S for approval at the Annual General tion currency of the Parent Company. Meeting to be held on March 25, 2021. Where indicated, amounts are rounded to the nearest thousand, or TDKK. In this section 1.1 Corporate information 87 1.2 Significant accounting policies applicable to the parent company 87 Orphazyme Annual Report 2020 Parent Company Financial Statements 87 SECTION 1 1.1 CORPORATE 1.2 SIGNIFICANT INFORMATIONA CCOUNTING POLICIES APPLICABLE TO THE P ARENT COMPANY BASIS OF In April 2018, a wholly-owned subsidiary, The Parent Company applies the same PREPARATION Orphazyme U.S., Inc., was incorporated in accounting policies as disclosed in the Delaware, USA and in March 2020, a whol- Group’s consolidated financial statements. ly-owned subsidiary, Orphazyme Schweiz Therefore, only accounting policies specific GmbH, was incorporated in Zug, Switzer- to the Parent Company or that differ from land (together with Orphazyme A/S, “Orp- the accounting policies applied by the hazyme” or “the Group”). By establishing Group are disclosed in these notes to the The financial statements of Orphazyme A/S (the local subsidiaries, the Company aims to parent statements. If an accounting policy is “Parent Company”) have been prepared in accord- directly support the U.S. and European mar- not specifically mentioned, the Group ance with International Financial Reporting Stand- kets and establish closer relationships with accounting policy is applied. the medical, patient, and financial communi - ards, or IFRS, as adopted by the EU and additional ties as Orphazyme expands its development A description of Management’s key disclosure requirements under the Danish Financial programs and global reach. accounting estimates and judgements as Statements Act. well as new IFRS standards are disclosed in the Group financial statements and also The Parent Company financial statements of Orpha - apply to the Parent Company. zyme A/S for the year ended December 31, 2020 The Parent Company financial statements were approved by the Board of Directors on March 2, are presented in Danish Kroner, or DKK, 2021 and will be submitted to the shareholders of which is both the functional and presenta- Orphazyme A/S for approval at the Annual General tion currency of the Parent Company. Meeting to be held on March 25, 2021. Where indicated, amounts are rounded to the nearest thousand, or TDKK. In this section 1.1 Corporate information 87 1.2 Significant accounting policies applicable to the parent company 87 Orphazyme Annual Report 2020 Parent Company Financial Statements 87


SECTION 2 2.1 RESEARCH AND DEVELOPMENT EXPENSES (DKK 000) 2020 2019 External costs 256,445 214,766 NOTES Intercompany expenses 8,752 5,510 Employee costs (Note 2.3) 93,261 62,034 Depreciation and amortization (Note 3.1, 3.2, 3.3) 3,955 3,103 Total 362,413 285,413 2.2 GENERAL AND ADMINISTRATIVE EXPENSES The notes applicable to the financial statements of the Parent Company are the same as those (DKK 000) 2020 2019 presented in the Group Consolidated Financial External costs 54,251 17,860 Statements, except for those notes presented in Intercompany expenses 139,582 9,757 this Section 2. Employee costs (Note 2.3) 64,313 21,366 Depreciation and amortization (Note 3.1, 3.2, 3.3) 787 699 Total 258,933 49,682 2.3 EMPLOYEE COSTS EMPLOYEE COSTS (DKK 000) 2020 2019 Salaries 97,444 63,075 Cash bonus 21,636 7,991 In this section Share-based compensation costs 19,976 2,405 Pension 8,914 5,515 2.1 Research and development expenses 88 Other social security contributions 2,020 532 2.2 General and administrative expenses 88 Other staff costs 3,267 849 2.3 Employee costs 88 Total 153,257 80,367 2.4 Financial income and financial expenses 89 Board remuneration 3,470 3,033 2.5 Income taxes 89 Board share-based compensation 847 - 2.6 Intangible assets 90 Total employee costs 157,574 83,400 2.7 Leases 90 2.8 Property, plant and equipment 91 Recognized as follows in the Statement of Profit or Loss: 2.9 Investment in group companies 92 Research and development expenses 93,261 62,034 2.10 Pr epayments, deposits, and other receivables 92 General and administrative expenses 64,313 21,366 2.11 Financial assets and liabilities 93 Total 157,574 83,400 2.12 Cash 93 2.13 Related party disclosures 93 Average number of full-time employees 94 74 Year-end number of full-time employees 102 83 Orphazyme Annual Report 2020 Parent Company Financial Statements 88SECTION 2 2.1 RESEARCH AND DEVELOPMENT EXPENSES (DKK 000) 2020 2019 External costs 256,445 214,766 NOTES Intercompany expenses 8,752 5,510 Employee costs (Note 2.3) 93,261 62,034 Depreciation and amortization (Note 3.1, 3.2, 3.3) 3,955 3,103 Total 362,413 285,413 2.2 GENERAL AND ADMINISTRATIVE EXPENSES The notes applicable to the financial statements of the Parent Company are the same as those (DKK 000) 2020 2019 presented in the Group Consolidated Financial External costs 54,251 17,860 Statements, except for those notes presented in Intercompany expenses 139,582 9,757 this Section 2. Employee costs (Note 2.3) 64,313 21,366 Depreciation and amortization (Note 3.1, 3.2, 3.3) 787 699 Total 258,933 49,682 2.3 EMPLOYEE COSTS EMPLOYEE COSTS (DKK 000) 2020 2019 Salaries 97,444 63,075 Cash bonus 21,636 7,991 In this section Share-based compensation costs 19,976 2,405 Pension 8,914 5,515 2.1 Research and development expenses 88 Other social security contributions 2,020 532 2.2 General and administrative expenses 88 Other staff costs 3,267 849 2.3 Employee costs 88 Total 153,257 80,367 2.4 Financial income and financial expenses 89 Board remuneration 3,470 3,033 2.5 Income taxes 89 Board share-based compensation 847 - 2.6 Intangible assets 90 Total employee costs 157,574 83,400 2.7 Leases 90 2.8 Property, plant and equipment 91 Recognized as follows in the Statement of Profit or Loss: 2.9 Investment in group companies 92 Research and development expenses 93,261 62,034 2.10 Pr epayments, deposits, and other receivables 92 General and administrative expenses 64,313 21,366 2.11 Financial assets and liabilities 93 Total 157,574 83,400 2.12 Cash 93 2.13 Related party disclosures 93 Average number of full-time employees 94 74 Year-end number of full-time employees 102 83 Orphazyme Annual Report 2020 Parent Company Financial Statements 88


2.4 FINANCIAL INCOME AND FINANCIAL EXPENSES 2.5 INCOME TAXES (DKK 000) 2020 2019 The following table presents the total income tax benefit for the years ended Interest income on cash balances 28 316 December 31, 2020 and 2019: Foreign currency exchange gains 1,649 - (DKK 000) 2020 2019 Gain on embedded call option (Note 3.6) 750 - Total financial income 2,427 316 Current tax benefit on net loss 142,539 75,270 Adjustments prior years (1,065) - Interest expense on Loan Agreement (Note 3.6) 9,921 3,239 Tax credit research and development expenses 5,500 5,500 Write-off of transaction costs for Loan Agreement tranche 2 Change in unrecognized deferred tax before tax credit (144,256) (74,507) (Note 3.6) - 1,678 Permanent differences 2,782 (763) Loss on embedded call option (Note 3.6) - 354 Total income tax benefit for the period 5,500 5,500 Interest expense on lease liabilities (Note 3.2) 499 351 Loss on lease modification (Note 3.2) - 216 The following table presents the reconciliation of the effective tax rate to the statutory cor - Interest expense on cash balances 3,608 1,213 porate income tax rate in Denmark. Foreign currency exchange loss 14,805 229 (DKK 000) 2020 2019 Bank fees and other charges 152 79 Total financial expenses 28,985 7,991 Net loss before tax (647,905) (342,138) Corporate income tax rate in Denmark 22% 22% Computed income tax benefit 142,539 75,270 Tax effect of: Other non-deductible expenses, including Adjustments prior years (1,065) - IPO-related costs and share-based compensation 2,782 763 Deferred tax asset not recognized after tax credit (138,756) (69,007) Total income tax benefit for the period 5,500 5,500 The following table presents the carrying amount of deferred tax in the Statement of Financial Position: (DKK 000) 2020 2019 Tax deductible losses 192,837 93,030 Deferred tax on intangible assets 112,192 74,050 Other temporary differences 2,019 758 307,048 167,838 Deferred tax asset not recognized 307,048 167,838 Carrying amount included on statement of financial position - - At December 31, 2020, Orphazyme had tax receivables of DKK 8,250 thousand(hereof DKK 2,750 thousand as non-current receivables) related to the refundable tax credits for costs incurred in connection with research and development activities under the Danish Tax Credit Regime. Orphazyme Annual Report 2020 Parent Company Financial Statements 892.4 FINANCIAL INCOME AND FINANCIAL EXPENSES 2.5 INCOME TAXES (DKK 000) 2020 2019 The following table presents the total income tax benefit for the years ended Interest income on cash balances 28 316 December 31, 2020 and 2019: Foreign currency exchange gains 1,649 - (DKK 000) 2020 2019 Gain on embedded call option (Note 3.6) 750 - Total financial income 2,427 316 Current tax benefit on net loss 142,539 75,270 Adjustments prior years (1,065) - Interest expense on Loan Agreement (Note 3.6) 9,921 3,239 Tax credit research and development expenses 5,500 5,500 Write-off of transaction costs for Loan Agreement tranche 2 Change in unrecognized deferred tax before tax credit (144,256) (74,507) (Note 3.6) - 1,678 Permanent differences 2,782 (763) Loss on embedded call option (Note 3.6) - 354 Total income tax benefit for the period 5,500 5,500 Interest expense on lease liabilities (Note 3.2) 499 351 Loss on lease modification (Note 3.2) - 216 The following table presents the reconciliation of the effective tax rate to the statutory cor - Interest expense on cash balances 3,608 1,213 porate income tax rate in Denmark. Foreign currency exchange loss 14,805 229 (DKK 000) 2020 2019 Bank fees and other charges 152 79 Total financial expenses 28,985 7,991 Net loss before tax (647,905) (342,138) Corporate income tax rate in Denmark 22% 22% Computed income tax benefit 142,539 75,270 Tax effect of: Other non-deductible expenses, including Adjustments prior years (1,065) - IPO-related costs and share-based compensation 2,782 763 Deferred tax asset not recognized after tax credit (138,756) (69,007) Total income tax benefit for the period 5,500 5,500 The following table presents the carrying amount of deferred tax in the Statement of Financial Position: (DKK 000) 2020 2019 Tax deductible losses 192,837 93,030 Deferred tax on intangible assets 112,192 74,050 Other temporary differences 2,019 758 307,048 167,838 Deferred tax asset not recognized 307,048 167,838 Carrying amount included on statement of financial position - - At December 31, 2020, Orphazyme had tax receivables of DKK 8,250 thousand(hereof DKK 2,750 thousand as non-current receivables) related to the refundable tax credits for costs incurred in connection with research and development activities under the Danish Tax Credit Regime. Orphazyme Annual Report 2020 Parent Company Financial Statements 89


2.6 INTANGIBLE ASSETS 2.7 LEASES (DKK 000) (DKK 000) 2020 Software Licenses Total Office Operating 2020 buildings equipment Total Cost at the beginning of the year - 12,083 12,083 Cost at the beginning of the year 11,953 4,008 15,961 Additions during the year 896 - 896 Additions during the year 1,712 - 1,712 Disposals during the year - - - Disposals during the year - - - Exchange rate adjustment - - - Exchange rate adjustment - - - Cost at the end of the year 896 12,083 12,979 Cost at the end of the year 13,665 4,008 17,673 Depreciation at beginning of the year - (1,543) (1,543) Depreciation at beginning of the year (1,858) (200) (2,058) Depreciation for the year (42) (712) (754) Depreciation for the year (2,351) (401) (2,752) Depreciation reversed on disposals during the year - - - Depreciation reversed on disposals during the year - - - Exchange rate adjustment - - - Exchange rate adjustment - - - Depreciation at the end of the year (42) (2,256) (2,298) Depreciation at the end of the year (4,209) (601) (4,810) Carrying amount at the end of the year 854 9,827 10,681 Carrying amount at the end of the year 9,456 3,406 12,862 2019 Software Licenses Total 2019 Cost at the beginning of the year - 11,575 11,575 Cost at the beginning of the year 13,006 - 13,006 Additions during the year - 508 508 Additions during the year - 4,008 4,008 Disposals during the year - - - Modification during the year (1,053) - (1,053) Exchange rate adjustment - - - Exchange rate adjustment - - - Cost at the end of the year - 12,083 12,083 Cost at the end of the year 11,953 4,008 15,961 Depreciation at beginning of the year - (831) (831) Depreciation at beginning of the year - - - Depreciation for the year - (712) (712) Depreciation for the year (1,858) (200) (2,058) Depreciation reversed on disposals during the year - - - Depreciation reversed on disposals during the year - - - Exchange rate adjustment - - - Exchange rate adjustment - - - Depreciation at the end of the year - (1,543) (1,543) Depreciation at the end of the year (1,858) (200) (2,058) Carrying amount at the end of the year - 10,539 10,539 Carrying amount at the end of the year 10,095 3,807 13,903 Depreciation and impairment losses: Depreciation and impairment losses: Depreciation are included in the income statement as follows: 2020 2019 Depreciation are included in the income statement as follows: 2020 2019 General and administrative expenses 712 712 General and administrative expenses 2,441 1,825 General and administrative expenses 42 - General and administrative expenses 311 233 Total depreciation 754 712 Total depreciation 2,752 2,058 Orphazyme Annual Report 2020 Parent Company Financial Statements 902.6 INTANGIBLE ASSETS 2.7 LEASES (DKK 000) (DKK 000) 2020 Software Licenses Total Office Operating 2020 buildings equipment Total Cost at the beginning of the year - 12,083 12,083 Cost at the beginning of the year 11,953 4,008 15,961 Additions during the year 896 - 896 Additions during the year 1,712 - 1,712 Disposals during the year - - - Disposals during the year - - - Exchange rate adjustment - - - Exchange rate adjustment - - - Cost at the end of the year 896 12,083 12,979 Cost at the end of the year 13,665 4,008 17,673 Depreciation at beginning of the year - (1,543) (1,543) Depreciation at beginning of the year (1,858) (200) (2,058) Depreciation for the year (42) (712) (754) Depreciation for the year (2,351) (401) (2,752) Depreciation reversed on disposals during the year - - - Depreciation reversed on disposals during the year - - - Exchange rate adjustment - - - Exchange rate adjustment - - - Depreciation at the end of the year (42) (2,256) (2,298) Depreciation at the end of the year (4,209) (601) (4,810) Carrying amount at the end of the year 854 9,827 10,681 Carrying amount at the end of the year 9,456 3,406 12,862 2019 Software Licenses Total 2019 Cost at the beginning of the year - 11,575 11,575 Cost at the beginning of the year 13,006 - 13,006 Additions during the year - 508 508 Additions during the year - 4,008 4,008 Disposals during the year - - - Modification during the year (1,053) - (1,053) Exchange rate adjustment - - - Exchange rate adjustment - - - Cost at the end of the year - 12,083 12,083 Cost at the end of the year 11,953 4,008 15,961 Depreciation at beginning of the year - (831) (831) Depreciation at beginning of the year - - - Depreciation for the year - (712) (712) Depreciation for the year (1,858) (200) (2,058) Depreciation reversed on disposals during the year - - - Depreciation reversed on disposals during the year - - - Exchange rate adjustment - - - Exchange rate adjustment - - - Depreciation at the end of the year - (1,543) (1,543) Depreciation at the end of the year (1,858) (200) (2,058) Carrying amount at the end of the year - 10,539 10,539 Carrying amount at the end of the year 10,095 3,807 13,903 Depreciation and impairment losses: Depreciation and impairment losses: Depreciation are included in the income statement as follows: 2020 2019 Depreciation are included in the income statement as follows: 2020 2019 General and administrative expenses 712 712 General and administrative expenses 2,441 1,825 General and administrative expenses 42 - General and administrative expenses 311 233 Total depreciation 754 712 Total depreciation 2,752 2,058 Orphazyme Annual Report 2020 Parent Company Financial Statements 90


2.7 LEASES (CONTINUED) 2.8 PROPERTY, PLANT, AND EQUIPMENT (DKK 000) The following table presents the carrying amounts of lease liabilities and the movements during the period: Furniture Leasehold and improve- 2020 equipment ments Total (DKK 000) 2020 2019 Cost at the beginning of the year 5,532 2,066 7,598 At January 1, 2019 12,689 13,006 Additions during the year 1,259 - 1,259 Additions 1,712 4,008 Disposals during the year - - - Accretion of interest 499 351 Exchange rate adjustment - - - Payments (3,554) (3,838) Cost at the end of the year 6,791 2,066 8,857 Exchange rate adjustments - - Modifications - (838) Depreciation at beginning of the year (3,614) (300) (3,914) At December 31, 2019 11,346 12,689 Depreciation for the year (919) (317) (1,236) Current 3,275 2,876 Depreciation reversed on disposals during the year - - Non-current 8,071 9,813 Exchange rate adjustment - - - Depreciation at the end of the year (4,533) (617) (5,150) Carrying amount at the end of the year 2,258 1,449 3,707 Furniture Leasehold and improve- 2019 equipment ments Total Cost at the beginning of the year 4,419 402 4,821 Additions during the year 1,113 1,664 2,777 Modification during the year - - - Exchange rate adjustment - - - Cost at the end of the year 5,532 2,066 7,598 Depreciation at beginning of the year (2,761) (120) (2,881) Depreciation for the year (853) (180) (1,033) Depreciation reversed on disposals during the year - - - Exchange rate adjustment - - - Depreciation at the end of the year (3,614) (300) (3,914) Carrying amount at the end of the year 1,918 1,766 3,684 Depreciation and impairment losses: Depreciation are included in the income statement as follows: 2020 2019 General and administrative expenses 802 670 General and administrative expenses 434 363 Total depreciation 1,236 1,033 Orphazyme Annual Report 2020 Parent Company Financial Statements 912.7 LEASES (CONTINUED) 2.8 PROPERTY, PLANT, AND EQUIPMENT (DKK 000) The following table presents the carrying amounts of lease liabilities and the movements during the period: Furniture Leasehold and improve- 2020 equipment ments Total (DKK 000) 2020 2019 Cost at the beginning of the year 5,532 2,066 7,598 At January 1, 2019 12,689 13,006 Additions during the year 1,259 - 1,259 Additions 1,712 4,008 Disposals during the year - - - Accretion of interest 499 351 Exchange rate adjustment - - - Payments (3,554) (3,838) Cost at the end of the year 6,791 2,066 8,857 Exchange rate adjustments - - Modifications - (838) Depreciation at beginning of the year (3,614) (300) (3,914) At December 31, 2019 11,346 12,689 Depreciation for the year (919) (317) (1,236) Current 3,275 2,876 Depreciation reversed on disposals during the year - - Non-current 8,071 9,813 Exchange rate adjustment - - - Depreciation at the end of the year (4,533) (617) (5,150) Carrying amount at the end of the year 2,258 1,449 3,707 Furniture Leasehold and improve- 2019 equipment ments Total Cost at the beginning of the year 4,419 402 4,821 Additions during the year 1,113 1,664 2,777 Modification during the year - - - Exchange rate adjustment - - - Cost at the end of the year 5,532 2,066 7,598 Depreciation at beginning of the year (2,761) (120) (2,881) Depreciation for the year (853) (180) (1,033) Depreciation reversed on disposals during the year - - - Exchange rate adjustment - - - Depreciation at the end of the year (3,614) (300) (3,914) Carrying amount at the end of the year 1,918 1,766 3,684 Depreciation and impairment losses: Depreciation are included in the income statement as follows: 2020 2019 General and administrative expenses 802 670 General and administrative expenses 434 363 Total depreciation 1,236 1,033 Orphazyme Annual Report 2020 Parent Company Financial Statements 91


2.9 INVESTMENT IN GROUP COMPANIES 2.10 PREPAYMENTS, DEPOSITS, AND OTHER RECEIVABLES § ACCOUNTING POLICIES (DKK 000) 2020 2019 Deposits with vendors 296 295 Investments in subsidiaries are measured in Any distributed dividends are recognized Prepayments to vendors 280 465 the Parent Company financial statements at in the income statmement of the Parent Leasehold deposit 1,090 892 the lower of cost or recoverable amount. C ompany. Total non-current prepayments and deposits 1,666 1,652 (DKK 000) 2020 2019 (DKK 000) 2020 2019 Cost at January 1 1,207 1,207 Prepayments to vendors 37,342 13,174 Additions 139 - Grant income receivable 81 357 Cost end of year December 31 1,346 1,207 VAT receivable, net 10,331 2,522 Foreign VAT receivable 1,304 1,304 (DKK 000) 2020 2019 Receivables intercompany 211,878 - Other current receivables 1,237 1,600 Adjustment January 1 (1,207) - Total current prepayments and other receivables 262,173 18,957 Impairment - (1,207) End of period December 31 (1,207) (1,207) (DKK 000) 2020 2019 Carrying amount of investment 139 - Registered Ownership Share Net (000) office interest (%) capital Equity result Orphazyme US, Inc. Delaware, USA 100% USD 1 (USD 000) 3,406 94 Orhazyme GmbH (CH) Zug, Switzerland 100% CHF 20,000 (CHF 000) 291 53 Orphazyme Annual Report 2020 Parent Company Financial Statements 922.9 INVESTMENT IN GROUP COMPANIES 2.10 PREPAYMENTS, DEPOSITS, AND OTHER RECEIVABLES § ACCOUNTING POLICIES (DKK 000) 2020 2019 Deposits with vendors 296 295 Investments in subsidiaries are measured in Any distributed dividends are recognized Prepayments to vendors 280 465 the Parent Company financial statements at in the income statmement of the Parent Leasehold deposit 1,090 892 the lower of cost or recoverable amount. C ompany. Total non-current prepayments and deposits 1,666 1,652 (DKK 000) 2020 2019 (DKK 000) 2020 2019 Cost at January 1 1,207 1,207 Prepayments to vendors 37,342 13,174 Additions 139 - Grant income receivable 81 357 Cost end of year December 31 1,346 1,207 VAT receivable, net 10,331 2,522 Foreign VAT receivable 1,304 1,304 (DKK 000) 2020 2019 Receivables intercompany 211,878 - Other current receivables 1,237 1,600 Adjustment January 1 (1,207) - Total current prepayments and other receivables 262,173 18,957 Impairment - (1,207) End of period December 31 (1,207) (1,207) (DKK 000) 2020 2019 Carrying amount of investment 139 - Registered Ownership Share Net (000) office interest (%) capital Equity result Orphazyme US, Inc. Delaware, USA 100% USD 1 (USD 000) 3,406 94 Orhazyme GmbH (CH) Zug, Switzerland 100% CHF 20,000 (CHF 000) 291 53 Orphazyme Annual Report 2020 Parent Company Financial Statements 92


2.11 FINANCIAL ASSETS AND LIABILITIES 2.12 CASH (DKK 000) 2020 2019 (DKK 000) 2020 2019 Borrowings 57,180 62,824 DKK 483,872 89,153 Lease liabilities (Note 2.7) 11,346 12,689 EUR 644 20,083 Trade payables 18,376 1,093 USD 1,765 13,972 Accruals 30,698 30,080 GBP 1,051 42 Total liabilities measured at amortized cost 117,600 106,686 Total cash 487,332 123,250 (DKK 000) 2020 2019 Deferred grant income - 95 Remuneration to the Board of Directors 2,840 1,535 Payables to group entities 7,907 - 2.13 RELATED PARTY DISCLOSURES Payroll and employee related costs 45,413 16,279 Total other current liabilities 56,160 17,909 Orphazyme A/S’ related parties are the par- Orphazyme A/ S and are included in the Non-cash changes ent company’s Board of Directors, Executive consolidated financial statements. They Adjust- Management and close members of the perform certain research and development, ments and Exchang- family of these persons. general and administrative and management Dec 31, modifica - Acculated erate ad- Dec 31, activities on behalf on the parent company. (DKK 000) 2019 Cash flow Additions tions interest justments 2020 Transactions with subsidiaries All intercompany transactions have been Borrowings 62,824 (16,349) - 750 9,921 33 57,179 Orphazyme US, Inc. and Orphazyme GmbH eliminated in the consolidated financial Lease liabilities 12,689 (3,554) 1,712 - 499 - 11,346 (CH) are 100% owned subsidiaries of statements of the Orphazyme Group. Total liabilities from financing activities 75,513 (19,903) 1,712 750 10,420 33 68,525 (DKK 000) 2020 2019 Non-cash changes Transaction with subsidiaries Adjust- Service fee costs 148,334 15,267 ments and Exchang- Dec 31, modifica - Acculated erate ad- Dec 31, Balances with subsidiaries (DKK 000) 2018 Cash flow Additions tions interest justments 2019 Current receivables 211,878 - Borrowings 61,543 (2,185) - (1,324) 4,917 (127) 62,824 Current payables 7,907 - Lease liabilities - (3,838) 17,014 (838) 351 - 12,689 Total liabilities Please refer to note 4.6 in the consolidated financial statements for additional information from financing activities 61,543 (6,023) 17,014 (2,162) 5,268 (127) 75,513 regarding transactions with related parties of the Group. Orphazyme Annual Report 2020 Parent Company Financial Statements 932.11 FINANCIAL ASSETS AND LIABILITIES 2.12 CASH (DKK 000) 2020 2019 (DKK 000) 2020 2019 Borrowings 57,180 62,824 DKK 483,872 89,153 Lease liabilities (Note 2.7) 11,346 12,689 EUR 644 20,083 Trade payables 18,376 1,093 USD 1,765 13,972 Accruals 30,698 30,080 GBP 1,051 42 Total liabilities measured at amortized cost 117,600 106,686 Total cash 487,332 123,250 (DKK 000) 2020 2019 Deferred grant income - 95 Remuneration to the Board of Directors 2,840 1,535 Payables to group entities 7,907 - 2.13 RELATED PARTY DISCLOSURES Payroll and employee related costs 45,413 16,279 Total other current liabilities 56,160 17,909 Orphazyme A/S’ related parties are the par- Orphazyme A/ S and are included in the Non-cash changes ent company’s Board of Directors, Executive consolidated financial statements. They Adjust- Management and close members of the perform certain research and development, ments and Exchang- family of these persons. general and administrative and management Dec 31, modifica - Acculated erate ad- Dec 31, activities on behalf on the parent company. (DKK 000) 2019 Cash flow Additions tions interest justments 2020 Transactions with subsidiaries All intercompany transactions have been Borrowings 62,824 (16,349) - 750 9,921 33 57,179 Orphazyme US, Inc. and Orphazyme GmbH eliminated in the consolidated financial Lease liabilities 12,689 (3,554) 1,712 - 499 - 11,346 (CH) are 100% owned subsidiaries of statements of the Orphazyme Group. Total liabilities from financing activities 75,513 (19,903) 1,712 750 10,420 33 68,525 (DKK 000) 2020 2019 Non-cash changes Transaction with subsidiaries Adjust- Service fee costs 148,334 15,267 ments and Exchang- Dec 31, modifica - Acculated erate ad- Dec 31, Balances with subsidiaries (DKK 000) 2018 Cash flow Additions tions interest justments 2019 Current receivables 211,878 - Borrowings 61,543 (2,185) - (1,324) 4,917 (127) 62,824 Current payables 7,907 - Lease liabilities - (3,838) 17,014 (838) 351 - 12,689 Total liabilities Please refer to note 4.6 in the consolidated financial statements for additional information from financing activities 61,543 (6,023) 17,014 (2,162) 5,268 (127) 75,513 regarding transactions with related parties of the Group. Orphazyme Annual Report 2020 Parent Company Financial Statements 93


2020 Statements and Signatures2020 Statements and Signatures


STATEMENT BY THE BOARD OF DIRECTORS AND EXECUTIVE MANAGEMENT STATEMENT BY THE BOARD OF In our opinion, the Group’s consolidated BOARD OF DIRECTORS DIRECTORS AND EXECUTIVE financial statements and the Parent Com - MANAGEMENT pany financial statements provide a fair pres - entation of the assets, liabilities, and financial The Board of Directors and Executive Man- position at December 31, 2020 and of the agement have today considered and results of the Group’s and Parent Company’s Georges Gemayel Bo Jesper Hansen approved the Annual Report of Orphazyme operations and cash flows for the financial Chairman of the Board Deputy Chairman of the Board A/S for the financial year January 1-Decem - year January 1–December 31, 2020. ber 31, 2020. In our opinion, Management’s Review pro- The consolidated financial statements of the vides a fair presentation of the development Group and the Parent Company’s financial in the Group’s operations and financial cir - Martin Bonde Anders Hedegaard statements have been prepared in accord- cumstances, the results of the year, and the ance with International Financial Reporting overall financial position of the Group as Standards (IFRS) as issued by the Interna- well as a description of the most significant tional Accounting Standards Board (IASB) risks and elements of uncertainty facing the and in accordance with IFRS as endorsed by Group. Rémi Droller Martijn Kleijwegt the EU as well as additional disclosure requirements under the Danish Financial We recommend that the Annual Report be Statements Act. adopted at the Annual General Meeting on March 25, 2021. Sten Verland Catherine Moukheibir Copenhagen, March 2, 2021 Carrolee Barlow EXECUTIVE MANAGEMENT Anders Vadsholt Interim Chief Executive Officer and Chief Financial Officer Orphazyme Annual Report 2020 Statements And Signatures 95STATEMENT BY THE BOARD OF DIRECTORS AND EXECUTIVE MANAGEMENT STATEMENT BY THE BOARD OF In our opinion, the Group’s consolidated BOARD OF DIRECTORS DIRECTORS AND EXECUTIVE financial statements and the Parent Com - MANAGEMENT pany financial statements provide a fair pres - entation of the assets, liabilities, and financial The Board of Directors and Executive Man- position at December 31, 2020 and of the agement have today considered and results of the Group’s and Parent Company’s Georges Gemayel Bo Jesper Hansen approved the Annual Report of Orphazyme operations and cash flows for the financial Chairman of the Board Deputy Chairman of the Board A/S for the financial year January 1-Decem - year January 1–December 31, 2020. ber 31, 2020. In our opinion, Management’s Review pro- The consolidated financial statements of the vides a fair presentation of the development Group and the Parent Company’s financial in the Group’s operations and financial cir - Martin Bonde Anders Hedegaard statements have been prepared in accord- cumstances, the results of the year, and the ance with International Financial Reporting overall financial position of the Group as Standards (IFRS) as issued by the Interna- well as a description of the most significant tional Accounting Standards Board (IASB) risks and elements of uncertainty facing the and in accordance with IFRS as endorsed by Group. Rémi Droller Martijn Kleijwegt the EU as well as additional disclosure requirements under the Danish Financial We recommend that the Annual Report be Statements Act. adopted at the Annual General Meeting on March 25, 2021. Sten Verland Catherine Moukheibir Copenhagen, March 2, 2021 Carrolee Barlow EXECUTIVE MANAGEMENT Anders Vadsholt Interim Chief Executive Officer and Chief Financial Officer Orphazyme Annual Report 2020 Statements And Signatures 95


INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF Standards Board (IASB) and in accordance To the best of our knowledge, we have not financial statements. The results of our audit ORPHAZYME A/S with IFRS as endorsed by the EU as well as provided any prohibited non-audit services procedures, including the procedures per- additional disclosure requirements under as described in article 5(1) of Regulation formed to address the matters below, pro- Opinion the Danish Financial Statements Act. (EU) no. 537/2014. vide the basis for our audit opinion on the We have audited the consolidated financial financial statements. statements and the parent company financial Our opinion is consistent with our long-form Appointment of auditor statements of Orphazyme A/S for the finan - audit report to the Audit Committee and We were initially appointed as auditor of Statement on the Management’s review cial year 1 January – 31 December 2020, the Board of Directors. Orphazyme A/S on 4 December 2015 for Management is responsible for the Manage- which comprise statement of profit or loss the financial year 1 July to 31 December ment’s review. and other comprehensive income, statement Basis for opinion 2015. We have been reappointed annually of financial position, statement of changes in We conducted our audit in accordance with by resolution of the general meeting for a Our opinion on the financial statements shareholders’ equity, statement of cash flow International Standards on Auditing (ISAs) total consecutive period of 6 years up until does not cover the Management’s review, and notes, including accounting policies, for and additional requirements applicable in the financial year 2020. and we do not express any form of assur- the Group and the Parent Company. The Denmark. Our responsibilities under those ance conclusion thereon. consolidated financial statements and the standards and requirements are further Key audit matters parent company financial statements are described in the “Auditor’s responsibilities Key audit matters are those matters that, in prepared in accordance with International for the audit of the consolidated financial our professional judgement, were of most Financial Reporting Standards (IFRS) as statements and the parent company finan - significance in our audit of the financial issued by the International Accounting cial statements” (hereinafter collectively statements for the financial year 2020. Standards Board (IASB) and in accordance referred to as “the financial statements”) These matters were addressed during our with IFRS as endorsed by the EU as well as section of our report. We believe that the audit of the financial statements as a whole additional disclosure requirements under the audit evidence we have obtained is suffi - and in forming our opinion thereon. We do Danish Financial Statements Act. cient and appropriate to provide a basis for not provide a separate opinion on these our opinion. matters. For each matter below, our In our opinion, the consolidated financial description of how our audit addressed the statements and the parent company finan - Independence matter is provided in that context. cial statements give a true and fair view of We are independent of the Group in the financial position of the Group and the accordance with the International Ethics We have fulfilled our responsibilities Parent Company at 31 December 2020 and Standards Board for Accountants’ Code of described in the “Auditor’s responsibilities of the results of the Group’s and the Parent Ethics for Professional Accountants for the audit of the financial statements” Company’s operations and cash flows for (IESBA Code) and additional requirements section, including in relation to the key audit the financial year 1 January – 31 December applicable in Denmark, and we have ful- matters below. Accordingly, our audit 2020 in accordance with International filled our other ethical responsibilities in included the design and performance of Financial Reporting Standards (IFRS) as accordance with these rules and procedures to respond to our assessment of issued by the International Accounting requirements. the risks of material misstatement of the Orphazyme Annual Report 2020 Statements And Signatures 96INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF Standards Board (IASB) and in accordance To the best of our knowledge, we have not financial statements. The results of our audit ORPHAZYME A/S with IFRS as endorsed by the EU as well as provided any prohibited non-audit services procedures, including the procedures per- additional disclosure requirements under as described in article 5(1) of Regulation formed to address the matters below, pro- Opinion the Danish Financial Statements Act. (EU) no. 537/2014. vide the basis for our audit opinion on the We have audited the consolidated financial financial statements. statements and the parent company financial Our opinion is consistent with our long-form Appointment of auditor statements of Orphazyme A/S for the finan - audit report to the Audit Committee and We were initially appointed as auditor of Statement on the Management’s review cial year 1 January – 31 December 2020, the Board of Directors. Orphazyme A/S on 4 December 2015 for Management is responsible for the Manage- which comprise statement of profit or loss the financial year 1 July to 31 December ment’s review. and other comprehensive income, statement Basis for opinion 2015. We have been reappointed annually of financial position, statement of changes in We conducted our audit in accordance with by resolution of the general meeting for a Our opinion on the financial statements shareholders’ equity, statement of cash flow International Standards on Auditing (ISAs) total consecutive period of 6 years up until does not cover the Management’s review, and notes, including accounting policies, for and additional requirements applicable in the financial year 2020. and we do not express any form of assur- the Group and the Parent Company. The Denmark. Our responsibilities under those ance conclusion thereon. consolidated financial statements and the standards and requirements are further Key audit matters parent company financial statements are described in the “Auditor’s responsibilities Key audit matters are those matters that, in prepared in accordance with International for the audit of the consolidated financial our professional judgement, were of most Financial Reporting Standards (IFRS) as statements and the parent company finan - significance in our audit of the financial issued by the International Accounting cial statements” (hereinafter collectively statements for the financial year 2020. Standards Board (IASB) and in accordance referred to as “the financial statements”) These matters were addressed during our with IFRS as endorsed by the EU as well as section of our report. We believe that the audit of the financial statements as a whole additional disclosure requirements under the audit evidence we have obtained is suffi - and in forming our opinion thereon. We do Danish Financial Statements Act. cient and appropriate to provide a basis for not provide a separate opinion on these our opinion. matters. For each matter below, our In our opinion, the consolidated financial description of how our audit addressed the statements and the parent company finan - Independence matter is provided in that context. cial statements give a true and fair view of We are independent of the Group in the financial position of the Group and the accordance with the International Ethics We have fulfilled our responsibilities Parent Company at 31 December 2020 and Standards Board for Accountants’ Code of described in the “Auditor’s responsibilities of the results of the Group’s and the Parent Ethics for Professional Accountants for the audit of the financial statements” Company’s operations and cash flows for (IESBA Code) and additional requirements section, including in relation to the key audit the financial year 1 January – 31 December applicable in Denmark, and we have ful- matters below. Accordingly, our audit 2020 in accordance with International filled our other ethical responsibilities in included the design and performance of Financial Reporting Standards (IFRS) as accordance with these rules and procedures to respond to our assessment of issued by the International Accounting requirements. the risks of material misstatement of the Orphazyme Annual Report 2020 Statements And Signatures 96


INDEPENDENT AUDITOR’S REPORT (CONTINUED) HOW OUR AUDIT ADDRESSED KEY AUDIT MATTERS THE KEY AUDIT MATTER Accrual for costs incurred through Clinical We have obtained an understanding of the We have validated the key assumptions and Research Organisations (CROs) process for accounting for costs associated data applied by management by comparing Orphazyme has entered into several clinical with research and development services total contract costs to specific terms in the research contracts with Clinical Research received and evaluated the design of the individual CRO contracts, total expected Organizations (CROs) that render research internal controls relating to the recognition patients in the study protocol, patients and development services to the company. and measurement of such costs. enrolled and length of the study to clinical Due to the materiality and complexity of trial protocols, historical experience with these arrangements management is For example, we have performed walk- the CROs and comparing management’s required to make significant estimates when through of management’s controls over estimation models to industry guidance for accounting for the costs associated with review of CRO contracts, controls over accounting for clinical trials. research and development services reconciliation of estimation assumptions received, including recognition of prepay- to third party confirmations from CROs, We further examined subsequent settle- ments, accruals and research and develop- controls over timing of patient enrolment, ment of obligations recognized as at Janu- ment costs. controls over estimated duration of the ary 1, 2020 and December 31, 2020 to clinical trial and estimated costs per treat- assess completeness and accuracy of the Management estimates duration of trials ment per patient. recorded accruals, prepayment and based on the agreed trial protocols and research and development costs. We per- estimates total cost per treatment per To test management’s estimation models, formed an independent assessment of the patient based on quotations from the we obtained management’s models for most significant elements of the accruals CROs. Management’s assumptions in accounting for research and development and prepayments as of December 31, 2020 respect of timing on patient enrolment is services rendered by CROs to the company, and compared these to the actual accruals based on information provided by the supporting the accounting for CRO accru- and prepayments recognized. CROs. als, related prepayments and research and development costs. Further we tested management’s models Refer to Note 2.1, 3.4 and 3.6 to the Consoli - for clerical accuracy. dated Financial Statements Orphazyme Annual Report 2020 Statements And Signatures 97INDEPENDENT AUDITOR’S REPORT (CONTINUED) HOW OUR AUDIT ADDRESSED KEY AUDIT MATTERS THE KEY AUDIT MATTER Accrual for costs incurred through Clinical We have obtained an understanding of the We have validated the key assumptions and Research Organisations (CROs) process for accounting for costs associated data applied by management by comparing Orphazyme has entered into several clinical with research and development services total contract costs to specific terms in the research contracts with Clinical Research received and evaluated the design of the individual CRO contracts, total expected Organizations (CROs) that render research internal controls relating to the recognition patients in the study protocol, patients and development services to the company. and measurement of such costs. enrolled and length of the study to clinical Due to the materiality and complexity of trial protocols, historical experience with these arrangements management is For example, we have performed walk- the CROs and comparing management’s required to make significant estimates when through of management’s controls over estimation models to industry guidance for accounting for the costs associated with review of CRO contracts, controls over accounting for clinical trials. research and development services reconciliation of estimation assumptions received, including recognition of prepay- to third party confirmations from CROs, We further examined subsequent settle- ments, accruals and research and develop- controls over timing of patient enrolment, ment of obligations recognized as at Janu- ment costs. controls over estimated duration of the ary 1, 2020 and December 31, 2020 to clinical trial and estimated costs per treat- assess completeness and accuracy of the Management estimates duration of trials ment per patient. recorded accruals, prepayment and based on the agreed trial protocols and research and development costs. We per- estimates total cost per treatment per To test management’s estimation models, formed an independent assessment of the patient based on quotations from the we obtained management’s models for most significant elements of the accruals CROs. Management’s assumptions in accounting for research and development and prepayments as of December 31, 2020 respect of timing on patient enrolment is services rendered by CROs to the company, and compared these to the actual accruals based on information provided by the supporting the accounting for CRO accru- and prepayments recognized. CROs. als, related prepayments and research and development costs. Further we tested management’s models Refer to Note 2.1, 3.4 and 3.6 to the Consoli - for clerical accuracy. dated Financial Statements Orphazyme Annual Report 2020 Statements And Signatures 97


INDEPENDENT AUDITOR’S REPORT (CONTINUED) In connection with our audit of the financial as Management determines is necessary to As part of an audit conducted in accord- audit evidence obtained, whether a statements, our responsibility is to read the enable the preparation of financial state - ance with ISAs and additional requirements material uncertainty exists related to Management’s review and, in doing so, con- ments that are free from material misstate- applicable in Denmark, we exercise profes- events or conditions that may cast sig- sider whether the Management’s review is ment, whether due to fraud or error. sional judgement and maintain professional nificant doubt on the Group’s and the materially inconsistent with the financial scepticism throughout the audit. We also: Parent Company’s ability to continue as statements or our knowledge obtained dur- In preparing the financial statements, Man - • Identify and as sess the risks of material a going concern. If we conclude that a ing the audit, or otherwise appears to be agement is responsible for assessing the misstatement of the financial statements, material uncertainty exists, we are materially misstated. Group’s and the Parent Company’s ability to whether due to fraud or error, design and required to draw attention in our audi- continue as a going concern, disclosing, as perform audit procedures responsive to tor’s report to the related disclosures in Moreover, it is our responsibility to consider applicable, matters related to going concern those risks and obtain audit evidence the financial statements or, if such dis - whether the Management’s review provides and using the going concern basis of that is sufficient and appropriate to pro - closures are inadequate, to modify our the information required under the Danish accounting in preparing the financial state - vide a basis for our opinion. The risk of opinion. Our conclusions are based on Financial Statements Act. ments unless Management either intends to not detecting a material misstatement the audit evidence obtained up to the liquidate the Group or the Parent Company resulting from fraud is higher than for date of our auditor’s report. However, Based on the work we have performed, we or to cease operations, or has no realistic one resulting from error, as fraud may future events or conditions may cause conclude that the Management’s review is alternative but to do so. involve collusion, forgery, intentional the Group and the Parent Company to in accordance with the financial statements omissions, misrepresentations or the cease to continue as a going concern. and has been prepared in accordance with Auditor’s responsibilities for the audit of override of internal control. the requirements of the Danish Financial the financial statements • E valuate the overall presentation, struc- Statements Act. We did not identify any Our objectives are to obtain reasonable • Obtain an unders tanding of internal con- ture and contents of the financial state - material misstatement of the Manage- assurance as to whether the financial state - trol relevant to the audit in order to ments, including the note disclosures, ment’s review. ments as a whole are free from material mis- design audit procedures that are appro- and whether the financial statements statement, whether due to fraud or error, priate in the circumstances, but not for represent the underlying transactions Management’s responsibilities for the and to issue an auditor’s report that the purpose of expressing an opinion on and events in a manner that gives a true financial statements includes our opinion. Reasonable assurance the effectiveness of the Group’s and the and fair view. Management is responsible for the prepara- is a high level of assurance, but is not a Parent Company’s internal control. tion of consolidated financial statements guarantee that an audit conducted in • E valuate the appropriateness of • Obtain sufficient appr opriate audit evi - and parent company financial statements accordance with ISAs and additional accounting policies used and the rea- dence regarding the financial information that give a true and fair view in accordance requirements applicable in Denmark will sonableness of accounting estimates of the entities or business activities with International Financial Reporting always detect a material misstatement when and related disclosures made by within the Group to express an opinion Standards (IFRS) as issued by the Interna- it exists. Misstatements can arise from fraud Management. on the consolidated financial statements. tional Accounting Standards Board (IASB) or error and are considered material if, indi- We are responsible for the direction, and in accordance with IFRS as endorsed by vidually or in the aggregate, they could rea- • C onclude on the appropriateness of supervision and performance of the the EU as well as additional disclosure sonably be expected to influence the eco - Management’s use of the going concern group audit. We remain solely responsi- requirements under the Danish Financial nomic decisions of users taken on the basis basis of accounting in preparing the ble for our audit opinion. Statements Act and for such internal control of the financial statements. financial statements and, based on the Orphazyme Annual Report 2020 Statements And Signatures 98INDEPENDENT AUDITOR’S REPORT (CONTINUED) In connection with our audit of the financial as Management determines is necessary to As part of an audit conducted in accord- audit evidence obtained, whether a statements, our responsibility is to read the enable the preparation of financial state - ance with ISAs and additional requirements material uncertainty exists related to Management’s review and, in doing so, con- ments that are free from material misstate- applicable in Denmark, we exercise profes- events or conditions that may cast sig- sider whether the Management’s review is ment, whether due to fraud or error. sional judgement and maintain professional nificant doubt on the Group’s and the materially inconsistent with the financial scepticism throughout the audit. We also: Parent Company’s ability to continue as statements or our knowledge obtained dur- In preparing the financial statements, Man - • Identify and as sess the risks of material a going concern. If we conclude that a ing the audit, or otherwise appears to be agement is responsible for assessing the misstatement of the financial statements, material uncertainty exists, we are materially misstated. Group’s and the Parent Company’s ability to whether due to fraud or error, design and required to draw attention in our audi- continue as a going concern, disclosing, as perform audit procedures responsive to tor’s report to the related disclosures in Moreover, it is our responsibility to consider applicable, matters related to going concern those risks and obtain audit evidence the financial statements or, if such dis - whether the Management’s review provides and using the going concern basis of that is sufficient and appropriate to pro - closures are inadequate, to modify our the information required under the Danish accounting in preparing the financial state - vide a basis for our opinion. The risk of opinion. Our conclusions are based on Financial Statements Act. ments unless Management either intends to not detecting a material misstatement the audit evidence obtained up to the liquidate the Group or the Parent Company resulting from fraud is higher than for date of our auditor’s report. However, Based on the work we have performed, we or to cease operations, or has no realistic one resulting from error, as fraud may future events or conditions may cause conclude that the Management’s review is alternative but to do so. involve collusion, forgery, intentional the Group and the Parent Company to in accordance with the financial statements omissions, misrepresentations or the cease to continue as a going concern. and has been prepared in accordance with Auditor’s responsibilities for the audit of override of internal control. the requirements of the Danish Financial the financial statements • E valuate the overall presentation, struc- Statements Act. We did not identify any Our objectives are to obtain reasonable • Obtain an unders tanding of internal con- ture and contents of the financial state - material misstatement of the Manage- assurance as to whether the financial state - trol relevant to the audit in order to ments, including the note disclosures, ment’s review. ments as a whole are free from material mis- design audit procedures that are appro- and whether the financial statements statement, whether due to fraud or error, priate in the circumstances, but not for represent the underlying transactions Management’s responsibilities for the and to issue an auditor’s report that the purpose of expressing an opinion on and events in a manner that gives a true financial statements includes our opinion. Reasonable assurance the effectiveness of the Group’s and the and fair view. Management is responsible for the prepara- is a high level of assurance, but is not a Parent Company’s internal control. tion of consolidated financial statements guarantee that an audit conducted in • E valuate the appropriateness of • Obtain sufficient appr opriate audit evi - and parent company financial statements accordance with ISAs and additional accounting policies used and the rea- dence regarding the financial information that give a true and fair view in accordance requirements applicable in Denmark will sonableness of accounting estimates of the entities or business activities with International Financial Reporting always detect a material misstatement when and related disclosures made by within the Group to express an opinion Standards (IFRS) as issued by the Interna- it exists. Misstatements can arise from fraud Management. on the consolidated financial statements. tional Accounting Standards Board (IASB) or error and are considered material if, indi- We are responsible for the direction, and in accordance with IFRS as endorsed by vidually or in the aggregate, they could rea- • C onclude on the appropriateness of supervision and performance of the the EU as well as additional disclosure sonably be expected to influence the eco - Management’s use of the going concern group audit. We remain solely responsi- requirements under the Danish Financial nomic decisions of users taken on the basis basis of accounting in preparing the ble for our audit opinion. Statements Act and for such internal control of the financial statements. financial statements and, based on the Orphazyme Annual Report 2020 Statements And Signatures 98


INDEPENDENT AUDITOR’S REPORT (CONTINUED) We communicate with those charged with precludes public disclosure about the mat- governance regarding, among other mat- ter or when, in extremely rare circum- ters, the planned scope and timing of the stances, we determine that a matter should audit and significant audit findings, includ - not be communicated in our report ing any significant deficiencies in internal because the adverse consequences of control that we identify during our audit. doing so would reasonably be expected to outweigh the public interest benefits of We also provide those charged with govern- such communication. ance with a statement that we have com- plied with relevant ethical requirements Copenhagen, 2 March 2021 regarding independence, and to communi- EY GODKENDT cate with them all relationships and other REVISIONSPARTNERSELSKAB matters that may reasonably be thought to CVR no. 30 70 02 28 bear on our independence, and where appli- cable, related safeguards. From the matters communicated with Christian Schwenn Johansen those charged with governance, we deter- State Authorised mine those matters that were of most sig- Public Accountant nificance in the audit of the consolidated MNE no.: mne33234 financial statements and the parent com - pany financial statements of the current Anders Roe Eriksen period and are therefore the key audit mat- State Authorised ters. We describe these matters in our Public Accountant auditor’s report unless law or regulation MNE no.: mne46667 Orphazyme Annual Report 2020 Statements And Signatures 99INDEPENDENT AUDITOR’S REPORT (CONTINUED) We communicate with those charged with precludes public disclosure about the mat- governance regarding, among other mat- ter or when, in extremely rare circum- ters, the planned scope and timing of the stances, we determine that a matter should audit and significant audit findings, includ - not be communicated in our report ing any significant deficiencies in internal because the adverse consequences of control that we identify during our audit. doing so would reasonably be expected to outweigh the public interest benefits of We also provide those charged with govern- such communication. ance with a statement that we have com- plied with relevant ethical requirements Copenhagen, 2 March 2021 regarding independence, and to communi- EY GODKENDT cate with them all relationships and other REVISIONSPARTNERSELSKAB matters that may reasonably be thought to CVR no. 30 70 02 28 bear on our independence, and where appli- cable, related safeguards. From the matters communicated with Christian Schwenn Johansen those charged with governance, we deter- State Authorised mine those matters that were of most sig- Public Accountant nificance in the audit of the consolidated MNE no.: mne33234 financial statements and the parent com - pany financial statements of the current Anders Roe Eriksen period and are therefore the key audit mat- State Authorised ters. We describe these matters in our Public Accountant auditor’s report unless law or regulation MNE no.: mne46667 Orphazyme Annual Report 2020 Statements And Signatures 99


Orphazyme A/S (CVR: 32266355) Ole Maaløes Vej 3 DK-2200 Copenhagen N Approval at Annual General Meeting (AGM): March 25, 2021 Chairman of AGM: Rikke Schiøtt Petersen, Gorrissen Federspiel AdvokatpartnerselskabOrphazyme A/S (CVR: 32266355) Ole Maaløes Vej 3 DK-2200 Copenhagen N Approval at Annual General Meeting (AGM): March 25, 2021 Chairman of AGM: Rikke Schiøtt Petersen, Gorrissen Federspiel Advokatpartnerselskab