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