PROQR THERAPEUTICS N.V.
Index to Unaudited Condensed Consolidated Financial Statements
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Notes to Unaudited Condensed Consolidated Financial Statements | 5 |
PROQR THERAPEUTICS N.V.
Unaudited Condensed Consolidated Statement of Financial Position
June 30, | December 31, | |||
| 2022 |
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€ 1,000 | € 1,000 | |||
Assets |
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Current assets |
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Cash and cash equivalents | ||||
Prepayments and other receivables | ||||
Other taxes | ||||
Total current assets | ||||
Property, plant and equipment | ||||
Investments in associates | — | |||
Investments in financial assets | ||||
Total assets | ||||
Equity and liabilities |
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Equity |
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Equity attributable to owners of the Company | ||||
Non-controlling interests | ( | ( | ||
Total equity | ||||
Current liabilities |
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Borrowings | ||||
Lease liabilities | ||||
Derivative financial instruments | ||||
Trade payables | ||||
Current income tax liability | — | — | ||
Social securities and other taxes | ||||
Deferred income | ||||
Other current liabilities | ||||
Total current liabilities | ||||
Borrowings | ||||
Lease liabilities | ||||
Deferred income | ||||
Total liabilities | ||||
Total equity and liabilities |
The notes are an integral part of these condensed consolidated financial statements.
PROQR THERAPEUTICS N.V.
Unaudited Condensed Consolidated Statement of Profit or Loss and OCI
(€ in thousands, except share and per share data)
Three month period | Six month period | |||||||
ended June 30, |
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| 2022 | 2021 | ||
€ 1,000 | € 1,000 | € 1,000 | € 1,000 | |||||
Revenue | ||||||||
Other income | ||||||||
Research and development costs | ( | ( | ( | ( | ||||
General and administrative costs | ( | ( | ( | ( | ||||
Total operating costs | ( | ( | ( | ( | ||||
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Operating result | ( | ( | ( | ( | ||||
Finance income and expense | ( | ( | ( | ( | ||||
Results related to associates | — | — | ( | — | ||||
Gain on disposal of associate | — | — | — | |||||
Gain on derecognition of financial liabilities | — | — | ||||||
Results related to financial liabilities measured at fair value through profit or loss | ( | ( | ||||||
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Result before corporate income taxes | ( | ( | ( | ( | ||||
Income taxes | ( | ( | ( | ( | ||||
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Result for the period | ( | ( | ( | ( | ||||
Other comprehensive income (foreign exchange differences on foreign operation) | ( | |||||||
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Total comprehensive income | ( | ( | ( | ( | ||||
Result attributable to |
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Owners of the Company | ( | ( | ( | ( | ||||
Non-controlling interests | ( | ( | ||||||
( | ( | ( | ( | |||||
Total comprehensive income attributable to | ||||||||
Owners of the Company | ( | ( | ( | ( | ||||
Non-controlling interests | ( | ( | ||||||
( | ( | ( | ( | |||||
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Share information |
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Weighted average number of shares outstanding1 | ||||||||
Earnings per share attributable to owners of the Company (Euro per share) | ||||||||
Basic loss per share1 | ( | ( | ( | ( | ||||
Diluted loss per share1 | ( | ( | ( | ( | ||||
The notes are an integral part of these condensed consolidated financial statements.
| 1. |
PROQR THERAPEUTICS N.V.
Unaudited Condensed Consolidated Statement of Changes in Equity
Attributable to owners of the Company | ||||||||||||||||||||
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| Equity settled |
| Option |
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| Accumulated |
| Total |
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| Total | |
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| € 1,000 | € 1,000 | € 1,000 | € 1,000 | € 1,000 | € 1,000 | € 1,000 | € 1,000 | € 1,000 | ||||||||||
Balance at January 1, 2021 |
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Result for the period |
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Other comprehensive income |
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Recognition of share-based payments |
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Issuance of ordinary shares | — | — | — | — | — | |||||||||||||||
Treasury shares transferred | ( | — | — | — | — | — | — | — | — | — | ||||||||||
Share options lapsed | — | — | — | ( | — | — | — | — | — | |||||||||||
Share options exercised | — | ( | — | — | — | |||||||||||||||
Balance at June 30, 2021 |
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Balance at January 1, 2022 |
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Result for the period |
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Other comprehensive income |
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Recognition of share-based payments |
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Issuance of ordinary shares | — | — | — | — | — | — | — | — | — | — | ||||||||||
Treasury shares transferred | ( | — | — | — | — | — | — | — | — | — | ||||||||||
Share options lapsed | — | — | — | ( | — | — | — | — | — | |||||||||||
Share options exercised / RSUs vested | — | ( | — | — | — | |||||||||||||||
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Balance at June 30, 2022 |
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The notes are an integral part of these condensed consolidated financial statements
PROQR THERAPEUTICS N.V.
Unaudited Condensed Consolidated Statement of Cash Flows
Three month period | Six month period | |||||||
ended June 30, |
| ended June 30, | ||||||
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| 2022 | 2021 | 2022 | 2021 | |||
€ 1,000 | € 1,000 | € 1,000 | € 1,000 | |||||
Cash flows from operating activities |
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Net result | ( | ( | ( | ( | ||||
Adjustments for: | ||||||||
— Depreciation | ||||||||
— Share-based compensation | ||||||||
— Financial income and expenses | ||||||||
— Results related to associates | — | — | — | |||||
— Gain on disposal of associate | — | — | — | ( | ||||
— Results related to financial liabilities measured at fair value through profit or loss | ( | ( | ||||||
— Gain on derecognition of financial liabilities | ( | — | ( | — | ||||
— Income tax expenses | ||||||||
Changes in working capital | ( | |||||||
Cash used in operations | ( | ( | ( | ( | ||||
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Corporate income tax paid | ( | ( | ( | ( | ||||
Interest received | — | — | ||||||
Interest paid | ( | ( | ( | ( | ||||
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Net cash used in operating activities | ( | ( | ( | ( | ||||
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Cash flow from investing activities | ||||||||
Purchases of property, plant and equipment | ( | ( | ( | ( | ||||
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Net cash used in investing activities | ( | ( | ( | ( | ||||
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Cash flow from financing activities |
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Proceeds from issuance of shares, net of transaction costs | — | — | ||||||
Proceeds from exercise of share options | — | |||||||
Proceeds from borrowings | — | — | ||||||
Proceeds from convertible loans | — | — | — | — | ||||
Repayment of lease liability | ( | ( | ( | ( | ||||
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Net cash (used in)/generated by financing activities | ( | ( | ||||||
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Net increase (decrease) in cash and cash equivalents | ( | ( | ||||||
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Currency effect cash and cash equivalents | ( | ( | ||||||
Cash and cash equivalents, at beginning of the period | ||||||||
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Cash and cash equivalents at the end of the period | ||||||||
The notes are an integral part of these condensed consolidated financial statements.
PROQR THERAPEUTICS N.V.
Notes to Unaudited Condensed Consolidated Financial Statements
1. General information
ProQR Therapeutics N.V., or “ProQR” or the “Company”, is a development stage company domiciled in the Netherlands that primarily focuses on the development and commercialization of novel therapeutic medicines.
Since September 18, 2014, the Company’s ordinary shares are listed on the NASDAQ Global Market under ticker symbol PRQR.
The Company was incorporated in the Netherlands, on February 21, 2012 and was reorganized from a private company with limited liability to a public company with limited liability on September 23, 2014. The Company has its statutory seat in Leiden, the Netherlands. The address of its headquarters and registered office is Zernikedreef 9, 2333 CK Leiden, the Netherlands.
ProQR Therapeutics N.V. is the ultimate parent company of the following entities:
| ● | ProQR Therapeutics Holding B.V. ( |
| ● | ProQR Therapeutics I B.V. ( |
| ● | ProQR Therapeutics II B.V. ( |
| ● | ProQR Therapeutics III B.V. ( |
| ● | ProQR Therapeutics IV B.V. ( |
| ● | ProQR Therapeutics V B.V. ( |
| ● | ProQR Therapeutics VI B.V. ( |
| ● | ProQR Therapeutics VII B.V. ( |
| ● | ProQR Therapeutics VIII B.V. ( |
| ● | ProQR Therapeutics IX B.V. ( |
| ● | ProQR Therapeutics I Inc. ( |
| ● | Amylon Therapeutics B.V. ( |
ProQR Therapeutics N.V. is also statutory director of Stichting Bewaarneming Aandelen ProQR (“ESOP Foundation”) and has full control over this entity. The Company holds a
As used in these condensed consolidated financial statements, unless the context indicates otherwise, all references to “ProQR” or the “Company” refer to ProQR Therapeutics N.V. including its subsidiaries and the ESOP Foundation.
2. Significant Accounting Policies
These condensed consolidated financial statements have been prepared in accordance with the recognition and measurement criteria of IFRS. Certain disclosures required by IAS 34 Interim Financial Statements have been condensed or omitted. Accordingly, these condensed consolidated financial statements should be read in conjunction with the Company’s annual financial statements for the year ended December 31, 2021. In the opinion of management, all events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since the end of the last annual reporting period are disclosed in these condensed consolidated financial statements.
The Company’s financial results have varied substantially, and are expected to continue to vary, from period to period. The Company believes that its ordinary activities are not linked to any particular seasonal factors.
The Company operates in
3. Adoption of new and revised International Financial Reporting Standards
The accounting policies adopted in the preparation of the condensed consolidated financial statements are consistent with those applied in the preparation of the Company’s annual financial statements for the year ended December 31, 2021.
New Standards and Interpretations, which became effective as of January 1, 2022, did not have a material impact on our condensed consolidated financial statements.
4. Critical Accounting Estimates and Judgments
In the application of the Company’s accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
The significant judgements made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those described in the Company’s annual financial statements for the year ended December 31, 2021.
Revenue recognition for the Eli Lilly collaboration and license agreement
a. Identification of the performance obligation
Note 11 describes the Company’s collaboration and license agreement with Eli Lilly. Under this agreement, ProQR provides Eli Lilly with a license (with a right to sub-license) to exploit compounds resulting from the collaboration. A significant amount of judgement is required to determine whether the license is distinct from the other promises in the contract. The license was concluded not to be distinct from the other promises in the contract based on the following considerations:
| ● | the license has no stand-alone value to Eli Lilly without the Company being involved in the research and development collaboration, and; |
| ● | there are significant interdependencies between the license and the research and development services to be provided by the Company. |
b. Determining the timing of satisfaction of performance obligations
For the Eli Lilly collaboration, the Company recognizes revenue over time, using an input method that estimates the satisfaction of the performance obligation as the percentage of labor hours incurred compared to the total estimated labor hours required to complete the promised services. As our estimate of the total labor hours required is dependent on the evolution of the research and development activities, it may be subject to change. If the progression and/or outcome of certain research and development activities would be different from the assumptions that were made during the preparation of these financial statements, this could lead to material adjustments to the total estimated labor hours, which might result in a reallocation of revenue between current and future periods.
c. Determining the transaction price
The Company applied judgement to determine whether the equity investment made by Eli Lilly in ProQR is part of the transaction price for the collaboration and license agreement. The Company concluded that the premium that Eli Lilly paid above the closing price on the day of entering into the equity investment agreement was paid because of the Company’s existing obligations to deliver research and development services to Eli Lilly under the terms of the collaboration and license agreement. Therefore, the premium paid by Eli Lilly on the equity investment is considered to be part of the transaction price. The contract also includes variable consideration, but no variable consideration was included in the transaction price, as it is not highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
Research and development expenditures
Development expenditures are currently not capitalized but are reflected in the income statement because the criteria for capitalization are not met. At each balance sheet date, the Company estimates the level of service performed by the vendors and the associated costs incurred for the services performed.
Although we do not expect the estimates to be materially different from amounts actually incurred, the understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and could result in reporting amounts that are too high or too low in any particular period.
Convertible debt
The terms of our convertible debt agreements are evaluated to determine whether the convertible debt instruments contain both liability and equity components, in which case the instrument is a compound financial instrument. Convertible debt agreements are also evaluated to determine whether they contain embedded derivatives, in which case the instrument is a hybrid financial instrument. Judgement is required to determine the classification of such financial instruments based on the terms and conditions of the convertible debt agreements, the currencies in which the debt instruments are denominated and the Company’s functional currency.
Estimation methods are used to determine the fair values of the liability and equity components of compound financial instruments and to determine the fair value of embedded derivatives included in hybrid financial instruments. The determination of the effective interest used for the host contracts of hybrid financial instruments and the liability components of compound financial instruments is dependent on the outcome of such estimations. Evaluating the reasonableness of these estimations and the assumptions and inputs used in the valuation methods requires a significant amount of judgement and is therefore subject to an inherent risk of error.
5. Cash and Cash Equivalents
At June 30, 2022, the Company’s cash and cash equivalents were €
6. Property, plant and equipment
At June 30, 2022 and December 31, 2021, property plant and equipment consisted of buildings and leasehold improvements, laboratory equipment and other assets. Buildings and leasehold improvements include a right-of-use asset relating to the lease of our Leiden office and laboratory space, with a carrying amount of €
7. Current liabilities
The following table summarizes details of deferred income at June 30, 2022 and December 31, 2021. The nature of the deferred income relating to Eli Lilly and Yarrow is described in Note 11.
June 30, | December 31, | |||
2022 | 2021 | |||
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| 2021 |
€ 1,000 | € 1,000 | |||
Eli Lilly up-front payment and premium on equity consideration | ||||
Yarrow up-front payment and premium on equity consideration | — | |||
Foundation for Fighting Blindness grant | ||||
Horizon 2020 grant | ||||
Total deferred income | ||||
Current portion | ( | ( | ||
At June 30, 2022, other current liabilities amount to €
8. Borrowings
| June 30, | December 31, | ||
| 2022 |
| 2021 | |
€ 1,000 | € 1,000 | |||
Innovation credit | ||||
Accrued interest on innovation credit | ||||
Convertible notes | ||||
Accrued interest on convertible notes | ||||
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Total borrowings | ||||
Current portion | ( | ( | ||
On December 10, 2018 ProQR was awarded an Innovation credit for the sepofarsen program for LCA 10. Amounts will be drawn under this facility from 2018 through 2022. The total credit of €
Convertible loans
In July 2020, the Company entered into a convertible debt financing agreement with Pontifax Medison Debt Financing. Under the agreement, the Company had access to up to $
A second close of the convertible debt financing agreement was completed in August 2020 with Kreos Capital. Under the second agreement, the Company had access to up to €
In connection with the loan agreement, the Company issued to Pontifax and Kreos warrants to purchase up to an aggregate of
On December 29, 2021, the Company amended its convertible debt financing agreement with the Lenders. Under the amended agreement, at June 30, 2022, the Company had drawn down an additional $
In connection with the loan agreement, the Company issued to the Lenders warrants to purchase up to an aggregate of
The Lenders may elect to convert the outstanding loan into ProQR ordinary shares at any time prior to repayment at a fixed conversion price. ProQR also has the ability to convert the loan into its ordinary shares, at the same conversion price, if the Company’s stock price reaches a pre-determined threshold.
Pontifax’ conversion option and warrants are accounted for as embedded derivatives and are recognized separately from the host contract as financial liabilities at fair value through profit or loss. The host contract is recognized at amortized cost.
The Kreos loan is accounted for as a compound financial instrument. The liability component is recognized at amortized cost. The equity component is initially recognized at fair value as option premium on convertible loan and will not be subsequently remeasured. Kreos’ warrants are accounted for as embedded derivatives and are recognized as financial liabilities at fair value through profit or loss.
Convertible loans were issued to Amylon Therapeutics B.V. (‘Amylon’) and are interest-bearing at an average rate of
In the second quarter of 2022, Amylon entered into waiver agreements with certain lenders. Such lenders’ loan agreements with Amylon are severed and any claims to repayment of any outstanding debt and accumulated interest are renounced. The total amount of convertible loans and accumulated interest waived under these agreements in the second quarter of 2022 is €
9. Lease liabilities
At June 30, 2022 and December 31, 2021, lease liabilities primarily consisted of the Company’s lease of office and laboratory facilities at Zernikedreef in Leiden, the Netherlands.
The lease agreement for our Leiden headquarters, where our main offices and laboratories are located, was put in place on July 1, 2020 and the current lease term is
10. Shareholders’ equity
The authorized share capital of the Company amounting to €
On March 31, 2020, the Company entered into a sales agreement, which permitted the offering, issuance and sale by the Company of up to a maximum aggregate offering price of $
In April 2021, the Company consummated an underwritten public offering of
In September 2021, the Company issued
On November 4, 2021, the Company filed a shelf registration statement, which permitted the offering, issuance and sale by the Company of up to a maximum aggregate offering price of $
On November 4, 2021, the Company entered into a sales agreement, which permitted the offering, issuance and sale by the Company of up to a maximum aggregate offering price of $
Translation reserve
The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.
Share options
The Company operates an equity-settled share-based compensation plan, which was introduced in 2013. Options and RSUs may be granted to employees, members of the Supervisory Board, members of the Management Board and consultants. The compensation expenses included in operating costs for this plan in the six month period ended June 30, 2022 were €
11. Revenue
Eli Lilly
In September 2021, the Company entered into a global licensing and research collaboration with Eli Lilly and Company (‘Eli Lilly’) focused on the discovery, development, and commercialization of potential new medicines for genetic disorders in the liver and nervous system. ProQR and Eli Lilly use ProQR’s proprietary Axiomer® RNA editing platform to progress new drug targets toward clinical development and commercialization.
Under the terms of the agreement, ProQR received an upfront payment and equity consideration, and is eligible to receive milestone payments and royalties on the net sales of any resulting products. In September 2021, the Company issued
With regard to its collaboration with Eli Lilly, the Company concluded as follows:
| ● | There is one single performance obligation under IFRS 15, which is the transfer of a license combined with the performance of research and development activities. The Company concluded that the license is not capable of being distinct and is not distinct in the context of the contract. |
| ● | The transaction price of this agreement currently only includes fixed parts, consisting of an up-front fee and an equity component. The agreement also contains variable parts, but those are not yet included in the transaction price. Milestone payments will only be included to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the milestones is subsequently resolved. Sales-based milestones and sales-based royalties will be included as the underlying sales occur. |
| ● | The Company recognizes revenue over time, using an input method that estimates the satisfaction of the performance obligation as the percentage of labor hours incurred compared to the total estimated labor hours required to complete the promised services. |
Yarrow Biotechnology
In May 2021, the Company entered into an exclusive worldwide license and discovery collaboration for an undisclosed target with Yarrow Biotechnology, Inc. (“Yarrow”). Under the terms of the agreement, ProQR received an upfront payment, equity consideration and reimbursement for ongoing R&D services. ProQR is also eligible to receive milestone payments and royalties on the net sales of any resulting products. In May 2021, ProQR received an up-front payment of €
With regard to its collaboration with Yarrow, the Company concluded as follows:
| ● | There is one single performance obligation under IFRS 15, which is the transfer of a license combined with the performance of research and development activities. The Company concluded that the license is not capable of being distinct and is not distinct in the context of the contract. |
| ● | The transaction price of this agreement currently includes both fixed and variable parts. The fixed part consists of an up-front fee and an equity component. The variable part consists of a cost reimbursement for research and development activities. The agreement also contains other variable parts, but those are not yet included in the transaction price. Milestone payments will only be included to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the milestones is subsequently resolved. Sales-based milestones and sales-based royalties will be included as the underlying sales occur. |
| ● | The Company recognizes revenue over time, using an input method that estimates the satisfaction of the performance obligation as the percentage of labor hours incurred compared to the total estimated labor hours required to complete the promised services. |
Six month period | ||||
ended June 30, | ||||
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| 2022 | 2021 | |
€ 1,000 | € 1,000 | |||
Eli Lilly collaboration revenue | — | |||
Yarrow collaboration revenue | ||||
The revenues relating to providing IP licenses and research and development services under the Company’s collaboration agreements have no directly associable cost of sales. Costs incurred to fulfill the associated performance obligations are recognized in research and development expenses, due to their being part of the Company’s primary activities of biopharmaceutical research and development.
12. Other income
Six month period | ||||
ended June 30, | ||||
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| 2022 | 2021 | |
€ 1,000 | € 1,000 | |||
Grant income | ||||
Other income | ||||
On February 9, 2018, the Company entered into a partnership agreement with Foundation Fighting Blindness (FFB), under which FFB has agreed to provide funding of $
Grants are recognized in other income in the same period in which the related R&D costs are recognized.
13. Research and development costs
Research and development costs amount to €
14. General and administrative costs
General and administrative costs amount to €
15. Investments in associates and results related to associates
As disclosed in note 11, in May 2021, the Company obtained an
The results related to associates for the six month period ended June 30, 2022 amounting to €
16. Investment in financial asset and gain on disposal of associate
In January 2021, Wings Therapeutics Inc. merged into Phoenicis Therapeutics Inc. by means of a non-cash transaction. ProQR holds a
The net gain on disposal of associate for the six month period ended June 30, 2021 of €
17. Income taxes
The current income tax liability amounts to €
Tax losses may be carried forward indefinitely. However, the offset of losses will be limited in a given year against the first € 1 million of taxable profit. For taxable profit in excess of this amount, losses may only be offset up to 50% of this excess.
18. Events after balance sheet date
No significant events occurred after the balance sheet date.