Årsrapport 30700228 EY Godkendt Revisionspartnerselskab Dirch Passers Allé 36 Postboks 250, 2000 Frederiksberg 2024-01-01 2024-12-31 2023-01-01 2023-12-31 25834844 Fertin Pharma A/S Dandyvej 19 7100 Vejle 2001-01-02 Vejle 72151300 +4572151301 www.fertin.com PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab 33771231 Munkebjergvænget 1 5230 Odense 2025-06-12 Christopher Beck Lambert Regnskabsklasse C, stor virksomhed Revisionspåtegning Grundlag for konklusion Konklusion true 2025-06-12 2025-06-12 CaseWare Working Papers Vejle Michael Henrik Thomsen Managing Director Christopher Beck Lambert Chairman Michael Henrik Thomsen Lene Lind Bo Korsgaard Jensen Stine Borup Hvam Odense Henrik Forthoft Lind Brian Petersen State Authorised Public Accountant mne34169 State Authorised Public Accountant mne33722 894000000 943000000 991000000 -27000000 50000000 54000000 241000000 342000000 Earnings before interest, taxes, depreciation and amortisation (EBITDA) Earnings before interest, taxes, depreciation and amortisation (EBITDA) Earnings before interest, taxes, depreciation and amortisation (EBITDA) Earnings before interest, taxes, depreciation and amortisation (EBITDA) Earnings before interest, taxes, depreciation and amortisation (EBITDA) -75000000 96000000 192000000 -58000000 -50000000 -14000000 -28000000 -26000000 Net financials excl. investment in group enterprises Net financials excl. investment in group enterprises Net financials excl. investment in group enterprises Net financials excl. investment in group enterprises Net financials excl. investment in group enterprises -142000000 -91000000 -39000000 -41000000 -34000000 -91000000 38000000 155000000 2249000000 2021000000 1998000000 101000000 123000000 158000000 123000000 61000000 596000000 681000000 770000000 265 242.3 39.6 38.9 102.2 Current ratio Current ratio Current ratio Current ratio Current ratio 58.5 18.3 26.5 33.7 38.5 -26.4 -26 -14.3 5.2 20 690 654 622 5000 5000 400 400 7000 6000 570 330 1104175000 1012566000 1004228000 883362000 99947000 129204000 41686000 39222000 75017000 61596000 15000 0 44000 0 149211000 99911000 -165996000 -71525000 -84018000 -41450000 16375000 3998000 74042000 53997000 -307681000 -162974000 -48670000 -26273000 -259011000 -136701000 172678000 166428000 154664000 73894000 278788000 240927000 606130000 481249000 452872000 456633000 454139000 418644000 7872000 4438000 0 32000 172246000 313499000 1087129000 1193246000 119458000 67663000 119458000 67663000 1812717000 1742158000 124160000 145576000 27572000 31358000 101504000 96315000 253236000 273249000 139857000 149426000 0 590000 338362000 315001000 8894000 1755000 9655000 10198000 496768000 476970000 8064000 5822000 758068000 756041000 2570785000 2498199000 1370511000 70511000 352143000 318198000 -219104000 69699000 1503550000 458408000 91832000 125775000 91832000 125775000 633642000 1564541000 56157000 37688000 689799000 1602229000 556000 698000 108850000 101687000 3329000 36248000 172869000 173154000 285604000 311787000 975403000 1914016000 2570785000 2498199000 70511000 267929000 257905000 50269000 -186970000 0 1236000 70511000 318198000 69699000 1300000000 0 33945000 -292956000 0 -4153000 1370511000 352143000 -219104000 56299000 41405000 100430000 94718000 156729000 136123000 156729000 136123000 468861000 377303000 56588000 45707000 8714000 8152000 2420000 2505000 536583000 433667000 536583000 433667000 868 798 570000 605000 15405000 3004000 970000 994000 67744000 47664000 6298000 6333000 -33943000 -26273000 14727000 0 33945000 50269000 -292956000 -186970000 369781000 153238000 250034000 0 36555000 76758000 232000 5000 3790000 38522000 68420000 -38522000 408071000 258208000 284480000 203353000 79344000 9107000 32098000 24201000 0 58000 1000 3415000 235393000 103544000 5692000 172678000 154664000 278788000 806816000 1191020000 46564000 65839000 313499000 0 0 0 0 64624000 0 1242000 0 0 1443000 27604000 101376000 7034000 0 -204434000 834420000 1291154000 53598000 65839000 172246000 350183000 772376000 42126000 65807000 0 31365000 65433000 3600000 32000 0 0 794000 0 0 0 381548000 837015000 45726000 65839000 0 452872000 454139000 7872000 0 172246000 190873000 104253000 295126000 -123210000 4153000 -79641000 -4377000 27407000 -175668000 119458000 Fertin India Private Ltd. Ltd. India 100 Fertin Canada Inc. Inc. Canada 100 Cogent International Manufacturing Inc. Inc. Canada 100 Vectura Fertin Pharma Private Limited India 99.99 Vectura Fertin Pharma Malaysia SDN. BHD. Private Limited Malaysia 100 1370511 1370511000 70511000 125776000 139981000 91832000 125776000 131824000 104473000 13722000 69049000 -1320000 8241000 0 -9621000 -30852000 -5262000 -21542000 -41104000 633642000 0 633642000 0 56713000 556000 56157000 34402000 Today, the Board of Directors and the Executive Board have discussed and approved the annual report of Fertin Pharma A/S for the financial year 1 January - 31 December 2024. The annual report is prepared in accordance with the Danish Financial Statements Act. In our opinion, the financial statements give a true and fair view of the financial position of the Company at 31 December 2024 and of the results of the Company's operations for the financial year 1 January - 31 December 2024. Further, in our opinion, the Management's review gives a fair review of the matters discussed in the Management's review. We recommend that the annual report be approved at the annual general meeting. To the shareholder of Fertin Pharma A/S In our opinion, the Financial Statements give a true and fair view of the financial position of the Company at 31 December 2024, and of the results of the Company’s operations and cash flows for the financial year 1 January - 31 December 2024 in accordance with the Danish Financial Statements Act. We have audited the Financial Statements of Fertin Pharma A/S for the financial year 1 January - 31 December 2024, which comprise income statement, balance sheet, statement of changes in equity and notes, including a summary of significant accounting policies (“the Financial Statements”). We conducted our audit in accordance with International Standards on Auditing (ISAs) and the additional requirements applicable in Denmark. Our responsibilities under those standards and requirements are further described in the “Auditor’s responsibilities for the audit of the Financial Statements” section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (IESBA Code) and the additional ethical requirements applicable in Denmark, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Management is responsible for Management’s Review. Our opinion on the Financial Statements does not cover Management’s Review, and we do not express any form of assurance conclusion thereon. In connection with our audit of the Financial Statements, our responsibility is to read Management’s Review and, in doing so, consider whether Management’s Review is materially inconsistent with the Financial Statements or our knowledge obtained during the audit, or otherwise appears to be materially misstated. Moreover, it is our responsibility to consider whether Management’s Review provides the information required under the Danish Financial Statements Act. Based on the work we have performed, in our view, Management’s Review is in accordance with the Financial Statements and has been prepared in accordance with the requirements of the Danish Financial Statements Act. We did not identify any material misstatement in Management’s Review. Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the Danish Financial Statements Act, and for such internal control as Management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the Financial Statements, Management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting in preparing the Financial Statements unless Management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements. As part of an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management. Conclude on the appropriateness of Management’s use of the going concern basis of accounting in preparing the Financial Statements and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. Evaluate the overall presentation, structure and contents of the Financial Statements, including the disclosures, and whether the Financial Statements represent the underlying transactions and events in a manner that gives a true and fair view. Plan and perform the audit to obtain sufficient appropriate audit evidence regarding the consolidated financial information of the entities or business units as a basis for forming an opinion on the Financial Statements. We are responsible for the direction, supervision and review of the audit work performed. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. The financial ratios stated under "Financial highlights" have been calculated as follows: Operating profit/loss Profit/loss before net financials +/- Other operating income and other operating expenses Current ratio Current assets x 100 Current liabilities Equity ratio Equity, year-end x 100 Total equity and liabilities, year-end Return on equity Profit/loss after tax x 100 Average equity Business Activities Fertin Pharma A/S (“Fertin Pharma” or the “Company”) is a specialist Contract Development and Manufacturing Organization (“CDMO”) offering innovative, high quality pharmaceutical and nutraceutical products for oral and intra oral delivery. The Company’s current main product formats (“delivery systems”) are chewing gum, lozenges, powders, fast dissolvable tablets, Zapliq® chewables, and Zapliq® chewing gum. Fertin Pharma is the world’s largest independent developer and manufacturer of medicated chewing gum and has over recent years expanded into other specialized solid dosage oral and intra oral delivery systems. The Company strives to develop innovative oral and intra oral delivery systems that offer convenient and pleasurable delivery of active pharmaceutical ingredients (“APIs") and nutraceutical ingredients (“AIs") to patients and consumers. In 2024, the largest category continues to be high quality chewing gum and lozenges systems applied within Nicotine Replacement Therapy (“NRT”) category. In line with its diversification strategy, Fertin Pharma continues to leverage its highly flexible delivery systems to grow business outside the NRT category, applying a wider range of APIs and AIs for OTC pharma and nutraceutical categories. In addition to Fertin Pharma’s group-external CDMO business, the Company is engaged in delivering innovation, R&D and production supporting its parent company’s commercial activities, which – as these activities continue to grow in relative size to the group-external activities – affects the Company’s financial figures materially. The Company is headquartered in Vejle, Denmark, where it owns and operates US FDA and EU GMP approved R&D and manufacturing facilities. Furthermore, Fertin Pharma owns and operates commercial, R&D, and manufacturing facilities in India and Canada. Business Review and Outlook Throughout 2024, Fertin Pharma has continued to execute the planned activities related to diversification of its external CDMO business. Even though at an early stage, sales have increased across all active categories compared to 2023 and have a positive outlook leading into 2025. The majority of growth within the nutraceutical categories has materialized in the subsidiary Fertin Canada and sister-company NCP NextGen and is hence not reflected in the revenue of Fertin Pharma (in this report). Despite these positive developments, the NRT category still forms the backbone of Fertin Pharma’s CDMO business. Following PMI’s acquisition of Claudio Holdco, the Fertin Pharma group has continued to increase its engagement in providing innovation, R&D and production, supporting PMI’s “smoke-free future strategy”. As these activities grow in relative size to the Company's external CDMO activities, the totality of Fertin Pharma’s business changes accordingly, which is mainly reflected in the development in the proportions of R&D and CAPEX investments over revenue growth. This is mainly reflected in below summary with increased investments by 41 MDKK (2024: 126 MDKK) compared to the previous reporting year (2023: 85 MDKK) and higher depreciation costs by 21 MDKK (2024: 157MDKK) compared to the previous reporting year (2023: 136 MDKK). During 2024, Fertin Pharma has received a capital injection of 1,300 MDKK to provide funding for the increase in these group-related activities/investments including the commercial geographical expansion activities hosted in the subsidiaries in India and Malaysia that increased by 43 MDKK (2024: 84 MDKK) compared to the previous reporting year (2023: 41 MDKK). In 2024 Fertin Pharma worked intensively with topics related to compliance within the areas of ESG (Environmental, Social and Governance), IT security (NIST2D) as well as internal control environment for financial reporting (Sarbanes-Oxley Act section 404). The accelerated activities and forming of needed operational procedures, controls systems and reporting has affected the accounts for 2024 materially, which is expected also to be the case in 2025 – until the new procedures are fully anchored in fully optimized and system-supported procedures. During the fourth quarter of 2024, Fertin Pharma has implemented an adjustment of its Danish organization, investing in future efficiency of operations. Total cost of strategic initiatives recognized in 2024 is 29 MDKK. All related effects have been provided for and included in the 2024 annual report. Key figures Management expects the 2025 growth and profitability to grow compared to 2024, and the raw materials and energy prices are expected to stabilize at the 2024 level with only moderate inflation. As a result, management expects the 2025 result to improve compared to 2024. Revenue is expected in the range of 1,200 to 1,300 MDKK and result before tax is expected in the range of -20 to -50 MDKK primarily due to increased sales, lower costs and increased income from investments in group enterprises. In 2024, Fertin Pharma A/S realized a revenue of 1,104 MDKK which is in line with the expected revenue (2023: 1,012 MDKK). The realized loss before tax is 308 MDKK (2023: -163 MDKK). In 2024 investments in R&D 126 MDKK increased by 41 MDKK compared to 2024. The investments in commercial geographical expansions in SEA has increased by 43 MDKK (2024: 84 MDKK) compared to the previous year (2023: 41 MDKK), Furthermore, the result for 2024 is impacted by strategic initiatives of 29 MDKK and interest rates. Overall, the financial result of the year is regarded in line with expectations. Investments In 2024 investments were focused on increasing manufacturing capacity for pharmaceutical and nutraceutical products driven by our geo-expansion strategy and expanded R&D capabilities to support the development in demand from existing and new customers. It is essential for the Company’s continued growth to attract and retain highly educated employees with expertise in the development and production of pharmaceutical and nutraceutical products. The Company offers both internal and external training programmes. Currency risks The Company primarily invoices in DKK and EUR and most goods purchased are denominated in DKK or EUR and to a lesser extent USD. Any identified significant risks are hedged using financial instruments. Interest-rate risks Revolving credit facilities are based on floating interest rates. Credit risks In accordance with the Company's policy for assuming credit risks, all major customers and other business partners are credit rated. The credit risk relating to individual customers or partners is considered relatively low. Investments in research and development activities have been as expected. The external and internal environmental impact is considered low. The Company’s report on social responsibility matters can be found at the following link: https://www.fertin.com/sustainability/ Fertin strives to attract highly skilled employees to support a high-performance organization and promotes gender equality among managers and at all levels in the organization. We ensure this through both recruitment and succession planning. In 2024, the distribution of genders was as shown. Overview 2024 2023 Supreme governing body Total number of members 5 5 Underrepresented gender in % 40 40 0.4000 0.4000 Other levels of management Total number of members 7 6 Underrepresented gender in % 57 33 0.5700 0.3300 Supreme governing body As of the reporting date Fertin Pharma A/S has fulfilled the definition of gender equality for the supreme governing body of the Company. Thus no new policies has been established, nor any new goals for gender equality for Fertin Parhma A/S has been set. Other levels of management As of the reporting date Fertin Pharma A/S has fulfilled the definition of gender equality for the other levels of management of the Company. Thus no new policies has been established, nor any new goals for gender equality for Fertin Parhma A/S has been set. Apart from coherence with the Company’s Code of Conduct and general GDPR legislation, Management does not find it relevant to implement additional, independent policies on data ethical code of conduct. In forming this opinion, Management has put emphasis to the fact that the Company does not engage in comprehensive or larger scale collection, storage, or analysis of external personnel data, as a part of the Company’s main activity. No events materially affecting the Company’s financial position have occurred subsequent to the financial year-end. The annual report of Fertin Pharma A/S for 2024 has been prepared in accordance with the provisions in the Danish Financial Statements Act applying to large reporting class C entities. Pursuant to section 112(2) of the Danish Financial Statements Act, the Company has not prepared consolidated financial statements. The financial statements of Fertin Pharma A/S are included in the consolidated financial statements of Philip Morris International Inc., 677 Washington blvd., Suite 1100, Stamford, Connecticut, USA (TIN no. 13-3435103) Reclassification has been made in the comparative figures in the income statement, which has no impact on the profit/loss after tax, total assets, or equity. Similarly, reclassification has been made of: • Equity notes: Translation reserve for 2023 of DKK’000 8,289 has been moved into retained earnings. • Income statement: Amortization of goodwill of DKK’000 4,378 is reclassified in 2023 from a split between production cost, administration cost and distribution cost to income from investments in group enterprises. • Financial highlights: The impact of above has been adjusted in 2023 financial highlights. Apart from the above changes the accounting policies are consistent with those of last year. With reference to section 86(4) of the Danish Financial Statements Act, no cash flow statement has been prepared. The Company's cash flows are reflected in the consolidated cash flow statement for the higher-ranking parent company Philip Morris International Inc. Assets are recognised in the balance sheet when it is probable as a result of a prior event that future economic benefits will flow to the Entity, and the value of the asset can be measured reliably. Liabilities are recognised in the balance sheet when the Entity has a legal or constructive obligation as a result of a prior event, and it is probable that future economic benefits will flow out of the Entity, and the value of the liability can be measured reliably. On initial recognition, assets and liabilities are measured at cost. Measurement subsequent to initial recognition is expected as described below for each financial statement item. Anticipated risks and losses that arise before the time of presentation of the annual report and that confirm or invalidate affairs and conditions existing at the balance sheet date are considered at recognition and measurement. Income is recognised in the income statement when earned, whereas costs are recognised by the amounts attributable to this financial year. Reporting currency The financial statements are presented in Danish kroner (DKK'000). On initial recognition, transactions denominated in foreign currencies are translated at the exchange rate at the transaction date. Foreign exchange differences arising between the exchange rates at the transaction date and the date of payment are recognised in the income statement as financial income or financial expenses. Receivables and payables and other monetary items denominated in foreign currencies are translated at the exchange rate at the balance sheet date. The difference between the exchange rates at the balance sheet date and the date at which the receivable or payable arose or was recognised in the most recent financial statements is recognised in the income statement as financial income or financial expenses. The Company has chosen IAS 18 as interpretation for revenue recognition. Income from the sale of goods for resale and finished goods, is recognised in revenue when the most significant rewards and risks have been transferred to the buyer and provided the income can be measured reliably and payment is expected to be received. The date of the transfer of the most significant rewards and risks is based on standardised terms of delivery based on Incoterms® 2010. Revenue is measured at the fair value of the agreed consideration excluding VAT and taxes charged on behalf of third parties. All discounts and rebates granted are recognised in revenue. Production costs comprise costs incurred in generating the revenue for the year. Such costs include direct and indirect costs of raw materials, consumables and production staff, rent and leases, as well as depreciation on production plant. Distribution costs comprise costs related to the distribution of goods sold in the year and to sales campaigns, etc. carried out in the year, including costs related to sales staff, advertising, exhibitions and amortisation/depreciation. Sales and marketing costs are recognised in the income statement when the Company obtains control of the sales or marketing product. Administrative expenses include expenses incurred in the year for company management and administration, including expenses relating to administrative staff, Management, office premises and expenses as well as amortisation/depreciation of assets used for administrative purposes. The item includes research and development costs that do not qualify for capitalisation as well as amortisation of capitalised development costs. Other operating income comprise items of a secondary nature relative to the Company's core activities, including gains on the sale of fixed assets. The item comprises amortisation/depreciation of intangible assets and property, plant and equipment. The basis of amortisation, which is calculated as cost less any residual value, is amortised on a straight line basis over the expected useful life. The expected useful lives of the assets are as follows: Completed development projects 5-20 years Software 3-10 years Buildings 10-70 years Equipment and machinery 5-20 years Fixtures and fittings, plant and other equipment 3-5 years Leasehold improvements 6-30 years Land is not depreciated. Depreciation is based on the residual value of the asset and is reduced by impairment losses, if any. The depreciation period and the residual value are determined at the acquisition date and are reassessed annually. Where the residual value exceeds the carrying amount of the asset, no further depreciation charges are recognised. In the case of changes in the depreciation period or the residual value, the effect on the depreciation charges is recognised prospectively as a change in accounting estimates. Other operating expenses comprise items of a secondary nature relative to the Company's core activities, including losses on the sale of fixed assets. The income statement includes the proportional share of the underlying companies' profit or loss after elimination of internal profit/loss and after tax. In group entities, the full elimination of internal profit and loss is carried out without regard to ownership shares. Financial income and expenses are recognised in the income statement at the amounts that relate to the financial reporting period. The items comprise interest income and expenses, e.g. from group entities and associates, declared dividends from other securities and investments, financial expenses relating to finance leases, realised and unrealised capital gains and losses relating to other securities and investments, exchange gains and losses and amortisation of financial assets and liabilities. Tax for the year includes current tax on the year's expected taxable income and the year's deferred tax adjustments. The portion of the tax for the year that relates to the profit/loss for the year is recognised in the income statement, whereas the portion that relates to transactions taken to equity is recognised in equity. The entity is jointly taxed with other group entities. The total Danish income tax charge is allocated between profit/loss-making Danish entities in proportion to their taxable income (full absorption). Jointly taxed entities entitled to a tax refund are reimbursed by the management company based on the rates applicable to interest allowances, and jointly taxed entities which have paid too little tax pay a surcharge according to the rates applicable to interest surcharges to the management company. Other intangible assets include software licences. Investment in software programs includes the cost of direct software cost and internally as externally related labour cost regarding the development process. Other intangible assets are measured at cost less accumulated amortisation and impairment losses. Development costs comprise expenses, salaries and amortisation directly or indirectly attributable to development activities. Some external customers are paying for part of the development costs. These payments are offset against the booked asset. Development projects that are clearly defined and identifiable, where the technical feasibility, sufficient resources and a potential future market or development opportunities are identifiable and where the Company intends to produce, market or use the project, are recognised as intangible assets provided that the cost can be measured reliably and that there is sufficient assurance that future earnings can cover production costs, selling costs, administrative expenses and development costs. Other development costs are recognised in the income statement as incurred. Development costs that are recognised in the balance sheet are measured at cost less accumulated amortisation and impairment losses. On completion of a development project, development costs are amortised on a straight-line basis over the estimated useful life. The amortisation period is usually 5 years and cannot exceed 20 years. Gains and losses on the sale of intangible assets are recognised in the income statement under "Other operating income" or "Other operating expenses", respectively. Gains and losses are calculated as the difference between the selling price less selling expenses and the carrying amount at the time of sale. Property, plant and equipment Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. Cost includes the acquisition price and costs directly related to the acquisition until the time at which the asset is ready for use. The cost of self constructed assets includes the cost of direct materials and labour, etc. directly used in the production process and a portion of the relating production overheads. Gains or losses are calculated as the difference between the selling price less selling costs and the carrying amount at the date of disposal. Gains and losses from the disposal of property, plant and equipment are recognised in the income statement as other operating income or other operating expenses. The Company has chosen IAS 17 as interpretation for classification and recognition of leases. Leases that do not transfer substantially all the risks and rewards incident to the ownership to the Company are classified as operating leases. Payments relating to operating leases and any other rent agreements are recognised in the income statement over the term of the lease. The Company's aggregate liabilities relating to operating leases and other rent agreements are disclosed under "Contingent liabilities". Equity investments in subsidiaries are measured according to the equity method. On initial recognition, equity investments in subsidiaries are measured at cost, i.e. plus transaction costs. The cost is allocated in accordance with the acquisition method. The cost is adjusted by shares of profit/loss after tax calculated in accordance with the Group's accounting policies less or plus unrealised intra-group gains/losses. Identified increases in value and goodwill, if any, compared to the underlying entity's net asset value are amortised in accordance with the accounting policies for the assets and liabilities to which they can be attributed. Negative goodwill is recognised in the income statement. Dividend received is deduced from the carrying amount. Equity investments in group entities measured at net asset value are subject to impairment test requirements if there is any indication of impairment. Gains and losses on disposal of group entities and associates are made up as the difference between the sales price and the carrying amount of net assets at the date of disposal including non-amortised goodwill and anticipated costs of disposal. Gains or losses are recognised in the income statement as financial income or financial expenses. The carrying amount of intangible assets, property, plant and equipment and investments in group entities is assessed for impairment on an annual basis. Impairment tests are conducted on assets or groups of assets when there is evidence of impairment. The carrying amount of impaired assets is reduced to the higher of the net selling price and the value in use (recoverable amount). The recoverable amount is the higher of the net selling price of an asset and its value in use. The value in use is calculated as the present value of the expected net cash flows from the use of the asset or the group of assets and the expected net cash flows from the disposal of the asset or the group of assets after the end of the useful life. Previously recognised impairment losses are reversed when the reason for recognition no longer exists. Impairment losses on goodwill are not reversed. Inventories are measured at cost in accordance with the FIFO method. Where the net realisable value is lower than cost, inventories are written down to this lower value. The net realisable value of inventories is calculated as the sales amount less costs of completion and expenses required to effect the sale and is determined taking into account marketability, obsolescence and development in the expected selling price. The cost of raw materials and consumables comprises the cost of acquisition plus delivery costs. The cost of finished goods and work in progress includes the cost of raw materials, consumables, direct labour and indirect production overheads. Indirect production overheads include the indirect cost of material and labour as well as maintenance and depreciation of production machinery, buildings and equipment and expenses relating to plant administration and management. Borrowing costs are not recognised in the cost. The Company has chosen IAS 39 as interpretation for impairment write-down of financial receivables. Receivables are measured at amortised cost. An impairment loss is recognised if there is objective evidence that a receivable or a group of receivables is impaired. If there is objective evidence that an individual receivable has been impaired, an impairment loss is recognised on an individual basis. Receivables in respect of which there is no objective evidence of individual impairment are tested for objective evidence of impairment on a portfolio basis. The portfolios are primarily based on the debtors' domicile and credit ratings in line with the Company's risk management policy. The objective evidence applied to portfolios is determined based on historical loss experience. Impairment losses are calculated as the difference between the carrying amount of the receivables and the present value of the expected cash flows, including the realisable value of any collateral received. The effective interest rate for the individual receivable or portfolio is used as discount rate. Service supplies and contract work in progress for third parties are measured at the market value of the work performed less progress billings. The market value is calculated based on the stage of completion at the balance sheet date and the total expected income from the relevant contract. The stage of completion is calculated based on the expenses incurred relative to the expected total expenses relating to the relevant contract. Where the outcome of contract work in progress cannot be estimated reliably, the market value is measured at the expenses incurred in so far as they are expected to be paid by the purchaser. Where the total expenses relating to the work in progress are expected to exceed the total market value, the expected loss is recognised as a loss-making agreement under "Provisions" and is expensed in the income statement. The value of work in progress less progress billings is classified as assets when the selling price exceeds progress billings and as liabilities when progress billings exceed the market value. Prepayments recognised under "Assets" comprise prepaid expenses regarding subsequent financial reporting years. Cash comprises bank deposits. Reserve for development costs The reserve for development costs comprises recognised development costs. The reserve cannot be used to distribute dividend or cover losses. The reserve will be reduced or dissolved if the recognised development costs are amortised or are no longer part of the Company's operations by a transfer directly to the distributable reserves under equity. Current tax payables and receivables are recognised in the balance sheet as the estimated income tax charge for the year, adjusted for prior-year taxes and tax paid on account. Deferred tax is measured according to the liability method on all temporary differences between the carrying amount and the tax base of assets and liabilities. However, deferred tax is not recognised on temporary differences relating to goodwill which is not deductible for tax purposes and on office premises and other items where temporary differences, apart from business combinations, arise at the date of acquisition without affecting either profit/loss for the year or taxable income. Where alternative tax rules can be applied to determine the tax base, deferred tax is measured based on Management's intended use of the asset or settlement of the liability, respectively. Deferred tax is measured according to the tax rules and at the tax rates applicable at the balance sheet date when the deferred tax is expected to crystallise as current tax. Deferred tax assets are recognised at the expected value of their utilisation; either as a set-off against tax on future income or as a set-off against deferred tax liabilities in the same legal tax entity. Changes in deferred tax due to changes in the tax rate are recognised in the income statement. The Company has chosen IAS 39 as interpretation for liabilities. Financial liabilities are recognised at the date of borrowing at the net proceeds received less transaction costs paid. On subsequent recognition, financial liabilities are measured at amortised cost, corresponding to the capitalised value, using the effective interest rate. Accordingly, the difference between the proceeds and the nominal value is recognised in the income statement over the term of the loan. Other liabilities are measured at net realisable value. The allocation of revenue to activities and geographical markets is disclosed where these activities and markets differ significantly in the organisation of sales of goods and services. No events materially affecting the Company's financial position have occurred subsequent to the financial year-end. Breakdown of revenue by business segment: Pharma products 954,513 859,494 Non-Pharma products 149,662 153,072 1,104,175 1,012,566 Breakdown of revenue by geographical segment: North America 575,643 537,370 Europe 425,054 385,685 South East Asia 99,614 83,495 South America 2,738 5,347 Other countries 1,126 669 1,104,175 1,012,566 Amortisation/depreciation of intangible assets and property, plant and equipment is recognised in the income statement under the following items: Production costs 120,682 104,816 Administrative expenses 18,807 16,334 Research costs 17,240 14,973 156,729 136,123 Staff costs are recognised as follows in the financial statements: Production costs 386,965 311,912 Distribution costs 19,509 17,459 Administrative expenses 36,121 35,997 Research and development costs 93,988 68,299 536,583 433,667 By reference to section 98b(3), (ii), of the Danish Financial Statements Act, remuneration to Management for 2024 is not disclosed. For 2023 the remuneration of Management was DKK 8,092 thousand, where DKK 349 thousand was pension. Remuneration of Management is aggregated for the Board of Directors and the Executive Board since the Executive Board consists of one director. The Company has no incentive programmes. Development of medical products is defined as products with an active pharmaceutical ingredient requiring regulatory approval for the product to be developed, manufactured and sold legally. Development projects regarding medical products include salaries, wages and other costs for development and test of products for customers. The carrying amount of completed projects is DKK 172,679 thousand. The impairment test shows a higher commercial value. The carrying amount of projects in progress is DKK 278,788 thousand. The impairment test shows a higher commercial value. Development projects is regarding pharmaceutical oral products and dietary supplements. Products with pharmaceutical ingredients requires a regulatory approval, to be developed, manufactured and sold and expects to be launch within 1-5 years. Dietary supplements can be launch within 0-2 years. The projects are proceeding as planned by using resources allocated by management for the development including salaries, wages and materials cost as well as stability testing for the customer. The carrying amount of group entities comprises a goodwill at a carrying amount of DKK 17,509 thousand less elimination of intra-group gains of DKK 6,008 thousand. Prepayments include accrual of expenses relating to subsequent financial years, including insurance, IT licenses, marketing fees and others. There is no difference in voting rights. Other contingent liabilities The Company is jointly taxed with Philip Morris ApS, which acts as administration company, and is jointly and severally liable with other jointly taxed group entities for payment of income taxes for the income year 2021 onwards as well as withholding taxes on interest, royalties and dividends falling due for payment on or after 16 September 2021. Other rent and lease liabilities: DKK'000 2024 2023 Rent and lease liabilities 22,591 26,931 Rental and leasing obligations include rent obligations, as well as operational leases for cars, IT equipment and machines. Within 1 year, DKK 9,570 thousand (2023: DKK 9,585 thousand) is due, and in the period 1-5 years DKK 12,930 thousand (2023: 17,346 thousand), and more than 5 years DKK 91 thousand (2023: 0 thousand) is due. The Company has not provided any security or other collateral in assets at 31 December 2024. Parties exercising control Related party Domicile Basis for control Claudio HoldCo A/S Vejle, Denmark Ownership Aspeya Inc. Stamford, Connecticut, USA Ownership Philip Morris International Inc. Stamford, Connecticut, USA Ultimate ownership Information about consolidated financial statements Parent Domicile Requisitioning of the parent company's consolidated financial statements Philip Morris International Inc. 677 Washington blvd., Suite 1100, Stamford, Connecticut 06901, USA The consolidated finanical statement can be requisitioned in the following link: https://www.pmi.com/investor-relations/reports-filings Related party transactions The Company solely discloses related party transactions that have not been carried out on an arm's length basis, cf. section 98c(7) of the Danish Financial Statements Act. 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