ANNUAL REPORT 2014
INDEX
1. BUSINESS SECTION
INTRODUCTION 2014 achievements Interview with the Chairman of the Board of Directors and the CEO Strategy and outlook for 2015 NANOBODIES® CREATING BETTER MEDICINES Uniqueness and competitive advantages Product pipeline
ANNUAL REPORT 2014 / ABLYNX
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SHAREHOLDERS’ INFORMATION Key figures and performance indicators Shareholders structure The shares in 2014 Financial calendar Analyst coverage Contact the IR department
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38.
2. CORPORATE GOVERNANCE & FINANCIAL INFORMATION
58.
REPORT OF THE BOARD OF DIRECTORS
64.
RESPONSIBILITY STATEMENT
118.
CONSOLIDATED FINANCIAL STATEMENTS
122.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
126.
3. GLOSSARY
194.
3.
INDEX
ABLYNX AT A GLANCE
A MULTI-ASSET CLINICAL DEVELOPMENT COMPANY WITH A POWERFUL PROPRIETARY TECHNOLOGY PLATFORM DEDICATED TO CREATING NEW MEDICINES WHICH WILL MAKE A REAL DIFFERENCE TO PATIENTS AND THEIR CAREGIVERS
Ablynx is a clinical-stage biopharmaceutical company engaged in the development of Nanobodies®, proprietary therapeutic proteins based on single-domain antibody fragments. Due to their small size and unique structure, Nanobodies are ideal building blocks for the generation of novel biological drugs with multiple competitive advantages over other therapeutic molecules.
6 PRODUCTS IN CLINICAL DEVELOPMENT >25 in early development
UNIQUE AND POWERFUL technology platform
6 PHARMA PARTNERS
€206 MILLION
across the globe
2014 year end cash position
>€340 MILLION non-dilutive cash received to date from partners
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>300 EMPLOYEES 15 nationalities
5.
>500 PATENTS granted and pending
€49 MILLION 2014 revenue and grant income (+37% vs 2013) LISTED ON EURONEXT ticker: ABLX
BUSINESS SECTION
BUSINESS SECTION
INTRODUCTI
ION
2014 ACHIEVEMENTS
R&D MILESTONES Caplacizumab (anti-vWF) Achieved clinical proof-of-concept in worldwide Phase II study in patients with acquired TTP (June 2014), which is the 3rd clinical proof-of-concept for Ablynx’s Nanobodies Bioequivalence between liquid and lyophilised formulations demonstrated in Phase I study (Nov 2014)
ALX-0061 (anti-IL-6R) Demonstrated bioavailability of >80% when administered subcutaneously to healthy volunteers in Phase I study (Oct 2014)
ALX-0171 (anti-RSV) Positive Phase I results from two studies in healthy volunteers and subjects with hyper-reactive airways (May 2014) Published strong in vivo proof-of-concept results with inhaled ALX-0171 in neonatal lamb model of RSV infection in infants Initiated first-in-infant Phase IIa study in infants diagnosed with RSV and hospitalised for a lower respiratory tract infection (Dec 2014)
ALX-0761 (anti-IL-17A/F) Ablynx’s partner, Merck Serono, successfully completed a Phase Ia single ascending dose (SAD) study in healthy volunteers with ALX-0761, the first bi-specific Nanobody in the clinic, and then started a Phase Ib study in patients with moderate to severe psoriasis (Aug 2014)
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BUSINESS SECTION
PARTNERSHIPS
CORPORATE
Ablynx further strengthened its relationship with Merck & Co beyond their collaboration in ion channel drug discovery through the signing of a major discovery alliance and licensing agreement in the field of immuneoncology (focus on multi-specific Nanobodies) in a deal potentially worth up to €1.7 billion in future milestones plus royalties. The deal included an upfront payment of €20 million with up to €10.7 million due in research funding during the initial three years (Jan 2014).
During 2014, Ablynx strengthened its management team with the appointment of Johan Heylen as Chief Commercial Officer. Johan’s extensive commercial experience with some of the world’s leading companies (including GlaxoSmithKline, Servier and Wyeth) will help Ablynx to maximise the potential of its pipeline as its programmes move through the clinic and towards the market. This is the first step in establishing an infrastructure to enable the Company to increase its involvement in the commercialisation of certain of its Nanobody programmes (Nov 2014).
Ablynx expanded its relationship with the leading Chinese biopharmaceutical company Eddingpharm by granting the company an exclusive, royaltybearing license to develop and commercialise its anti-TNFα Nanobody, ozoralizumab, in the People’s Republic of China, the Hong Kong and Macao Special Administrative Regions, and Taiwan, for all indications, including rheumatoid arthritis (Sept 2014).
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FINANCIAL
Euronext launched Spotlight Options (July 2014) on the Ablynx shares and Ablynx established a Sponsored Level I ADR programme in the United States (Sept 2014), thereby offering alternative investment mechanisms in Ablynx for both European and American investors.
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€ 206.2 M CASH, CASH EQUIVALENTS, RESTRICTED CASH AND SHORT TERM INVESTMENTS
€30.1 M CASH INCOME FROM COLLABORATIONS
€41.7 M RAISED THROUGH PRIVATE PLACEMENT OF NEW SHARES
90%
FREE FLOAT
ESTABLISHED A DIVERSIFIED SHAREHOLDER BASE
BUSINESS SECTION
INTERVIEW WITH THE CHAIRMAN AND CEO OF THE COMPANY
LETTER TO SHAREHOLDERS
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DEAR SHAREHOLDERS, COLLEAGUES AND BUSINESS PARTNERS, 2014 WAS A YEAR OF CONSIDERABLE SUCCESS FOR ABLYNX AS WE WORK TO BUILD A UNIQUE BIOPHARMACEUTICAL COMPANY BASED AROUND MORE THAN 30 NANOBODY-BASED R&D PROGRAMMES. WE PURSUED OUR MODEL OF MAXIMISING THE POTENTIAL VALUE OF OUR ASSETS WHILE SPREADING RISK, DIVERSIFYING OUR SHAREHOLDER BASE AND MAINTAINING A STRONG CASH POSITION TO ENSURE FLEXIBILITY IN OUR DECISION MAKING.
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BUSINESS SECTION
2014 WAS AN EVENTFUL YEAR FOR ABLYNX. DID IT MEET YOUR EXPECTATIONS? Absolutely. The past year has been a successful one for the Company right across our business - scientifically, operationally and financially. From a financial perspective, we achieved our targets and ended the year with a strong cash position of €206 million and recorded a net operational cash burn of €34.1 million, which is within the cash burn guidance we provided at the beginning of 2014. It has also been a successful year in terms of our overall business development. We further expanded our relationships with both Merck & Co and Eddingpharm, and raised €41.7 million in an oversubscribed private placement of new shares. 2014 also saw important developments across our clinical pipeline. We published results from six clinical trials, including compelling proof-of-concept data for one of our wholly-owned
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programmes, caplacizumab, in acquired thrombotic thrombocytopenic purpura (TTP). In addition, four clinical trials were started, including two partnered programmes. The initiation of the first-in-infant Phase IIa study with our own anti-RSV Nanobody, ALX-0171, is a major milestone for the Company, particularly as it is the first trial with inhaled Nanobodies in a patient population. With six Nanobody programmes at the clinical development stage, including one planned to enter Phase III trials in 2015, our clinical pipeline continues to progress positively. This pipeline is complemented by on-going investments in early-stage discovery programmes which are funded by both Ablynx and its partners. There are more than 30 R&D programmes in our pipeline, a combination of partnered and wholly-owned assets which underpin our hybrid business strategy.
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WHAT WAS IN YOUR VIEW THE MAJOR ACHIEVEMENT FOR THE COMPANY IN 2014? In 2014, we made great strides across the business but we are particularly proud of the advances in our anti-vWF programme where we achieved clinical proofof-concept with caplacizumab in the orphan disease acquired TTP. A total of 75 patients were recruited in the trial, with one group receiving caplacizumab plus standard-of-care and the other receiving placebo and standard-ofcare. We met the primary endpoint of the trial by demonstrating that patients treated with caplacizumab achieved confirmed platelet normalisation at twice the rate of the group treated with placebo. Moreover, 71% fewer patients treated with caplacizumab experienced an exacerbation during drug treatment, demonstrating the Nanobody’s potential protective effect against the formation of additional microthrombi and possible related organ damage during the acute phase of the disease.
BUSINESS SECTION
Following the publication of these results, we began preparations to start the Phase III study with caplacizumab in 2015. Regulatory meetings were held early in 2015 in the US and EU to discuss the possibility of an expedited approval process based on the Phase II study data.
ARE YOU STARTING TO PUT GREATER EMPHASIS ON YOUR INTERNALLY-DRIVEN PROJECTS? Collaborations continue to form a crucial part of our hybrid business model and we expanded a number of existing partnerships during the year. We further validated the uniqueness of our powerful technology platform through the signature of a second agreement with Merck & Co. This new agreement focuses on the discovery and development of Nanobodies directed towards immune checkpoint modulators in immune-oncology, with a specific focus on multi-specific Nanobodies. Immune-oncology is a rapidly developing therapeutic field, with the first antibody-based products already reaching the
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market and showing great promise. The ability to link together multiple Nanobodies to different targets is a key advantage of our technology and could offer important benefits compared with mono-specific antibody approaches. In addition, we continued to expand our relationships in Asia through a second, exclusive, royalty-bearing licensing agreement with Eddingpharm to develop and commercialise our anti-TNFÎą Nanobody, ozoralizumab, in China, Macao, Taiwan and Hong Kong. We believe that both collaborations demonstrate that our business partners value our technology and our products, and their potential to make a difference to patients suffering from severe diseases.
DESPITE SIGNIFICANT LEVELS OF ACTIVITY, YOUR CASH POSITION REMAINED STRONG LAST YEAR. With many potentially attractive assets and a powerful and widely applicable technology platform, it has been critical to plan ahead
BUSINESS SECTION
and ensure that we have sufficient resources to take our whollyowned programmes through to their optimum value creation points. In 2014, we generated â‚Ź30.1 million in cash from our partners and raised another â‚Ź41.7 million from the capital markets. These funds together with our existing cash give us flexibility in decisions relating to the development and commercialisation of our whollyowned lead assets, caplacizumab and ALX-0171, as well as enabling us to invest in the technology platform and earlier stage assets.
WHAT DO YOU EXPECT TO SEE IN 2015? We anticipate another year of good progress in 2015. We expect to build on the success of 2014 by focusing on the operational delivery of our clinical pipeline, including multiple, later stage programmes. These include two Phase IIb RA studies with the anti-IL-6R Nanobody, ALX-0061, partnered with AbbVie, which we expect to initiate in the first quarter and a Phase II study which we plan to start in mid-year with the same Nanobody in SLE.
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In addition, we plan to start a Phase III study with caplacizumab in patients with acquired TTP in the second half of 2015. In parallel with the Phase III study, our new Chief Commercial Officer is leading a thorough analysis of our partnering and commercialization strategy for this product. Recruitment of the Phase IIa infant study with ALX-0171 will continue this year with the opening of clinical sites across the globe, to take advantage of the fact that the RSV season occurs at different times of the year in different geographies. 2015 could also see up to three partnered programmes start Phase I studies, together with results from the Phase Ib study in psoriasis patients with the bispecific anti-IL-17A/F Nanobody, ALX-0761, being run by Merck Serono and pre-clinical data from the first programmes from our immune-oncology collaboration with Merck & Co. Ablynx also expects to receive potential milestone payments from on-going collaborations and we are continuously exploring
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opportunities to partner with pharmaceutical companies to create additional value. In summary, in 2015 we will be running multiple, international, later-stage clinical trials, further investing in the earlystage pipeline and technology and preparing for the commercialisation of our first marketed Nanobody product. These activities will increase the operational cash burn but are a strong signal of our ambitions and confidence in the future as we focus on building a leading international biopharmaceutical company generating significant returns for shareholders and bringing drugs to market which will make a real difference to the lives of patients. Sincerely,
Dr Peter Fellner - Chairman Dr Edwin Moses- CEO
BUSINESS SECTION
STRATEGY AND OUTLOOK
CORPORATE STRATEGY Ablynx’s strategy is to use the Company’s unique Nanobody technology to develop therapeutics in areas of high unmet medical need where Nanobodies offer a clear promotable advantage over existing products and technologies. The Company employs a hybrid business model where it invests directly in its own development programmes as well as collaborating with pharmaceutical partners at all stages of discovery and development. Where there are appropriate opportunities, Ablynx will retain some or all rights to commercialise its products. Ablynx’s ambition is to develop differentiated and innovative medicines which have the potential to make a real difference to society, as well as creating sustainable value for all its stakeholders.
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OUTLOOK FURTHER IMPLEMENTING THE CORPORATE STRATEGY Ablynx is well positioned for further growth during the course of 2015 as it will focus on further value creation through the operational delivery of its later-stage clinical pipeline while continuing to invest in the technology platform and early stage product pipeline. In parallel, the Company will continue its business development activities to partner programmes at appropriate stages, to maximise the valuecreation from the Nanobody platform, while also generating short-term cash income to support the Company’s overall activities.
BUSINESS SECTION
EXPECTED PROGRAMME READ OUTS ALX-0761 (anti-IL-17A/F)
Phase Ib results in patients with psoriasis Immune-oncology
Pre-clincal in vivo proof-of-concept results from initial programmes as part of Merck & Co immuno-onco collaboration
DEVELOPING THE PIPELINE Caplacizumab (anti-vWF)
Start of Phase III study in patients with acquired TTP ALX-0061 (anti-IL-6R)
Start of 2 Phase IIb RA studies and Phase II study in SLE patients ALX-0171 (anti-RSV)
Complete recruitment of first-in-infant Phase IIa study Partners
Start of up to three Phase I studies
COMMERCIAL Determine commercialisation and partnering strategy for caplacizumab Potential milestone payments and additional collaborative deals
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BUSINESS SECTION
Ablynx continues to focus on longterm value creation and expects clinical data from various patient studies and key regulatory events during the course of the next few years.
2018
Clinical study results Key regulatory events
2017
2016 ALX-0171 Infant Phase IIa (RSV) Wholly-owned ALX-0061 Phase IIb combination therapy (RA)
2015 ALX-0761 Phase Ib (psoriasis) Licensed to Merck Serono (worldwide)
AbbVie have option to license worldwide ALX-0061 Phase IIb monotherapy (RA) AbbVie have option to license worldwide
Caplacizumab MAA filing EU Phase III results (TTP) Wholly-owned ALX-0171 Infant Phase IIb (RSV) Wholly-owned ALX-0141 and ozoralizumab Phase I/II in China Licensed to Eddingpharm (China)
Caplacizumab conditional approval EU and BLA filing in US Wholly-owned ALX-0061 Phase II (SLE) AbbVie have option to license worldwide Results from various patient studies with partners
ALX-0761 Phase IIa (psoriasis) Licensed to Merck Serono (worldwide)
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BUSINESS SECTION
NANOBODIES CREATING BETTER MEDIC
S
速
CINES
OFFERING MULTIPLE COMPETITIVE ADVANTAGES OVER OTHER TECHNOLOGIES
UNIQUE AND POWERFUL TECHNOLOGY PLATFORM
Mix and match Ability to design modular drugs based on Nanobody building blocks combined with each other, with other protein domains or with other molecules or drugs. Multi-specific, multi-valent and bi-paratopic Nanobodies have all been produced and their potential therapeutic efficacy demonstrated.
Alternative delivery routes The robustness and stability of Nanobodies allows administration not only by injection but also by nebulisation directly into the respiratory tract, and potentially through the ocular route, topically and orally for local treatment in the gut.
Challenging targets Nanobodies can interact with epitopes on targets which are hidden or shielded from the much larger conventional antibodies such as ion channels and GPCRs.
Cell and tissue homing The potential to develop specific Nanobody formats to increase specific binding to certain cells and tissues.
Customised half-life extension Ability to tailor the in vivo half-life of a Nanobody from a few hours to >3 weeks.
Cell killing Nanobodies can be linked to toxins which can then be delivered directly to target cancer cells.
Ease of production Nanobodies are encoded by single genes and are efficiently produced in prokaryotic and eukaryotic hosts including bacteria and yeast. They can be formulated at high concentrations and low viscosity.
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BUSINESS SECTION
FOTO
The Company employs a hybrid model where it invests directly in its own development programmes as well as collaborating with pharmaceutical partners at all stages of discovery and development.
Therapeutic area Haematology
Fully owned
MULTIPLE SHOTS ON GOAL
PRODUCT PIPELINE
>30 PROPRIETARY AND PARTNERED PRODUCTS IN DEVELOPMENT FOR THE TREATMENT OF A WIDE RANGE OF DISEASES, INCLUDING INFLAMMATION, HAEMATOLOGY, RESPIRATORY DISEASES AND ONCOLOGY
Product name Target caplacizumab vWF
Dis
Respiratory ALX-0171 RSV Various Oncology Various Inflammation/ Various Immunology/Infection Ocular Various Inflammation/ Immunology
ALX-0061 IL-6R ALX-0761 IL-17F/IL-17A ozoralizumab TNFÎą Various
Partnered
Clinically validated targets First-in-class ANNUAL REPORT 2014 / ABLYNX
Oncology/ Various Immuno-oncology ALX-0751 Various
Bone disorders ALX-0141 RANKL Neurology Various Various CXCR2 Other Various
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BUSINESS SECTION
At the end of 2014, six Nanobodies reached the clinical development stage and over 25 programmes were in early stage development. Two of those (ALX0141 and ozoralizumab) have been licensed in China and are currently in precinical development to generate data in China before they can move forward in the clinic in Chinese patients. An overview of the development status of each of the Nanobodies in the clinic is provided in the following sections. More detailed results from the clinical studies are available on the Ablynx website www.ablynx.com.
scovery
Pre-clinical Phase I
Phase II
Phase III
Filing
Greater China
Greater China
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BUSINESS SECTION
CAPLACIZUMAB
wholly-owned anti-vWF Nanobody to treat acquired Thrombotic Thrombocytopenic Purpura (TTP) //
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Caplacizumab, in addition to plasma exchange and immunosuppressive therapy, has the potential to become an important new treatment for acquired thrombotic thrombocytopenic purpura (TTP) Caplacizumab received Orphan Drug status in 2009 (FDA and EMA) Phase II clinical proof-of-concept data published in June 2014 suggest that caplacizumab prevents further consumption of platelets, thereby protecting patients from additional formation of microvascular thrombi Phase III study on track to start in 2015 MAA filing for conditional approval in Europe is expected in 2017
Caplacizumab (28kD) is a bivalent Nanobody that binds to the A1 domain of vWF, a blood glycoprotein involved in haemostasis, and thereby inhibits platelet binding to UL-vWF. As such, caplacizumab has the potential to prevent the formation of string-like clots in the blood of patients with acquired TTP. Importantly, caplacizumab selectively prevents thrombus formation in high-shear blood vessels and is expected not to interact with haemostasis in normal, healthy blood vessels.
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BUSINESS SECTION
2014 ACHIEVEMENTS In June, Ablynx reported compelling clinical proofof-concept Phase II results with its anti-vWF Nanobody, caplacizumab, in patients with acquired TTP. The results demonstrated that caplacizumab has an acceptable safety profile and that treatment with caplacizumab, in addition to standard of care, results in a significant shorter time to platelet normalisation and a reduced number of exacerbations during treatment. These results suggest that caplacizumab prevents further consumption of platelets, thereby protecting patients from additional formation of microvascular thrombi.
between the liquid and lyophilised formulations of caplacizumab, the latter which will be used in the Phase III study and for commercialisation. Ablynx consulted a number of clinical and regulatory experts to discuss the design of the Phase III study with caplacizumab and made further preparations to start this Phase III study in 2015.
THROMBOTIC THROMBOCYTOPENIC PURPURA (TTP) //
Potentially life threatening, rare thrombotic disorder
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Extensive microscopic thrombi formed in small blood vessels throughout the body
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5-11 patients per million people worldwide suffer from TTP
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High mortality rate (10-20%) and about 36% of patients experience relapses
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Patients have major morbidities after a TTP episode such as neurocognitive impairment and potential damage to the heart and kidneys
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High unmet medical need and currently no drugs specifically approved to treat TTP
In November, Ablynx demonstrated bioequivalence
Sources: George et al, 2008; Scully et al, Br J Haematology 2012
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BUSINESS SECTION
ALX-0171
wholly-owned anti-RSV Nanobody to treat Respiratory Syncytial Virus (RSV) infection //
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ALX-0171 is an anti-RSV therapeutic administered via inhalation ALX-0171 has demonstrated a strong therapeutic effect in a neonatal lamb model for infant RSV infection ALX-0171 was well tolerated in multiple Phase I clinical studies in adults A first-in-infant Phase IIa study with inhaled ALX-0171 is currently on-going
ALX-0171 (42kD) has first-in-class potential for the treatment of RSV infection. It is a trivalent Nanobody that inhibits RSV replication by binding the F-protein on the virus’ surface and thereby neutralises RSV by blocking virus uptake into cells, allowing the host’s immune system to clear the virus. The physical robustness and stability of Nanobodies allows them to survive the extreme conditions needed for drug nebulisation. ALX-0171 is the first Nanobody treatment developed for delivery by nebulisation directly into the respiratory tract, i.e. the site of RSV infection.
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BUSINESS SECTION
2014 ACHIEVEMENTS In May, Ablynx successfully completed two Phase I studies with inhaled ALX-0171 in healthy volunteers and subjects with hyper-reactive airways. In addition, in vivo proof-of-concept results were published demonstrating that ALX-0171 markedly reduced viral titres, lung lesions and symptoms of illness in a neonatal lamb model of infant RSV infection. In December, Ablynx opened recruitment for the Phase IIa firstin-infant study with ALX-0171 to evaluate the safety, tolerability and clinical activity (such as effect on feeding, respiratory rate, wheezing, coughing and general appearance) of ALX-0171, administered via inhalation, in otherwise healthy infants and toddlers diagnosed with RSV and hospitalised for a lower respiratory tract infection.
RESPIRATORY SYNCYTIAL VIRUS (RSV) //
Respiratory virus that infects the respiratory tract, including the lungs
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Most common cause of bronchiolitis and pneumonia in children under 1 year of age
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~300,000 children (<5 years) are hospitalised per year in the 7 major markets
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RSV infection during infancy results in prolonged wheezing and is associated with an increased risk for asthma development later in life
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High unmet medical need and currently only symptomatic treatment options available
Sources: Sigurs et al, Thorax, 2010; Backman et al, Acta Pediatr, 2014
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BUSINESS SECTION
ALX-0061
anti-IL-6R Nanobody to treat auto-immune disorders
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ALX-0061 is being developed for the treatment of rheumatoid arthritis (RA) and systemic lupus erythematosus (SLE) ALX-0061 achieved clinical proof-of-concept in Phase IIa RA study Global exclusive license agreement for ALX-0061 signed with AbbVie in September 2013 Clinical centres opened for the Phase IIb studies in RA and Phase II study in SLE expected to start around mid-2015
ALX-0061 targets the interleukin 6 pathway via its IL-6 receptor (IL-6R). IL-6 is a pro-inflammatory cytokine that plays a role in T-cell activation, production of acute phase proteins in response to inflammation, induction of immunoglobulin production, and stimulation of osteoclast differentiation and activation. ALX-0061 (26kD) has a very strong affinity for the soluble IL-6R and contains an anti-IL-6R Nanobody linked to an anti-human serum albumin (HSA) Nanobody, thereby increasing the in vivo serum half-life.
2014 ACHIEVEMENTS In October, Ablynx announced positive results from a Phase I study of the subcutaneous (sc) formulation of ALX-0061, demonstrating that bioavailability after sc administration was higher than 80%. There were no significant safety or tolerability signals noted with subcutaneous administration of ALX-0061. Maximum mean ALX0061 serum concentrations following sc administration were reached after approximately one to three days post dose. Mean serum IL-6
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BUSINESS SECTION
concentrations increased following ALX-0061 administration, with a dose-related increase in the duration of the effect, which was similar between the different administration routes. Ablynx made further progress with the preparations to start the two Phase IIb studies in RA in Q1 2015 and the Phase II study in SLE around mid-2015.
Source: Decision Resources 2013
RHEUMATOID ARTHRITIS (RA) //
//
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ALX-0061 GLOBAL EXCLUSIVE LICENSING DEAL WITH ABBVIE In September 2013, Ablynx and AbbVie entered into a global license agreement, worth up to US$840 million plus doubledigit royalties, to develop and commercialise ALX-0061. As part of the agreement, Ablynx is responsible for Phase II clinical development of ALX0061 in both RA and systemic lupus erythematosus (SLE). Upon the achievement of predefined Phase II success criteria, AbbVie will exercise its right to in-license ALX-0061 and be responsible for subsequent Phase III clinical development and commercialisation.
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//
Chronic, progressive, inflammatory disease of the joints and surrounding tissues ~6 million people expected to suffer from RA in the 7 major markets in 2021 The RA market is anticipated to grow from $14.0 billion in 2013 to $18.2 billion in 2023 Need for new, differentiating products as patients become refractory to existing therapies
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SYSTEMIC LUPUS ERYTHEMATOSUS (SLE) //
Complex, multi-organ, autoimmune disorder
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5 million people worldwide suffer from a form of lupus
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90% of diagnosed people are women
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The SLE therapy market is expected to grow to $4.2 billion by 2021
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High unmet need for novel treatment options for patients with severe disease
BUSINESS SECTION
ALX-0761
anti-IL-17A/F to treat auto-immune disorders
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//
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ALX-0761 is being developed for the treatment of auto-immune disorders ALX-0761 achieved pre-clinical proof-of-concept in an animal model for rheumatoid arthritis A Phase Ib study with ALX-0761 in patients with psoriasis is currently on-going ALX-0761 exclusively licensed to Merck Serono in June 2013
ALX-0761 (40kD) is a trivalent, bi-specific Nanobody that blocks both IL-17A and IL-17F and that binds to human serum albumin for in vivo serum half-life extension. Th17 cells and IL-17 are associated with the pathology of many human inflammatory and autoimmune disorders like psoriasis, rheumatoid arthritis (RA) and multiple sclerosis and have proved to play an important role in animal models mimicking these and other auto-immune disorders.
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BUSINESS SECTION
2014 ACHIEVEMENTS In August, Ablynx announced that Merck Serono started a Phase Ib study in patients with moderate to severe psoriasis with ALX0761, following the successful completion of a single ascending dose study with ALX-0761 in healthy volunteers.
ALX-0761 GLOBAL EXCLUSIVE LICENSING DEAL WITH MERCK SERONO In September 2008, Ablynx entered into an agreement with Merck Serono under which Merck Serono and Ablynx would co-discover and co-develop Nanobodies against two targets in immunology and oncology. Both companies agreed to share equally all research and development
costs and the resulting profits but the collaboration agreement also allowed Ablynx to convert, after successfully having passed certain development milestones at certain time-points in development, the 50-50 co-discovery and codevelopment collaboration into a license agreement. In June 2013, at the time of the initiation of the Phase I healthy volunteer study with ALX-0761, Ablynx announced that it had converted the collaboration into a license agreement. As a result, Merck Serono now has an exclusive worldwide license agreement for ALX-0761. Ablynx is eligible to receive additional development milestone payments associated with the progress of the product in multiple indications as well as regulatory and commercial milestones plus tiered royalties upon approval of the product. The start of the Phase I study triggered a â&#x201A;Ź2.5 million milestone payment to Ablynx.
PSORIASIS //
Chronic auto-immune disease, requiring long-term treatment to manage disease flares
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Associated with important comorbidities, including cardiovascular disease and metabolic syndrome
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Skin involvement ranges from mild to very severe and possibly accompanied by the debilitating joint disease, psoriatic arthritis
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~17.5 million patients expected to suffer from psoriasis in 2022 in the 7 major markets
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The psoriasis therapy market is expected to grow to US$9.2 billion by 2022
Source: Decision Resources 2013
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BUSINESS SECTION
OZORALIZUMAB
anti-TNFα to treat auto-immune disorders //
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//
// //
Ozoralizumab is a next generation TNFα blocker that is being developed for the treatment of auto-immune disorders with initial focus on rheumatoid arthritis (RA) Ozoralizumab achieved clinical proof-of-concept in a Phase IIa RA study Exclusively licensed to Eddingpharm in Mainland China, Hong Kong, Macao and Taiwan Pre-clinical study currently on-going in China Ablynx is looking for additional licensing opportunities outside Greater China
Ozoralizumab (38kD) is a trivalent Nanobody that potently neutralises TNFα and binds to serum albumin to increase its in vivo half-life. TNFα promotes the inflammatory response which in turn causes many of the clinical problems associated with auto-immune disorders such as rheumatoid arthritis, ankylosing spondylitis, inflammatory bowel disease and psoriasis.
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BUSINESS SECTION
2014 ACHIEVEMENTS In September, Ablynx announced that it had expanded its relationship with the Chinese biopharmaceutical company, Eddingpharm, by granting the Company an exclusive, royaltybearing license to develop and commercialise ozoralizumab, in the mainland of the People’s Republic of China, the Hong Kong and Macao Special Administrative Regions, and Taiwan, for all indications, including RA.
development, registration and commercialisation in Greater China of anti-TNFα Nanobody therapeutics. Ablynx will have access to the clinical data generated by Eddingpharm to support potential licensing discussions in other geographic regions. Ablynx received the first of €1 million of the upfront payment of €2 million and is entitled to receive development and commercial milestone payments plus tiered, double-digit royalties of up to 20%, based on annual net sales of ozoralizumab generated by Eddingpharm in Greater China.
Under the terms of the agreement, Eddingpharm will be responsible for the clinical
RHEUMATOID ARTHRITIS (RA) //
Chronic, progressive, inflammatory disease of the joints and surrounding tissues
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~6 million people expected to suffer from RA in the 7 major markets in 2021
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The RA market in China is expected to be ~1.8% of the total Chinese pharmaceutical market, expected to amount ~$2.9bn in 2017
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Need for new, differentiating products as patients become refractory to therapies
Source: Espicom Business Intelligence
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BUSINESS SECTION
ALX-0141
anti-RANKL to treat bone-loss related disorders
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//
// //
ALX-0141 is being developed for the treatment of bone-loss related disorders including osteoporosis and bone metastasis ALX-0141 successfully completed a Phase I study in postmenopausal women Exclusively licensed to Eddingpharm in Mainland China, Hong Kong, Macao and Taiwan Pre-clinical study currently on-going in China Ablynx is looking for additional licensing opportunities outside Greater China
ALX-0141 (41kD) is a trivalent Nanobody targeting Receptor Activator of Nuclear factor Kappa-B Ligand (RANKL), a key mediator of bone resorption and an essential regulator of osteoclasts, the cells involved in the breakdown of bone, and which binds to serum albumin to increase its in vivo half-life. A Phase I study in healthy post-menopausal women showed that a single administration of ALX-0141 has a strong and very long lasting inhibitory effect on bone resorption biomarkers and was well tolerated with no serious adverse events or dose-limiting toxicity being observed.
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Intelligence; Global Data
OSTEOPOROSIS //
ALX-0141 EXCLUSIVE LICENSING DEAL WITH EDDINGPHARM IN GREATER CHINA //
In October 2013, Ablynx granted an exclusive license to the Chinese biopharmaceutical company Eddingpharm, to develop and commercialise ALX-0141 in the mainland of the Peopleâ&#x20AC;&#x2122;s Republic of China, the Hong Kong and Macao Special Administrative Regions, and Taiwan, for all indications, including osteoporosis and bone metastases. Eddingpharm is responsible for the clinical development, registration and commercialisation in Greater China of anti-RANKL Nanobody therapeutics and Ablynx will have access to the data generated by Eddingpharm to support potential licensing discussions in other geographic regions.
//
Progressive bone disease characterised by a decrease in bone mass and density which can lead to an increased risk for fractures Global osteoporosis market expected to grow to US$11.4 billion in 2015, increasing at a compound annual growth rate (CAGR) of 9.2% over the period 2010 to 2015 The market in China for osteoporosis treatments is expected to grow at a CAGR of 13.5% from 2010 to 2015 to reach US$2.5bn in 2015
BONE METASTASIS //
Class of cancer metastases that results from primary tumour invasion to the bone
//
Generally arise from epithelial tumours and form a solid mass inside the bone
//
The global market for bone metastasis is expected to grow to US$6.4 billion in 2017
//
Market for bone metastasis in China expected to account for approximately 22% of the global market
Ablynx received a â&#x201A;Ź2 million upfront payment from Eddingpharm and is entitled to receive commercial milestone payments plus tiered, double-digit royalties of up to 20%, based on annual net sales of ALX0141 generated by Eddingpharm in Greater China. Sources: Transparency Market Business
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SHAREHOLDE INFORMATION
ERS’ N
KEY FIGURES AND PERFORMANCE INDICATORS
(€’000) R&D income Grants
2008 2009 2010 15,557 28,068 29,196 1,198 1,615 2,263
Total revenues R&D expenses G&A expenses
16,755 (29,889) (7,447)
29,683 (42,800) (9,044)
31,432 (48,512) (8,882)
Total expenses Other operating income/(expense)
(37,336) 6
(51,844) 1
(57,394) 97
Operating result Net financial result Result before taxes
(20,575) (5,352) (15,223)
(22,160) 2,165 (19,995)
(25,865) 1,395 (24,470)
Income tax expense Net result of the year Basic and diluted loss per year
0 0 0 (15,223) (0)
2008
(19,995) (1)
(24,470) (1)
2009
2011 2012 2013 2014 19,861 25,645 33,181 47,710 2008 1,082 2,761 1,587
21,869 (56,307) (10,423)
26,727 (46,868) (9,409)
35,942 (43,699) (10,044)
49,297 (54,488) (11,052)
(66,730) (668)
(56,277) (222)
(53,743) 128
(65,450) 0
(45,529) 1,634 (43,895)
(29,772) 1,264 (28,508)
(17,673) 1,797 (19,470)
(16,238) 3,508 (12,730)
0 0 0 0 (43,895) (1)
2010
(28,508) (1)
2011
(12,730) (0)
(19,470) (0)
2012
2013
(€ MILLION)
REVENUES & GRANT INCOME
17
30
31
22
27
36
49
2008
2009
2010
2011
2012
2013
2014
2008
2009
2010
2011
2012
2013
2014
200.37 206.18 115.84
113.53
92.32
157.57
(€ MILLION)
CASH-INCOME, OPERATING EXPENSES AND TOTAL CASH POSITION
83.82 62.77
66.73
58.75 53.77
51.84
65.53
57.39
37.34
30.08 22.57 19.29
Opex Cash Income Cash position
28.51 31.09
36.46
NUMBER OF EMPLOYEES
31 dec.2012
31 dec
221
244
40
40
261
284
R&D G&A Total
c.2013
31 dec.2014
280 41 321
PRODUCTS IN THE CLINIC
6
2014
7
2013
5
2012
7
2011
5
2010
4
2009
3
2008
SHAREHOLDERS PER REGION
29% Benelux
24% UK
4% France
26% US
17% Other
DIVERSIFIED SHAREHOLDERS BASE WITH FREE FLOAT OF 90%
3% FMR LLC (US)
4% Perceptive Advisors
4% Aviva (UK)
4% Boehringer Ingelheim (DE)
9% Abingworth (UK)
76% Other institutional and retail investorrs
THE SHARES IN 2014
On 31 December 2014, there were 54,014,159 shares representing a total share capital of the Company of €100,952,3651 . The total number of outstanding warrants (in number of shares) at 31 December 2014 was 3,015,978 with the total number of fully diluted shares being 57,030,137. Ablynx’s shares are traded on NYSE Euronext Brussels, under the ticker symbol ABLX. Ablynx’s ADRs are listed ont he OTC mariet in the United States under ticker symbol ABYLY.
1
Under Belgian GAAP
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BUSINESS SECTION
2010
2011
2012
2013
2014
Average daily volume
25,292
69,642
116,296
190,926
121,006
Average daily value
197,362
353,980
503,372
1,343,892
1,045,748
Total traded volume
6,499,989
17,975,216
29,771,718
48,686,030
30,795,240
Total traded value
50,722,056
90,972,838
128,863,121
342,692,372
265,619,949
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10
9
8
7
March 2014
May 2014
Ju 20
ABSOLUTE PERFORMANCE IN 2014
uly 014
September 2014
November 2014
RELATIVE PERFORMANCE IN 2014
Next Biotech ABLX BEL Pharma Bio BEL Mid
March 2014
May 2014
60.00% 40.00% 20.00% 00.00%
July 2014
September 2014
November 2014
FINANCIAL CALENDAR 2015 DATE EVENT 31 March online publication annual report 2014 30 April Annual General Meeting 2015 13 May results Q1 2015 27 August half year results 2015 18 November results Q3 2015
SHAREHOLDERS’ CLUBS AT ABLYNX (In Dutch language only) Ablynx organises frequent shareholders’ clubs at its headquarters in Ghent during which individual investors have the opportunity to meet with the CFO and IR, and to visit the laboratories. The events in 2015 are scheduled on the following days: 20 May at 5.45pm 16 September at 5.45pm 9 December at 5.45pm To attend an event, please register via email: investors@ablynx.com, stating your name and preferred day. The events are on a “first come, first served” basis.
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ANALYST COVERAGE Ablynx is covered by eight analysts: BROKER ANALYST Berenberg Bank Alistair Campbell Bryan Garnier Hugo Solvet Goldman Sachs Steve Chesney Helvea Olav Zilian Jefferies Peter Welford/Trung Huynh KBC Securities Jan De Kerpel Kempen & Co Sachin Soni Petercam Roderick Verhelst
RATING END 2014 Buy Buy Neutral Buy Buy Buy Buy Buy
INVESTOR RELATIONS CONTACT Marieke Vermeersch Associate Director Investor Relations Ablynx nv Technologiepark 21 9052 Zwijnaarde (Ghent) Belgium Email: marieke.vermeersch@ablynx.com Tel: +32 9 262 00 82 Website: www.ablynx.com
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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
CONTENTS
01.
REPORT OF THE BOARD OF DIRECTORS 64. 1.1. Strategic Highlights 1.2. Analysis of Results of Operations 1.3. Balance Sheet Analysis 1.4. Cash Flow Analysis 1.5. Outlook 2015 1.6. Corporate Governance Statement 1.7. Transactions within the Authorised Capital 1.8. Acquisition of Own Securities 1.9. Use of Financial Instruments by the Group 1.10. Circumstances that could considerably affect the Development of the Group 1.11. Research and Development 1.12. Conflicting Interests of Directors (Art. 523 of the Belgian Companies Code) 1.13. Independence and Expertise of at least one Member of the Audit Committee 1.14. Justification of the Valuation Rules 1.15. Appropriation of Results 1.16. Important Events subsequent to the Accounting Reference Date 1.17. Grant of Discharge to the Directors and the Statutory Auditor
02. RESPONSIBILITY STATEMENT
118.
03.
STATUTORY AUDITORâ&#x20AC;&#x2122;S REPORT
119.
04. CONSOLIDATED BALANCE SHEET
122.
05.
123.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
06. CONSOLIDATED CASH FLOW STATEMENTS 07.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
08. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 8.1. General Information 8.2. Summary of Significant Accounting Policies 8.3. Financial Risk Management 8.4. Critical Accounting Estimates and Judgements 8.5. Segment Information 8.6. Intangible Fixed Asset 8.7. Property, Plant and Equipment
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125. 126.
CORPORATE GOVERNANCE & FINANCIAL REVIEW
8.8. Restricted Cash 8.9. R&D tax incentive receivables 8.10. Trade Receivables and Other Current Assets 8.11. Other Short-term Investments 8.12. Cash and Cash Equivalents 8.13. Financial Instruments by Category 8.14. Share Capital 8.15. Share-Based Payments 8.16. Borrowings 8.17. Trade Payables and Other Current Liabilities 8.18. Deferred Income Tax 8.19. Retirement Benefit Obligations 8.20. Revenue Recognition 8.21. Research and Development Expenses 8.22. General and Administrative Expenses 8.23. Other Income and Expenses 8.24. Employee Benefit Expense 8.25. Operating Leases 8.26. Finance Income and Expenses 8.27. Income Tax Expense 8.28. Loss Per Share 8.29. Contingencies and Arbitrations 8.30. Commitments 8.31. Related Party Transactions 8.32. Events after the Balance Sheet Date 09. DISCLOSURE AUDIT FEES 10.
11.
181.
CONDENSED STATUTORY FINANCIAL STATEMENTS OF ABLYNX NV SUMMARY OF VALUATION RULES AND ADDITIONAL INFORMATION 11.1. Principles 11.2. Specific Rules
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CORPORATE GOVERNANCE & FINANCIAL REVIEW
01. REPORT OF THE BOARD OF DIRECTORS
Dear Shareholders, We are pleased to present you the consolidated financial statements for the fiscal year ended 31 December 2014 prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU.
1.1. STRATEGIC HIGHLIGHTS During 2014, total revenue and grants income increased by 37% to €49.3 million (2013: €35.9 million) driven by higher income for full-time equivalents and higher recognised income from the upfront payments received from AbbVie and Merck & Co. Cash-income for the period of €30.1 million showed a strong decrease compared with 2013 (2013: €157.6 million) as 2013 cash-income included US$175 million upfront payment from AbbVie. Total research and development costs increased to €54.5 million (2013: €43.7 million) in line with higher external development costs, which are largely related to clinical trials expenditure and increased headcount. General and administrative costs increased to €11.1 million (2013: €10.0 million), in line with higher personnel costs, including share based payments. The operating loss decreased by 8% to €16.2 million (2013: €17.7 million). The net loss for the period was €12.7 million (2013: €19.5 million). The net cash burn in 2014 (excluding the proceeds of 39.9 million from the private placement completed in July 2014) was €34.1 million. The Company ended the year with €206.2 million in cash, cash equivalents, restricted cash and other short-term investments. Pipeline update At the end of 2014, Ablynx had six wholly-owned/partnered Nanobodies in the clinical development stage. In February, after completing pre-clinical studies with the anti-IgE Nanobody, ALX-0962, for use in severe allergic asthma, Ablynx announced that it would not progress this programme into Phase I studies because of insufficient differentiation from the competition. In May, Ablynx successfully completed two Phase I studies with the inhaled anti-RSV Nanobody, ALX-0171, in healthy volunteers
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and subjects with hyper-reactive upper airways. In addition, in November, in vivo pre-clinical proof-of-concept results were published, demonstrating that ALX-0171 markedly reduced viral titres, lung lesions and symptoms of illness in a neonatal lamb model of infant RSV infection. In December, Ablynx opened recruitment of the Phase IIa first-in-infant inhalation study with ALX-0171 to evaluate the safety, tolerability and clinical activity (such as effect on feeding, respiratory rate, wheezing, coughing and general appearance) of ALX-0171, administered via inhalation, in otherwise healthy infants and toddlers diagnosed with RSV and hospitalised for a lower respiratory tract infection. In June, Ablynx reported clinical proof-of-concept Phase II top line results for its anti-vWF Nanobody, caplacizumab, in patients with acquired TTP. The results demonstrated that caplacizumab has an acceptable safety profile and that treatment with the drug, in addition to the standard of care, results in a significantly shorter time to platelet normalisation and a reduced number of exacerbations during treatment. These results suggest that caplacizumab prevents further consumption of platelets, thereby protecting patients from additional formation of microvascular thrombi which may then help to reduce the organ damage which is an important longer-term consequence of this disease. It is believed that caplacizumab has the potential to become an important new treatment for acquired TTP, in addition to plasma exchange and immunosuppressive therapy (current standard of care). In November, Ablynx demonstrated bioequivalence between the liquid and lyophilised formulations of caplacizumab, the latter will be used in the Phase III study and for commercialisation. In August, Ablynx announced that Merck Serono had started a Phase Ib study in patients with moderate to severe psoriasis with the bi-specific Nanobody, ALX-0761, targeting both IL-17A and IL-17F. This study is due to report in 2015. Also in August, Ablynx announced that Boehringer Ingelheim had stopped the Phase I study with its anti-Abeta Nanobody, thereby ending the collaboration in Alzheimerâ&#x20AC;&#x2122;s disease that both companies had entered into in January 2007. In October, Ablynx announced positive results from the Phase I bioavailability study of the subcutaneous formulation of its anti-IL-6R Nanobody, ALX-0061, partnered with AbbVie for the treatment of inflammatory diseases. Bioavailability after subcutaneous
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administration was higher than 80% and there were no significant safety or tolerability signals noted after subcutaneous administration of ALX-0061. The subcutaneous formulation will be used in the next phases of clinical development and for commercialisation. Partnerships update In February, Ablynx further strengthened its relationship with Merck & Co through the signing of a major discovery alliance and licensing agreement in the field of immuno-oncology with an upfront payment of €20 million, €10.7 million in research funding and up to €1.7 billion in potential milestone payments plus royalties. In August, Ablynx announced that it had exercised an opt-out option for the co-development project with Merck Serono on ALX-0751 in oncology. In September, Ablynx expanded its relationship with the Chinese biopharmaceutical company, Eddingpharm, by granting them an exclusive license to develop and commercialise the anti-TNFα Nanobody, ozoralizumab, in mainland China, Hong Kong, Macao and Taiwan, in all indications, including RA. Ablynx received the first part of the €2 million upfront payment and is eligible to receive development and commercial milestone payments and up to 20% royalties on net sales generated by Eddingpharm. In addition, the Company will have access to the clinical data generated by Eddingpharm to support potential licensing discussions in other geographic regions. Due to the acquisitions of Spirogen by AstraZeneca and of Algeta by Bayer, the feasibility studies to evaluate novel Nanobody drug conjugates in cancer therapy have been put on hold and it is unlikely that they will proceed further. As a result, Ablynx has initiated new pre-clinical research activities in the field of Nanobody drug conjugates both in-house and with other external partners. Corporate developments In November, Ablynx announced that it had further strengthened its management team with the appointment of Johan Heylen as Chief Commercial Officer. Johan’s extensive commercial experience with some of the world’s leading pharmaceutical companies (including GlaxoSmithKline, Servier and Wyeth) will help Ablynx to maximise the potential of its pipeline as the programmes move through the clinic and towards the market. This is the first step in establishing an
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infrastructure to enable Ablynx to participate in the commercialisation of certain of its own Nanobody programmes. In July, Euronext launched Spotlight Options on the Ablynx shares and in September, Ablynx established a Sponsored Level I ADR programme in the United States, thereby offering alternative investment mechanisms in Ablynx for both European and American investors.
1.2. ANALYSIS OF RESULTS OF OPERATIONS Total income In 2014, total revenues and grants increased by 37% to €49.3 million (2013: €35.9 million), driven by higher recognised income from the upfront payments from AbbVie and Merck & Co and higher FTE funding, slightly compensated by lower milestone payments and grant income. Research and development expenses Total research and development costs increased to €54.5 million (2013: €43.7 million), in line with higher external development costs, which are largely related to clinical trials expenditure and in line with higher personnel costs related to increased headcount. General and administrative expenses General and administrative costs increased to €11.1 million (2013: €10.0 million) in line with higher personnel costs, including share based payment which is due to an increased headcount. Operating result As a result of the foregoing, the operating loss, before tax and net financial result, decreased to €16.2 million (2013: €17.7 million). Net financial result Finance income (€4.2 million) comprises interest income from bank deposits and floating and fixed rate notes (€1.6 million), the positive time impact of discounting the tax credit (€0.4 million), realised exchange rate gains of €1.5 million on US$ sold in 2014 and unrealised exchange gains of €0.7 million at the end of 2014 on the remaining US$8.1 million
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from the US$175 million upfront payment received from AbbVie in October 2013. Finance expenses (€0.8 million) mainly relate to realised exchange rate losses on dollars sold in 2014. As a result, the net financial result in 2014 was €3.5 million (2013: -€1.8 million). Net result As a result of the foregoing, the net loss decreased to €12.7 million (2013: €19.5 million). Loss for the period As the Company incurred losses in all of the relevant periods, the Company had no taxable income, and therefore paid no income taxes.
1.3. BALANCE SHEET ANALYSIS The Company’s intangible assets include a portfolio of patents, which are fully amortised, and technology licenses which are being amortised over 5, 18 and 20 years. The Company expenses all its research and development activities in the IFRS consolidated financial statements. The intangible assets also include software licenses. The Company’s non-current tangible assets include the Company’s laboratory and office equipment, the investments in its facilities and €2.0 million restricted cash, which is a cash pledge that the Company has provided for the lease of its building. The Company has exercised an option to acquire one of its llama facilities (for €375,000), which it had previously rented, and continues to invest in equipment for its research activities. Tax receivables include an R&D tax tax credit of €11.8 million. The Company’s current assets consist mainly of €206.2 million (including US$8.1 million) in short term investments, cash, restricted cash and cash equivalents. Current liabilities consist mainly of trade payables and deferred income related to the upfront payments received from partners. The Company’s equity increased from €46.2 million to €75.5 million mainly as a result of the net proceeds of €39.9 million from the Private Placement in June 2014. The equity increase has partially been offset by the net loss for the year (€12.7 million).
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1.4. CASH FLOW ANALYSIS There was a net cash outflow from operating activities of €32.3 million in 2014, compared to a net inflow of €105.8 million in 2013. The difference primarily relates to lower upfront cash received in 2014 (€21 million from Merck & Co and Eddingpharm) as compared to 2013 (US$175 million from AbbVie and €11.5 million from Merck Serono and €2 million from Eddingpharm). There was a net cash outflow from investing activities of €6.2 million in 2014, as compared to a net cash outflow of €132.0 million in 2013. The net cash outflow comprises primarily the net movements in cash and cash equivalents (on deposits with a term of less than 3 months) and other short-term financial investments (on deposits with a term of more than 3 months). There was a net cash inflow from financing activities of €39.7 million in 2014, as compared to a net cash inflow of €32.4 million in 2013, mainly as a result of the net proceeds of €39.9 million from the private placement in June 2014 as compared to €30.1 million net proceeds from the private placement completed in February 2013. The Company’s total liquidity position at the end of 2014 consists of cash and cash equivalents of €11.7 million, other short-term financial investments of €192.5 million and restricted cash of €2.0 million, amounting to €206.2 million (2013: €200.4 million). The net cash burn in 2014 was €34.1 million (excluding the net proceeds of €39.9 million from the private placement).
1.5. OUTLOOK 2015 2015 will be an important year with a major focus on the initiation and running of a number of later stage clinical trials with the Company’s three lead assets: caplacizumab (anti-vWF) in acquired TTP; anti-RSV (ALX-0171) in RSV infected infants and anti-IL-6R (ALX-0061) in RA and SLE. During the first quarter of 2015, Ablynx expects to administer the first doses in the two Phase IIb studies with the anti-IL-6R Nanobody, ALX-0061, partnered with AbbVie, in patients with active RA. The first Phase IIb study will evaluate the efficacy and safety of ALX-0061 administered subcutaneously (sc) in combination with methotrexate
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(MTX) in adult patients with active RA, despite MTX therapy. The study aims to identify the optimum dose and frequency of sc administration of ALX-0061 for the next phases of development. The second Phase IIb study will evaluate the efficacy and safety of ALX-0061, administered sc as a monotherapy in adult patients with active RA who are intolerant to MTX, or for whom MTX is inappropriate. This study also aims to obtain parallel descriptive information concerning the efficacy and safety of sc administered tocilizumab in the same RA population. In the summer of 2015, Ablynx expects to start the Phase II study with ALX-0061, partnered with AbbVie, in patients with systemic lupus erythematosus (SLE). Ablynx is also preparing the start, in H2 2015, of the Phase III study with caplacizumab in patients with acquired TTP. In parallel, partnering and commercial discussions are on-going, including an assessment of the sales and marketing infrastructure which would be required for this asset, to help determine to what degree Ablynx could remain involved or even lead the commercialisation of caplacizumab. By the end of 2015, Ablynx expects to complete recruitment of its first-in-infant Phase IIa study in RSV infected infants, with its inhaled Nanobody, ALX-0171. During 2015, Ablynx expects progress with a number of its partnered programmes, including the potential start of up to three Phase I studies. The Company also expects that Merck Serono will have completed the Phase Ib study in psoriasis patients with the bi-specific anti-IL-17A/F Nanobody, ALX-0761. In addition, Ablynx anticipates potential in vivo proof-of-concept results from the first programmes within the immuneoncology collaboration with Merck & Co. Ablynx expects to receive potential milestone payments from on-going collaborations and potentially to enter into additional partnering deals. Finally, given the number of later stage clinical programmes in development, the Company currently expects to have a net cash burn in 2015 of approximately â&#x201A;Ź70-80 million.
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1.6. CORPORATE GOVERNANCE STATEMENT
1.6.1. REFERENCE CODE – COMPLY OR EXPLAIN
The Corporate Governance of the Company has been organised pursuant to the Belgian Companies Code and the Company’s Articles of Association. The Company’s Corporate Governance Charter is available on the Ablynx website. The Company’s Corporate Governance Charter and this Corporate Governance Statement have been adopted in accordance with the recommendations set out in the Belgian Corporate Governance Code (the “CGC”) that was issued on 9 December 2004 by the Belgian Corporate Governance Committee and subsequently amended on 12 March 2009. The Charter is regularly updated and the date of modification is mentioned each time. The Company has opted for a two-tier governance structure. As a result, the governance structure of Ablynx is based on a distinction between: • The management of Ablynx (including the daily management), a task conducted by the Executive Committee (“Directiecomité”) within the meaning of Art. 524bis of the Belgian Companies Code and within the framework of the general strategy defined by, and under the supervision of the Board of Directors; and • The development of the general strategy of Ablynx, the supervision of the Executive Committee and the exercise of specific powers attributed by the Belgian Companies Code, the Company’s Articles of Association and the Company’s Corporate Governance Charter, which fall within the powers of the Board of Directors. All transactions involving conflicts of interests were in line with the precisions of the Corporate Governance Charter and are listed in the annual report under point 1.12. The Company’s Board of Directors complies with the Corporate Governance Charter (CGC), and believes that certain deviations from its provisions are justified in view of the Company’s particular situation. These deviations include the following: • Provision 2.1: gender diversity. Since the IPO, the Board was mainly composed of men. The Company commits to build a diverse list of candidates for new positions in the future.
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• Provision 2.9: the Company has no Company Secretary. The CFO acts as Company Secretary with the assistance of external counsels. • Provision 5.2 CGC: the Company has no overall formal internal auditor because of the size of the Company, however, the Audit Committee regularly evaluates the need for this function and/or commissions external parties to conduct specific internal audit missions and report back to the Audit Committee. • Provision 7.7 CGC: only the independent Directors shall receive a fixed remuneration in consideration of their membership to the Board of Directors and their attendance in the meetings of the committees of which they are members. In principle, they will not receive any performance-related remuneration, nor will any options or warrants be granted to them in their capacity as Director. However, upon recommendation of the Nomination and Remuneration Committee, the Board of Directors may propose to the Shareholders Meeting to deviate from that principle in application of Art. 554 BCC, if, to the Board of Directors’ reasonable opinion, the granting of options or warrants would be necessary or useful to attract or retain independent Directors with the most relevant experience and expertise.
1.6.2. CAPITAL AND SHARES
The following capital increases took place in 2014: On 17 January 2014, the Company issued 5,583 new shares in exchange for €27,440.04 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €10,440.21 and €16,999.83 respectively. On 18 April 2014, the Company issued 85,098 new shares in exchange for €451,598.59 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €158,227.67 and €293,370.92 respectively. On 30 June 2014, the Company raised €41.7 million through a private placement of new shares via an accelerated bookbuilding procedure. The company placed 4,908,332 new shares in exchange for €41,720,822. The par value and share premium amounted to €9,178,580.84 and €32,542,241.16 respectively. On 17 July 2014, the Company issued 10,000 new shares in exchange for €64,197.57 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium
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amounted to €18,700 and €45,497.57 respectively. On 17 October 2014, the Company issued 12,500 new shares in exchange for €22,500 as a result of the exercise of warrants by some employees and consultants of the Company. The par value amounted to €22,500. The share capital consists of shares, which are fully paid up, with a par value of €1.87 per share. • Number of shares on 31 December 2013
48,992,646
• Number of new shares (exercise of warrants)
113,181
• Number of new shares (private placement)
4,908,332
• Number of shares on 31 December 2014
54,014,159
During the Extraordinary General Shareholders Meeting of 24 April 2014, the issuance of a maximum number of 725,000 warrants was approved and 327,224 warrants have subsequently been granted on 17 July 2014 and on 28 October 2014 (133,556 warrants at €8.85/warrant, 28,000 warrants at €9.18/warrant and 12,500 warrants at €8.25/warrant for employees and 153,168 warrants at €9.09/warrant for consultants). Each warrant gives the beneficiary the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the lowest of the average closing rate of the share on Euronext Brussels during a period of thirty days before the Date of the Offer and the last closing rate prior to the Date of the Offer for employees and for consultants the highest of the following two values: (i) the average closing rate of the share on Euronext Brussels during the period of thirty days preceding the Date of the Decision, as mentioned in a letter to be sent to the Selected Participants subsequently to the Date of the Decision, and (ii) the lowest of the following two values: (a) the average closing rate of the share on Euronext Brussels during a period of thirty days preceding the Date of the Offer, or (b) the last closing rate preceding the Date of the Offer. The warrants vest over 4 years: 25% of the warrants vest after one year; after that date the remaining 75% become vested on a monthly basis (2.083% per month). The duration of the warrants is 5 years for consultants and 7 years for employees as of the issue date of the warrants. The warrants can only be exercised when vested and as from the beginning of the
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fourth calendar year following the year in which the warrants were granted (thus starting as from the 1st of January 2018 until 15 January 2019 for consultants and as from 1 January 2018 until 15 January 2021 for employees). In the case of a normal termination of the employee contract or the consulting agreement, all the vested warrants need to be exercised during the current or if not yet exercisable during the first exercisable period. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed at the moment of termination of the agreement. Warrants that have not been exercised within 5 or 7 years of their creation become null and void. The General Shareholders Meeting of 30 April 2009 and the Board of Directors meeting of 22 June 2009 approved the five-year extension of certain warrant plans in accordance with Art. 583 of the Belgian Company Code and in accordance with Art. 21 of the â&#x20AC;&#x153;Economische Herstelwetâ&#x20AC;?. Because of this extension, the fair value of the warrants has changed. The incremental fair value was calculated as the difference between the fair value with and without extension at the date of extension. The Company had a total of 3,455,478 outstanding warrants at the end of 2014.
1.6.3. SHAREHOLDERS AND SHAREHOLDER STRUCTURE
As at 31 December 2014, the shareholding structure is as follows (based on the most recent transparency declarations): Shareholder
Address
Number of votes
Aviva Investors Global Services Limited
No 1 Poultry, London, EC2R 8EJ, London, UK
2,071,484
3.84%
Abingworth Management Limited and Abingworth LLP
38, Jermyn Street, SW1Y 6DN London, United Kingdom
4,902,951
9.08%
C.H. Boehringer Sohn AG & Co. KG
Binger Strasse 173, 55216 Ingelheim am Rhein, Germany
2,142,857
3.97%
Perceptive Advisors
499, Park Avenue, 25th Floor, New York, NY 10022, USA
2,077,590
3.85%
Fidelity Management Research
245, Summer Street Boston; Massachusetts 02210, USA
1,810,500
3.35%
41,008,777
75.91%
Other
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From left to right: Russell G. Greig, Peter Fellner, William J. Jenkins, Catherine Moukheibir, Bo Jesper Hansen, Edwin Moses, Remi Vermeiren
1.6.4. BOARD OF DIRECTORS
1.6.4.1. COMPOSITION OF THE BOARD
The Board of Directors consists of seven members, one of whom is an executive Director, six of whom are independent non-executive Directors. Peter Fellner Chairman of the Board Dr Peter Fellner is currently Chairman of the Boards of Consort Medical plc and Optos plc. In addition, he serves as Chairman of the biotech company Vernalis plc. He was recently Vice Chairman of Astex Pharmaceuticals Inc, which was acquired in 2013 by Otsuka Pharmaceuticals for US$886 million. He also served as Chairman of Biotie Therapies Corp. from 2010 to 2014, and as a Director of the global biopharmaceutical company UCB from 2005 to 2014, where he continues as a member of the UCB Science Advisory Board. In addition, he is a member of the Novo A/S Advisory Group. Dr Fellner previously served as Chairman of Acambis from 2006 until its acquisition by Sanofi Aventis in 2008, and of Premier Research Group from 2007 to 2008, when it was acquired by a private-equity backed group. He was Chairman of Celltech Group from 2003 to July 2004, until its acquisition for €2.3 billion by UCB, having been CEO from 1990 onwards, during which time he oversaw the Company’s growth from a small research-based company to UK’s largest biotech company. Before joining Celltech, he was CEO of Roche UK from 1986 to 1990. He was nominated Chairman of the Board of Ablynx on 12 November 2013.
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Edwin Moses Member of the Board of Directors and Chief Executive Officer After completing his post-doctoral research in Germany, Dr Edwin Moses began a successful commercial career at Amersham International, Enzymatix and Raggio-Italgene. From 1993-2001, first as CEO and later as Chairman, he was responsible for the growth of Oxford Asymmetry (OAI) through a series of venture rounds cumulating in a flotation (LSE) in 1998 at a value of £120 million. This was followed by a sale of the company to Evotec Biosystems in 2000 for £316 million. During this period, OAI grew from four people to over 250. Over the past fourteen years, Edwin has played an important role at Board level (primarily as Chairman) in over 15 European life science companies. During this time he has been involved in a number of financing rounds, a series of M&A transactions and four IPOs. He has been Chairman of Ablynx from 2004 till 2013, and in 2006 he was appointed Chief Executive Officer of the Company. Apart from and in addition to his duties as CEO of the Company, Edwin Moses is the Chairman of the Board of Capricorn Health-tech Fund (Belgium). Furthermore, in addition to Ablynx, he has held Board memberships with the following companies: Clinphone Group plc (UK), Fusion IP plc (formerly Biofusion plc) (UK), Phoqus Pharmaceuticals Ltd (UK), Pharmaceutical Profiles Ltd (UK), Proimmune Ltd (UK), Paradigm Therapeutics Ltd (UK), Avantium Technologies (the Netherlands), Ionix Pharmaceuticals Ltd (UK), Evotec OAI AG (Germany), Bioimage A/S (Denmark), Inpharmatica Ltd (UK), Prolysis Ltd (UK), ProPharma Ltd (UK), Lectus Therapeutics Ltd. (UK) and European Biopharmaceutical Enterprises. Russell G. Greig Independent Director Dr Russell Greig, permanent representative of Greig Biotechnology Global Consulting Inc, has more than 30 years’ experience in the pharmaceutical industry, with knowledge and expertise in research and development, business development and commercial operations. He spent the majority of his career at GlaxoSmithKline, where he held a number of positions including GSK’s President of Pharmaceuticals International from 2003 to 2008 and Senior Vice President Worldwide Business Development. From 2008 to 2010, Dr Greig was also President of SR One, GSK’s Corporate Venture Group. He is currently Chairman of AM Pharma and Mint Solutions (The Netherlands), a Board Member of Onxeo (France), as well as a Director of Tigenix (Belgium) and Oryzon (Spain). He also acts as Venture Partner to Kurma Life Sciences (France).
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He served as acting CEO at Genocea and Isconova for an interim period. He was a member of the Scottish Scientific Advisory Committee, reporting to the First Minister. He was also Chairman of Syntaxin (UK), which was acquired by Ipsen (France), Novagali (France) sold to Santen (Japan), and of Isconova (Sweden), acquired by Novavax (USA). Remi Vermeiren Independent Director Before Remi Vermeiren became an independent Director of Ablynx, he had a 43 year long career at Kredietbank NV, which in 1998 merged with Cera Bank and ABB Insurance into KBC Bank and Insurance Group. In the earlier years, he was mainly involved in Asset Management, Trading and Administration of Securities, Treasury and International and Investment banking. From 1989 on, he was a member of the Executive Committee responsible for the day-to-day management of the bank. From 1998 until 2003, he held the function of Chairman of the KBC Bank and Insurance Group and of KBC Bank. During this period, he was mainly involved in defining the strategy of the new group, integration of the banking and insurance activities, implementation of the merger of the two banks and the cost reduction going with it, and expansion of KBC into Central Europe where it became one of the most important Western European investors in the banking and insurance industry. Currently, Mr Vermeiren is also member of a number of nonquoted companies and of charitable organisations, such as De Warande, Pro Vives, Vives and ‘Foundation RV’ set up and funded by himself. He is currently a member of the Board or supervisory bodies of the following companies: ACP II SCA (Luxembourg) (Liquidator) and Zinner NV (Belgium). In the past five years, he has held positions as a member of the Board or administrative, management or supervisory bodies of the following companies: Devgen NV (Belgium), Afinia Plastics NV (Belgium), IFB SPA (Italy), Cumerio NV (Belgium) and MCS NV. Remi Vermeiren holds a degree in commercial and financial sciences. Catherine Moukheibir Independent Director Catherine Moukheibir has been in C-level positions in several European biotech companies after an initial career in strategy consulting and investment banking in Boston and London. Her particular experience lies in aligning corporate and financial strategy appropriate to various stages of a biotech’s development, on the continuum from venture capital funding to public market or M&A. She is currently a non-
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executive Board member of Creabilis and a Board observer at Zealand Pharma. She is also a member of the three-person management board at Innate Pharma where she is responsible for financial and corporate strategy. Catherine Moukheibir holds an MBA from Yale University. Bo Jesper Hansen Independent Director Dr Bo Jesper Hansen, M.D., PhD, permanent representative of Orfacare Consulting, currently serves as Executive Chairman of the Board of SOBI AB (Swedish Orphan Biovitrum AB). He is Chairman of Karolinska Development AB and is also non-executive Director of a number of biotech and pharma companies including Orphazyme ApS, Newron Pharmaceuticals SpA, CMC AB, Hyperion Therapeutics Inc. and Genspera Inc. Dr Hansen served as CEO and President and as Director to the Board of Swedish Orphan International until the merger with Biovitrum, forming Swedish Orphan Biovitrum. He also was non-executive Director of Gambro until its acquisition by Baxter, and Zymenex, until its acquisition by Chiesi. Dr. Hansen was the Executive Chairman of Topotarget and in this role led the merger with BioAlliance forming OnXeo. He founded Scandinavian Medical Research during which he served as Medical Advisor for SynthĂŠlabo, Pfizer, Pharmacia and Yamanouchi Pharmaceutical. William J. Jenkins Independent Director Dr William J. Jenkins, M.D., is Principal of William Jenkins Pharma Consulting and has been advising a wide range of pharma and biotech companies, and investment and venture capital firms in the healthcare sector since 1999. Formerly, he was Head of Worldwide Clinical and Regulatory Affairs for Novartis Pharma and held a similar position with Glaxo Group Research Limited. He is currently Senior independent Director of Consort Medical, a member of the Board of Allecra Therapeutics AG and of Allocyte Pharmaceuticals AG, and a member of the Strategic Advisory Board of Chiesi Farmaceutici. In addition, he is a member of the Scientific Advisory Boards of BB Biotech Ventures II and III funds, and until recently of Nicholas Piramal India.
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Name
Year of Birth
Position
Term (1)
Board Committee Memberships
Dr Peter Fellner
1943
Independent Director Chairman
2017
Dr Edwin Moses(2)
1954
Director Chief Executive Officer
2015
Member of the Research and Development Committee.
Remi Vermeiren
1940
Independent Director
2015
Chairman of the Audit Committee.
Greig Biotechnology Global Consulting Inc, represented by its permanent representative, Dr Russell Greig
1952
Independent Director
2016
Chairman of the Nomination and Remuneration Committee. Member of the Audit Committee.
Catherine Moukheibir
1959
Independent Director
2017
Member of the Audit Committee.
William Jenkins Pharma Consulting, represented by its principal Dr William J. Jenkins
1947
Independent Director
2017
Chairman of the Research and Development Committee. Member of the Nomination and Remuneration Committee.
Orfacare Consulting GmbH represented by its permanent representative, Dr Bo Jesper Hansen
1958
Independent Director
2017
Member of the Nomination and Remuneration Committee. Member of the Research and Development Committee.
(1)
The term of the mandate of the Director will expire immediately after the Annual General Meeting of Shareholders held in the year indicated.
(2)
First appointed as independent Director by the Extraordinary General Meeting of Shareholders held on 21 October 2004. He has been re-appointed
as executive Director by the Extraordinary General Meeting of Shareholders held on 23 August 2006. Dr Moses has taken up the position of CEO on 6 June 2006. Dr Moses was also Chairman of the Board until November 2013.
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1.6.4.2. ACTIVITY REPORT
In 2014, thirteen Board meetings have been held. In four of these meetings, the strategy and/or the company results have been discussed. All members of the Board were present at all meetings. All other Board meetings were related to the exercise of warrants, the private placement of new Shares (ABO) and the preparation of General Assemblies.
1.6.4.3. PERFORMANCE EVALUATION OF THE BOARD
Under the lead of the Chairman, the Board regularly evaluates its performance to determine whether the Board and its Committees are functioning effectively. The evaluation process has the following objectives: assessing how the Board operates; verifying that important issues are adequately prepared and discussed; evaluating the actual composition of each Director’s work, the Director’s presence in the Board and Committee meetings and his/her constructive involvement in discussions and decision-making and verifying the Board’s current composition against the Board’s desired composition. The non-executive Directors will assess their interactions with the Executive Committee. At least once a year, they meet in the absence of the CEO. No formal Board decision can be taken in such meeting. The Board has discussed the composition and performance of the Board at several occasions in 2014. At the time of their re-election, the Directors’ commitments and contributions are evaluated within the Board, and the Board ensures that any appointment or re-election allows an appropriate balance of skills and experience to be maintained in the Board. The same applies at the time of the appointment or the re-election of the Chairman (of the Board and of the Board’s Committees). The Board shall act on the results of the performance evaluation by recognising its strengths and addressing its weaknesses. Where appropriate, this will involve proposing new members for appointment, proposing not to re-elect existing members or taking any measure deemed appropriate for the effective operation of the Board. Since the IPO, the Board was mainly composed of men. The Company commits to build a diverse list of candidates for new positions in the future.
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1.6.5. AUDIT COMMITTEE
As of 8 January 2009 (the date on which the Law of 17 December 2008 with regard to the incorporation of an Audit Committee in listed companies and financial companies entered into effect), “large” listed companies (as defined in Art. 526bis of the Belgian Companies Code) are legally obliged to establish an Audit Committee within their Boards of Directors. The Board of Directors has set up an Audit Committee. The Audit Committee was in 2014 composed of three members, which are exclusively non-executive Directors. All of its members are independent Directors and two of its members have an expertise in the field of accounts and audit. The Chairman of the Audit Committee is not the Chairman of the Board of Directors.
1.6.5.1. COMPOSITION
The following Directors are members of the Audit Committee: Remi Vermeiren (Chairman), Dr Russell Greig permanent representative of Greig Biotechnology Consulting Inc, and Catherine Moukheibir. Remi Vermeiren and Catherine Moukheibir have expertise in the field of accounts and audit and are both independent Directors.
1.6.5.2. ACTIVITY REPORT
The Audit Committee met four times in 2014. At these meetings the financial results, budgets, treasury and the financial press releases were discussed. The attendance was as follows: Remi Vermeiren (100 %), Dr Russell Greig (100%) and Catherine Moukheibir (100%). The Audit Committee is responsible for the financial reporting, the internal control and risk management, the internal audit and the external audit, and for the reporting and communication between the statutory auditor and the Board. More detailed information on the responsibilities can be found on Ablynx’s website in the Corporate Governance Charter (Schedule D).
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1.6.6. NOMINATION AND REMUNERATION COMMITTEE
The Nomination and Remuneration Committee is appointed by the Board of Directors of Ablynx to advise the Board in its duties and responsibilities relating to the Nomination and the Compensation and Benefit programmes of executive & non-executive Directors, the Chief Executive Officer and the Executive Committee including other terms of employment for the CEO and the Executive Committee. The Nomination and Remuneration Committee at the same time reviews possible warrant plans for Employees. The basic principle is that the level of remuneration should be sufficient to attract, retain and motivate on each level the most talented individuals for the job.
1.6.6.1. MEMBERSHIP AND CHAIRMANSHIP
The Nomination and Remuneration Committee consists of three members. All members of the Nomination and Remuneration Committee are also a member of the Board of Directors. All members are independent non-executive Directors. Each member of the Committee has appropriate knowledge and experience in compensation and benefit-related matters, since they are associates of Boards of other companies and as a result have knowledge of pay policies across the world. The CEO and the Vice-President Human Resources are invited to attend the meetings of the Nomination and Remuneration Committee in an advisory and non-voting capacity on all matters. They will not attend during discussions concerning their own remuneration. The Chairman leads all meetings of the Committee, coordinates the evaluation of the performance of the CEO and acts as Secretary, although he can delegate this duty or parts thereof to the VicePresident Human Resources. The members of the Committee declare that they dedicate a significant amount of their time to the Committeeâ&#x20AC;&#x2122;s activities. The Remuneration & Nomination Committee of Ablynx advises the Board of Directors on all aspects of the Compensation and Benefit
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programmes for the executive and non-executive Directors, the CEO and the Executive Committee and other terms of employment for the CEO and the Executive Committee. The Committee makes recommendations to the Board on appropriate Compensation and Benefit programmes (in respect of both amounts and composition) of: • The CEO and the other members of the Executive Committee, upon proposal by the CEO (except when it concerns his own remuneration), such as: (i) the principal contractual terms and arrangements for the termination of employment; and (ii) the principal components of the remuneration package (including, the relative importance of each component, the performance criteria applying to the variable elements, the benefits in kind, bonuses and long-term incentives, whether stock-related or not, in the form of stock options or other financial instruments); as well as Directors; • Drawing up the policy regarding warrant plans and overseeing the general policy for the granting of warrants to employees, executive and non-executive Directors and members of the Executive Committee. The CEO shall propose the identity of the beneficiaries and the number of warrants to be allocated to each of them (individually in the case of members of the Executive Committee, and individually or per category in the case of other Employees) to the Nomination and Remuneration Committee. The Nomination and Remuneration Committee shall evaluate such proposals. In the case of grants of warrants to the CEO, the initial proposal shall be made by the Committee itself. • Ensuring that remuneration levels take into account risks involved, demands and time requirements of each role, and relevant industry benchmarks. • Preparing the annual remuneration report. • Explaining the remuneration report during the Statutory General Meeting. As it is the Nomination and Remuneration Committee’s duty to oversee the search for appropriate candidates for appointment to the Executive Committee or non-executive Director membership to the Board of Directors, the Committee receives detailed and regular updates (while diligently respecting any confidentiality and conflict of interest issues) on the hiring of Executive Committee members from the CEO and is given the opportunity (or designated members) to interview the final candidate(s) before their appointment. The Nomination & Remuneration Committee is together with the Executive Committee engaged in the Succession Planning of Executive Committee members, including the CEO. In the latter case the Nomination & Remuneration Committee coordinates closely
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with the Chairman any and all activities involved in planning for CEOÂ succession. Any recommendations made in respect of the recruitment or succession planning requires discussion and endorsement by the Board of Directors before becoming effective. The Nomination & Remuneration Committee (or designated members) has the option to schedule exit interviews with departing members of the Executive Committee. The Nomination & Remuneration Committee, with the input of the Executive Committee, annually reviews and presents the annual goals/ objectives for the Board of Directors in order to finalize and approve the final goals and objectives by the Board of Directors. The Nomination & Remuneration Committee also advises the Board of Directors on the accomplishment of the targets set earlier and consequently initiates a discussion on the Board which finally adjusts and/or approves the recommendations of the Nomination & Remuneration Committee.
1.6.6.2. COMPOSITION
The following Directors are members of the Nomination and Remuneration Committee: Greig Biotechnology Global Consulting Inc, represented by its permanent representative, Dr Russell Greig, William Jenkins Pharma Consulting, represented by its principal Dr William J. Jenkins and Orfacare Consulting GmbH representend by its permanent representative, Dr Bo Jesper Hansen. These Directors are all members of Boards of other companies and as a result have knowledge of pay policies across the world.
1.6.6.3. ACTIVITY REPORT
The Nomination & Remuneration Committee met officially three times in 2014 to fulfil its functions. Meeting minutes circulated after the meeting among all members of the Board of Directors. During the meetings, the goals of the Company, the performance against the goals of the Company and the goals of the Executive
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Committee, the warrant plans, the salary evolution, the minutes of the previous meetings, the benchmark of salaries in general and more specifically of the Executive Committee members and the independent Directors and the nomination of new members of the Board of Directors, were discussed. On top of these meetings, the Nomination & Remuneration Committee held several teleconferences to discuss ad hoc nomination and remuneration topics as well as to finalize the Charter of this committee.
1.6.7. THE RESEARCH AND DEVELOPMENT COMMITTEE
During the Board meeting of 16 October 2014 the Board of Directors decided to establish a Research and Development committee. The purpose of this newly established committee of the Board is to advise the Board on its duties and responsibilities related to the long term Research and Development strategy of the Company in general and the development of the Companyâ&#x20AC;&#x2122;s Nanobody platform and programmes in particular.
1.6.7.1. COMPOSITION
The research and Development Committee consists of three members. William Jenkins Pharma Consulting, represented by its principal Dr William J. Jenkins (Chairman), Orfacare Consulting GmbH represented by its permanent representative, Dr Bo Jesper Hansen and Dr Edwin Moses. Dr Jenkins and Dr Hansen are independent Directors. All the members of the committee have relevant scientific, research, medical or other related expertise.
1.6.7.2. ACTIVITY REPORT
The first meeting of the Research and Development Committee took place on 11Â November 2014. All members of the Committee assisted at the meeting.
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1.6.8. EXECUTIVE COMMITTEE
1.6.8.1. COMPOSITION
The Board of Directors has established an Executive Committee (“Directiecomité”) within the meaning of Art. 524bis of the Belgian Companies Code and Art. 24 of the Company’s Articles of Association. The Executive Committee consists of eight members, the Chief Executive Officer (CEO), the Chief Financial Officer (CFO), the Chief Scientific Officer (CSO), the Chief Medical Officer (CMO), the Chief Commercial Officer (CCO), The Chief Operations Officer (COO), The VP Human Resources and the VP IP and Legal. The current members of the Executive Committee are listed in the table below.
from left to right: Dominique Tersago, Wim Ottevaere, Guido Gielen, Edwin Moses, Tony de Fougerolles, Kim Simonsen, Johan Heylen, Frank Landolt
Name
Year of Birth
Nationality
Edwin Moses
Chief Executive Officer
1954
British
Johan Heylen
Chief Commercial Officer from 1 December 2014
1967
Belgian
Wim Ottevaere(1)
Chief Financial Officer
1956
Belgian
Antonin Rollet de Fougerolles
Chief Scientific Officer
1965
Canadian
Kim Simonsen
Chief Operations Officer
1957
Danish
Dominique Tersago
Chief Medical Officer
1962
Belgian
Guido Gielen
VP Human Resources
1960
Belgian
Gerrit Franciscus Landolt
VP IP and Legal
1964
Dutch
(1)
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Function
Mr Ottevaere acts as the permanent representative of Woconsult BVBA
88.
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1.6.8.2. ACTIVITY REPORT
In principle, the Executive Committee meets at least once every month. Additional meetings may be called at any time by the CEO or at the request of two members. The Executive Committee shall constitute a quorum when all members have been invited and the majority of the members are present or represented at the meeting. The resolutions of the Executive Committee shall be passed unanimously. If unanimity cannot be reached, the matter shall be referred to the Board of Directors, which shall decide upon the matter in its next meeting.
1.6.9. REMUNERATION REPORT
1.6.9.1. DIRECTORS
Procedure applied in 2014 in order to create a remuneration policy and to determine the individual remuneration The Nomination and Remuneration Committee recommends the level of remuneration for Directors, including the Chairman of the Board, which is subject to approval by the Board and, subsequently, by the Annual Shareholders Meeting. The Nomination and Remuneration Committee benchmarks the Directors’ compensation against peer companies to ensure competitiveness. Without prejudice to the powers granted by law to the Shareholders Meeting, the Board sets and revises at regular intervals the rules and the level of compensation for Directors executing a special mandate or having a seat in one of the committees, as well as the rules for reimbursement of the Directors’ business-related out-of-pocket expenses. Apart from the remuneration for independent Directors, all Directors will be entitled to a reimbursement of out-of-pocket expenses actually incurred as a result of their participation in meetings of the Board of Directors. The remuneration of the Directors will be disclosed to the Company’s shareholders in accordance with the applicable laws and regulations. The level of remuneration should be sufficient to attract, retain and motivate Directors who match the profile determined by the Board. Only independent Directors shall receive a fixed remuneration in
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consideration of their membership of the Board and the Committees of which they are members. They will not receive, in principle, any performance-related remuneration, nor will any options or warrants be granted to them. Given the fact that the company acts in a highly competitive and international environment and is at the same time cost conscious because it does not yet generate profits, the Board may upon advice of the Nomination and Remuneration Committee propose to the Shareholders Meeting to deviate from the latter principle and grant warrants in order to attract and retain highly qualified independent Directors. The other Directors receive no compensation for serving as a member of the Board. Executive Committee members receive no additional compensation when invited to the Board. The Directors’ mandate may be terminated ad nutum (at any time) without any form of compensation. There are no employment or service agreements that provide for notice periods or indemnities between the Company and the members of the Board of Directors, who are not a member of the Executive Committee. In respect of the members of the Board of Directors, who are a member of the Executive Committee, reference is made to the section Executive Committee below. Remuneration policy applied during 2014 Ablynx received mid 2014 salary market data for the members of the Board via an external compensation and benefit consultant and own research. The fixed annual remuneration of the Chairman of the Board is €100,000. No additional remuneration is foreseen for membership of other board committees. The fixed annual remuneration of independent Directors as part of their membership of the Board of Directors, is €30,000, and the additional fixed annual remuneration of the Chairman of the Nomination and Remuneration Committee, the Chairman of the Audit Committee and the Chairman of the Research and Development Committee is €10,000, which confirms the remuneration policy is in line with the market practice.
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For other independent non-executive Directors the additional fixed remuneration related to the membership of the Nomination and Remuneration Committee, the Audit Committee or the Research and Development Committee remains at €5,000 per committee. The total amount of the remunerations and the benefits paid in 2014 to the independent Directors (in such capacity) was €293,750 (gross, excluding VAT), € 100,000 was paid to Dr Peter Fellner, €40,000 to Remi Vermeiren, €35,000 to Catherine Moukheibir, €45,000 to Greig Biotechnology Global Consulting Inc, represented by its permanent representative, Dr Russell Greig, €37,500 to William Jenkins Pharma Consulting, represented by its principal Dr William J. Jenkins and €36,250 to Orfacare Consulting GmbH, represented by its permanent representative, Dr Bo Jesper Hansen. Name
Position
Remuneration received as member of the Board
Remuneration received as member of the Audit Committee
in €
in €
Remuneration received as member of the Nomination and Remuneration Committee in €
Remuneration received as member of the Research and Development Committee in €
Peter Fellner
Chairman
100,000.00
-
-
-
Edwin Moses
Chief Executive Officer
-
-
-
-
Remi Vermeiren
Independent Director
30,000.00
10,000.00
-
-
Catherine Moukheibir Independent Director
30,000.00
5,000.00
-
-
Greig Biotechnology Global Consulting Inc, represented by its permanent representative Dr Russell Greig
Independent Director
30,000.00
5,000.00
10,000.00
-
William Jenkins Pharma Co, represented by its Principal Dr William J. Jenkins
Independent Director
30,000.00
-
5,000.00
2,500.00
Orfacare Consulting GmbH, represented by its permanent representative Dr Bo Jesper Hansen
Independent Director
30,000.00
-
5,000.00
1,250.00
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There is no performance-related remuneration for non-executive Directors. The Extraordinary General Meeting of Shareholders of 22 December 2014 decided not to approve the offer of 10,000 warrants to Dr Peter Fellner, granted under the philosophy described above. The table below provides an overview of the shares and warrants held by the members of the Board. This overview should be read together with the notes listed below. Total shares and warrants (i) Name
Shares
Number
%(iii)
Number
Dr Peter Fellner
50,000
0.09
Dr Edwin Moses
967,700
1.70
79,200
Remi Vermeiren
28,571
0.05
25,000(viii)
Catherine Moukheibir
5,028
Greig Biotechnology Global Consulting Inc, represented by its permanent representative Dr Russell Greig
Warrants (i) %(iii)
Number
%(iii)
50,000(ii)
1.66
0.15
888,500(v)
29.46
0.05
3,571(vi)
0.12
0.01
5,028(ii)
0.17
6,434
0.01
6,434(vii)
0.21
William Jenkins Pharma Co represented by its Principal Dr William J. Jenkins
4,781
0.01
4,781(iv)
0.16
Orfacare Consulting represented by its permanent representative Dr Bo Jesper Hansen
4,781
0.01
4,781(iv)
0.16
(i) Reflecting the number of shares of the Company to which such warrants give right to subscription (ii) Warrants granted in 2013 with an exercise price of €7.32 (iii) Percentage on a fully diluted basis (iv) Warrants granted in 2013 with an exercise price of €7.32 (v) Warrants granted from 2004 onwards with an exercise price between €1.8 and €8.68 (vi) Warrants granted in 2007 with an exercise price of €7.00 (vii) Warrants granted in 2012 with an exercise price of €5.44 (viii) of which 7,500 held by spouse
With respect to the following two years, Ablynx does not foresee changes in its remuneration policy.
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1.6.9.2. EXECUTIVE COMMITTEE
Procedure applied in 2014 in order to create a remuneration policy and to determine the individual remuneration The remuneration of the members of the Executive Committee is determined by the Board of Directors upon recommendation of the Nomination and Remuneration Committee and subsequent to the CEO’s recommendation to this Committee (except for his own remuneration). Ablynx strives to be competitive in the European biotech market. Remuneration policy applied during 2014 In the compensation strategy of Ablynx, the starting salary is primarily based on input from the market and the merit increase on individual performance. Via an external compensation and benefit consultant and own research, Ablynx received mid 2014 salary market data for the members of the Executive Committee, in order to understand the compensation market and which confirms the remuneration policy is in line with the market practice. The level and structure of the remuneration of the members of the Executive Committee is such that qualified and expert professionals can be recruited, retained and motivated taking into account the nature and scope of their individual responsibilities. An appropriate proportion of the remuneration package of a member of the Executive Committee shall be structured so as to link rewards to corporate and individual performance, thereby aligning on an annual basis the interests of a member of the Executive Committee with the interests of the Company and its shareholders. Since any Short Term compensation component should include a maximum award limit, an Executive Committee member can receive maximum 30% of the annual base remuneration as a performancedriven bonus. Given the competitive landscape the CEO’s bonus will be maximum 50% of the annual base salary. The Extraordinary General Meeting of 26 April 2012 has approved that the CEO’s variable remuneration, which is part of his yearly remuneration will be spread over a period of one year. This means that the bonus is spread over a period that is shorter than the periods
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determined in Art. 520ter, second paragraph of the Belgian Companies Code. This deviation has been incorporated in Art. 25 bis of the Ablynx Articles of Association. The corporate and individual goals are based on the operation performance of the Company as measured by a.o. financial indicators, progress in the pipeline, the completion and/or extension of important collaborations and other measures. More specifically the following areas, not disclosed in great level of detail because of the competitive nature of the business, are part of the corporate goals and subsequently part of the individual goals of the members of the Executive Committee: • Control of the cash burn versus a predefined target; • Completion of new discovery deal(s) generating an upfront defined income; • Control of expenditure of internal development programs while delivering on time and against earlier agreed standards; • Initiation of new internal discovery programmes and access to complementary technologies. The above goals and the criteria for the variable remuneration of the CEO and members of the Executive Committee are in advance and explicitly spelled out in a software system, which automates the performance management and appraisal process at Ablynx and binds the Company and the individuals. The variable remuneration will only be paid when the KPIs are effectively met. The Remuneration Committee evaluates the performance and makes a proposal to the Board. Schemes under which members of the Executive Committee are remunerated in shares, warrants or any other rights to acquire shares, shall be subject to prior shareholder approval by way of a resolution taken by the General Meeting of Shareholders. The approval shall relate to the scheme itself and not to the grant to individuals of share-based benefits under the scheme. As a rule, 25% of the warrants granted vest after 1 year, 2.08% vest additionally after each full month, however, vested warrants shall in principle not be exercisable within less than three full calendar years. In order to avoid a subjective and discretionary benefit, the grant of warrants to Executive Committee members (similar to the grant to certain levels of employees) is based on a formula. Whereas the Short Term Incentive (bonus) is based on contributing to the corporate
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goals, the Long Term Incentive plan is based on the performance against the key responsibilities in the job description of the individual or group of individuals as well as based on the observed attitude versus the values of the company. The outcome of this yearly evaluation can vary between 2 (low) and 10 (high) points. Based on the ultimate performance score between 6 and 10 points, based on the share price and the yearly base salary of the individual the exact number of warrants are calculated (Number of Warrants=(yearly salary/grant price)* performance coefficient). A performance score below 6 does not qualify for a Long Term Incentive. The CEO presents his proposal regarding performance against key responsibilities and values to the Nomination and Remuneration Committee, which submits a final proposal regarding the offering of warrants to members of the Executive Committee and the CEO to the Board of Directors which takes a final decision. The remuneration policy for the Executive Committee shall at least include the main contractual terms including the main characteristics of pension schemes, termination arrangements and the key elements for determining the remuneration, including (i) the relative importance of each component of the remuneration, (ii) the performance criteria chosen for the variable elements and (iii) the fringe benefits. The total amount of remunerations and benefits paid to the CEO and the other members of the Executive Committee and to the persons they are represented by, amounted to â&#x201A;Ź2,015,976.72 (gross, excluding VAT and share-related payments) in 2014, of which a detailed breakdown is shown in the table below: in â&#x201A;Ź Basic Salary
Total
of which CEO
1,460,730.40
472,770.00
Variable Remuneration (*)
354,826.49
183,600.00
Group Insurance (pension, invalidity, life)
140,875.44
44,961.60
59,544.39
12,778.80
2,015,976.72
714,110.40
Other (car, cell phone, hospitalisation insurance (**) Total (*) paid in cash (**) not including share based payments mentioned under point 8.15
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The pension plan, for which the above amounts have been paid, is a defined contribution plan for which maximum 10 % of the base salary is contributed on a yearly basis. Given the nature of the contract of the Executive Committee members there is no liability for the company regarding the defined interest rate or total benefit during or at the end of the collaboration. With respect to the two financial years to come, Ablynx does not foresee changes in its remuneration policy regarding the Executive Committee. The table below provides an overview of the shares and warrants held by the members of the Executive Committee, including the Executive Director. Name
Function
Shares
Warrants
Edwin Moses
Chief Executive Officer
79,200
1,201,000 warrants giving the right to subscribe to 888,500 shares
Wim Ottevaere/ Chief Financial Woconsult BVBA Officer
21,605
393,702 warrants giving the right to subscribe to 288,702 shares
Antonin Rollet de Fougerolles
Chief Scientific Officer
170,000 warrants giving the right to subscribe to 170,000 shares
Johan Heylen
Chief Commercial Officer
Dominique Tersago
Chief Medical Officer
76,000 warrants giving right to subscribe to 76,000 shares
Kim Simonsen
Chief Operations Officer
88,500 warrants giving right to subscribe to 88,500 shares
Gerrit Franciscus VP IP & Legal Landolt
167,452 warrants giving right to subscribe to 167,452 shares
Guido Gielen
135,264 warrants giving the right to subscribe to 135,264 shares
VP Human Resources
During 2014 Frank Landolt, VP IP & Legal exercised 7,687 warrants. Guido Gielen, VP Human Resources sold 1,230 shares. The most important characteristics of the warrants, which were allocated in 2014, are detailed below. During the Extraordinary General Shareholders’ Meeting of 24 April 2014, the issuance of a maximum number of 725,000 warrants was approved and 327,224 warrants have subsequently been granted on
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17 July 2014 and on 28 October 2014 (133,556 warrants at €8.85/warrant, 28,000 warrants at €9.18/warrant and 12,500 warrants at €8.25/warrant for employees and 153,168 warrants at €9.09/warrant for consultants). Each warrant gives the beneficiary the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the lowest of the average closing rate of the share on Euronext Brussels during a period of thirty days before the Date of the Offer and the last closing rate prior to the Date of the Offer for employees and for consultants the highest of the following two values: (i) the average closing rate of the share on Euronext Brussels during the period of thirty days preceding the Date of the Decision, as mentioned in a letter to be sent to the Selected Participants subsequently to the Date of the Decision, and (ii) the lowest of the following two values: (a) the average closing rate of the share on Euronext Brussels during a period of thirty days preceding the Date of the Offer, or (b) the last closing rate preceding the Date of the Offer. The warrants vest over 4 years: 25% of the warrants vest after one year; after that date the remaining 75% become vested on a monthly basis (2.083% per month). In order to focus on sustainable, long term growth and alignment with shareholders interest, the warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants were granted (thus starting as from the 1st of January 2018 until 15 January 2019 for consultants and as from 1 January 2018 until 15 January 2021 for employees). In the case of a normal termination of the employee contract or the consulting agreement, all the vested warrants need to be exercised during the current or if not yet exercisable in the first exercisable period. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed at the moment of termination of the agreement. The duration of the warrants is 5 years for consultants and 7 years for employees as of the issue date of the warrants. Warrants that have not been exercised within 5 or 7 years of their creation become null and void. Severance payments Currently, all members of the Executive Committee are employed on the basis of a service agreement, which can be terminated at any
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time provided that a previously determined term of notice is observed, which, at the Company’s discretion, can be replaced by a corresponding termination allowance. There are no other termination remunerations foreseen. All service agreements contain non-competition clauses, as well as confidentiality obligations and obligations relating to the transfer of intellectual property. The Corporate Governance Charter requires that every contractual settlement agreed upon before or after 1 July 2009 concerning the remuneration of the CEO or any other member of the Executive Committee, clearly states that the amount of the exit remuneration, which is granted when the contract is prematurely terminated, should not exceed the basic and variable remuneration of twelve months. All existing contractual settlements reached with the CEO or any other member of the Executive Committee do not contain any exit remuneration higher than 12 months. Claw-back provisions There are no provisions allowing the Company to reclaim any variable remuneration paid to executive management based on incorrect financial information. Miscellaneous Furthermore the company has no intention to compensate in a subjective or discretionary manner.
1.6.10. MOST IMPORTANT CHARACTERISTICS OF THE COMPANY’S INTERNAL CONTROL SYSTEMS AND RISK MANAGEMENT
The Executive Committee should lead the Company within the framework of prudent and effective control, which enables to assess and manage risks. The Executive Committee should develop and maintain adequate internal control systems so as to offer a reasonable assurance concerning the realisation of the goals, the reliability of the financial information, the observance of applicable laws and regulations and to enable the execution of internal control procedures. The Audit Committee assists the Board of Directors in the execution of its task to control the Executive Committee. The Company has opted for a “two-tier” governance structure. As a result, the principal governance structure of Ablynx is based on a distinction between:
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• The management of Ablynx (including the daily management), a task conducted by the Executive Committee (“Directiecomité”) within the meaning of Art. 524bis of the Belgian Companies Code, within the framework of the general strategy defined by, and under the supervision of the Board; and • The development of the general strategy of Ablynx, the supervision of the Executive Committee and the exercise of specific powers attributed by the Belgian Companies Code, the Articles of Association and the Corporate Governance Charter which fall within the powers of the Board. Control Environment The Executive Committee has organised the internal control environment, which is monitored by the Audit Committee. The role of the Audit Committee is stipulated in the Corporate Governance Statement. The Audit Committee decided not to create an internal audit role for the time being, since the scope of the business does not justify a full-time role. The role of the Audit Committee shall be to assist the Board in fulfilling its monitoring responsibilities in respect of control in the broadest sense, including responsibilities for the financial reporting process, the system of internal control and risk management (including the Company’s process for monitoring compliance with laws and regulations) and the external audit process. Risk analysis During 2014, the management of the Company assessed its operational risks and challenged and compared these with the risk intelligence framework. Following this exercise, appropriate actions will be proposed to the Executive Committee. The Group is potentially subject to the following inherent risks: • Nanobody-based drug candidates must undergo rigorous pre-clinical and clinical testing, the results of which are uncertain and could substantially delay or prevent the drug candidates from reaching the market. • Delays in clinical trials are common and may have many causes. Such delays could result in increased costs and jeopardise or delay the Group’s ability to achieve regulatory approval and commence product sales as currently contemplated. • The Group’s drug candidates may not obtain regulatory approval
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• • • • • • • •
• • • •
when expected, if at all, and even after obtaining approval, the drugs will be subject to ongoing regulation. To date, one of the Group’s drug candidates has reached the stage of submission or evaluation for regulatory approval. The Group has a history of operating losses and an accumulated deficit; the Group may never become profitable or may not be able to sustain profitability in subsequent periods. The Group is reliant on collaborative partners for the development and commercialisation of most of its existing and future drug candidates. The Group’s patents and other intellectual property rights may not adequately protect its products and drug candidates, which may impede the Company’s ability to compete effectively. The Group may infringe the patents or other intellectual property rights of others and may face patent or other intellectual property litigation, which may be costly and time consuming. The Group faces, and will continue to face, significant competition and rapid technological change, which could limit or eliminate the market opportunity for its products and drug candidates. The Group relies on outsourcing arrangements with third parties for some of its activities including manufacturing and clinical trials management. The Group may not have adequate insurance cover, particularly in connection with product liability risk. The commercial success of the Group will depend on attaining significant market acceptance of its drug candidates among physicians, patients, healthcare payers and the medical community. The Group has not yet commercialised any product. If the Group fails to attract and retain qualified personnel, it may be unable to successfully develop its technologies, conduct its clinical trials and commercialise drug candidates. The Group may need additional funding, which may not be available on acceptable terms when required, if at all. The revenue is generated by a limited number of clients. Tax legislation in Belgium might change over time.
Our financial risk management consists of: Liquidity risk management The Group makes use of term accounts and treasury notes. The maturities of the term deposits are limited to a maximum of one year. The Group has €2.0 million restricted cash related to a cash pledge. The Group has limited financial debt relating to investments in the leasehold improvements and in equipment.
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Interest rate risk As the Group has no other significant interest-bearing assets or liabilities, its income and operating cash flows are independent of changes in the market interest rates. Credit risk The credit risk arises from outstanding transactions with customers. It is the Groupâ&#x20AC;&#x2122;s policy to deal with creditworthy partners to avoid significant risk exposure. The trade receivables relate to a limited number of high-ranked international customers for whom there is no recent history of default. The credit risk is highly concentrated around a limited number of customers. The financial institutions have credit ratings varying from A+, over A to A-. Available liquidities are placed with several banks. No cash credit lines were available. Foreign exchange risk The Group has sales transactions from research and collaboration agreements denominated in USD and purchase transactions denominated in CHF, DKK, GBP, HUF, JPY, SEK, USD and ZAR. The Group did not enter into any currency hedging arrangements in order to cover this risk. Control activities The Board of Directors yearly approves the strategy and the goals. Each year, a business plan is elaborated for the next three years, as well as a detailed budget for the next year, which is submitted to the Board of Directors for approval. The budget is systematically followed up at each Audit Committee and Board of Directors meeting, and regularly adjusted to changing prospects. A process is in place which enables the finance department to prepare consolidated financial statements on a quarterly basis. ERP support systems have been implemented generating consistent financial and operational information. Systems are in place in order to verify the accuracy of the reporting figures and are compared with the previous year, budgets and forecasts.
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Supervision and monitoring Supervision and monitoring activities are performed by the senior management on a daily basis.
1.6.11. STATUTORY AUDITOR
Deloitte Bedrijfsrevisoren BV o.v.v.e. CVBA/SC s.f.d. SCRL, a civil company having the form of a co-operative company with limited liability (“burgerlijke vennootschap onder de vorm van een coöperatieve vennootschap met beperkte aansprakelijkheid”) and existing under the laws of Belgium, with registered offices at Berkenlaan 8b, 1831 Diegem, Belgium, represented by Gert Vanhees, was reappointed as Statutory Auditor of Ablynx on 24 April 2014 for a term of three years ending immediately after the Annual General Shareholders Meeting to be held in 2017.
1.6.12. STATEMENTS REQUIRED BY ART. 34 OF THE ROYAL DECREE OF 14 NOVEMBER 2007
All shares are ordinary shares and represent the entire capital. There are no preference shares. Some of the important agreements that Ablynx has entered into may be amended or terminated in the event of a change of control over Ablynx.
1.6.12.1. BOEHRINGER INGELHEIM AGREEMENTS
The Boehringer Ingelheim Alzheimer’s disease Agreement signed in January 2007 states that in the event of a change of control over Ablynx, Boehringer Ingelheim is entitled to terminate the research (as a result of which each party is released from paying any research license fees and Ablynx is no longer entitled to the research license from Boehringer Ingelheim), and is no longer held to participate in joint committees or to share its development and commercialisation plans. This clause was approved by the Company’s Annual Shareholders Meeting held on 29 April 2010 in accordance with Art. 556 of the Belgian Company Code. This clause is however no longer applicable as the Company announced on 28 August 2014 that following the termination of the Phase I study with BI 1034020 in Alzheimer’s disease, and after a full review of the
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programme, Boehringer Ingelheim (BI) decided not to move forward with the development of this anti-Abeta Nanobody, thereby ending the collaboration in Alzheimer’s disease that both companies entered into in January 2007. Under the Boehringer Ingelheim Strategic Alliance Agreement signed in September 2007, it is stated that in the event of a change of control over Ablynx, Boehringer Ingelheim is also entitled to terminate the research (without being released from the obligation to pay royalties on licensed products, if any) and is no longer held to participate in joint committees, to share its development and commercialisation plans or to start new programmes. However, Boehringer Ingelheim is entitled to continue the research independently, and Ablynx’s option to co-promotion rights expires. This clause was approved by the Extraordinary Shareholders Meeting of 12 October 2007. The Agreement was extended with two years in March 2012 and the same change of control clause was approved by the Company’s Annual General Shareholders Meeting of 26 April 2012. On 21 August 2014 the agreement was extended a last time until 31 December 2014, being the end of the Discovery Term of this Agreement.
1.6.12.2. MERCK SERONO AGREEMENTS
The Merck Serono Agreement signed in September 2008 states that a change of control may result automatically, in the case of early joint research and development programmes, in a full opt-out by Ablynx. In the event of further advanced joint research and development programmes, Merck Serono may at its sole discretion invite the controlling shareholder of Ablynx to continue to contribute to such joint research and development programme. If Merck Serono does not extend such invitation or if Ablynx’s controlling shareholder does not accept such invitation, the change of control results in a full optout by Ablynx. This clause was approved by the Company’s Annual Shareholders Meeting held on 29 April 2010 in accordance with Art. 556 of the Belgian Company Code. The Merck Serono Agreement signed in October 2010 states that (i) in the event of a change of control over Ablynx during the research term, Merck Serono is entitled to terminate the programmes and to assume sole responsibility for further discovery, development and commercialisation; and (ii) in the event of a change of control over Ablynx (a) in respect of early programmes, Ablynx will be deemed to
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have exercised its opt-out right in full (if the first opt-out point had been reached; if the first opt-out point had not yet been reached, as of the time that the first opt-out point will have been reached); and (b) in respect of further advanced programmes, Ablynx will be deemed to have exercised its opt-out right under the agreement in full, provided that Merck Serono, at its sole discretion, invites the new controlling shareholder of Ablynx to continue to contribute to such programme. If Merck Serono does not extend such invitation or if Ablynx’s new controlling shareholder does not accept such invitation, the change of control results in an opt-out in full by Ablynx (in which case, however, the entitlement to royalties will be replaced by an entitlement to a share of net income calculated according to the percentage of resources provided by Ablynx to a programme until the first commercial sale). The clauses under (ii) cease to have effect, on a programme-by-programme basis, as of the first commercial sale of a product resulting from a programme. This clause was approved by the Company’s Extraordinary General Meeting of Shareholders of 11 January 2011 in accordance with Art. 556 of the Belgian Company Code. In November 2011, a third agreement with Merck Serono was signed with the same change of control clause as mentioned above. This clause was approved by the Company’s Annual Shareholders Meeting held on 26 April 2012 in accordance with Art. 556 of the Belgian Company Code. The Merck Serono Collaboration agreement which was signed in September 2013 states that in certain cases of change of control of the Company Merck Serono is entitled at their option either to (i) proceed with the relevant collaboration, it being understood that Merck Serono shall have the right to unilaterally decide upon the composition and the continued existence of the joint committees in respect of this collaboration agreement, or (ii) terminate the collaboration agreement and to oblige the Company to transfer all or parts of the ongoing programmes under this collaboration agreement, in which case the Company and Merck Serono shall enter into separate agreements in respect of these programmes and Merck Serono shall be exempted from further payments (without any right to, however, reimbursement by the Company). This clause was approved by the Company’s Extraordinary General Shareholders Meeting on 7 November 2013 in accordance with Art. 556 of the Belgian Company Code.
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1.6.12.3. MERK & CO AGREEMENTS
The agreement Ablynx entered into in 2012 with Merck & Co (known as MSD outside the United States and Canada), through a subsidiary of Merck, states that in the event of a change of control over Ablynx, Merck is entitled to elect any one or more of the following options: (i) to immediately discontinue any or all then-ongoing research programmes under the agreement; (ii) terminate Ablynx’s involvement on any joint committees; (iii) limit Merck’s reporting obligations such that Merck is only required to provide reports relating to Merck’s obligation to pay royalties; and/or (iv) if such change of control involves a company that has initiated an IND enabling study for a competing product (i.e. a compound or molecule directed against the same target), to terminate the agreement. The clause was approved during the Extraordinary General Meeting of Shareholders of 5 August 2013 in accordance with Art. 556 of the Belgian Company Code. The agreement Ablynx entered into in February 2014 with Merck & Co (known as MSD outside the United States and Canada), through a subsidiary of Merck, states that in the event of a change of control over Ablynx, Merck is entitled to elect any one or more of the following options: (i) to immediately discontinue any or all then-ongoing research programs under the agreement; (ii) terminate Ablynx’s involvement on any joint committees; (iii) limit Merck’s reporting obligations such that Merck is only required to provide reports relating to Merck’s obligation to pay royalties; and/or (iv) if such change of control involves a company that has initiated an IND enabling study for a competing product (i.e. a compound or molecule directed against the same target or combination of targets), to terminate the agreement. The clause was approved during the Extraordinary General Meeting of Shareholders of 4 April 2014 in accordance with Art. 556 of the Belgian Company Code.
1.6.12.4. ABBVIE AGREEMENT
The Agreement with AbbVie which was signed in September 2013 states that in certain cases of a change of control over the Company, and depending on the stage of the research of the programmes under this collaboration agreement, AbbVie is entitled to: i. terminate the joint committees in respect of these programmes and assume their tasks;
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ii. oblige the Company to take the appropriate measures to avoid the disclosure of confidential information; iii. terminate co-promotion rights; iv. decide to either (i) assume or(ii) allow the Company to continue, the initial development activities in respect of the programme; v. oblige the Company to either transfer or terminate the ongoing clinical trials. This clause was approved by the Company’s Extraordinary General Meeting of Shareholders on 7 November 2013 in accordance with Art. 556 of the Belgian Company Code.
1.7. TRANSACTIONS WITHIN THE AUTHORISED CAPITAL In June 2014 the Company raised €41.7 million through a private placement of new shares via an accelerated bookbuilding procedure (ABO). This is the only transaction which needs to be reported in accordance with Art. 608 of the Belgian Companies Code.
1.8. ACQUISITION OF OWN SECURITIES Neither Ablynx nv nor any direct affiliate or any nominee acting in his own name but on behalf of the Company or of any direct affiliate, have acquired any of the Company’s shares. Ablynx nv has not issued profitsharing certificates or any other certificates.
1.9. USE OF FINANCIAL INSTRUMENTS BY THE GROUP The Group did not use any financial instruments.
1.10. CIRCUMSTANCES THAT COULD CONSIDERABLY AFFECT THE DEVELOPMENT OF THE GROUP No special events have occurred that could considerably affect the development of the Group.
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1.11. RESEARCH AND DEVELOPMENT We are committed to fully exploiting our technology platform to develop a diverse and broad portfolio of therapeutic Nanobodies, and to exploring next generation Nanobody-based technologies. We will continue to leverage the advantages of the Groupâ&#x20AC;&#x2122;s Nanobody technology in view of identifying potential drug candidates across a range of therapeutic areas and exploring and developing the potential of Nanobodies in areas where they have specific advantages. We will invest in further advancing the technology platform in terms of performance, applicability and scale. We expect that research and development expenditures for the discovery, development and commercialisation of drug candidates will continue to increase as the Group progresses its clinical and pre-clinical programmes into the next phase. In addition, we intend to initiate new discovery programmes and we are committed to seek, maintain and expand our proprietary Nanobody technology and intellectual property position.
1.12. CONFLICTING INTERESTS OF DIRECTORS (ART. 523 OF THE BELGIAN COMPANIES CODE) The Directors report that during the financial year three decisions have been taken that fall within the provisions of Art. 523 of the Belgian Companies Code. As required by Art. 523 of the Belgian Companies Code, the full minutes of said meeting of the Board of Directors relating to such conflict of interests are to be reproduced hereunder: Meeting Board of Directors of 26 February 2014 Mr Moses did not participate in the deliberations and resolution of the Board with respect to this item on the agenda. Prior to the deliberation on this item, the other members of the Board acknowledge that they have been informed, in accordance with Art. 523 of the Belgian Companies Code, by e-mail dated 21 February 2014, of the declaration by Edwin Moses in respect of his conflict of interest in relation to this item on the agenda, as follows:
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“I write to you in my capacity of Director of the Board of Directors (the “Board”) of Ablynx nv (the “Company”). I refer to the meeting of the Board scheduled for 26 February 2014, which will resolve on the issue of warrants for the benefit of certain employees and consultants of the Company (the “Stock Option Plan”). In accordance with Art. 523 of the Belgian Company Code, I would like to report that I have a financial conflict of interest in respect of this agenda item. In my capacity of member of the executive committee of the Company, I am selected as one of the beneficiaries of the Stock Option Plan and will accordingly be offered a certain number of warrants. However, I believe that the approval by the Board of the Stock Option Plan is in the interest of the Company, given the limited financial consequences for the Company (as the issue of the warrants shall have no immediate financial impact on the Company), as well as the purpose thereof. The purpose of this Stock Option Plan is (i) to create a long-term incentive for the selected employees, consultants and Directors who are able to contribute substantially to the success and growth of the Company; (ii) to provide the Company with the necessary means to recruit and retain competent and experienced staff members; and (iii) to create a common interest between the selected participants on the one hand and the shareholders of the Company on the other, aimed at an increase in the value of the Company’s shares. The consequences of the Stock Option Plan for the existing shareholders and warrant holders, and more in particular the dilution that would result from the exercise of all offered warrants, are clearly indicated in the special report of the Board in accordance with Art. 583 of the Belgian Company Code.” Meeting of the Board of Directors of 28 March 2014 Mr Moses did not participate in the deliberations and resolution of the Board with respect to this item on the agenda. Prior to the deliberation on this item, the other members of the Board acknowledge that they have been informed, in accordance with Art. 523 of the Belgian Companies Code, by e-mail dated 25 March 2014, of the declaration by Edwin Moses in respect of his conflict of interest in relation to this item on the agenda, as follows:
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“In accordance with Art. 523 of the Belgian Company Code, I wish to report that I am faced with a conflict of interest of a financial nature in respect of the proposed decision of the Board of Directors to grant discharge to the members of the Executive Committee. The decision to grant discharge to the members of the Executive Committee entails in principle a lapse of the right of the Company to submit a liability claim against (the members of) the Executive Committee in respect of the actions or decisions (in their capacity as members) of the Executive Committee during the 2013 fiscal year. As I am a member of the Executive Committee, the decision to grant discharge to the members of the Executive Committee entails a conflict of interest of a financial nature between the Company and myself: as a result of such decision, I will no longer be subject to such liability claims in respect of my function as a member of the Executive Committee in the 2013 fiscal year, while the Company loses the opportunity to claim against me and the other members of the Executive Committee, which may lead to potential negative financial consequences for the Company. The exact amount of the financial impact on the Company of this decision cannot be determined at this time, as it cannot be known, at this time, whether the Company would wish, in the future, to assert any liability claim vis-à-vis myself or the Executive Committee and, if so, in what amount. The financial impact on the Company consists of the loss of this particular possibility. However, I believe that the decision to grant discharge to the members of the Executive Committee is in the interest of the Company. Through such decision, the Company expresses its confidence in the members of the Executive Committee and offers such members a measure of security, which will allow the Company to attract and retain capable managers within the Company, as well as keep the current members of the Executive Committee motivated, committed and focused on their tasks. The Company’s statutory auditor has been copied on this e-mail, thereby notifying him of this conflict of interest.” The Board confirmed that the financial impact on the Company of the decision to grant discharge to the members of the Executive Committee cannot be determined at this time, but consists in the lapse of the right of the Company to submit a liability claim against the (members of the) Executive Committee. The Board was of the opinion that the decision to grant discharge to the members of the Executive Committee is in the interest of the Company, because
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it expresses the confidence in the members of the Executive Committee, which will allow the Company to attract and retain capable managers. The Board of Directors considered that the decision to grant discharge is in the interest of the Company, because it keeps the current members of the Executive Committee motivated, committed and focused on their tasks. In that perspective, the Board declared that it believes that the decision to grant discharge to the members of the Executive Committee is in the interest of the Company. After deliberation on the basis of the draft of the annual accounts and the annual report of the fiscal year 2013, which counts as “Annual Activity Report” as described in the Charter of Executive Committee, the Board of Directors unanimously granted discharge to the members of the Executive Committee for 2013. Meeting of the Board of Directors of 26 March 2015 Mr Moses did not participate in the deliberations and resolution of the Board with respect to this item on the agenda. Prior to the deliberation on this item, the other members of the Board acknowledge that they have been informed, in accordance with Art. 523 of the Belgian Companies Code, by e-mail dated 20 March 2015, of the declaration by Edwin Moses in respect of his conflict of interest in relation to this item on the agenda, as follows: “In accordance with Art. 523 of the Belgian Company Code, I wish to report that I am faced with a conflict of interest of a financial nature in respect of the proposed decision of the Board of Directors to grant discharge to the members of the Executive Committee. The decision to grant discharge to the members of the Executive Committee entails in principle a lapse of the right of the Company to submit a liability claim against (the members of) the Executive Committee in respect of the actions or decisions (in their capacity as members) of the Executive Committee during the 2014 fiscal year. As I am a member of the Executive Committee, the decision to grant discharge to the members of the Executive Committee entails a conflict of interest of a financial nature between the Company and myself: as a result of such decision, I will no longer be subject to such liability claims in respect of my function as a member of the Executive Committee in the 2014 fiscal year, while the Company loses the opportunity to claim against me and the other members
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of the Executive Committee, which may lead to potential negative financial consequences for the Company. The exact amount of the financial impact on the Company of this decision cannot be determined at this time, as it cannot be known, at this time, whether the Company would wish, in the future, to assert any liability claim vis-à-vis myself or the Executive Committee and, if so, in what amount. The financial impact on the Company consists of the loss of this particular possibility. However, I believe that the decision to grant discharge to the members of the Executive Committee is in the interest of the Company. Through such decision, the Company expresses its confidence in the members of the Executive Committee and offers such members a measure of security, which will allow the Company to attract and retain capable managers within the Company, as well as keep the current members of the Executive Committee motivated, committed and focused on their tasks. The Company’s statutory auditor has been copied on this e-mail, thereby notifying him of this conflict of interest.” The Board confirmed that the financial impact on the Company of the decision to grant discharge to the members of the Executive Committee cannot be determined at this time, but consists in the lapse of the right of the Company to submit a liability claim against the (members of the) Executive Committee. The Board was of the opinion that the decision to grant discharge to the members of the Executive Committee is in the interest of the Company, because it expresses the confidence in the members of the Executive Committee, which will allow the Company to attract and retain capable managers. The Board of Directors considered that the decision to grant discharge is in the interest of the Company, because it keeps the current members of the Executive Committee motivated, committed and focused on their tasks. In that perspective, the Board declared that it believes that the decision to grant discharge to the members of the Executive Committee is in the interest of the Company. After deliberation on the basis of the draft of the annual accounts and the annual report of the fiscal year 2014, which counts as “Annual Activity Report” as described in the Charter of Executive Committee, the Board of Directors unanimously granted discharge to the members of the Executive Committee for 2014.
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1.13. INDEPENDENCE AND EXPERTISE OF AT LEAST ONE MEMBER OF THE AUDIT COMMITTEE Remi Vermeiren Remi Vermeiren is an independent Director of Ablynx. He is Chairman of the Audit Committee and holds a degree in Economic and Financial Sciences. Before he became an independent Director of Ablynx, he had a 43 year long career at Kredietbank nv, which in 1998 merged with Cera Bank and ABB Insurance into KBC Bank and Insurance Group. Currently, Mr Vermeiren is also member of a number of non-quoted companies and of charitable organisations, such as De Warande, Pro Vives, Vives and ‘Foundation RV’ set up and funded by himself. He is currently a member of the Board or supervisory bodies of the following companies: ACP II SCA (Luxembourg) (Liquidator) and Zinner NV (Belgium). In the past five years, he has held positions as a member of the Board or administrative, management or supervisory bodies of the following companies: Devgen NV (Belgium), Afinia Plastics NV (Belgium), IFB SPA (Italy), Cumerio NV (Belgium) and MCS NV. Remi Vermeiren holds a degree in commercial and financial sciences. Russell Greig Greig Biotechnology Global Consulting Inc, represented by its permanent representative, Dr Russell Greig, has been appointed as independent Director of Ablynx in 2012 and joined the Audit Committee in February 2013. Dr Greig has more than 30 years’ experience in the pharmaceutical industry, with knowledge and expertise in research and development, business development and commercial operations. He spent the majority of his career at GlaxoSmithKline, where he held a number of positions including GSK’s President of Pharmaceuticals International from 2003 to 2008 and Senior Vice President Worldwide Business Development. From 2008 to 2010, Dr. Greig was also President of SR One, GSK’s Corporate Venture Group. He is currently Chairman of AM Pharma (The Netherlands) and Mint Solutions (The Netherlands), a Board Member of Onxeo (France), as well as a Director of Tigenix (Belgium) and Oryzon (Spain). He also acts as Venture Partner to Kurma Life Sciences (France). He served as acting CEO at Genocea and Isconova for an interim period. He was a member of the Scottish Scientific Advisory Committee, reporting to the First Minister. He was also Chairman of Syntaxin (UK), which was acquired by Ipsen (France), Novagali (France) sold to Santen (Japan), and of Isconova (Sweden), acquired by Novavax (USA).
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Catherine Moukheibir Catherine Moukheibir has been appointed as independent Director of Ablynx on 2 September 2013 and joined the Audit Committee on 12 November 2013. She has been in C-level positions in several European biotech companies after an initial career in strategy consulting and investment banking in Boston and London. Her particular experience lies in aligning corporate and financial strategy appropriate to various stages of a biotech’s development, on the continuum from venture capital funding to public market or M&A. She is currently a nonexecutive Board member of Creabilis and a Board observer at Zealand Pharma. She is also a member of the three-person management board at Innate Pharma where she is responsible for financial and corporate strategy. Catherine Moukheibir holds an MBA from Yale University .
1.14. JUSTIFICATION OF THE VALUATION RULES Ablynx nv, established in 2001, is a biotechnology Company. For the further successful expansion of the research and development activities, the Group is, among others, dependent on sufficient financial funding, the results obtained from research and the Group’s capacity to obtain and maintain adequate protection of its intellectual property. In addition, several clinical tests are planned in the next years, which will increase the operational costs. On the other hand, major commercial deals were closed which have already generated and which will generate important revenues as milestones have been achieved. In view of the above, the Company initiated an IPO on Euronext in November 2007 and raised €85.2 million and initiated an SPO on Euronext in March 2010 and raised €50 million. In February 2013 the Company raised €31.5 million through a private placement of new shares via an accelerated bookbuilding procedure. In June 2014 the Company raised another €41.7 million through a private placement of new shares via an accelerated bookbuilding procedure. The current cash position of €206.2 million including cash, other investments, restricted cash and deposits will allow the Group to keep up with the financial obligations for at least the following 12 months. Consequently, the annual accounts have been prepared on the assumption that the Company is a going concern.
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1.15. APPROPRIATION OF RESULTS Ablynx nv, the parent Company, ended the financial year 2014 with a net loss of €22,440,611.84. The Board of Directors proposed to appropriate the loss of the year of €22,440,611.84 to retained losses, the latter amounting to €89,094,086.50. This brings the total amount of retained losses to €111,534,698.34.
1.16. IMPORTANT EVENTS SUBSEQUENT TO THE ACCOUNTING REFERENCE DATE The Company held “end-of Phase II” meetings on the TITAN data for caplacizumab with both European and US regulators. As a result, it is the Company’s intention to file for conditional approval in Europe of caplacizumab during the first half of 2017 based on the Phase II TITAN data. Conditional approval is the approval of a medicine on the basis of less comprehensive clinical data but with a positive benefit/risk balance (nevertheless with a commitment to carry out further clinical studies), justified by the fact that the product is indicated for an orphan disease with a high unmet medical need. In addition, the Company will proceed with a Phase III study to support the submission of a Biologics License Application (BLA) in the USA and the transformation of the potential conditional approval to a “standard” approval in Europe (i.e. with no further specific obligations). Input from both regulators will be used to finalise the next clinical trial design for caplacizumab. Recruitment into the Phase IIa first-in-infant study with the inhaled anti-RSV Nanobody began in the Northern Hemisphere. The lead-in phase of this study was successfully completed and the Independent Data Monitoring Committee confirmed that the Company could proceed into the placebo-controlled phase of the study. Overall, recruitment has progressed more slowly than anticipated due to a number of different factors, including a shorter and less severe RSV season than normal in some countries due to milder temperatures. But, as indicated previously, Ablynx is preparing a plan to use clinical centres in parts of the Southern Hemisphere and Asia, where the RSV season peaks later in the year, to enable the completion of this 35 patient study in 2015. It is now expected that data from this trial will be available in the first half of 2016.
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The Company made further progress in preparing to start the dosing of subjects in both of the planned two Phase IIb RA studies with the anti-IL-6R Nanobody, ALX-0061, partnered with AbbVie. The first clinical centres to evaluate the safety and efficacy of ALX-0061 in combination with methotrexate have been opened and initial subjects are being screened, with first dosing expected beginning 2015. Preparations have also been underway to start the monotherapy Phase IIb study with ALX-0061 and at the beginning of 2015 the first sites involved in this trial will start with the screening of initial patients. On 21 January, Ablynx announced the issuance of an additional 115,946 common shares in exchange for €909,426.07 as the result of the exercise of warrants by some employees and consultants of the Company. As a result of this transaction, Ablynx now has 54,130,105 shares outstanding. On 22 January, Ablynx announced that it was successful in opposing the appeal procedure lodged by Domantis (now a member of the GlaxoSmithKline, GSK, group of companies) in 2010 against the decision by the Opposition Division of the European Patent Office to revoke Domantis’ European Patent 1 517 921. As a result of the decision by the Board of Appeal, the Domantis patent will remain revoked in full (without further possibility to appeal). The European Patent 1 517 921 relates to one specific technique for the half-life extension of immunoglobulin single variable domains. Now that the revocation of this patent has been confirmed in appeal, Ablynx and its partners remain free to apply such half-life extension techniques in their internal and partnered programmes, as Domantis has no granted patent claims that could possibly be invoked against the use of these techniques in Europe. The Ablynx Board of Directors has decided to propose the appointment of Professor Dr Baroness Lutgart Van den Berghe as an Independent Director on the Ablynx Board at the upcoming Annual General Meeting taking place on 30 April 2015. Professor Van den Berghe is Executive Director of GUBERNA, the Belgian Governance Institute, and Extraordinary Professor at the University of Ghent and the Vlerick Business School, Belgium. In addition, Professor Van den Berghe brings a lot of expertise in corporate governance and strategy from her roles as an Independent Director of the Boards of a number of listed and nonlisted multi-national companies.
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Merck Serono has informed Ablynx that it wishes to revisit the Strategic Collaboration Agreement between the Companies announced in September 2013, under which €11.5 million, representing nearly 50% of the agreed upon research funding (which was scheduled to be provided over a four-year term) has already been provided by Merck Serono. Negotiations are currently ongoing but Ablynx believes that Merck Serono may no longer provide the remaining funding under the Strategic Collaboration Agreement as scheduled, and Ablynx has now made provisions in its budgets and plans for this change. Ablynx also believes that termination of the Strategic Collaboration Agreement is currently the most likely outcome of the discussions and that under this scenario Ablynx would retain ownership of the five programmes currently in progress, whilst having no obligations to initiate further programmes under this contract. Separately, Merck Serono has informed Ablynx that it intends to terminate the pre-clinical oncology programme, ALX-0751. All assets and rights would then return to Ablynx. On 16 March, Ablynx announced the issuance of an additional 174,302 common shares in exchange for €1,292,682.18 as the result of the exercise of warrants by some employees and consultants of the Company. As a result of this transaction, Ablynx now has 54,304,407 shares outstanding.
1.17. GRANT OF DISCHARGE TO THE DIRECTORS AND THE STATUTORY AUDITOR You are requested, for Ablynx nv, in accordance with the law and the Articles of Association, to grant discharge to the Directors and the Statutory Auditor for the duties carried out by them during the financial year ending 31 December 2014. This report will be deposited according to the legal requirements and can be consulted at the Company’s address. Ghent, 26 March 2015 For the Board of Directors, Dr Peter Fellner Chairman
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02. RESPONSIBILITY STATEMENT ANNUAL REPORT 2014 / ABLYNX
We hereby certify that, to the best of our knowledge, the consolidated financial statements as of 31 December 2014, prepared in accordance with the International Financial Reporting Standards, as adopted by the European Union, and the legal requirements applicable in Belgium, give a true and fair view of the assets, liabilities, financial position and loss of the Group and the undertakings included in the consolidation taken as a whole, and that the management report includes a fair review of the development and the performance of the business and the position of the Group and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. On behalf of the Board of Directors Dr Peter Fellner
Woconsult BVBA represented by
Chairman
Wim Ottevaere, CFO
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As required by law, we report to you in the context of our appointment as the company’s statutory auditor. This report includes our report on the consolidated financial statements together with our report on other legal and regulatory requirements. These consolidated financial statements comprise the consolidated balance sheet as at 31 December 2014, the consolidated statement of comprehensive income, the consolidated statement of changes in shareholders’ equity and the consolidated cash flow statement for the year then ended, as well as the summary of significant accounting policies and other explanatory notes. Report on the consolidated financial statements – Unqualified opinion We have audited the consolidated financial statements of Ablynx nv (“the company”) and its subsidiaries (jointly “the group”), prepared in accordance with International Financial Reporting Standards as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium. The consolidated balance sheet shows total assets of € 223,346 (000) and the consolidated statement of comprehensive income shows a consolidated loss for the year then ended of € 12,730 (000).
TO THE GENERAL SHAREHOLDERS MEETING ON THE CONSOLIDATED ACCOUNTS OF THE GROUP AS OF AND FOR THE YEAR ENDING 31 DECEMBER 2014
To the shareholders
03. STATUTORY AUDITOR’S REPORT
REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS – UNQUALIFIED OPINION
Board of Directors’ responsibility for the preparation of the consolidated financial statements The board of Directors is responsible for the preparation and fair presentation of consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium, and for such internal control as the board of directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
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Statutory auditor’s responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing (ISA). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the statutory auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the statutory auditor considers internal control relevant to the group’s preparation and fair presentation of consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the group’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors, as well as evaluating the overall presentation of the consolidated financial statements. We have obtained from the group’s officials and the Board of Directors the explanations and information necessary for performing our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Unqualified opinion In our opinion, the consolidated financial statements of Ablynx nv give a true and fair view of the group’s net equity and financial position as of 31 December 2014, and of its results and its cash flows for the year then ended, in accordance with International Financial Reporting Standards as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium.
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Report on other legal and regulatory requirements The board of directors is responsible for the preparation and the content of the directors’ report on the consolidated financial statements. As part of our mandate and in accordance with the Belgian standard complementary to the International Standards on Auditing applicable in Belgium, our responsibility is to verify, in all material respects, compliance with certain legal and regulatory requirements. On this basis, we make the following additional statement, which does not modify the scope of our opinion on the consolidated financial statements: • The directors’ report on the consolidated financial statements includes the information required by law, is consistent with the consolidated financial statements and is free from material inconsistencies with the information that we became aware of during the performance of our mandate. Diegem, 27 March 2015 The statutory auditor
DELOITTE Bedrijfsrevisoren / Reviseurs d’Entreprises BV o.v.v.e. CVBA / SC s.f.d. SCRL Represented by Gert Vanhees
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04. CONSOLIDATED BALANCE SHEET
CONSOLIDATED FINANCIAL STATEMENTS As at 31 December (€’000)
2014
2013
16,550
13,068
439
328
(Note 8.6)
2,301
2,394
(Note 8.7)
Restricted cash
1,980
2,320
(Note 8.8)
R&D Tax credit receivable
11,830
8,026
(Note 8.9)
206,796
200,492
19
515
(Note 8.10)
571
502
(Note 8.10)
454
448
(Note 8.10)
1,549
977
(Note 8.10)
Other short-term financial investments
192,542
187,519
(Note 8.11)
Cash and cash equivalents
11,661
10,531
(Note 8.12)
223,346
213,560
Non-current assets Intangible fixed assets Property, plant and equipment
Current assets Trade receivables Other current assets Tax receivables Accrued income and deferred charges
Total assets Equity attributable to equity holders
75,474
46,173
Share capital
91,975
84,004
183,645
150,747
7,615
6,736
(207,761)
(195,314)
Non-current liabilities
0
141
Borrowings
0
141
147,872
167,246
141
786
(Note 8.16)
10,408
11,336
(Note 8.17)
4,826
3,299
(Note 8.17)
Deferred income
132,497
151,825
(Note 8,17)
Total liabilities
147,872
167,387
Total equity and liabilities
223,346
213,560
Share premium account Share-based payment reserve Retained earnings
Current liabilities Borrowings Trade payables Other current liabilities
(Note 8.16)
The notes from point 8.1 to point 8.31 are an integral part of these financial statements.
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(â&#x201A;Ź '000)
2014
2013
47,710
33,181
1,587
2,761
49,297
35,942
Research and development expenses
(54,488)
(43,699)
(Note 8.20)
General and administrative expenses
(11,052)
(10,044)
(Note 8.21)
(65,540)
(53,743)
14
131
(Note 8.22)
(9)
(3)
(Note 8.22)
(16,238)
(17,673)
Financial result (net)
3,508
(1,797)
Finance income
4,294
949
(Note 8.25)
Finance cost
(786)
(2,746)
(Note 8.25)
(12,730)
(19,470)
0
0
(12,730)
(19,470)
0
0
Total comprehensive income for the period
(12,730)
(19,470)
Loss attributable to equity holders
(12,730)
(19,470)
Total comprehensive loss attributable to equity holders
(12,730)
(19,470)
(0.25)
(0.41)
Revenue: Research and development Grants Total revenue and grant income
Total operating expenses Other operating income Other operating expenses Operating result
Loss before taxes Income tax expense Loss for the year
05. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended 31 December
(Note 8.26)
Other comprehensive loss : Fair value gains/losses on availablefor-sale financial assets, net of tax
Basic and diluted loss per share
(Note 8.27)
The notes from point 8.1 to point 8.31 are an integral part of these financial statements.
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06. CONSOLIDATED CASH FLOW STATEMENTS
Year ended 31 December (â&#x201A;Ź'000)
2014
2013
(12,730)
(19,470)
Amortisation
183
462
(Note 8.6)
Depreciation
1,354
1,508
(Note 8.7)
Share-based payment expense
1,540
699
Finance income â&#x20AC;&#x201C; net
(1,534)
(741)
Net movement in trade and other receivables
(3,955)
(2,289)
Net movement in trade and other payables
(18,730)
124,938
Cash (used in)/provided by operations
(33,872)
105,107
(88)
(31)
(Note 8.25)
1,622
772
(Note 8.25)
0
0
(Note 8.26)
(32,338)
105,848
(1,261)
(599)
(Note 8.7)
147
(Note 8.7)
(294)
(190)
(Note 8.6)
Purchases of short-term financial investments
(4,683)
(131,369)
(Note 8.11)
Net cash (used in)/provided by investing activities
(6,238)
(132,011)
39,926
30,155
566
3,067
(786)
(825)
39,706
32,397
1,130
6,234
Cash and cash equivalents at beginning of the period
10,531
4,297
Cash and cash equivalents at end of the period
11,661
10,531
Cash flows from operating activities Loss before income tax Adjustments for:
Interest paid Interest received Income tax paid Net cash (used in)/provided by operating activities
(Note 8.25)
Cash flows from investing activities Purchases of property, plant and equipment Proceeds from sale of property, plant and equipment Purchases of intangible assets
Cash flows from financing activities Proceeds from issuance of ordinary shares Proceeds from exercise of warrants Repayments of borrowings Net cash generated from financing activities Net (decrease)/increase in cash and cash equivalents
The notes from point 8.1 to point 8.31 are an integral part of these financial statements.
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Balance at 31 December 2012
Share capital 73,465
Share premium
Share- based payments
Retained loss
8,078
(176,287)
126,466
Loss of the period
Total Equity 31,722
(19,470)
Other comprehensive income Available-for-sale financial assets Total Comprehensive Income Warrant plans Share-Based Payments
699
443
Transactions with owners Capital increase Issuance costs Exercise of warrants Balance at 31 December 2013
8,187
23,334
(1,366) 3,718
947
(2,041)
84,004
150,747
6,736
Loss of the period
(195,314)
46,173
(12,730)
Other comprehensive income
07. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
(€’000)
Available-for-sale financial assets Total Comprehensive Income Warrant plans Share-Based Payments
1,257
283
Transactions with owners Capital increase Issuance costs Exercise of warrants Balance at 31 December 2014
9,178
32,542
(1,795) 588
356
(378)
91,975
183,645
7,615
(207,761)
75,474
The notes from point 8.1 to point 8.31 are an integral part of these financial statements.
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08. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8.1. GENERAL INFORMATION The Company was incorporated on 4 July 2001 under the name “MatchX”. It changed its name to “Ablynx” on 12 June 2002. Ablynx is a public limited liability company (“naamloze vennootschap” or “NV”) organised and existing under the laws of Belgium with registered offices at Technologiepark 21, 9052 Zwijnaarde, Belgium (company number 0475.295.446 (RPR Ghent). Ablynx is a biopharmaceutical company engaged in the development of Nanobodies, proprietary therapeutic proteins based on single-domain antibody fragments, which combine the advantages of conventional antibody drugs with some of the features of small-molecule drugs. Ablynx is dedicated to creating new medicines which will make a difference to society. Today, the Company has more than 30 proprietary and partnered programmes in development in multiple therapeutic areas including inflammation, haematology, oncology and respiratory disease. The Company has on-going collaborations with various pharmaceutical companies including AbbVie, Boehringer Ingelheim, Eddingpharm, Merck & Co, Merck Serono and Novartis, which today have generated over €340 million in non-dilutive cash to the Company. To date, the Company has raised €71.5 million private equity financing including the exercise of warrants, raised an additional €85.2 million as a result of its IPO on Euronext in November 2007, and raised €50 million resulting from its SPO on Euronext in March 2010. On 28 February 2013 the Company raised an additional €31.5 million through a private placement of new shares via an ABO (accelerated bookbuilding procedure). On 30 June 2014 the Company again raised €41.7 million through a private placement of new shares via an ABO (accelerated bookbuilding procedure). It has a research facility in Ghent (Belgium) and, as at 31 December 2014, it employed 321 people. The Board of Directors decided in the meeting of November 2011 to stop all operations in Porto. This subsidiary was operationally closed down in the first quarter of 2012 and was liquidated end of February 2014.
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8.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
8.2.1. BASIS OF PREPARATION
The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union, IFRIC Interpretations and Belgian legal requirements applicable to the Group. The consolidated financial statements are presented in thousands of euro (unless stated otherwise). The consolidated financial statements for the financial year ended 31 December 2014 have been approved for issue by the Board of Directors on 26 March 2015. The consolidated financial statements have been prepared under the assumption that the Group is a going concern and under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss. The preparation of consolidated financial statements in conformity with IFRS, as adopted by the EU, requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 8.4. Changes in accounting policy and disclosures without impact for the company: Standards and interpretations applicable for the annual period beginning on 1 January 2014. • IFRS 10 Consolidated Financial Statements (applicable for annual periods beginning on or after 1 January 2014) • IFRS 11 Joint Arrangements (applicable for annual periods beginning on or after 1 January 2014) • IFRS 12 Disclosures of Interests in Other Entities (applicable for annual periods beginning on or after 1 January 2014)
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• IAS 28 Investments in Associates and Joint Ventures (applicable for annual periods beginning on or after 1 January 2014) • Amendments to IFRS 10, IFRS 12 and IAS 27 Consolidated Financial Statements and Disclosure of Interests in Other Entities: Investment Entities (applicable for annual periods beginning on or after 1 January 2014) • Amendments to IAS 32 Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities (applicable for annual periods beginning on or after 1 January 2014) • Amendments to IAS 36 Impairment of Assets – Recoverable Amount Disclosures for Non-Financial Assets (applicable for annual periods beginning on or after 1 January 2014) • Amendments to IAS 39 Financial Instruments – Novation of Derivatives and Continuation of Hedge Accounting (applicable for annual periods beginning on or after 1 January 2014) Standards and interpretations published, but not yet applicable for the annual period beginning on 1 January 2014. • IFRS 9 Financial Instruments and subsequent amendments (applicable for annual periods beginning on or after 1 January 2018 but not yet endorsed in the EU) • IFRS 15 Revenue from Contracts with Customers (applicable for annual periods beginning on or after 1 January 2017, but not yet endorsed in EU) • Improvements to IFRS (2010-2012) (applicable for annual periods beginning on or after 1 February 2015) • Improvements to IFRS (2011-2013) (applicable for annual periods beginning on or after 1 January 2015) • Improvements to IFRS (2012-2014) (applicable for annual periods beginning on or after 1 July 2014, but not yet endorsed in the EU) • Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception (applicable for annual periods beginning on or after 1 January 2016, but not yet endorsed in EU) • Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (applicable for annual periods beginning on or after 1 January 2016, but not yet endorsed in the EU) • Amendments to IFRS 11 Joint Arrangements - Accounting for Acquisitions of Interests in Joint Operations (applicable for annual periods beginning on or after 1 January 2016, but not yet endorsed in EU) • Amendments to IAS 1 Presentation of Financial Statements – Disclosure Initiative (applicable for annual periods beginning on or after 1 January 2016, but not yet endorsed in EU)
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• Amendments to IAS 16 and IAS 38 Property, Plant and Equipment and Intangible Assets – Clarification of Acceptable Methods of Depreciation and Amortisation (applicable for annual periods beginning on or after 1 January 2016, but not yet endorsed in EU) • Amendments to IAS 19 Employee Benefits - Employee Contributions (applicable for annual periods beginning on or after 1 February 2015) • IFRIC 21 Levies (applicable for annual periods beginning on or after 17 June 2014)
8.2.2. CONSOLIDATION SCOPE
Ablynx nv controlled a sole 100 %-owned subsidiary (Ablynx SA with registered offices in Rua do Campo Alegre 1021, 4150-180 Porto, Portugal). The consolidated financial statements are presented in euro and rounded to the nearest thousand. The subsidiary was operationally closed down in the 1st quarter of 2012 and was liquidated end of February 2014.
8.2.3. SEGMENT REPORTING
The Group operates as a single operating segment.
8.2.4. FOREIGN CURRENCY TRANSLATION
Functional and presentation currency Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (functional currency). The consolidated financial statements are presented in euro, which is the functional and presentation currency of the Group. Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.
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Changes in the fair value of monetary securities denominated in foreign currency classified as available-for-sale are analysed between translation differences resulting from changes in the amortised cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in the amortised cost are recognised in profit or loss, and other changes in the carrying amount are recognised in other comprehensive income (OCI). Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss. Group companies The subsidiary had the same functional currency as the parent and no translation differences arose on consolidation. The following foreign exchange rates have been used for the preparation of the accounts: 1 Euro = X foreign currency
Closing rate
Average rate
2014
2013
2014
2013
US Dollar
1.2110
1.3776
1.335
1.3252
GB Pound
0.7770
0.8312
0.8081
0.8467
8.2.5. REVENUE RECOGNITION
The Group generates revenue from research collaboration agreements and from government grants. The Group recognises revenue when the amount of revenue can be reliably measured, when it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the Groupâ&#x20AC;&#x2122;s activities as described below. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. Research collaboration agreements These research agreements typically contain license fees, nonrefundable up-front access fees, research and development service fees and milestone payments. The revenue recognition policy for research projects can be summarised as follows:
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• License fees are recognised when the Group has fulfilled all conditions and obligations. The license fee will not be recognised if the amount cannot be reasonably estimated and if the payment is doubtful. As the Group has a continuing involvement during the license period, license fees are recognised rateably over the term of the agreement. • Non-refundable up-front fees for access to prior research results and databases are recognised when earned, if the Group has no continuing performance obligations and all conditions and obligations are fulfilled (this means after the delivery of the required information). If the Group has continuing performance obligations towards the client, the fee will be recognised pro rata the costs incurred (with adjustment to the actual performance period at the end of the contract or at the actual termination date). • Research and development service fees are recognised as revenue over the life of the research agreement as the required services are provided and costs are incurred. These services are usually in the form of a defined number of full-time equivalents (FTE) at a specified rate per FTE. • Commercial collaborations resulting in a reimbursement of research and development (R&D) costs are recognised as revenue as the related costs are incurred. The corresponding research and development expenses are included in research and development expenses in the consolidated financial statements. • Milestone payments are recognised as revenue upon the achievement of the milestone, when all conditions attached have been fulfilled. Deferred revenue represents amounts received prior to revenue being earned.
8.2.6. GOVERNMENT GRANTS
Grants related to research projects received from governmental agencies are recognised at their fair value over the period necessary to match them with the costs that they are intended to compensate, and when there is reasonable assurance the Group will comply with the conditions attached to the grants, but not prior to the formal grant approval. These grants are separately presented in the income statement as and included in the operating income.
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8.2.7. INTANGIBLE FIXED ASSETS
Internally generated intangible assets Research expenses are charged to the profit and loss statement as incurred. Development costs are only capitalised if the following conditions are met: • The internally developed intangible asset is identifiable and controlled by the entity • The asset will generate future economic benefits • The development costs can be reliably measured At present, the current stage of development activities does not allow any capitalisation of intangible assets. The existing regulatory and clinical risks constitute an important uncertainty with respect to the capitalisation of development costs. In contrast to Belgian GAAP, the R&D expenses are not capitalised because the criteria under IFRS are not met. As no internally generated assets are recognised, all costs with respect to the protection of intellectual property are expensed as R&D expenses. Purchased intangible assets Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised on a straight-line basis over their estimated useful lives of maximum three years. Acquired knowledge in the form of licenses and patents is recorded at cost less accumulated amortisation and impairment. It is amortised on a straight-line basis over the shorter of the term of the license agreement and its estimated useful life. The Group does not have intangible fixed assets with an indefinite useful life.
8.2.8. PROPERTY, PLANT AND EQUIPMENT
An item of property, plant and equipment is carried at historical cost less accumulated depreciation and impairment. Costs relating to the
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day-to-day servicing of the item are recognised in the income statement as incurred. Gains and losses on the disposal of property, plant and equipment are recognised in other income or expense. A pro rata straight-line depreciation method is used to reflect the pattern in which the asset’s future economic benefits are expected to be consumed by the entity. The residual value and the useful life of an asset is reviewed each financial year-end for possible impairment. Depreciation is charged to the income statement on the following basis: Equipment
3 year
Hardware
3 year
Furniture
5 year
Equipment under leasing
The shorter of the useful life or the minimum leasing term
Leasehold improvements
The shorter of the useful life or the minimum leasing term
Property, plant and equipment under construction are not depreciated.
8.2.9. IMPAIRMENT OF NON-FINANCIAL ASSETS
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
8.2.10. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
The Group has no derivative financial instruments, in all material respect, to hedge interest rates and foreign currency risks.
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8.2.11. R&D TAX CREDITS INCENTIVES
As a company that carries extensive research and development activities, the Group benefits from various grants and R&D incentives from certain governmental agencies. These grants and R&D incentives generally aim to partly reimburse approved expenditures incurred in research and development efforts of the Group and are credited to the income statement, in minus of the related R&D expenses, when the relevant expenditure has been incurred and there is reasonable assurance that the grants or R&D incentives are receivable. Research and development incentives receivables Non-current research and development incentives receivables are discounted over the period until maturity date according to the appropriate discount rates.
8.2.12. TRADE RECEIVABLES
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables.
8.2.13. OTHER SHORT-TERM INVESTMENTS
Term deposits with an initial term of more than three months are held to maturity and measured at amortised cost.
8.2.14. CASH AND CASH EQUIVALENTS
The cash and cash equivalents heading consists of cash, deposits held at call with banks and short-term deposits with an initial term not exceeding three months.
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8.2.15. EQUITY INSTRUMENTS
Equity instruments issued by the Group are recorded at the proceeds received, net of direct issuance costs.
8.2.16. TRADE PAYABLES
Payables after and within one year are measured at amortised cost, i.e. at the net present value of the payable amount. Unless the impact of discounting is material, the nominal value is taken.
8.2.17. BORROWINGS
Interest-bearing bank loans are initially recorded as the proceeds received, net of transaction costs, and subsequently carried at amortised cost: the financial charges are accounted for on an accrual basis using the effective interest rate method and added to the carrying amount of the borrowing to the extent that they are not settled in the period in which they occur.
8.2.18. INCOME TAXES
Income taxes are accrued for in the same period as the related revenues and expenses. The taxable result can differ from the net profit or loss, because of revenues and expenses which are taxable in another fiscal year or that will never be taxable or deductible. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit nor loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
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Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. As such, a deferred tax asset for the carry forward of unused tax losses will be recognised to the extent that it is probable that future taxable profit will be available.
8.2.19. EMPLOYEE BENEFITS
The Group offers several post-employment, death, disability and healthcare benefit schemes. All employees have access to these schemes. The death, disability and healthcare benefits granted to employees of the Group are covered by external insurance companies, where premiums are paid annually and charged to the income statement as they were incurred. The post-employment pension plans granted to employees of the Group are defined contribution plans. A defined contribution plan is a pension plan under which the Group pays a fixed contribution into a separate entity. Defined contribution plans are according to Belgian legislation subject to a minimum guaranteed return. In the past the legally required return was basically guaranteed by the external insurance company. However, due to the current financial market circumstances the insurance companies at this point in time do not any longer guarantee this required return. Since the minimum guaranteed return remains the responsibility of the employer, Ablynx is closely following up on the plans per individual. If needed the company will book reserves to comply with its legal obligation.
8.2.20. PROVISIONS
A provision is recognised only when: the Group has a present obligation to transfer economic benefits as a result of past events; it is probable (more likely than not) that such a transfer will be required to settle the obligation; and a reliable estimate of the amount of the obligation can be made. When the impact is likely to be material (for long-term provisions), the amount recognised as a provision is estimated on a net present value
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basis (discount factor). The increase in provision due to the passage of time is recognised as an interest expense. A present obligation arises from an obligating event and may take the form of either a legal obligation or a constructive obligation (a constructive obligation exists when the Group has an established pattern of past practice that indicates to other parties that it will accept certain responsibilities and as a result has created a valid expectation on the part of those other parties that it will discharge those responsibilities). An obligating event leaves the Group no realistic alternative to settling the obligation, independently of its future actions. Provisions for decommissioning costs and restoring sites are recorded as appropriate in application of the above. Provisions for future operating losses are strictly prohibited. If the Group has onerous contracts (the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it), the present obligations under the contract are recognised as a provision. A provision for restructuring is only recorded if the Group demonstrates a constructive obligation to restructure at the balance sheet date. The constructive obligation should be demonstrated by: (a) a detailed formal plan identifying the main features of the restructuring; and (b) raising a valid expectation to those affected that it will carry out the restructuring by starting to implement the plan or by announcing its main features to those affected.
8.2.21. LEASES
A financial lease is a lease that substantially transfers all the risks and rewards incident to ownership of an asset. The cost of assets acquired by way of a finance lease is measured at the lower of the fair value of the leased asset and the present value of the minimum lease payments, using the interest rate implicit in the lease as the discount rate, both determined at the inception of the lease. Initially incurred costs, directly attributable to the arrangement of the finance lease, are added to the amount recognised as an asset.
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Assets acquired under financial leases are depreciated over the shorter of the lease term and their estimated useful life, if it is not reasonably certain that the entity will obtain ownership of the asset by the end of the lease term. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease.
8.2.22. SHARE-BASED PAYMENT TRANSACTIONS
The Group has offered equity-settled, share-based compensation plans to its employees, executive management and consultants. The cost with respect to the employee services received in compensation for the grant of these warrants is recognised as an expense. The total amount of the expense is recognised over the vesting period and determined on the basis of the fair value of the warrants at grant date. The fair value of each warrant is estimated on the date of grant using the Black-Scholes model. The total cost is initially estimated on the basis of the number warrants that will become exercisable. At each balance date, the Group revises its estimates of the number of warrants that will become exercisable. The impact of the revision is recognised in the income statement over the remaining vesting period with a corresponding adjustment to equity.
8.2.23. EARNINGS PER SHARE
Basic net profit (/loss) per share is computed on the basis of the weighted average number of ordinary shares outstanding during the period, excluding treasury shares. Diluted net profit (/loss) per share is computed based on the weightedaverage number of ordinary shares outstanding including the dilutive effect of warrants. Warrants should be treated as dilutive, when and only when their conversion to ordinary shares would decrease the net profit per share from continuing operations.
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8.3. FINANCIAL RISK MANAGEMENT
8.3.1. FINANCIAL RISK FACTORS
Liquidity risk management The Group makes use of term accounts and treasury notes. The maturities of the term deposits are limited to a maximum of one year. The Group has â&#x201A;Ź2.0 million restricted cash related to a cash pledge. The Group has limited financial debt relating to investments in the leasehold improvements and in equipment. Interest rate risk As the Group has no significant interest-bearing assets or liabilities, its income and operating cash flows are independent of changes in market interest rates. Credit risk The credit risk arises from outstanding transactions with customers. It is the Groupâ&#x20AC;&#x2122;s policy to deal with creditworthy partners to avoid significant risk exposure. The trade receivables relate to a limited number of high-ranked international customers for whom there is no recent history of default. The credit risk is highly concentrated around a limited number of customers. The financial institutions have credit ratings varying from A+, over A to A-. Available liquidities are placed with several banks. No cash credit lines were available.
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Credit quality of financial assets: € ‘000
Rating (*)
2014
2013
A+
11,345
9,761
A
143
0
A-
173
770
11,661
10,531
A+
50,870
65,210
A
84,000
0
A-
57,672
122,309
192,542
187,519
Cash and cash equivalents
Total Short-term investments
Total (*) source at 15 January 2015: Standard & Poor’s.
Foreign exchange risk The Group has sales transactions from research and collaboration agreements denominated in USD and purchase transactions denominated in CHF, DKK, GBP, HUF, JPY, SEK, USD and ZAR. The Group did not enter into any currency hedging arrangements in order to cover this risk. As per 31 December 2014, if the EUR had weakened 10 % against the GBP and strengthened 10 % against the USD with all other variables held constant, the loss of the period would have been €610,456 (2013: €11,774,000) higher. Conversely, if the EUR had strengthened 10 % against the GBP and weakened 10 % against the USD with all other variables held constant, the loss of the period would have been €662,848 (2013: €12,911,000) lower. The table below provides an indication of the Group’s open net foreign currency position as per year end: 2014
2013
Liabilities denominated in USD
0
327
Liabilities denominated in GBP
59
571
6,687
66,920
(€’000)
Assets denominated in USD
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8.3.2. CAPITAL RISK MANAGEMENT
The Company manages its capital to ensure that it will be able to continue as a going concern. The capital structure of the Company consists of limited financial debt, cash and cash equivalents, restricted cash and short-term investments and equity attributed to the holders of equity instruments of the Company, such as capital, reserves and results carried forward as mentioned in the consolidated statements of changes in equity. The Company makes the necessary adjustments in the light of changes in the economic circumstances, risks associated to the different assets and the projected cash needs of the current and projected research activities. The current cash situation and the anticipated cash generation are the most important parameters in assessing the capital structure. The Company objective is to maintain the capital structure at a level to be able to finance its activities for at least twelve months. Cash income from existing and new partnerships is taken into account and, if needed and possible, the Company can issue new shares or enter into financing agreements.
8.4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS At each reporting date, the Group makes assumptions and estimates with respect to the impact of past events on the future resulting in a number of accounting estimates, which at present have a limited impact. In September 2013, Ablynx and AbbVie entered into a global license agreement to develop and commercialise ALX-0061 for the treatment of inflammatory diseases. The deal was the largest clinical asset deal globally at that time in 2013 and is potentially worth US $840 million plus double-digit royalties. In February 2014, Ablynx announced that it had entered into a second research and development agreement with Merck & Co. Ablynx received an upfront payment of €20 million and will receive up to €10.7 million in research funding during the initial three year research term of the collaboration. In addition Ablynx is eligible to receive development, regulatory and commercial milestone payments on achieved sales thresholds for a number of products with ultimate potential to accrue as much as €1.7 billion plus tiered royalties.
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In August Ablynx was awarded a €2.1 million grant by the Flemish Agency for innovation by Science and Technologie (IWT) to help advance a wholly-owned programme, which will explore a novel approach to the treatment of diseases of the eye by utilising some of the unique characteristics of Nanobodies. The grant is available over a period of three years and will allow the development and subsequent testing of Nanobody leads in relevant pre-clinical disease models. In September 2014 Ablynx expanded its relationship in China by granting the Chinese pharmaceutical Company Eddingpharm an exclusive, royalty-bearing license to develop and commercialise its anti-TNFα Nanobody, ozoralizumab (ATN-103), in the mainland of the People’s Republic of China, the Hong Kong and Macao Special Administrative Regions, and Taiwan, for all indications, including rheumatoid arthritis (RA). Ablynx received the first of two tranches of the €2 million upfront payment, and is entitled to receive development and commercial milestone payments plus tiered double-digit royalties of up to 20%, based on annual net sales of ozoralizumab generated by Eddingpharm in Greater China. The Company has accounted for a tax receivable of €11.8 million following an R&D incentive scheme in Belgium under which the tax can be refunded after five years if not offset against taxable basis over that period. The R&D incentives are recorded net against the relating R&D expenses in the consolidated statement of comprehensive income. We expect to receive this amount progressively over 5 years, starting as from accounting year 2016 onwards. The Company has €145 million of available tax losses carried forward. Based upon a tax planning, the Company did not recognise a deferred tax asset as the mid-term planning demonstrated significant uncertainty to realise taxable profits in the foreseeable future. The Company used the Black & Scholes model for share-based payment calculation purposes and based the volatility parameter on the volatility of the Ablynx share. Rotation of employees as a parameter for share-based payment calculations is considered to be limited. The Company has not identified at reporting date any sources of estimation uncertainty, which involve a significant risk of material adjustment to the financial statements in the following year.
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The current cash position of €206.2 million including cash, other investments, restricted cash and deposits will allow the Group to keep up with the financial obligations for at least the following 12 months. Consequently, the annual accounts have been prepared on the assumption that the Company is a going concern.
8.5. SEGMENT INFORMATION The Group does not distinguish different operating segments. The income stems from six pharmaceutical partners, namely Boehringer Ingelheim, Merck Serono, Merck & Co, Novartis, AbbVie and Eddingpharm. Moreover, in 2014, almost 90% of the income originated from 3 parties, one party was responsible for more than 40% of the income, 2 others parties represented 20% to 25% each. In 2013, 1 party represented more than 35% of the revenues, 2 other parties represented between 20% to 25% each and a fourth party represented just over 10% of the revenues.
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8.6. INTANGIBLE FIXED ASSET (€’000)
Patents
Software
Total
217
383
600
Additions
0
190
190
Transfer
0
0
0
(116)
(346)
(462)
101
227
328
2,174
2,179
4,353
(2,073)
(1,952)
(4,025)
101
227
328
101
227
328
Additions
0
294
294
Transfer
0
0
0
Amortisation charge
(7)
(176)
(183)
Closing net book amount
94
345
439
2,174
2,473
4,647
(2,080)
(2,128)
(4,208)
94
345
439
Year ended 31 December 2013 Opening net book amount
Amortisation charge Closing net book amount As at 31 December 2013 Cost Accumulated amortisation and impairment Net book amount Year ended 31 December 2014 Opening net book amount
As at 31 December 2014 Cost Accumulated amortisation and impairment Net book amount
The intangible fixed assets mainly consist of a portfolio of acquired patents and software licences.
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8.7. PROPERTY, PLANT AND EQUIPMENT (â&#x201A;Źâ&#x20AC;&#x2122;000)
Equipment
Furniture
Equipment Leasehold under leasing improvements
PPE under construction
Total
Year ended 31 December 2013 Opening net book amount
921
217
Additions
346
253
Disposals - acquisition value
(110)
Disposals - accumulated depreciation and impairment
110
Depreciation charge
(558)
2,126
149
37
599 (37)
(147) 110
(262)
(730)
(68)
(1,618)
Transfer Closing net book amount
3,450
0 709
208
1,396
81
0
2,394
As at 31 December 2013 Cost Accumulated depreciation and impairment Net book amount
12,587
1,451
3,657
870
675
19,240
(11,878)
(1,243)
(2,261)
(789)
(675)
(16,846)
709
208
1,396
81
0
2,394
709
208
1,396
81
0
2,394
2,350
323
Year ended 31 December 2014 Opening net book amount Additions
64
2,737
Disposals - acquisition value
(3,331)
(1,476)
(675)
(5,482)
Disposals - accumulated depreciation and impairment
3,331
1,474
675
5,480
Depreciation charge Transfer Costs Transfer Depreciations Closing net book amount
(1,848)
(363)
(188)
(601)
(16)
(2,828)
275
(87)
0
22
(72)
50
0
1,045
371
793
92
0
2,301
As at 31 December 2014 Cost Accumulated depreciation and impairment Net book amount
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11,418
2,049
2,181
847
0
16,495
(10,373)
(1,678)
(1,388)
(755)
0
(14,194)
1,045
371
793
92
0
2,301
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8.8. RESTRICTED CASH Restricted cash is related to a cash pledge the Company has provided in respect of the service agreement with NV Bio-Versneller (see point 8.30.3). As at 31 December (€’000)
2014
2013
Restricted cash
1,980
2,320
8.9. R&D TAX INCENTIVE RECEIVABLES As at 31 December (€’000) Tax credit related to research expenditure capitalised under BE GAAP
2014
2013
11,830
8,026
The Company has accounted for an R&D tax credit receivable of €11.8 million following an R&D incentive scheme in Belgium under which the tax incentive can be refunded after five years if not offset against taxable basis over that period. The R&D incentives are recorded net against the relating R&D expenses in the consolidated statement of comprehensive income. We expect to receive this amount progressively over 5 years, starting as from accounting year 2016 onwards.
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8.10. TRADE RECEIVABLES AND OTHER CURRENT ASSETS As at 31 December (€'000)
2014
2013
Trade receivables
0
272
Invoices to be made
19
243
Total
19
515
553
478
18
24
571
502
Witholding taxes on interest income
454
448
Total
454
448
1,070
626
479
351
1,549
977
Trade receivables
Other current assets VAT receivables Other receivables Total Tax receivables
Accrued income and deferred expenses Accrued income Deferred expenses Total
Trade receivables consist of amounts due from research collaboration partners. The nominal amount of both trade and other receivables approximates the fair value. Other receivables mainly consist of taxes to be recovered. Trade receivables that were past due are not impaired. The trade receivables relate to a limited number of high-ranked international customers for whom there is no recent history of default. Currently there are no past due trade receivables. Currently there are no carrying amounts of the Group’s trade and other receivables. As at 31 December ('000)
2014
2013
€
0
272
US $
0
0
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Accrued income consists mainly of earned income from government grants for which no payments have been received but for which the relating expenditures have been incurred.
8.11. OTHER SHORT-TERM INVESTMENTS As at 31 December (€'000) Term deposits in EUR Term deposits in foreign currency Term deposits > 3 months
2014
2013
185,936
120,723
6,606
66,796
192,542
187,519
These are term deposits with banks with an initial term between 3 and 12 months.
8.12. CASH AND CASH EQUIVALENTS As at 31 December (€'000) Cash at bank and on hand in EUR Cash at bank and on hand in foreign currency Total
2014
2013
11,579
10,404
82
127
11,661
10,531
The cash and cash equivalents heading consists of cash, deposits held at call with banks and short-term deposits with an initial term not exceeding three months.
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8.13. FINANCIAL INSTRUMENTS BY CATEGORY € ‘000
2014
Loans and Receivables
Total
1,980
1,980
12,874
12,874
Other short-term deposits
192,542
192,542
Cash and cash equivalents
11,661
11,661
(10,408)
(10,408)
Loans and Receivables
Total
Restricted cash
2,320
2,320
Trade receivables - other current assets
9,491
9,491
Other short-term deposits
187,519
187,519
Cash and cash equivalents
10,531
10,531
(11,336)
(11,336)
Restricted cash Trade receivables - other current assets
Trade payables € ‘000
2013
Trade payables
8.14. SHARE CAPITAL
8.14.1. CAPITAL TRANSACTIONS DURING THE YEAR
The following capital increases took place in 2014: On 17 January 2014, the Company issued 5,583 new shares in exchange for €27,440.04 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €10,440.21 and €16,999.83 respectively. On 18 April 2014, the Company issued 85,098 new shares in exchange for €451,598.59 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €158,227.67 and to €293,370.92 respectively. On 30 June 2014, the Company raised €41.7 million through a private placement of new shares via an accelerated bookbuilding procedure. The company placed 4,908,332 new shares in exchange for €41,720,822. The par value and share premium amounted to €9,178,580.84 and €32,542,241.16 respectively.
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On 17 July 2014, the Company issued 10,000 new shares in exchange for €64,197.57 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €18,700 and €45,497.57 respectively. On 17 October 2014, the Company issued 12,500 new shares in exchange for €22,500 as a result of the exercise of warrants by some employees and consultants of the Company. The par value amounted to €22,500. The share capital consists of shares, which are fully paid up, with a par value of €1.87 per share. • • • •
Number of shares on 31 December 2013 Number of new shares (exercise of warrants) Number of new shares (private placement) Number of shares on 31 December 2014
48,992,646 113,181 4,908,332 54,014,159
As at 31 December 2014 the shareholder structure is as follows (based on the most recent transparency declarations): Shareholder
Address
Number of votes
% of votes
Aviva Investors Global Services Limited
No 1 Poultry, London, EC2R 8EJ, London, UK
2,071,484
3.84%
Abingworth Management Limited and Abingworth LLP
38, Jermyn Street, SW1Y 6DN London, UK
4,902,951
9.08%
C.H. Boehringer Sohn AG & Co. KG
Binger Strasse 173, 55216 Ingelheim am Rhein, Germany
2,142,857
3.97%
Perceptive Advisors
499, Park Avenue, 25th Floor, New York, NY 10022, USA
2,077,590
3.85%
Fidelity Management Research
245, Summer Street Boston; Massachusetts 02210, USA
1,810,500
3.35%
41,008,777
75.91%
Other
8.14.2. AUTHORISED CAPITAL
In January 2013, the Board of Directors issued a new warrant plan with a total number of 467,500 warrants and 391,330 were granted at an exercise price between €5.93 and €7.37 per warrant.
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In February 2013, the Company raised €31.5 million through a private placement of new shares via an accelerated bookbuilding procedure. The Extraordinary General Meeting of Shareholders of 18 July 2013 authorised the Board of Directors to increase the share capital, including by way of the issue of warrants and convertible bonds, in one or more transactions with a total amount equal to the total share capital of the company, i.e., ninety million six hundred ninety-five thousand four hundred and six euro, twelve cents (EUR 90,695,406.12). In June 2014, the Company raised again €41.7 million through a private placement of new shares via an accelerated bookbuilding procedure. As per 31 December 2014, the authorised capital amounts to €81,516,825.28 in € Authorised capital 31/12/2012 Issue of January 2013
Shares
Par Value
79,695,739.59 (874,225)
467,500.00
1.87
4,377,919.00
1.87
78,821,514.59 ABO of February 2013
(8,186,709) 70,634,806.06
E.O. General Assembly of 18/7/2013 90,695,406.12
For five years from 8/8/2013 till 8/8/2018
Publication in BS 8/8/2013 ABO of July 2014 Authorised capital 31/12/2014
(9,178,581)
4,908,332.00
1.87
81,516,825.28
8.14.3. VOTING RIGHTS
Each share gives right to one vote. If the share is encumbered by usufruct, the voting rights attached to the share shall be exercised by the usufructuary. The voting rights attached to pledged shares shall be exercised by the owner-pledgor.
8.14.4. DIVIDENDS AND MINIMUM SHARE CAPITAL
The Company has never distributed any dividends to its shareholders. According to Belgian company law, the Company is required to deduct
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at least 5 % from its profit to constitute the legal reserve until it reaches one-tenth of the Company’s statutory share capital. As of 31 December 2014, no profits were available for distribution. In accordance with Belgian company law, the minimum share capital of a public limited liability company is €61,500.
8.15. SHARE-BASED PAYMENTS
8.15.1. WARRANTS ISSUED ON 29 JANUARY 2013 FOR EMPLOYEES AND CONSULTANTS
During the Board meeting of 29 January 2013, the granting of a maximum number of 295,000 warrants in favour of certain employees and also the issue of 172,500 warrants in favour of certain consultants was approved and so in total 467,000 warrants have been issued. Each warrant gives the beneficiaries the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the average closing share price over a period of 30 days before the date of the grant (from €5.93 to €7.37 per warrant). The warrants vest rateably over 4 years: 25 % of the warrants vest after one year; thereafter, the remaining 75 % become vested on a monthly basis (2.083 % per month). The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants have been granted (thus starting as from 1 January 2017 until October 2019). In case of normal termination of the employee contract or the consulting agreement, all the vested warrants need to be exercised during the current or next exercise period. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed upon termination of the agreement. The duration of the warrants is seven years as of the issue date of the warrants. Any warrants that have not been exercised within seven years of their creation become null and void.
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8.15.2. WARRANTS ISSUED ON 5 AUGUST 2013 FOR EMPLOYEES, CONSULTANTS AND DIRECTORS.
During the Extraordinary General Meeting of Shareholders of 5 August 2013, the issuance of a maximum number of 50,000 warrants in favour of certain employees and also the issuance of 570,000 warrants in favour of certain consultants and Directors was approved and 334,340 warrants have been granted. Each warrant gives the beneficiaries the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the average closing share price over a period of 30 days before the date of the grant (from €6.65 to €7.54 per warrant). The warrants vest rateably over 4 years: 25 % of the warrants vest after one year; thereafter, the remaining 75 % become vested on a monthly basis (2.083 % per month). The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants have been granted (thus starting as from 1 January 2017 until April 2020). In case of normal termination of the employee contract, the consulting agreement or the mandate, all the vested warrants need to be exercised during the current or, if not yet exercisable during the first exercisable period. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed upon termination of the agreement or mandate. The duration of the warrants is seven years as of the issue date of the warrants. Any warrants that have not been exercised within seven years of their creation become null and void.
8.15.3. WARRANTS ISSUED 25 NOVEMBER 2013 FOR A CERTAIN DIRECTOR
During the Extraordinary General Meeting of Shareholders of 25 November 2013, the issuance of a maximum of 50,000 warrants in favour of a certain Director was approved. Each warrant gives the beneficiary the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the average closing share price over a period of 30 days before the date of the grant (€7.27 per warrant). The
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warrants vest rateably over 3 years: 33.33 % of the warrants vest after one year; thereafter, the remaining 66.7 % become vested on a monthly basis (2.78 % per month). The warrants can only be exercised when vested and as from the beginning of the third calendar year following the year in which the warrants were granted (thus starting as from the 1st of January 2017 until July 2018). In the case of a normal termination of the mandate, all the vested warrants need to be exercised during the current or if not yet exercisable during the first exercisable period. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed at the moment of termination of the agreement. The duration of the warrants is 5 years. Any warrants that have not been exercised within 5 of their creation become null and void. All non-vested warrants become lapsed upon termination of the mandate. The duration of the warrants is five years. Any warrants that have not been exercised within five years of their creation become null and void.
8.15.4. WARRANTS ISSUED IN 24 APRIL 2014 FOR CERTAIN EMPLOYEES AND CONSULTANTS
During the Extraordinary General Shareholders’ Meeting of 24 April 2014, the issuance of a maximum number of 725,000 warrants was approved and 327,224 warrants have subsequently been issued on 17 July 2014 and on 28 October 2014 (133,556 warrants at €8.85/warrant, 28,000 warrants at €9.18/warrant and 12,500 warrants at €8.25/warrant for employees and 153,168 warrants at €9.09/warrant for consultants). Each warrant gives the beneficiary the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the lowest of the average closing rate of the share on Euronext Brussels during a period of thirty days before the Date of the Offer and the last closing rate prior to the Date of the Offer for employees and for consultants the highest of the following two values: (i) the average closing rate of the share on Euronext Brussels during the period of thirty days preceding the Date of the Decision, as mentioned in a letter to be sent to the Selected Participants subsequently to the Date of the Decision, and (ii) the lowest of the following two values: (a) the average closing rate of the share on
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Euronext Brussels during a period of thirty days preceding the Date of the Offer, or (b) the last closing rate preceding the Date of the Offer. The warrants vest over 4 years: 25% of the warrants vest after one year; after that date the remaining 75% become vested on a monthly basis (2.083% per month). The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants were granted (thus starting as from the 1st of January 2018 until 15 January 2019 for consultants and as from 1 January 2018 until 15 January 2021 for employees). In the case of a normal termination of the employee contract or the consulting agreement, all the vested warrants need to be exercised during the current or if not yet exercisable during the first exercisable period. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed at the moment of termination of the agreement. The duration of the warrants is 5 years for consultants and 7 years for employees as of the issue date of the warrants. Warrants that have not been exercised within 5 or 7 years of their creation become null and void.
8.15.5. EXTENSION OF CERTAIN WARRANT PLANS
The General Shareholders Meeting of 30 April 2009 and the Board of Directors meeting of 22 June 2009 approved the five-year extension of certain warrant plans in accordance with Art. 583 of the Belgian Company Code and in accordance with Art. 21 of the â&#x20AC;&#x153;Economische Herstelwetâ&#x20AC;?. Because of this extension, the fair value of the warrants has changed. The incremental fair value was calculated as the difference between the fair value with and without extension at the date of extension.
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Warrants
2007
2007
2008
2009
2009
2009
2009
2010
2010
307,500
10,713
305,000
70,000
111,145
87,670
160,000
267,953
80,500
Non-vested
0
0
0
1,458
9,844
15,000
33,334
85,233
39,000
Exercisable
307,500
10,713
305,000
68,542
101,301
72,670
126,666
182,720
41,500
336
7,813
17,980
104,167
70,000
56,831
7,031
price (in Euro) At 31 December 2012 Outstanding
Granted Forfeited Exercised
7,142 300,000
Expired
11,803
67,187
68,500
85,000
At 31 December 2013 Outstanding
7,500
3,571
200,833
0
54,314
Non-vested Exercisable
7,500
3,571
200,833
0
54,314
68,500
85,000
249,973
80,500
14,925
19,500
235,048
61,000
44
2,084
Granted Forfeited Exercised
32,916
19,000
17,750
15,578
Expired
72,892
10,416
At 31 December 2014 Outstanding
7,500
3,571
167,917
0
35,314
50,750
85,000
161,459
68,000
Non-vested
0
0
0
0
0
0
0
0
0
Exercisable
7,500
3,571
167,917
0
35,314
50,750
85,000
161,459
68,000
The weighted average price at the date of exercise for warrants exercised during 2013 was €6.84 per share and for warrants exercised during 2014 was €5.00 per share
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2012
374,395
735,250
150,000
0
0
0
0
0
2,660,126
5.14
102,083
735,250
150,000
0
0
0
0
0
1,171,202
4.39
272,312
0
0
0
0
0
0
0
1,488,924
5.73
17,868
391,330
302,778
711,976
6.58
6,434
79,000
107,589
333,892
627,661
95,833
523,845
238,059
103,816
4,511
103,125
46,875 46,875
2013
2013
2014
2012
40,503
2012
2014
2011
0
0
Total number
Average Exercise
369,922
4.94
538,029
3.02
78,990
8.01
2,385,161
5.98
1,277,548
5.41
11,434
312,330
302,778
8,337
312,330
302,778
3,097
0
0
0
0
1,107,613
6.64
22,062
50,000
327,224
399,286
8.51
31,917
5.05
85,244
6.02
83,308
7.67
18,047
7,231
329,381
609,614
46,875
11,434
305,099
324,840
50,000
327,224
2,583,978
6.33
21,800
157,296
0
5,479
157,203
216,560
31,944
327,224
917,506
6.89
307,581
452,318
46,875
5,955
147,896
108,280
18,056
0
1,666,472
6.02
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Warrants
2007
2007
2008
2009
2009
2009
2009
2010
425,000
10,713
375,000
135,000
187,500
205,400
170,000
287,700
1.40
7.00
4.88
4.52
5.79
6.99
8.19
7.59
0
0
0
0
0
0
0
0
60%
60%
60%
60%
60%
60%
60%
50%
4.63%
4.22%
4.42%
3.79%
3.20%
3.14%
3.11%
2.75%
Expected duration
7.00
4.78
7.00
5.00
7.00
7.00
7.00
5.00
Fair value (in Euro) at grant date
0.90
3.78
3.11
2.06
3.51
5.25
5.07
3.23
Incremental Fair Value (in Euro) at extension
0.30
1.13
0.84
0
0
0
60%
60%
60%
3.50%
3.33%
4.08%
10.21
8.54
11.17
Number of warrants granted Number of warrants not vested at 31/12/2014 Exercise price (in â&#x201A;Ź) (*) Expected dividend yield Expected stock price volatility Risk-free interest rate
Expected dividend yield Expected stock price volatility Risk-free interest rate Expected duration at extension
(*) Equals the fair market value of the underlying shares on the grant date.
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2010
2011
2012
2012
2012
2013
2013
2013
2014
85,500
387,050
748,750
162,500
17,868
391,330
302,778
50,000
327,224
21,800
157,296
0
5,479
157,203
216,560
31,944
327,224
8.24
8.68
3.21
3.23
5.44
6.46
6.79
7.27
8.81
0
0
0
0
0
0
0
0
0
50%
50%
55%
55%
49%-56%
53.4% - 54.0%
52.7%-53.8%
52.7%-53.8%
40.9%
3.46%
3.65%-3.89%
2.35%-2.84%
2.83%-3.65%
1.09%-1.78%
1.54% - 1.88%
1.56%-2.08%
1.56%-2.08%
0.91%-1.50%
7.00
5.00-7.00
5.00-7.00
5.00-7.00
5.00-7.00
6.60-7.00
6.70-7.00
6.70-7.00
5.00-7.00
4.49
3.78-4.48
1.38-1.64
1.47-1.74
2.15-2.89
3.18-4.04
3.86-4.07
3.86-4.07
3.06-3.80
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8.16. BORROWINGS As at 31 December (€'000)
2014
2013
Secured
0
141
Total
0
141
Secured
141
786
Total
141
786
Non-current
Current
Borrowings comprise the financial leasing, which has been secured with the asset it provides financing for. The asset is an investment in the building and equipment.
8.16.1. MATURITY TABLE
The maturity of non-current borrowings (including financial lease) is as follows: As at 31 December (€'000)
2014
2013
Between 1 and 2 years
141
927
Total
141
927
Borrowings
The details on the borrowings are summarised below:
ANNUAL REPORT 2014 / ABLYNX
Year
Nominal Currency Amount
Secured (s) / Non secured (ns)
First installments
Number of installments
Periodicity of installments
2010
1,641.920
€
s
18/06/10
60
Monthly
2011
281,055
€
s
18/10/11
36
Monthly
2011
85,799
€
s
06/12/11
36
Monthly
2011
1,110,022
€
s
06/12/11
36
Monthly
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The carrying amounts of borrowings approximate their fair value. As at 31 December (€'000)
2014
2013
142
796
0
142
142
938
Less future finance charges
(1)
(11)
Present value of lease obligations
141
927
Finance lease obligations Future lease payments Within one year In the second to the fifth year Total
8.17. TRADE PAYABLES AND OTHER CURRENT LIABILITIES Trade payables
As at 31 December 2014
2013
Trade payables
3,004
4,642
Accruals for invoices to be received
7,404
6,694
10,408
11,336
(€’000)
Total Other current liabilities
As at 31 December
(€’000)
2014
2013
Social security
1,106
194
Payroll accruals
3,615
3,138
Other liabilities
105
(33)
Total
4,826
3,299
Deferred income
As at 31 December 2014
2013
Deferred income
132,308
151,636
Within one year
68,188
37,901
64,120
113,735
189
189
132,497
151,825
(€’000)
In the second to the fifth year Accrued expenses Total
Deferred income mainly relates to cash received from research collaboration agreements prior to completion of the earnings process.
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8.18. DEFERRED INCOME TAX Sources of temporary differences (assets)/liabilities As at 31 December (€'000) Tax loss carried forward Notional interest deduction (*) Other temporary differences Net book value of capitalised R&D assets Depreciation of tangible assets Total temporary differences Unrecognized deferred tax asset (33.99%)
2014
2013
(144,768)
(118,576)
(21,319)
(22,044)
7,439
8,268
(129,786)
(115,471)
(1)
(1)
(288,435)
(247,824)
(98,039)
(84,235)
(*) The application of Notional Interest Deduction is restricted as it has an expiry term of 7 years
The Group has unused tax losses carry forward. This, combined with the other temporary differences, results in a net deferred tax asset position. The Company has accounted for an R&D tax credit receivable of €11.8 million following an R&D incentive scheme in Belgium under which the tax incentive can be refunded after five years if not offset against taxable basis over that period. The R&D incentives are recorded net against the relating R&D expenses in the consolidated statement of comprehensive income. We expect to receive this amount progressively over 5 years, starting as from accounting year 2016 onwards. Due to the uncertainty surrounding the Group’s ability to realise taxable profits in the near future, the Company did not recognise any deferred tax assets.
8.19. RETIREMENT BENEFIT OBLIGATIONS The Belgian defined contribution pension plans are by law subject to minimum guaranteed rates of return, currently 3.25% on employer contributions and 3.75% on employee contributions. The latter, which apply as an average over the employees entire career, may be modified by Royal Decree in which case the new rate(s) apply to both the accumulated past contributions and the future contributions as
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CORPORATE GOVERNANCE & FINANCIAL REVIEW
from the date of modification onwards. Those plans, which are funded through group insurances, were basically accounted for as defined contribution plans. There was no material deficit with respect to the positive difference between the minimum guaranteed reserves and the actual accumulated reserves. The contributions paid during 2014 for those plans amounted to €815,288.85 million by the employer and € 319,673.16 million by the employees. The plan assets at 31 December 2014 consisted of €4.6 million individual insurance reserves which benefit from a guaranteed interest rate by the insurance company. Given the non-material nature of the debts (€2,994.41) at this point in time we do not consider this as a liability to the Company.
8.20. REVENUE RECOGNITION As at 31 December (€'000)
2014
2013
Up-front fees
33,772
13,969
R&D Service Fees
13,784
11,549
Milestone payments License Fees & Other Total
7,500 154
163
47,710
33,181
In 2014, revenues increased to €47.7 million (2013: €33.2 million), driven by higher FTE funding and higher recognised income from the upfront payments received from AbbVie and Merck & Co.
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8.21. RESEARCH AND DEVELOPMENT EXPENSES Year ended 31 December (€'000)
2014
2013
Consumables
4,022
2,950
Outsourcing
26,289
19,533
Patent costs
1,655
1,711
Personnel costs
22,131
17,688
428
504
5,302
5,023
Withholding tax (Reduction Tax Scientist)
(3,133)
(2,590)
R&D tax credit
(3,336)
(2,939)
Subtotal
53,358
41,880
1,130
1,819
54,488
43,699
Share-based payments Other operating expenses
Depreciation and amortisation Total research and development expenses
The increase in outsourcing is mainly related to higher technology and preclinical development costs.
8.22. GENERAL AND ADMINISTRATIVE EXPENSES Year ended 31 December (€'000)
2014
2013
2,802
3,326
1,112
639
Executive Committee (*) compensation
3,419
2,690
Consultancy
1,464
1,599
Other operating expenses
1,609
1,604
239
(289)
10,645
9,569
407
475
11,052
10,044
Personnel costs Share-based payments
Retribution (**) Subtotal Depreciation and amortisation Total general and administrative expenses
(*) The Executive Committee consists of key management members and entities controlled by them (**) In 2014 the Company had to reimburse €505,828.32 of Reduction Tax Scientist over the previous years
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8.23. OTHER INCOME AND EXPENSES Year ended 31 December (€'000)
2014
2013
14
131
Other operating expenses
9
3
Total
5
128
Other operating income
Other operating expenses mainly consist of expenses related to nondeductible VAT and county taxes. Other operating income mainly consists of recuperation of nondeductible VAT of previous years.
8.24. EMPLOYEE BENEFIT EXPENSE Year ended 31 December (€'000)
2014
2013
16,644
14,127
Social security
5,180
4,095
Group and hospitalisation insurance cost (*)
1,047
761
Share-based payments
1,540
1,142
Other employment costs
2,061
2,031
Executive Committee compensation (**)
3,813
2,579
Withholding tax (Reduction Tax Scientist)
(3,287)
(2,768)
Total
26,998
21,967
8
7
280
243
41
40
317
279
Salaries, wages and bonuses
Headcount Executive Committee (**) R&D personnel General and administrative staff Average FTE (*) Post-employment benefits (**) The Executive Committee consists of key management members and the entities controlled by them
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8.25. OPERATING LEASES As at 31 December (€'000)
2014
2013
Current lease payments
3,225
3,131
Within one year
3,208
3,102
In the second to the fifth year
7,100
9,539
Future lease payments
The majority of the lease arrangements concerns the leasing of company cars and office facilities.
8.26. FINANCE INCOME AND EXPENSES Year ended 31 December (€'000)
2014
2013
Interest income on financial assets
1,622
772
Other finance income
2,672
177
Total
4,294
949
88
31
Other finance expenses
698
2,715
Total
786
2,746
Finance expenses Interest charges on financial liabilities
In 2014, the line ‘Other finance expenses’ includes realised exchange losses of €683,791.04 (2013: €839,784.07). In 2014, the line ‘Other finance income’ included unrealised foreign exchange gains of €681,940.04 (2013: €1,345,151.40 unrealised foreign exchange losses) and foreign exchange gains of €1,525,455.10 (2013: €163,714.02).
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8.27. INCOME TAX EXPENSE Year ended 31 December (€'000)
2014
2013
Current income taxes
0
0
Total
0
0
(12,730)
(19,470)
Stock issuance costs
1,795
1,366
Share-based payments
1,540
1,142
Other permanent differences
4,595
4,701
Expected income tax credit
13,804
(6.275)
Impact unrecognized deferred tax asset
13,804
(6.275)
0
0
Loss of the year
Effective income taxes
8.28. LOSS PER SHARE Year ended 31 December (€'000) Loss of the year Weighted average number of shares outstanding
2014
2013
(12,730)
(19,470)
51,105,884 47,859,905 (0.25)
Basic and diluted loss per share after reverse split (in €)
(0.41)
Earnings/losses per share are calculated by dividing the net result attributable to shareholders by the weighted average numbers of shares during the year. As the Group is suffering operating losses, warrants have an antidilutive effect. As such, there is no difference between basic and diluted earnings per share.
8.29. CONTINGENCIES AND ARBITRATIONS At present there are no contingencies and arbitrations.
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8.30. COMMITMENTS
8.30.1. COLLABORATIVE RESEARCH AGREEMENTS AND CLINICAL RESEARCH AGREEMENTS
8.30.1.1. BOEHRINGER INGELHEIM (B.I.)
• On 8 January 2007, B.I. and Ablynx agreed to collaborate to identify Nanobodies in a specific biological target believed to be relevant in Alzheimer’s disease and B.I. received an exclusive worldwide license to develop and commercialise such Nanobodies. In return, Ablynx received an up-front payment and would receive milestone payments, FTE payments and royalties as Nanobody drug candidates would proceed through development and potentially reach the market. Ablynx would also participate in the relevant steering committees. On 28 August 2014 it was announced however that following the termination of the Phase I study with BI 1034020 in Alzheimer’s disease, and after a full review of the programme, B.I. decided not to move forward with the development of this anti-Abeta Nanobody, thereby ending the collaboration in Alzheimer’s disease that both companies entered into in January 2007. • On 7 September 2007, B.I. and Ablynx announced a major global strategic alliance to discover, develop and commercialise up to 10 different Nanobody programmes. In return, Ablynx received an up-front payment and will receive research license payments, milestones and royalties. Additionally, Boehringer Ingelheim subscribed for €15 million in the IPO in November 2007. Ablynx will have certain co-promotion rights in Europe. On 21 August 2008, the research funding was extended until 2009. The agreement was extended with two years in March 2012 and on 21 August 2014 it was extended a last time until 31 December 2014, being the end of the Discovery Term of this Agreement
8.30.1.2. NOVARTIS AGREEMENT
• The agreement with Novartis was signed in December 2005. Under this agreement, Ablynx will seek to discover Nanobodies against a number of targets nominated by Novartis in a
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collaborative research programme. The deal includes R&D payments, FTE payments, license fees, milestones and royalties. On 10 December 2007, the alliance was extended for another year and on 5 February 2009, it was extended again for another year. On 12 July 2010, two License, Development and Commercialisation Agreements were signed for two targets. The first partnered programme with Novartis, TAS266 (anti-DR5), entered Phase I clinical development in cancer patients in 2012 but was terminated later the same year.
8.30.1.3. MERCK SERONO AGREEMENTS
Agreement signed in 2008 • On 4 September 2008, Ablynx and Merck Serono announced a codiscovery and co-development collaboration. They will collaborate to research and develop Nanobody-based therapeutics against two disease targets, one oncology and one immunology exploiting some of the key benefits Nanobodies have over conventional antibodies and other fragments. Under the terms of the agreement, both companies will equally share all research and development costs. Should Ablynx contribute equally to each programme, it will be eligible to receive fifty percent of the resulting profits. In addition, Ablynx has an option to opt-out partly or fully during the research and development programmes, in which case Ablynx would be eligible to receive either a reduced profit share, in the case of a partial opt-out, or milestones and royalties on potential sales in the case of a full opt-out. The agreement includes an upfront cash payment to Ablynx of €10 million. In June 2013, Ablynx announced that it had exercised its opt-out option for the co-development project with Merck Serono on ALX0761 in inflammation. At the same time, Merck Serono initiated a Phase I study with ALX-0761, triggering a €2.5 million milestone to Ablynx. In August 2014, Ablynx announced that Merck Serono further advanced ALX-0761 and initiated a Phase Ib study in patients with psoriasis. The study is expected to read out in 2015. In August 2014, Ablynx announced that it had exercised its opt-out option for the co-development project with Merck Serono on ALX0751 in oncology (the second of the two targets as part of the 2008
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agreement between Merck Serono and Ablynx). And in February 2015, Merck Serono informed Ablynx that they intend to terminate this pre-clinical oncology programme. All assets and rights to Ablynx would then return to Ablynx. Agreement signed in 2010 • On 11 October 2010, Ablynx and Merck Serono announced that they have expanded their relationship and entered into a second agreement to co-discover and co-develop Nanobodies against an inflammatory disease target. Under the terms of the agreement, Ablynx has received an up-front payment of €10 million in 2010 and is responsible for all activities and costs, excluding manufacturing costs, up to the delivery of a pre-clinical package that will form the basis for the filing of an IND or IND-equivalent. Upon acceptance of the package by Merck Serono, Ablynx will be eligible for a €15 million milestone payment. Ablynx has the option to continue with Merck Serono up to a 50:50 co-development basis and share the resulting profits, or to convert this collaboration into an exclusive, worldwide licensing deal with milestone payments and tiered royalties. Agreement signed in 2011 • On 9 November 2011, Ablynx and Merck Serono announced that they have expanded their relationship and entered into a third agreement to co-discover and co-develop Nanobodies against two targets in osteoarthritis. Under the terms of the agreement, Ablynx has received an up-front payment of €12 million in 2011 and €8 million in January 2012 and is responsible for all activities and costs, excluding manufacturing costs, up to the delivery of a pre-clinical package that will form the basis for the filing of an IND or IND-equivalent. Upon acceptance of the package by Merck Serono, Ablynx will be eligible for a €30 million milestone payment. Ablynx has the option to continue with Merck Serono up to a 50:50 co-development basis and share the resulting profits, or to convert this collaboration into an exclusive, worldwide licensing deal with milestone payments and tiered royalties. Agreement signed in 2013 • On 26 September 2013, Ablynx and Merck Serono announced that they had signed a multi-year research alliance that could lead to
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at least four co-discovery and co-development collaborations. Under the terms of the agreement, Merck Serono will fund a dedicated discovery group at Ablynx. Both partners will jointly select disease targets against which this group will develop Nanobodies, up to in vivo proof-of-principle. The dedicated group will focus on the discovery and development of Nanobodies against a number of targets across multiple disease areas. The collaboration will span all of Merck Serono’s core research and development fields, including oncology, immuno-oncology, immunology and neurology. In February 2015, Ablynx announced that Merck Serono has informed Ablynx that it wishes to revisit the Strategic Collaboration Agreement between the Companies announced in September 2013, under which €11.5 million, representing nearly 50% of the agreed upon research funding (which was scheduled to be provided over a four-year term) has already been provided by Merck Serono. Negotiations are currently ongoing but Ablynx believes that Merck Serono may no longer provide the remaining funding under the Strategic Collaboration Agreement as scheduled, and Ablynx has now made provisions in its budgets and plans for this change. Ablynx also believes that termination of the Strategic Collaboration Agreement is currently the most likely outcome of the discussions and that under this scenario Ablynx would retain ownership of the five programmes currently in progress, whilst having no obligations to initiate further programmes under this contract.
8.30.1.4. MERCK & CO AGREEMENTS
• On 2 October 2012 Ablynx announced a collaboration with a subsidiary of Merck & Co, known outside the US and Canada as MSD, to develop and commercialise Nanobody candidates directed towards a voltage gated ion channel with the option to develop and commercialise a Nanobody to a second target. Under the terms of the agreement, Merck gains exclusive global rights to Nanobodies against the selected target, with an option for similar rights to a second target. Upon signing, Merck will pay Ablynx a €6.5 million upfront payment and a €2 million fee for research funding. In addition, Ablynx will be eligible to receive up to €448 million in research, regulatory and commercial milestone payments associated with the progress of multiple candidates
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as well as tiered royalties on any products derived from the collaboration. Ablynx will be responsible for the discovery of Nanobody candidates and Merck will be responsible for the research, development, manufacturing and commercialisation of any Nanobody product resulting from the collaboration. • On 3 February 2014, Ablynx announced that the Company had entered into a second research collaboration and licensing agreement with a subsidiary of Merck & Co. This new exclusive collaboration and licensing agreement is focused on the discovery and development of several predefined Nanobody candidates (including bi- and trispecifics) directed toward so called ‘immune checkpoint modulators’, proteins believed to provide potential targets for the development of cancer immunotherapies, a rapidly emerging approach to the treatment of a wide range of cancer types. Under the terms of the agreement, Ablynx will receive an upfront payment of €20 million and up to €10.7 million in research funding during the initial three year research term of the collaboration. In addition, Ablynx is eligible to receive development, regulatory and commercial milestone payments on achieved sales thresholds for a number of products with ultimate potential to accrue as much as €1.7 billion plus tiered royalties. Merck will be responsible for the development, manufacturing and commercialisation of any products resulting from the collaboration.
8.30.1.5. ABBVIE AGREEMENT
• In September 2013, Ablynx and AbbVie entered into a global license agreement to develop and commercialise the anti-IL-6R Nanobody, ALX-0061, to treat inflammatory diseases. ALX-0061 is Ablynx’s proprietary anti-IL-6R Nanobody that successfully completed a Phase IIa study in February 2013 reporting strong efficacy and safety data in patients with moderately to severely active rheumatoid arthritis (RA) on a stable background of methotrexate. Under the terms of the agreement, Ablynx is responsible for completing Phase II clinical development in both RA and systemic lupus erythematosus (SLE). Upon the achievement of pre-defined success criteria, AbbVie will exercise its right to in-license ALX-0061 and be responsible for subsequent Phase III clinical development and commercialisation. Ablynx has retained an option for co-promotion rights in Belgium,
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the Netherlands and Luxembourg. Ablynx has received an upfront payment of US$175 million which will partly be used to fund the next phases of clinical development of ALX-0061 and is thus recognised a rato of the R&D costs incurred in relation with the program. Upon achievement of certain development, regulatory, commercial and sales-based milestones, Ablynx will be eligible to receive additional milestone payments totaling up to US$665 million as well as double-digit tiered royalties on net sales upon commercialisation.
8.30.1.6. EDDINGPHARM AGREEMENTS
• On 18 October 2013 Ablynx granted an exclusive, royaltybearing license to Eddingpharm, a leading Chinese specialty pharmaceutical company, to develop and commercialise its anti-RANKL Nanobody, ALX-0141, in the mainland of the People’s Republic of China, the Hong Kong and Macao Special Administrative Regions, and Taiwan, for all indications, including osteoporosis and bone metastases. Under the terms of the agreement, Eddingpharm will be responsible for the clinical development, registration and commercialisation in Greater China of anti-RANKL Nanobody therapeutics. Ablynx will have access to the data generated by Eddingpharm to support potential licensing discussions in other geographic regions. Ablynx has received a €2 million upfront payment from Eddingpharm and is entitled to receive commercial milestone payments plus tiered, double-digit royalties of up to 20%, based on annual net sales of ALX-0141 generated by Eddingpharm in Greater China. • On 1 September 2014 Ablynx announced that it has expanded its relationship with Eddingpharm, one of the leading Chinese specialty pharmaceutical companies, by granting Eddingpharm an exclusive, royalty-bearing license to develop and commercialise Ablynx’s anti-TNFα Nanobody, ozoralizumab (ATN-103), in the mainland of the People’s Republic of China, the Hong Kong and Macao Special Administrative Regions, and Taiwan, for all indications, including rheumatoid arthritis (RA). Under the terms of the agreement, Eddingpharm will be responsible for the clinical development, registration and commercialisation in Greater China of anti-TNFα Nanobody therapeutics. Ablynx
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will have access to the clinical data generated by Eddingpharm to support potential licensing discussions in other geographic regions. Ablynx has received an upfront payment of â&#x201A;Ź2 million, payable in two tranches, and is entitled to receive development and commercial milestone payments plus tiered, double-digit royalties of up to 20%, based on annual net sales of ozoralizumab generated by Eddingpharm in Greater China.
8.30.1.7. OTHER COLLABORATIVE RESEARCH AGREEMENTS
Ablynx has entered into numerous agreements with universities, medical centers and external researchers for research and development work and for the validation of the Groupâ&#x20AC;&#x2122;s technology and products. These agreements typically have durations of one to three years. Ablynx must pay fixed and variable fees to the collaborators and in exchange receives access and rights to the results of the work.
8.30.2. PRINCIPAL GOVERNMENT GRANTS AND INCENTIVES
GRANTS
IWT 14
Grant
Assigned
Received at 31/12/2014
Recognised as income 2013
600,000
600,000
600,000
360,000
Recognised as income 2014
Still to receive
IWT 15
157,773
157,773
157,773
100,177
18,991
IWT 16
747,648
747,648
747,648
596,000
151,648
IWT 17
1,680,765
1,680,765
1,581,768
1,149,009
432,759
98,997
IWT 18
885,597
885,597
708,000
540,511
167,489
177,597
IWT 19
2,093,845
2,093,845
558,000
583,970
1,535,845
IWT 20
445,027
445,027
178,000
192,428
267,027
IWT 21
460,181
460,181
184,000
39,723
276,181
The IWT, funded by the Flemish Government, awarded Ablynx three additional grants in 2013; the long term S&P rating for the Flemish Government is AA. Altogether, the Group received a fixed percentage of the expenses incurred in the following R&D projects:
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1) IWT 14: Grouped Feasibility Studies Application Grantor: IWT Start date: 1 December 2011 End date: 30 November 2013 Amount approved: €600,000 Amount recognised: €600,000 Amount received: €600,000 2) IWT 15: Centibody Project Grantor: IWT Start date: End date: Amount approved: Amount recognised: Amount received:
1 May 2012 30 April 2014 €157,773 €157,773 €157,773
3) IWT 16: Development of anti-IgE Nanobody in combination with a novel serum albumin binder for the treatment of allergic asthma Grantor: IWT Start date: 1 April 2012 End date: 31 March 2014 Amount approved: €747,647 Amount recognised: €747,647 Amount received: €747,647 4) IWT 17: Efficacy, safety and pharmacokinetic behavior of ALX-0171, an inhaled Nanobody for the treatment of RSV infection in infants Grantor: IWT Start date: 1 June 2013 End date: 31 May 2014 Amount approved: €1,680,765 Amount recognised: €1,581,768 Amount received: €1,581,768 5) IWT 18: T cell recruiting Nanobodies for targeted delivery Grantor : IWT Start date: 1 June 2013 End date: 31 May 2015 Amount approved: €885,597 Amount recognised: €708,000 Amount received: €708,000
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6) IWT 19: Development of a novel Nanobody-based therapeutic platform for treatment of ocular diseases Grantor: IWT Start date: 1 April 2014 End date: 31 March 2017 Amount approved: €2,093,845 Amount recognised: €583,970 Amount received: €558,000 7) IWT 20: Bispecific nanobodies with enhanced specificity Grantor : IWT Start date: 1 June 2014 End date: 31 May 2016 Amount approved: €445,027 Amount recognised: €192,428 Amount received: €178,000 8) IWT 21: Development of nanobody-based immunotoxins Grantor: IWT Start date: 1 June 2014 End date: 31 May 2016 Amount approved: €460,181 Amount recognised: €39,773 Amount received: €184,000
8.30.3. PRINCIPAL LEASE AND BORROWINGS CONTRACTS
Ablynx has signed contracts with NV Bio-Versneller, who provides the Company with 8,000 m2 of laboratory facilities within the Technologiepark as from June 2010, with an initial term of eight years which can be extended. Ablynx was granted by KBC Bank a credit commitment of €3.2 million for the guarantee clause, which is mentioned in the NV Bio-Versneller contract and of which end 2010 €1.3 million was withdrawn. For this same amount, a pledge was granted to KBC Bank NV and is constituted as restricted cash. The pledge and the restricted cash of €1.3 million can be increased to a maximum of €3.2 million in relation to the cash position of the Company. NV Bio-Versneller was granted a pledge of €1.7 million in the framework of additional investments which NV Bio-Versneller made in the
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Bio-Versneller building at the request of Ablynx nv. The pledge is being reduced every year over a period of five years as from January 2012 and per 31 December 2014 an amount of €0.68 million was still outstanding. The amount of the pledge is considered as restricted cash. Ablynx rents 25,322 m2 of land from BVBA Rootom in Belgium. The Company developed facilities on this land for the housing of llamas. The rental agreement gives the Company the option to purchase the land and the facilicities at a nominal value of €375,000 from the first day of the sixth year of the contract. The company decided to exercise this option at the end of January 2015.
8.31. RELATED PARTY TRANSACTIONS
8.31.1. REMUNERATION KEY MANAGEMENT AND NON-EXECUTIVE DIRECTORS
Key management consists of the members of the Executive Committee and the non-executive Directors and the entities controlled by any of them. Remuneration key management: As at 31 December (€'000)
2014
2013
8
7
2,519
1,832
Post-employment benefits (group insurance)
157
196
Share-based compensation
926
772
Other employee costs
144
112
Management fees
334
355
Retribution (*)
394
(111)
4,474
3,156
153,168
410,000
1,814,418
2,094,124
100,805
102,035
Number of management members Short-term employee benefits (salaries, social security bonuses, lunch vouchers)
Total Number of warrants granted (in units) Cumulative outstanding warrants (in units) Shares owned (in units)
(*) In 2014 the Company had to reimburse €505,828.32 of Retribution over the previous years
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Transactions with non-executive Directors: As at 31 December (€'000)
2014
2013
0
12
Management fees
140
8
Total benefits
140
20
Share-based compensation
0
64,590
Cumulative outstanding warrants (in units)
74,595
14,033
Non-vested warrants
44,756
9,719
Shares owned (in units)
25,000
25,000
Number of warrants offered or granted (in units)
8.32. EVENTS AFTER THE BALANCE SHEET DATE The Company held “end-of Phase II” meetings on the TITAN data for caplacizumab with both European and US regulators. As a result, it is the Company’s intention to file for conditional approval in Europe of caplacizumab during the first half of 2017 based on the Phase II TITAN data. Conditional approval is the approval of a medicine on the basis of less comprehensive clinical data but with a positive benefit/risk balance (nevertheless with a commitment to carry out further clinical studies), justified by the fact that the product is indicated for an orphan disease with a high unmet medical need. In addition, the Company will proceed with a Phase III study to support the submission of a Biologics License Application (BLA) in the USA and the transformation of the potential conditional approval to a “standard” approval in Europe (i.e. with no further specific obligations). Input from both regulators will be used to finalise the next clinical trial design for caplacizumab. Recruitment into the Phase IIa first-in-infant study with the inhaled anti-RSV Nanobody began in the Northern Hemisphere. The lead-in phase of this study was successfully completed and the Independent Data Monitoring Committee confirmed that the Company could proceed into the placebocontrolled phase of the study. Overall, recruitment has progressed more slowly than anticipated due to a number of different factors, including a shorter and less severe RSV season than normal in some countries due to milder temperatures. But, as indicated previously, Ablynx is preparing a plan to use clinical centres in parts of the Southern Hemisphere and Asia, where the RSV season peaks later in the year, to enable the completion of this 35 patient study in 2015. It is now expected that data from this trial will be available in the first half of 2016.
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The Company made further progress in preparing to start the dosing of subjects in both of the planned two Phase IIb RA studies with the anti-IL6R Nanobody, ALX-0061, partnered with AbbVie. The first clinical centres to evaluate the safety and efficacy of ALX-0061 in combination with methotrexate have been opened and initial subjects are being screened, with first dosing expected in the next few weeks. Preparations have also been underway to start the monotherapy Phase IIb study with ALX-0061 and the first sites involved in this trial will start with the screening of initial patients over the next few days. On 21 January, Ablynx announced the issuance of an additional 115,946 common shares in exchange for €909,426.07 as the result of the exercise of warrants by some employees and consultants of the Company. As a result of this transaction, Ablynx now has 54,130,105 shares outstanding. On 22 January, Ablynx announced that it was successful in opposing the appeal procedure lodged by Domantis (now a member of the GlaxoSmithKline, GSK, group of companies) in 2010 against the decision by the Opposition Division of the European Patent Office to revoke Domantis’ European Patent 1 517 921. As a result of the decision by the Board of Appeal, the Domantis patent will remain revoked in full (without further possibility to appeal). The European Patent 1 517 921 relates to one specific technique for the half-life extension of immunoglobulin single variable domains. Now that the revocation of this patent has been confirmed in appeal, Ablynx and its partners remain free to apply such half-life extension techniques in their internal and partnered programmes, as Domantis has no granted patent claims that could possibly be invoked against the use of these techniques in Europe. The Ablynx Board of Directors has decided to propose the appointment of Professor Dr Baroness Lutgart Van den Berghe as an Independent Director on the Ablynx Board at the upcoming Annual General Meeting taking place on 30 April 2015. Professor Van den Berghe is Executive Director of GUBERNA, the Belgian Governance Institute, and Extraordinary Professor at the University of Ghent and the Vlerick Business School, Belgium. In addition, Professor Van den Berghe brings a lot of expertise in corporate governance and strategy from her roles as an Independent Director of the Boards of a number of listed and non-listed multi-national companies. In February Merck Serono informed Ablynx that it wishes to revisit the Strategic Collaboration Agreement between the Companies announced in September 2013, under which €11.5 million, representing nearly 50% of the agreed upon research funding (which was scheduled to be provided over a four-year term) has already been provided by Merck Serono. Negotiations
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are currently ongoing but Ablynx believes that Merck Serono may no longer provide the remaining funding under the Strategic Collaboration Agreement as scheduled, and Ablynx has now made provisions in its budgets and plans for this change. Ablynx also believes that termination of the Strategic Collaboration Agreement is currently the most likely outcome of the discussions and that under this scenario Ablynx would retain ownership of the five programmes currently in progress, whilst having no obligations to initiate further programmes under this contract. Separately, Merck Serono has informed Ablynx that it intends to terminate the pre-clinical oncology programme, ALX-0751. All assets and rights would then return to Ablynx. On 16 March, Ablynx announced the issuance of an additional 174,302 common shares in exchange for â&#x201A;Ź1,292,682.18 as the result of the exercise of warrants by some employees and consultants of the Company. As a result of this transaction, Ablynx now has 54,304,407 shares outstanding.
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Auditor’s fees
52,127
Fees for exceptional services or special missions executed in the Group by the auditor Other attestation missions
11,025
Tax consultancy Other missions external to the audit Fees for exceptional services or special missions executed in the Group by people they are linked to Other attestation missions Tax consultancy
1,575
Other missions external to the audit
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09. DISCLOSURE AUDIT FEES
€
CORPORATE GOVERNANCE & FINANCIAL REVIEW
AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2014
10. CONDENSED STATUTORY FINANCIAL STATEMENTS OF ABLYNX NV
In accordance with Art. 105 of the Belgian Companies’ Code, the condensed statutory standalone financial statements of Ablynx nv are presented. These condensed statements have been drawn up using the same accounting principles for preparing the complete set of statutory financial statements of Ablynx nv at and for the year ending 31 December 2014 in Belgian GAAP. The management report, the statutory financial statements of Ablynx nv and the report of the statutory auditor will be filed with the appropriate authorities and are available at the Company’s registered offices. The statutory auditor has issued an unqualified report on the statutory financial statements of Ablynx nv. The complete set of the statutory financial statements of Ablynx nv is also available on the Company’s website www.ablynx.com. SUMMARY BALANCE SHEET OF ABLYNX NV Assets as at (€'000)
2014
2013
Fixed assets
132,434
118,104
Intangible fixed assets
130,133
115,710
2,301
2,394
220,606
210,805
Amounts receivable
12,874
9,462
Current investments
194,535
189,884
11,648
10,482
1,549
977
353,040
328,909
Tangible fixed assets Current assets
Cash at bank and in hand Deferred charges and accrued income Total Assets
Current investments include €1,980,000Restricted Cash in 2014 (€2,320,000 in 2013).
Liabilities as at (€’000)
2014
2013
Equity
173,062
153,217
Capital
100,952
91,564
Share premium account
183,645
150,747
Accumulated profits (losses)
(111,535)
(89,094)
0
141
179,978
175,551
15,375
15,421
Deferred charges and accrued income
164,603
160,130
Total Liabilities
353,040
328,909
Amounts payable after more than one year Current liabilities Amounts payable within one year
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SUMMARY INCOME STATEMENT OF ABLYNX NV 2014
2013
Operating Income
92,507
89,966
Turnover
23,490
32,746
Own construction capitalised
60,528
48,789
8,489
8,431
Operating charges
116,580
98,984
Services and other goods
42,377
35,025
Remuneration, social security costs and pensions
26,528
21,836
Depreciation of and amounts written off formation expenses, intangible and tangible fixed assets
47,666
41,909
9
214
(24,073)
(9,018)
1,713
(3,157)
Financial income
4,298
950
Financial charges
(2,585)
(4,107)
(22,360)
(12,175)
Extraordinary result
(62)
(1,721)
Extraordinary cost
(86)
(1,853)
24
132
(22,422)
(13,896)
(€’000)
Other operating income
Other operating charges Operating Profit Financial result
Gain (loss) on ordinary activities before taxes
Extraordinary income Profit (loss) for the year before taxes Taxes Profit (loss) for the period available for appropriation
(19) (22,441)
(13,896)
APPROPRIATION ACCOUNT 2014
2013
111,535
89,094
Profit (loss) to be appropriated
(22,441)
(13,896)
Profit (loss) to be carried forward
(89,094)
(75,198)
Profit (loss) to be carried forward
(111,535)
(89,094)
(€’000) Profit (loss) to be appropriated
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CAPITAL STATEMENT (position as at 31 December 2014) (€’000)
Amounts
Number of shares
A. Capital 1. Issued capital - At the end of the previous year - Changes during the year - At the end of this year
91,564 9,388 100,952
2. Capital representation
54,014.159
2.1. Shares without par value - Bearer and dematerialised
54,014.159
B. Own shares held by
0
C. Commitments to issue shares (*)
0
D. Autorised capital not issued
81.517
(*) See chapter 11, Additional information, the number of outstanding warrants amounts to 3,455,478.
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The valuation rules have been prepared in agreement with the requirements of the Royal Decree of 30 January 2001 concerning the enforcement of the Commercial Code.
11.2. SPECIFIC RULES Company Formation Expenses Formation expenses are charged directly to the profit and loss account. Intangible Fixed Assets Concessions, patents, licenses, know-how, trademarks Software licenses and implementation costs are capitalised at their acquisition prices, and amortised straight-line at a ratio of 33.33â&#x20AC;&#x2030;% per year. Other licenses are valued at their acquisition prices and depreciated straight-line over the economic life of the patent to which they relate. The maximum depreciation period for other licenses is five years. Research and Development Research costs have also been capitalised at cost price, insofar as the cost price does not exceed the value in use or the future return of these assets for the Company. They are amortised straight-line over five years.
11. SUMMARY OF VALUATION RULES AND ADDITIONAL INFORMATION
11.1. PRINCIPLES
Other intangible fixed assets Other intangible fixed assets are capitalised at their cost price and to their probable useful life for the company. These other intangible fixed assets include contributed technology. The contribution value of this technology is depreciated linearly over five years. Tangible Fixed Assets Tangible fixed assets are capitalised at their acquisition price, including all subsequent direct costs required to make such assets operational.
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The following depreciation percentages are used: Asset
Method
Basis
Depreciation %
L-D-O
NR-R
Principle costs (Min-Max)
2 Intangible Fixed Assets
L
NR
20-33,3 %
3 Installations, machinery and equipment
L
NR
33,3 %
4 Office equipment and furniture
L
NR
20 %
5 Other tangible fixed assets
L
NR
33,3 %
Subsequent costs (Min-Max)
1 Formation Cost
6 Leasehold improvements : the shorter of the useful life or the minimum leasing term L = linear, D= degressive, O = other, NR = not revalued, R = revalued Financial Fixed Assets Guarantees are measured at their acquisition price. Amounts receivable of more than one year The receivables are measured at their nominal value, no discount factor has been taken into account. Amounts Receivable within one Year The receivables are measured at their nominal value. Each receivable is individually valued. Devaluation of receivables is recorded, if the actual value is lower than their nominal value. Cash Cash is measured at its nominal value. Grants, Government Incentives, upfront payments and FTE income Grants and government incentives are recognised in the income statement when all the conditions of the grants and government incentives are fulfilled and costs are incurred. Grants, government incentives, upfront payments and FTE income (as from 2009) related to capitalised research cost are recognised in the income statement in accordance with the depreciation rhythm of the asset to which they relate.
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In accordance with the CBN recommendation issued in 2010, the reduction in withholding tax has been directly recorded in other operating income. Amounts Payable within One Year Amounts payable are measured at their nominal value. Foreign Currencies Transactions in foreign currencies during the year are booked at the current exchange rate. All outstanding payables and receivables at year end are recorded at the exchange rate on the balance sheet date. Exchange rate gains and losses are recognised in the results under the heading â&#x20AC;&#x2DC;Other Financial Charges and Incomeâ&#x20AC;&#x2122;. Turnover Turnover from research contracts is recognised over the duration of the contract in accordance with the progress of the work and contractual terms.
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187.
CORPORATE GOVERNANCE & FINANCIAL REVIEW
Additional Information Warrants Warrants
2007
2007
2008
2009
2009
2009
2009
2010
2010
307,500
10,713
305,000
70,000
111,145
87,670
160,000
267,953
80,500
Non-vested
0
0
0
1,458
9,844
15,000
33,334
85,233
39,000
Exercisable
307,500
10,713
305,000
68,542
101,301
72,670
126,666
182,720
41,500
336
7,813
17,980
104,167
70,000
56,831
7,031
price (in Euro) At 31 December 2012 Outstanding
Granted Forfeited Exercised
7,142 300,000
Expired
11,803
67,187
68,500
85,000
At 31 December 2013 Outstanding
7,500
3,571
200,833
0
54,314
Non-vested Exercisable
7,500
3,571
200,833
0
54,314
68,500
85,000
249,973
80,500
14,925
19,500
235,048
61,000
44
2,084
Granted Forfeited Exercised
32,916
19,000
17,750
15,578
Expired
72,892
10,416
At 31 December 2014 Outstanding
7,500
3,571
167,917
0
35,314
50,750
85,000
161,459
68,000
Non-vested
0
0
0
0
0
0
0
0
0
Exercisable
7,500
3,571
167,917
0
35,314
50,750
85,000
161,459
68,000
The weighted average price at the date of exercise for warrants exercised during 2013 was €6.84 per share and for warrants exercised during 2014 was €5.00 per share
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2012
374,395
735,250
150,000
0
0
0
0
0
2,660,126
5.14
102,083
735,250
150,000
0
0
0
0
0
1,171,202
4.39
272,312
0
0
0
0
0
0
0
1,488,924
5.73
17,868
391,330
302,778
711,976
6.58
6,434
79,000
107,589
333,892
627,661
95,833
523,845
238,059
103,816
4,511
103,125
46,875 46,875
2013
2013
2014
2012
40,503
2012
2014
2011
0
0
Total number
Average Exercise
369,922
4.94
538,029
3.02
78,990
8.01
2,385,161
5.98
1,277,548
5.41
11,434
312,330
302,778
8,337
312,330
302,778
3,097
0
0
0
0
1,107,613
6.64
22,062
50,000
327,224
399,286
8.51
31,917
5.05
85,244
6.02
83,308
7.67
18,047
7,231
329,381
609,614
46,875
11,434
305,099
324,840
50,000
327,224
2,583,978
6.33
21,800
157,296
0
5,479
157,203
216,560
31,944
327,224
917,506
6.89
307,581
452,318
46,875
5,955
147,896
108,280
18,056
0
1,666,472
6.02
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Warrants
2007
2007
2008
2009
2009
2009
2009
2010
425,000
10,713
375,000
135,000
187,500
205,400
170,000
287,700
1.40
7.00
4.88
4.52
5.79
6.99
8.19
7.59
0
0
0
0
0
0
0
0
60%
60%
60%
60%
60%
60%
60%
50%
4.63%
4.22%
4.42%
3.79%
3.20%
3.14%
3.11%
2.75%
Expected duration
7.00
4.78
7.00
5.00
7.00
7.00
7.00
5.00
Fair value (in Euro) at grant date
0.90
3.78
3.11
2.06
3.51
5.25
5.07
3.23
Incremental Fair Value (in Euro) at extension
0.30
1.13
0.84
0
0
0
60%
60%
60%
3.50%
3.33%
4.08%
10.21
8.54
11.17
Number of warrants granted Number of warrants not vested at 31/12/2014 Exercise price (in â&#x201A;Ź) (*) Expected dividend yield Expected stock price volatility Risk-free interest rate
Expected dividend yield Expected stock price volatility Risk-free interest rate Expected duration at extension
(*) Equals the fair market value of the underlying shares on the grant date.
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CORPORATE GOVERNANCE & FINANCIAL REVIEW
2010
2011
2012
2012
2012
2013
2013
2013
2014
85,500
387,050
748,750
162,500
17,868
391,330
302,778
50,000
327,224
21,800
157,296
0
5,479
157,203
216,560
31,944
327,224
8.24
8.68
3.21
3.23
5.44
6.46
6.79
7.27
8.81
0
0
0
0
0
0
0
0
0
50%
50%
55%
55%
49%-56%
53,4% - 54,0%
52,7%-53,8%
52,7%-53,8%
40.9%
3.46%
3,65%-3,89%
2,35%-2,84%
2,83%-3,65%
1,09%-1,78%
1,54% - 1,88%
1,56%-2,08%
1,56%-2,08%
0,91%-1,50%
7.00
5,00-7,00
5,00-7,00
5,00-7,00
5,00-7,00
6,60-7,00
6,70-7,00
6,70-7,00
5,00-7,00
4.49
3,78-4,48
1,38-1,64
1,47-1,74
2,15-2,89
3,18-4,04
3,86-4,07
3,86-4,07
3,06-3,80
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CORPORATE GOVERNANCE & FINANCIAL REVIEW
Grants Grant
Assigned
Received at 31/12/2014
Recognised as income 2013
Recognised as income 2014
Still to receive
IWT 14
600,000
600,000
600,000
360,000
IWT 15
157,773
157,773
157,773
100,177
18,991
IWT 16
747,648
747,648
747,648
596,000
151,648
IWT 17
1,680,765
1,680,765
1,581,768
1,149,009
432,759
98,997
IWT 18
885,597
885,597
708,000
540,511
167,489
177,597
IWT 19
2,093,845
2,093,845
558,000
583,970
1,535,845
IWT 20
445,027
445,027
178,000
192,428
267,027
IWT 21
460,181
460,181
184,000
39,723
276,181
Appropriation account 2014
2013
111,535
89,094
Profit (loss) to be appropriated
(22,441)
(13,896)
Profit (loss) to be carried forward
(89,094)
(75,198)
Profit (loss) to be carried forward
(111,535)
(89,094)
(€’000) Profit (loss) to be appropriated
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ADRESSES
Ablynx’s registered office and headquarters ABLYNX nv
Technologiepark 21 9052 Zwijnaarde Belgium T. +32 (0)9 262 00 00 F. +32 (0)9 262 00 01 info@ablynx.com investors@ablynx.com dealing_code@ablynx.com www.ablynx.com Independent registered public accounting firm DELOITTE BEDRIJFSREVISOREN | REVISEURS D’ENTREPRISES
Berkenlaan 8b 1831 Diegem Belgium T. +32 2 800 20 00 F. +32 2 800 20 01 www.deloitte.com
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GLOSSARY
GLOSSARY
BISPECIFIC CONSTRUCT
Nanobody construct which binds to two different targets.
BIVALENT CONSTRUCT
biological activity and possibly even a non-redundant role in vivo.
IL-6R
Nanobody construct comprising two Nanobodies.
Receptor of interleukin-6 - a cytokine involved in a wide range of biological activities.
FREE FLOAT
NANOBODY
Free float is defined as the outstanding capital less shareholdings exceeding 5%, except where such interests are held by (a) collective investment schemes/mutual funds or (b) pension funds. In addition, certain insider holdings (e.g. shares held by directors, employees, founders and family), government holdings and holdings of the Company itself (including subsidiaries) are not considered free float, irrespective of the size.
IL-17A/F
Protein that is composed of one or more binding domains with the structural and functional characteristics of naturally occurring heavy chain variable domains (VHHâ&#x20AC;&#x2122;s) from Camelidae. NanobodyÂŽ is a registered trademark of Ablynx.
NEBULISER
A device used to administer medication in the form of a mist inhaled into the lungs.
ORPHAN DRUG
Drug treating a rare disease - the T Helper 17 (Th17) cells and grant of orphan drug status by interleukine-17 (IL-17) are the authorities provides certain associated with the pathology privileges, intended to stimulate of many human inflammatory the research, development and and autoimmune disorders like commercialisation of orphan drugs psoriasis, rheumatoid arthritis and including market exclusivity of ten multiple sclerosis and have proved years in Europe and seven years in to play an important role in animal the USA. models mimicking these and other auto-immune disorders. PHASE I Although IL-17A is the most First stage of testing in human characterised family member, its subjects. Normally, a small (20closest relative IL-17F has similar 100) group of healthy volunteers
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196.
BUSINESSGLOSSARY SECTION
will be selected. This phase includes trials designed to assess the safety (pharmacovigilance), tolerability, pharmacokinetics, and pharmacodynamics of a drug.
PHASE II
Once the initial safety of the study drug has been confirmed in Phase I trials, Phase II trials are performed on larger patient groups (20-300) and are designed to assess how well the drug works, as well as to continue Phase I safety assessments in a larger group of patients.
PHASE III
Phase III studies are randomised controlled multi-centre trials on large patient groups (300-3,000 or more depending upon the disease/ medical condition studied) and are aimed at being the definitive assessment of how effective the drug is in comparison with current ‘gold standard’ treatment. Because of their size and comparatively long duration Phase III trials are the most expensive, time-consuming and difficult trials to design and run, especially in therapies for chronic medical conditions.
PK
Pharmacokinetics - the study of the absorption, distribution,
ANNUAL REPORT 2014 / ABLYNX
metabolism, and excretion of drugs in the body.
PRE-CLINICAL
Involves in vitro (test tube or cell culture) and in vivo (animal) experiments using wide-ranging doses of the study drug to obtain preliminary efficacy, toxicity and pharmacokinetic information.
PROOF-OF-CONCEPT STUDY
Clinical trial to demonstrate the product is effective in patients.
RA
Rheumatoid arthritis autoimmune disease that causes chronic inflammation of the joints, the tissue around the joints, as well as other organs in the body .
of pathogenic autoantibodies and tissue deposition of immune complexes, which result in widespread tissue damage.
TNFα
Protein named Tumour Necrosis Factor-alpha - a cytokine involved in systemic inflammation.
TTP
Thrombotic thrombocytopenic purpura - a rare thrombotic disorder.
UL-vWF
Ultra-large vWF multimers
vWF
von Willebrand factor - a blood glycoprotein involved in haemostasis.
RANKL
Receptor Activator of Nuclear factor Kappa-B Ligand - a key regulator in bone remodelling.
RSV
Respiratory syncytial virus – virus that infects the respiratory tract, including the lungs.
SLE
Systemic lupus erythematosus - complex, multi-organ, autoimmune disorder characterised by the production
197.
BUSINESSGLOSSARY SECTION