Letter from the Chairman and the CEO

Let’s pave the way for curing skin diseases

2020 turned out to be a year far from what we had imagined, shaped by the COVID-19 pandemic. It was a challenging year for our company, LEO Pharma, and for our grantees and our investments. Yet, it also proved to be a year of resilience and dedication, and while 2020 saw a new level of uncertainty, the celebration of 400 years of proud LEO history created the LEO Group’s own sense of certainty by confirming that we have a unique heritage and a strong foundation on which to build the future.

In 2020, LEO Pharma launched its 2030 strategy with the ambition to be a global leader in medical dermatology, including rare diseases, by building on its unique dermatology heritage and developing a strong pipeline. At the same time, the company managed to convincingly mitigate the effects of the COVID-19 pandemic, thanks to the competent and sustained efforts of LEO Pharma’s committed employees. As well as maintaining a stable performance, LEO Pharma made significant progress in further developing its pipeline. An important milestone was the announcement of positive phase 3 trials for tralokinumab meeting all primary and secondary endpoints, enabling the company to prepare for the global launch in 2021 of what is only the second-to-market biologic treatment for atopic dermatitis.

The LEO Foundation was established to ensure the long-term continuance and development of LEO Pharma, and as an engaged owner our allimportant aim is to continuously provide the company with the best possible foundation for growth and success. The continuous success of LEO Pharma is not only paramount to the company but also a prerequisite for the Foundation’s ability to improve the understanding and treatment of skin diseases through philanthropic research grants to leading scientists around the world.

In August 2020, the LEO Foundation announced an opening for an investor to be part of the ownership of LEO Pharma. The process was completed at the beginning of 2021 with the agreement with Nordic Capital, which acquires a minority stake in the company. Combined with the LEO Foundation’s continued controlling ownership of the company, the partnership with Nordic Capital will ensure that LEO Pharma has a strong foundation for future growth and success.

A key theme, that we carefully and diligently considered throughout the year, was how the Foundation can best fulfill its role as a long-term owner in the most engaged and responsible way – and whether sole ownership of LEO Pharma was providing the company with the best possible platform to deliver on its ambitious 2030 strategy. The company’s journey towards becoming a global leader in medical dermatology will require continuous innovation and investments, and while LEO Pharma is well-funded today, it is important for the LEO Foundation to ensure optimal long-term funding flexibility as the company grows.

Looking at the LEO Foundation’s philanthropic activities in the form of grants dedicated to improving the understanding and treatment of skin diseases, 2020 was an extraordinary year. Our grantees and their research activities were severely affected by restrictions, with laboratories and universities closed for several months. But 2020 also highlighted the important role of science in mitigating the COVID-19 pandemic – and our commitment to support the best international skin research and make Denmark a global beacon for skin research is stronger than ever.

In 2020, we awarded 25 grants totaling DKK 72 million. Further, we did our best to help our grantees mitigate the impact of COVID-19 on their research projects – not least by offering additional funding to cover delays and other impacts. Building on our existing strategy, we will in 2021 review and develop our philanthropic activities to ensure we have the right framework to further increase our grant level over the coming years.

The COVID-19 pandemic triggered a highly volatile year on the capital markets. Yet looking at the LEO Foundation’s financial investments in isolation, it would be tempting to characterize 2020 as a normal year, in which most asset classes, despite uncertainty and surprises, delivered in line with our targets. Our long-term investment horizon, a diversified portfolio and a well-balanced risk profile provided the basis for a very satisfactory result at year-end, meeting our long-term return targets. Furthermore, we strengthened the ESG profile of the investment portfolio and focused on promoting responsible tax behavior in relation to unlisted investments by subscribing to the Tax Code of Conduct established by four major pension funds. There is no doubt that 2020 was a remarkable year for the LEO Foundation and for all areas of the LEO Group – a year that turned a new page in the impressive LEO history. The decision to establish a new ownership structure marks another major milestone that further strengthens the foundation on which to build the future.

We have emerged from 2020 more committed than ever to paving the way for curing skin diseases and creating sustainable value for people and society through engaged ownership, philanthropy and investments.

Lars Olsen Chairman of the Board of Trustees

Jesper Mailind CEO