Olink(OLK) - 2022 Q4 - Annual Report

PART I Key Information This section outlines the company's significant business, financial, intellectual property, and operational risks, including new product scaling, R&D dependence, and internal control weaknesses Risk Factors This subsection comprehensively details risks impacting the company's business, financial condition, and operations, including new product success, R&D reliance, financial stability, intellectual property, and internal control deficiencies - The company faces risks in developing, launching, and scaling new products like Explore, Signature, Flex, and Insight, where challenges could impede growth[25] - Business highly depends on R&D spending by academic, governmental, and biopharmaceutical entities; reductions could adversely affect product demand[41][42] - The company operates in a highly competitive life sciences market, facing established and emerging competitors[38] - Products are currently Research Use Only (RUO); future regulation by agencies like FDA or EMA could necessitate expensive and lengthy approval processes[58][59] - As of December 31, 2022, goodwill and other indefinite-lived intangible assets constituted approximately 35% of total assets, posing a risk of future impairment charges[97] - Material weaknesses in internal control over financial reporting were identified for FY2022, specifically in IT general controls and the inventory process, potentially impacting financial reporting accuracy[200][686][688] - As of December 31, 2022, Summa Equity AB owned approximately 62% of outstanding common shares, classifying Olink as a 'controlled company' under Nasdaq rules, exempting it from certain governance requirements[222] Information on the Company This section provides a detailed overview of Olink's business, history, and structure, focusing on its PEA technology, product lines, market, growth strategies, and intellectual property History and Development of the Company Olink Holding AB (publ) was founded in 2018, acquired Olink OldCo AB in 2019, became public in 2021, and operates through eleven wholly-owned global subsidiaries - The company was founded as a private limited company on December 13, 2018, and became a public limited company on January 27, 2021[251] - The current group was formed on March 7, 2019, through the acquisition of Olink OldCo AB[251] - The company operates through eleven wholly-owned subsidiaries across Sweden, USA, UK, Netherlands, Germany, Japan, China, and France[252] Business Overview Olink's business leverages proprietary PEA technology for proteomics research, serving over 926 customers with a $35 billion estimated total addressable market, driven by strategic growth and product expansion - Olink's core technology is the proprietary and patented Proximity Extension Assay (PEA), enabling high-multiplex and high-throughput proteomics[255][279] - The company serves over 926 customer accounts in more than 40 countries, including 19 of the top 20 largest pharmaceutical companies by 2021 R&D spending[254][275] Product Portfolio Overview | Product Line | Target Market | Readout Platform | Key Feature | | :--- | :--- | :--- | :--- | | Explore | High-plex discovery | NGS | High-throughput screening of up to ~3,000 proteins | | Target | Mid-plex / Low-plex | qPCR (Olink Signature Q100) | Targeted research with panels for specific disease areas | | Flex | Low-plex | qPCR (Olink Signature Q100) | Customizable panels of 15-21 proteins from a library of ~200 | | Focus | Clinical Applications | qPCR (Olink Signature Q100) | Custom-developed small panels (up to 21 proteins) for late-stage trials | - The total addressable market is estimated at $35 billion, split between a $19 billion research market and a $16 billion diagnostics market[273][285] - Key growth strategies include accelerating market adoption, expanding the protein biomarker library, establishing Olink as the proteomics standard, and enhancing the Olink Insight cloud platform[282] - As of December 31, 2022, the company's IP portfolio included 42 issued patents and 22 pending applications worldwide, covering core PEA technology and related aspects[362] Organizational Structure Olink Holding AB (publ) is the parent company, operating globally through eleven wholly-owned subsidiaries across Sweden, USA, UK, Netherlands, Germany, Japan, China, and France List of Significant Subsidiaries (as of Dec 31, 2022) | Name | Principle Activities | Country of Registration | Ownership % | | :--- | :--- | :--- | :--- | | Olink Finance AB | Cash management | Sweden | 100% | | Olink Proteomics AB | Sales, production, and R&D | Sweden | 100% | | Agrisera AB | Production, and R&D | Sweden | 100% | | Olink Proteomics Inc. | Sales of services and distribution | USA | 100% | | Olink Proteomics Ltd | Marketing and sales services | UK | 100% | | Olink Proteomics B.V | Marketing and sales services | Netherlands | 100% | | Olink Proteomics GmbH. | Marketing and sales services | Germany | 100% | | Olink Proteomics KK | Marketing and sales services | Japan | 100% | | Olink Biotech (Shanghai) Co., Ltd | Distribution, marketing and sales | China | 100% | | Olink Proteomics SAS | Marketing and sales services | France | 100% | Property, Plants and Equipment The company leases primary facilities in Uppsala, Sweden, and Waltham, Massachusetts, including a new 80,000 sq ft Uppsala headquarters, and owns two smaller buildings in Umeå, Sweden - The company leases its main corporate headquarters and R&D facilities in Uppsala, Sweden, and office/lab space in Waltham, Massachusetts[399] - A new headquarters lease in Uppsala for approximately 80,000 square feet has been signed, with occupancy expected in 2023 and lease expiry in 2033[399] - The company owns two office/laboratory buildings in Umeå, Sweden, totaling approximately 7,250 square feet[400] Operating and Financial Review and Prospects This section analyzes the company's financial performance, highlighting 47.3% revenue growth to $139.8 million in FY2022, a reduced net loss, and details liquidity, capital resources, and seasonal trends Operating Results In FY2022, Olink's revenue grew 47.3% to $139.8 million, driven by Explore and Target platforms, resulting in a 67.6% gross margin and a reduced net loss of $12.9 million Consolidated Financial Results (Year-over-Year) | Financial Metric | FY 2022 (in thousands USD) | FY 2021 (in thousands USD) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $139,848 | $94,973 | 47.3% | | Gross Profit | $94,499 | $58,209 | 62.3% | | Gross Margin | 67.6% | 61.3% | +6.3 pts | | Operating Loss | ($30,602) | ($44,652) | -31.5% | | Net Loss | ($12,851) | ($38,339) | -66.5% | - Revenue growth was primarily driven by the continued rollout of the Explore offering and accelerated growth of the Target portfolio following the Signature launch[408] - Gross profit margin increased from 61.3% in 2021 to 67.6% in 2022, primarily due to a strategic shift towards higher-margin kit revenues, which rose from 28.2% to 39.4% of total revenues[413] Operating Expenses (Year-over-Year) | Expense Category | FY 2022 (in thousands USD) | FY 2021 (in thousands USD) | Change (%) | | :--- | :--- | :--- | :--- | | Selling expenses | $44,673 | $33,668 | 32.7% | | Administrative expenses | $54,274 | $47,495 | 14.3% | | Research and development expenses | $26,345 | $22,141 | 19.0% | Adjusted EBITDA Reconciliation | Amounts in thousands of USD | Year ended Dec 31, 2022 | Year ended Dec 31, 2021 | | :--- | :--- | :--- | | Operating Loss | (30,602) | (44,652) | | Amortization | 11,212 | 11,089 | | Depreciation | 6,114 | 4,713 | | EBITDA | (13,276) | (28,849) | | Management Adjustments | 1,288 | 7,777 | | Share based compensation expenses | 8,047 | 2,524 | | Adjusted EBITDA | $ (3,941) | $ (18,548) | Liquidity and Capital Resources As of December 31, 2022, the company held $75.1 million in cash with no outstanding loans, supplemented by a $95.2 million January 2023 offering, deemed sufficient for future operations until positive cash flow - As of December 31, 2022, the company held $75.1 million in cash and had no outstanding loan balances[444] - In January 2023, a public offering of ADSs generated approximately $95.2 million in gross proceeds before costs[445][925] Summary of Cash Flows | Cash Flow Activity (in thousands USD) | Year ended Dec 31, 2022 | Year ended Dec 31, 2021 | | :--- | :--- | :--- | | Cash flow used in operating activities | $ (30,066) | $ (53,686) | | Cash flow used in investing activities | $ (8,713) | $ (14,960) | | Cash flow (used in)/from financing activities | $ (2,884) | $ 179,062 | | Net cash flow during the financial year | $ (41,663) | $ 110,416 | - The company anticipates existing cash and proceeds from the 2023 offering will sufficiently fund operations until positive cash flow is achieved[454] Trend Information The company experiences significant seasonality, with over 40% of annual revenues historically concentrated in the fourth quarter, potentially leading to financial result volatility - The company experiences significant seasonal buying patterns, with over 40% of total yearly revenues historically concentrated in the fourth quarter due to customer procurement and budgeting cycles[357] - The company is unaware of any other material trends, uncertainties, demands, commitments, or events beyond those disclosed in the annual report that could significantly affect its financial results[466] Directors, Senior Management and Employees This section details the company's leadership, compensation, and board practices, including CEO Jon Heimer's $1.6 million compensation, its 'foreign private issuer' and 'controlled company' status, and its 582 employees as of December 31, 2022 Directors and Senior Management The company's leadership includes CEO Jon Heimer, CFO Oskar Hjelm, and a nine-member Board of Directors chaired by Jon Hindar, with diverse industry experience - The executive team is led by Jon Heimer, Chief Executive Officer, and Oskar Hjelm, Chief Financial Officer[470] - The Board of Directors comprises nine members, chaired by Jon Hindar[470][479] Compensation In FY2022, CEO Jon Heimer's total compensation was approximately $1.6 million, with other executive officers receiving $1.5 million in base pay and $0.65 million in bonuses, managed through performance-based plans and stock awards Executive Officer and Non-Executive Director Compensation (FY 2022) | Name and Title | Base Pay (US$) | Variable/Bonus Pay (US$) | Pension Cost (US$) | Share-based Compensation (US$) | Total (US$) | | :--- | :--- | :--- | :--- | :--- | :--- | | Jon Heimer (CEO) | $415,668 | $413,310 | $60,413 | $707,903 | $1,597,294 | | Jon Hindar (Chairman) | $130,000 | — | — | $175,470 | $305,470 | | Solange Bullukian (Director) | $100,000 | — | — | $76,610 | $176,610 | | Johan Lund, PhD (Director) | $90,000 | — | — | $76,610 | $166,610 | - For FY2022, aggregate compensation for eight other executive officers included $1.51 million in base pay, $0.65 million in variable/bonus pay, and $1.48 million in share-based compensation[490] - The company's Amended and Restated 2021 Incentive Award Plan initially made 1,680,303 shares available for stock-based awards, including options and RSUs[495][497] Board Practices The Board operates under Swedish law; as a 'foreign private issuer' and 'controlled company,' Olink is exempt from certain Nasdaq governance rules, maintaining an Audit Committee and Remuneration Committee - The company's status as a 'foreign private issuer' and 'controlled company' allows it to follow Swedish home country governance practices instead of certain Nasdaq corporate governance standards[500][507] - The Board of Directors comprises nine members, with a majority considered independent under Nasdaq standards[499][512] - The Board operates with two primary committees: an Audit Committee and a Remuneration Committee[514][515] - The Audit Committee includes Solange Bullukian (Chair), Mary Reumuth, and Robert Scheuren, with Ms. Bullukian designated as the 'audit committee financial expert'[514] Employees As of December 31, 2022, Olink had 582 employees, including 208 in commercial and 70 in R&D, primarily based in Uppsala, Sweden, and Waltham, Massachusetts - As of December 31, 2022, the company had 582 employees[516] - The workforce comprises a commercial team of 208 individuals and an R&D team of approximately 70 individuals[516] Major Shareholders and Related Party Transactions This section details the company's ownership structure, with Summa Equity AB holding 64.9% as of December 31, 2022, and outlines related party transactions including employment and shareholder agreements Major Shareholders As of December 31, 2022, major shareholders include Summa Equity AB (64.89%), Fidelity Management & Research Company LLC (9.85%), and T. Rowe Price Associates, Inc. (5.28%) Beneficial Ownership of Major Shareholders (as of Dec 31, 2022) | Name of Beneficial Owner | Shares Beneficially Owned | Percentage (%) | | :--- | :--- | :--- | | 5% or Greater Shareholders: | | | | Summa Equity AB | 77,284,718 | 64.89% | | Fidelity Management & Research Company LLC | 11,732,111 | 9.85% | | T. Rowe Price Associates, Inc. | 6,288,565 | 5.28% | | Executive Officers and Directors: | | | | Jon Heimer (CEO) | 4,069,209 | 3.42% | Related Party Transactions The company has employment agreements with executives, a Registration Rights Agreement, and a Shareholders Agreement, and a historical shareholder loan from Knilo InvestCo AB was converted to equity in 2020 - The company maintains a Registration Rights Agreement and a Shareholders Agreement with certain shareholders, including its controlling shareholder Knilo InvestCo AB[527] - A $38.5 million shareholder loan from Knilo InvestCo AB was converted into common and preferred shares in May 2020, with no outstanding amounts remaining[528] - The company adopted a Related Party Transaction Policy requiring audit committee or independent board approval for all related party transactions[535] Financial Information This section refers to consolidated financial statements, confirms no significant legal proceedings, states no cash dividends have been paid, and notes a January 2023 public offering - The company is not involved in any significant legal or arbitration proceedings[538] - The company has never paid cash dividends and intends to retain future earnings for business growth[539] - A significant change after the reporting period was the initiation of a public offering on January 18, 2023[540] Additional Information This section provides supplementary details on corporate structure, governance, and tax status, including articles of association, shareholder agreements, exchange controls, and U.S. and Swedish tax considerations for ADS holders Memorandum and Articles of Association This subsection details the company's governing documents, Swedish corporate law framework, director powers, shareholder rights, meeting procedures, and includes a Federal Forum Provision and summaries of key shareholder agreements - Under Swedish law, shareholders generally possess a preemptive right to subscribe for new shares proportional to their holdings, subject to shareholder resolution override[558][559] - The Articles of Association include a Federal Forum Provision, designating the U.S. District Court for the Southern District of New York as the exclusive forum for Securities Act complaints filed in the U.S[568] - A Registration Rights Agreement grants certain shareholders, primarily Knilo InvestCo, demand and piggy-back registration rights for their shares[592][593][596] Taxation This subsection outlines U.S. federal and Swedish tax consequences for ADS holders, covering dividend and capital gains taxation, PFIC rules, and Swedish withholding tax implications - The company does not believe it was a Passive Foreign Investment Company (PFIC) for FY2022, but emphasizes that this determination is an annual, fact-intensive process[234][628] - Dividends to U.S. Holders may incur Swedish withholding tax, typically 30%, potentially reduced to 15% under the U.S.-Sweden Tax Treaty[650] - Non-resident holders are generally exempt from Swedish capital gains tax on common shares or ADSs disposal, unless they were Swedish residents within the last ten years[651][652] Quantitative and Qualitative Disclosures About Market Risk The company faces market risks (currency, interest rate), credit risk from blue-chip customers, and manages liquidity through cash and credit facilities, with no outstanding debt as of December 31, 2022 - The company faces foreign exchange risk from international operations, primarily involving USD/SEK, EUR/SEK, GBP/SEK, and JPY/SEK currency pairs[663] - As of December 31, 2022, the company had no outstanding debt (excluding leasing), thus incurring no interest rate risk[665][842] - Credit risk is low due to a customer base primarily composed of blue-chip global companies with strong credit ratings, resulting in historically negligible credit losses[666][667] Description of Securities Other Than Equity Securities This section details fees and expenses payable by American Depositary Share (ADS) holders for services like issuance, cancellation, and cash distributions, clarifying their responsibility for associated taxes ADS Holder Fees | Fee | For | | :--- | :--- | | $5.00 (or less) per 100 ADSs | Issuance or cancellation of ADSs | | $.05 (or less) per ADS | Any cash distribution | | $.05 (or less) per ADS per calendar year | Depositary services | PART II Controls and Procedures As of December 31, 2022, management deemed disclosure controls ineffective due to material weaknesses in IT access and change controls, and newly identified issues in inventory process controls - Management concluded that as of December 31, 2022, disclosure controls and procedures were not effective due to material weaknesses in internal control over financial reporting[683] - A material weakness in IT access and change control environment (IT Controls Weakness), identified in prior years, remained unremediated as of December 31, 2022[686][687] - A new material weakness was identified in 2022 concerning the inventory process, specifically ineffective controls over its completeness, accuracy, existence, and valuation (Inventory Weakness)[688][689] - Remediation plans are underway for both material weaknesses, involving formalizing IT policies, enhancing inventory controls, and hiring additional personnel[687][690] Other Information This section covers governance, including the audit committee financial expert, Code of Conduct, auditor fees for EY and PWC, the 2022 auditor change, and the company's 'foreign private issuer' status exemptions Principal Accountant Fees and Services The company discloses fees paid to Ernst & Young AB ($1.414 million in 2022) and Öhrlings PricewaterhouseCoopers AB ($0.349 million in 2022, $2.020 million in 2021), with all non-audit services pre-approved Fees Paid to Ernst & Young AB (EY) | Amounts in thousands of USD | Fiscal Year 2022 | Fiscal Year 2021 | | :--- | :--- | :--- | | Audit fees | $ 718 | $ — | | Audit-related fees | 154 | 241 | | All other fees | 511 | 405 | | Tax fees | 31 | — | | Total | $ 1,414 | $ 646 | Fees Paid to Öhrlings PricewaterhouseCoopers AB (PWC) | Amounts in thousands of USD | Fiscal Year 2022 | Fiscal Year 2021 | | :--- | :--- | :--- | | Audit fees | $ 86 | $ 991 | | Audit-related fees | 83 | 978 | | All other fees | 168 | 4 | | Tax fees | 12 | 47 | | Total | $ 349 | $ 2,020 | Change in Registrant's Certifying Accountant On March 7, 2022, Ernst & Young AB was appointed as the external auditor for FY2022, replacing Öhrlings PricewaterhouseCoopers AB, with prior 'reportable events' noted during PWC's tenure - Ernst & Young AB (EY) was appointed as the company's auditor for FY2022, replacing Öhrlings PricewaterhouseCoopers AB (PWC)[705][706] - During PWC's tenure, no accounting disagreements arose, but 'reportable events' occurred, specifically identified material weaknesses in internal control over financial reporting[707][708] Corporate Governance As a 'foreign private issuer,' Olink follows Swedish corporate governance practices, utilizing exemptions from certain Nasdaq rules regarding shareholder meetings, executive sessions, and committee composition, while adhering to Audit Committee requirements - The company follows Swedish corporate governance practices instead of certain Nasdaq rules, including those for shareholder meeting quorums, independent director executive sessions, and Remuneration and Nominating Committee composition[713] PART III Financial Statements This section presents the company's audited consolidated financial statements for FY2020-2022, prepared under IFRS, including reports from Ernst & Young AB and Öhrlings PricewaterhouseCoopers AB Consolidated Financial Statements The consolidated financial statements show FY2022 revenue of $139.8 million and a net loss of $12.9 million, with total assets of $476.3 million and negative operating cash flow Consolidated Statement of Income (in thousands USD) | | FY 2022 | FY 2021 | FY 2020 | | :--- | :--- | :--- | :--- | | Revenue | 139,848 | 94,973 | 54,067 | | Gross profit | 94,499 | 58,209 | 36,611 | | Operating loss | (30,602) | (44,652) | (5,370) | | Net loss for the period | (12,851) | (38,339) | (6,780) | | Basic and diluted loss per share | (0.11) | (0.43) | (1.10) | Consolidated Statement of Financial Position (in thousands USD) | | As of Dec 31, 2022 | As of Dec 31, 2021 | | :--- | :--- | :--- | | ASSETS | | | | Total Non-current assets | 293,844 | 339,111 | | Total Current assets | 182,446 | 200,667 | | TOTAL ASSETS | 476,290 | 539,778 | | EQUITY AND LIABILITIES | | | | Total equity | 410,685 | 475,676 | | Total Non-current liabilities | 29,518 | 32,519 | | Total Current liabilities | 36,087 | 31,583 | | TOTAL EQUITY AND LIABILITIES | 476,290 | 539,778 | Consolidated Statement of Cash Flows (in thousands USD) | | FY 2022 | FY 2021 | FY 2020 | | :--- | :--- | :--- | :--- | | Cash flow used in operating activities | (30,066) | (53,686) | (6,789) | | Cash flow used in investing activities | (8,713) | (14,960) | (15,842) | | Cash flow (used in)/from financing activities | (2,884) | 179,062 | 25,595 | | Net cash flow during the period | (41,663) | 110,416 | 2,964 |