4Share-based payment

Share-based payment was introduced at the Group as part of the IPO on SIX Swiss Exchange on 29 April 2021.

The following equity-settled share-based payment arrangements are recognized in the consolidated financial statements:

Board of Directors

Members of the Board of Directors receive at least half of their fixed fees in shares, with the option to elect to be paid up to 100% of their fixed fee in shares. For Board members electing to receive more than 50% of their fixed fee in shares, the shares exceeding the 50% portion are granted at a discount of 20% to market price. The proportion between shares (in excess of 50%) and cash is selected by each Board member upon election at the annual general meeting and is fixed until next annual general meeting. The Board of Directors is compensated on a pro-rata basis for the period of service, even in the case of early termination or removal.

The fair value at grant date amounted to kEUR 799 (2021: kEUR 731), reflecting a measurement based on a total number of shares of 9,835 (2021: 12,540) and the price of EUR 81 (CHF 83) per share as at 26 April 2022 (2021: The initial public offering price of EUR 58 (CHF 64) per share).

All shares will be fully vested at the annual general meeting in April 2023. In 2022, a total amount of kEUR 809 (2021: kEUR 713) was recognized as “General and administrative expenses” in the income statement according to the principles of graded vesting in IFRS 2.

Chief Executive Officer

During the year ended 31 December 2021, the then current CEO of the Group, Raymond De Vré, was granted three separate share-based payment arrangements:

• A one-time grant of shares at a value of kCHF 750, which was calculated at a 20% discount to the initial public offering price of CHF 64, as compensation for the loss of unvested options from his previous employer. The fair value at grant date amounted to kEUR 854, reflecting a measurement based on 14,648 number of shares and the initial public offering price of EUR 58 (CHF 64) per share. The grant includes a service condition of three years, one-third vesting each year as of 1 June (starting from 2022). The expenses are recognized in the income statement according to the principles of graded vesting in IFRS 2, resulting in an amount of kEUR 329 recognized as “General and administrative expenses” in 2022 (2021: kEUR 401).

• A grant of shares at a value of kCHF 100 at 15% discount to the initial public offering price as compensation for his loss of variable payments for 2020 and 2021 from his previous employer. The fair value at grant date amounted to kEUR 107, reflecting a measurement based on 1,838 number of shares and the initial public offering price of EUR 58 (CHF 64) per share. The grant included a service condition of one year and vested on 1 July 2022. The expenses have been recognized on a straight-line basis in the income statement, resulting in an amount of kEUR 45 recognized as “General and administrative expenses” in 2022 (2021: kEUR 66).

• During the second half of 2021, the Board of Directors adopted a Long-Term Incentive Plan (“LTIP”) for Executive Committee members and other members of senior management of the Group. Under this share-based incentive program, eligible participants will be awarded the contingent right to receive a certain number of shares in the future (“PSU(s)”) in the Company subject to, inter alia, continued employment and achievement of non-market performance targets. The actual number of PSUs that will eventually vest and be settled in shares depend on the RONOA and EPS performance of the Group over a three-year performance period.
    
  During the course of 2022, the Remuneration and Nomination Committee considered the expansion of the LTIP to the full executive Committee as well as other members of senior management. However, in light of PolyPeptide’s disappointing financial performance in 2022, the Remuneration and Nomination Committee ultimately recommended to the Board of Directors not to grant any long-term incentive awards in 2022. The then current CEO of the Group, Raymond De Vré, voluntarily agreed not to receive his annual target value 2022 for the allocation of PSUs as set out in his employment agreement. The Remuneration and Nomination Committee plans to revisit this topic during the course of 2023.
  
  For the year ended 31 December 2021, the only eligible participant in the LTIP was the then current CEO of the Group, Raymond De Vré. The PSUs were granted to Raymond De Vré on 29 November 2021. In accordance with IFRS 2, the maximum number of shares potentially vesting was used for the determination of the fair value of the grant. As a result, the fair value at grant date amounted to kEUR 1,241, reflecting a measurement based on 9,909 number of PSUs and the share price of PolyPeptide Group AG as of the grant date of EUR 125 (CHF 131). The vesting period ends 10 trading days after the shareholders approve the 2023 audited consolidated financial statements.
  
  In 2022, no expenses have been recognized in the income statement since it is expected that no shares from the 2021 grant will eventually vest. In 2021, an amount of kEUR 28 was recognized as “General and administrative expenses” in the income statement. This amount has been reversed in 2022.

IPO share bonus

For the year ended 31 December 2021, eligible members of the Board of Directors, the Executive Committee and certain other senior managers were granted a total of 51,434 number of shares upon the successful listing on SIX Swiss Exchange. The fair value at grant date amounted to kEUR 2,998 and was measured based on the initial public offering price of EUR 58 (CHF 64) per share.

Since all the shares vested immediately upon the listing, the full amount was recognized in the income statement in the year ended 31 December 2021 as “General and administrative expenses” (see Note 3). The amount was subsequently fully reimbursed by Draupnir Holding B.V., which was recognized directly in equity on “Other capital reserves” in the same period.