2015 A NNUA L RE P OR T
TAKE A LOOK AT OUR 3D-PRINTED GRAPHS
INDEX ANNUAL REPORT 2015 / ABLYNX
CORPORATE OVERVIEW
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1. INTRODUCTION 7 Ablynx at a glance 9 2015 achievements 10 Letter to our stakeholders 12 Company strategy and outlook for 2016 16 2. NANOBODIES® – POWERFUL PLATFORM GENERATING POTENTIALLY INNOVATIVE MEDICINES Platform advantages Product pipeline Key clinical value drivers Key pre-clinical value drivers
19 20 22 24 30
3. SHAREHOLDERS’ INFORMATION Key figures and performance indicators Shareholder structure The shares in 2015 Financial calendar Analyst coverage Contact the IR department
33 34 36 49 54 55 55
4. GLOSSARY
57
CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
61
5. REPORT OF THE BOARD OF DIRECTORS
64
6. RESPONSIBILITY STATEMENT
116
7. FINANCIAL STATEMENTS
120
8. NOTES TO THE FINANCIAL STATEMENTS
124
3.
INDEX
INTRODUCTION
ABLYNX AT A GLANCE
LATE-STAGE CLINICAL DEVELOPMENT COMPANY WITH 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 offer multiple advantages making them ideal building blocks for the generation of novel biological drugs.
>40 PROGRAMMES
UNIQUE AND POWERFUL
in the R&D pipeline
>500 PATENTS granted and pending
technology platform
9 PHARMA PARTNERS across the globe
>€380 MILLION non-dilutive cash received to date from partners
€236 MILLION
€78 MILLION
2015 year-end cash position
2015 revenue (+57% vs. 2014)
350 EMPLOYEES
LISTED ON EURONEXT
15 nationalities
ticker: ABLX
>€7 BILLION in potential milestones
>1,000 PATIENTS
6 PRODUCTS
treated with Nanobodies
in clinical development
PLUS ROYALTIES
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CORPORATE OVERVIEW
2015 ACHIEVEMENTS – EXCELLENT PROGRESS IN ALL AREAS
R&D MILESTONES During the year we initiated one Phase III study and three Phase II studies which together will include a total of over 900 patients worldwide. In addition, we completed recruitment of 35 infants in the Phase I/IIa RSV study with ALX-0171 and 345 patients in the Phase IIb combination study with ALX-0061 in RA patients. Finally, 14 new discovery programmes have been initiated, both proprietary and as part of pharmaceutical collaborations.
Caplacizumab (anti-vWF) • •
Defined the commercial strategy whereby Ablynx will retain direct control over commercialisation in Europe and the United States (August) Initiated the confirmatory international Phase III HERCULES study in patients with acquired TTP (aTTP) (September)
ALX-0061 (anti-IL-6R) • • • •
Initiated a Phase IIb study in RA patients in combination with methotrexate (March); recruitment of 345 patients was completed at year-end, on schedule Initiated a Phase IIb RA monotherapy study (April) and recruitment of 251 patients was completed on schedule post year-end, in February 2016 The first eligible patients from both Phase IIb RA studies rolled-over in the open-label extension study (July) Initiated a Phase II study in patients with systemic lupus erythematosus (SLE) (August)
ALX-0171 (anti-RSV) • •
The Phase I/IIa safety study with inhaled ALX-0171 completed recruitment in 35 infants, aged 3-24 months, who were hospitalised with an RSV infection (December) An independent data monitoring board gave approval to extend this Phase I/IIa study in younger infants, aged 1-5 months, to generate additional data (December)
Immuno-oncology •
Pre-clinical proof-of-concept was achieved with a bi-specific Nanobody programme as part of the extensive immuno-oncology collaboration with Merck & Co., Inc., which triggered a €3.5 million milestone payment to Ablynx (October)
BI 836880 (anti-VEGF/Ang2) •
ANNUAL REPORT 2015 / ABLYNX
Ablynx’s partner Boehringer Ingelheim presented compelling pre-clinical proof-ofmechanism data with the bi-specific anti-VEGF/Ang2 Nanobody in multiple in vivo cancer models (November)
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CORPORATE OVERVIEW
FINANCIAL PERFORMANCE
STRATEGIC PARTNERSHIPS We signed three new pharmaceutical partnerships and extended two existing collaborations in 2015:
€236.2 MILLION In March, we announced an extension of our initial two-year research collaboration with Merck & Co., Inc. to develop and commercialise Nanobodies directed towards an undisclosed voltage-gated ion channel. Merck & Co., Inc. will extend their funding to the end of September 2016.
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND OTHER SHORT TERM INVESTMENTS
€24.8 MILLION In May, a research and option agreement was signed with Genzyme to explore the potential of a Nanobody targeting an ion channel that plays a role in multiple sclerosis, triggering an undisclosed exclusivity payment to Ablynx.
CASH INCOME FROM COLLABORATIONS
€100 MILLION In June, we signed an exclusive license agreement with Taisho Pharmaceuticals to develop and commercialise the anti-TNFα Nanobody, ozoralizumab, in Japan. We received an upfront payment of US$3 million and we are entitled to receive development and commercial milestone payments plus royalties.
In July, we significantly expanded our immuno-oncology partnership with Merck & Co., Inc., which was originally signed in February 2014, to include up to 17 programmes with focus on multi-specific Nanobodies. As part of both the original and expansion agreements, we received €33 million in upfront payments and are entitled to receive up to €5.7 billion in future milestone payments, plus royalties.
In November, we entered into a drug discovery collaboration with Novo Nordisk to investigate multi-specific Nanobodies in an undisclosed indication. We received an upfront payment of €5 million early in 2016, and are entitled to receive €4 million in research funding during the initial three year research term of the collaboration and up to €182 million in potential milestones, plus royalties.
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RAISED THROUGH 5-YEAR CONVERTIBLE BONDS WITH 3.25% COUPON RATE AND 26.5% CONVERSION PREMIUM
95% FREE FLOAT DIVERSIFIED SHAREHOLDER BASE WITH >60% OF INSTITUTIONAL SHAREHOLDING IN UK AND USA
CORPORATE OVERVIEW
LETTER TO OUR STAKEHOLDERS ANNUAL REPORT 2015 / ABLYNX
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CORPORATE OVERVIEW
DEAR SHAREHOLDERS, COLLEAGUES AND BUSINESS PARTNERS, 2015 WAS A YEAR OF EXCELLENT PROGRESS ACROSS OUR ENTIRE BUSINESS. OUR NANOBODY-BASED DRUGS ADVANCED SUCCESSFULLY INTO THE LATER STAGES OF DEVELOPMENT AS WE STARTED A PHASE III STUDY AND THREE PHASE II STUDIES WHICH TOGETHER WILL INCLUDE A TOTAL OF OVER 900 PATIENTS WORLDWIDE. COLLABORATIONS TO EXPLOIT THE FULL POTENTIAL OF OUR NANOBODY TECHNOLOGY CONTINUE TO FORM A CRUCIAL PART OF OUR HYBRID BUSINESS MODEL AS WE SIGNED THREE NEW PHARMACEUTICAL PARTNERSHIPS AND EXTENDED TWO EXISTING COLLABORATIONS, FURTHER FUELLING OUR BROAD PRODUCT PIPELINE, WHICH NOW INCLUDES OVER 40 PROPRIETARY AND PARTNERED PROGRAMMES. WE ALSO SUCCESSFULLY PLACED €100 MILLION OF FIVE-YEAR CONVERTIBLE BONDS – A PARTICULARLY NOTEWORTHY ACHIEVEMENT IN THE EUROPEAN BIOTECH SECTOR – STRENGTHENING OUR BALANCE SHEET TO FACILITATE THE FINANCING AND EXECUTION OF OUR BUSINESS PLAN.
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MATURING PRODUCT PIPELINE
results with caplacizumab, our anti-vWF Nanobody to treat acquired TTP, we are on track to file for conditional approval of caplacizumab in Europe in early 2017 with the first European launch possible in 2018. In parallel with the European regulatory filing preparations, the confirmatory, international Phase III HERCULES study with caplacizumab has been initiated to support a BLA filing in the United States in 2018. The publication of the Phase II TITAN study in The New England Journal of Medicine on 11 February 2016 was a major accomplishment and is another endorsement of the potential of caplacizumab in the treatment of acquired TTP. We are now defining the commercial infrastructure required to lead the commercialisation of caplacizumab ourselves in Europe and the United States and we will announce further details when these plans are finalised.
2015 was a year of outstanding execution with six Nanobodies now in late-stage clinical development. We significantly expanded our clinical pipeline with the start of a Phase III study with caplacizumab, our first-in-class wholly-owned bivalent Nanobody to treat acquired TTP, as well as three Phase II studies with the anti-IL-6R Nanobody, ALX-0061, in RA and SLE, for which AbbVie has an option for an exclusive global license. In less than 10 months, we completed recruitment of 345 patients in the Phase IIb RA combination study of ALX-0061 and we completed recruitment of 35 infants in the Phase I/IIa study of our wholly-owned, first-in-class trivalent Nanobody, ALX-0171, to treat RSV, a serious viral respiratory infection. This was the first trial in which a Nanobody was administered to infants by inhalation and could prove to be a very important validation for the platform as a whole, in the general area of inhaled therapeutics, as well as in this particularly challenging indication.
HYBRID BUSINESS MODEL CONTINUES TO FUEL THE PIPELINE It is our ambition to ensure that the unique advantages of our Nanobodies are widely exploited to develop differentiated and innovative medicines which have the potential to make a real difference to patients suffering from severe diseases. To achieve this goal, we are committed to a hybrid business model where we invest directly in our own programmes in specific areas as well as collaborating with pharmaceutical partners at all
PREPARING FOR OUR FIRST PRODUCT LAUNCH 2015 was also the year in which we expanded our expertise beyond R&D, as we began preparing for our first product launch. Following compelling Phase II TITAN
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CORPORATE OVERVIEW
anticipate top line results from two Phase IIb studies with ALX-0061 in patients with RA and then we will await the decision by AbbVie on whether they wish to exercise their option to license this product in this indication. We also expect the initiation of up to four clinical studies by our collaborators (one of which already started early in 2016) which would trigger milestone payments to Ablynx.
stages of discovery and development. These partners are selected for their expertise and experience in certain therapeutic indications as well as having resources which help us advance programmes rapidly. During the past year we have again successfully delivered on this business strategy and initiated four new internal discovery programmes and some 10 new partnered programmes. We broadened our disease scope through partnering with Genzyme (in multiple sclerosis) and Novo Nordisk (in a disease indication that is of strategic importance to them). We significantly expanded our immuno-oncology agreement with Merck & Co., Inc., so that it now includes up to 17 Nanobody programmes for which the first bi-specific Nanobody has already achieved pre-clinical proof-of-concept in in vivo cancer models. We also delivered a breakthrough in our ion channel collaboration with Merck & Co., Inc., resulting in an extension of the research term to September 2016.
THANK YOU To conclude, we would like to thank all of our talented employees for their dedication to achieving our goals, our business partners for their enthusiasm and commitment, and our shareholders for supporting us in the creation of a unique European biotech company with, we believe, very significant potential. Sincerely yours,
AN EXCITING YEAR AHEAD As we continue to develop and mature, our priorities and objectives remain focused on delivering new hope for patients and sustainable value to all our stakeholders. We look forward to an exciting year with multiple potentially value-creating catalysts, including the results from the Phase I/IIa study with ALX-0171 in 53 infants who were hospitalised with an RSV infection. We also
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Dr Peter Fellner – Chairman
Dr Edwin Moses – CEO
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CORPORATE OVERVIEW
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 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, selected for their expertise and experience in key areas. In addition, Ablynx will retain some or all rights to commercialise its products, with the first launch of a wholly-owned Nanobody expected in 2018. 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.
OUTLOOK 2016 – AN EXCITING YEAR AHEAD Ablynx remains focused on creating sustainable value, and is well positioned for further growth during the course of 2016 with multiple significant pre-clinical, clinical and commercial catalysts:
Expected clinical study results ALX-0171 (anti-RSV) Phase I/IIa safety results with inhaled ALX-0171 in 53 infants aged 1-24 months who were hospitalised with an RSV infection (Q2 2016) ALX-0061 (anti-IL-6R) Top line results from the Phase IIb RA monotherapy and combination therapy studies (AbbVie has an option for global exclusive license) (Q3 2016) ALX-0761 (anti-IL-17A/F) Phase Ib results in 40 patients with psoriasis (exclusively licensed to Merck KGaA) (H1 2016)
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CORPORATE OVERVIEW
Building the pipeline Caplacizumab (anti-vWF) Recruitment of patients with acquired TTP in the Phase III HERCULES study will continue and a three -year follow-up study will be initiated in Q3 2016 ALX-0171 (anti-RSV) Initiation of a worldwide Phase II dose-ranging study in approximately 120 infants, aged 1-24 months, who are hospitalised with an RSV infection in Q4 2016 Various Start of up to four Phase I studies with partners and multiple pre-clinical data points with partners, triggering milestone payments to Ablynx. Initiate and continue about 40 internal and partnered discovery and pre-clinical programmes
Regulatory & Commercial Caplacizumab (anti-vWF) Continue preparations for the commercialisation of caplacizumab in Europe and the United States, and proceed with the preparations to file the dossier, in early 2017, for conditional approval of caplacizumab in Europe ALX-0061 (anti-IL-6R) Licensing decision in Q4 2016 by AbbVie for ALX-0061 in RA which, in the case of optin, would trigger a US$75 million license payment to Ablynx Various Expand existing collaborations and/or initiate new partnerships
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CORPORATE OVERVIEW
NANOBODIES® – POWERFUL PLATFORM GENERATING POTENTIALLY INNOVATIVE MEDICINES
PLATFORM ADVANTAGES
ABLYNX’S NANOBODIES
Nanobodies are a novel class of proprietary therapeutic proteins based on singledomain antibody fragments that contain the unique structural and functional properties of naturally-occurring heavy chain only antibodies. Due to their small size and unique structure, Nanobodies are ideal building blocks for the generation of novel biological drugs with multiple advantages:
Mix and match Ability to bind multiple targets with one therapeutic Nanobody molecule. These therapeutic molecules may contain Nanobody building blocks combined with each other (up to 7), combined with other protein domains, or with other molecules or drugs. Multi-specific (binding different targets; currently 2 bi-specific Nanobodies in the clinic), multivalent (binding identical targets; currently 2 Nanobodies in the clinic) and bi-paratopic (binding 2 different epitopes on the same target) Nanobody molecules have been successfully produced and their potential therapeutic effect demonstrated.
Multi-specific/multivalent Nanobodies that address multiple targets in a single drug molecule – flexible GS* linker lengths
Multiple delivery routes
Inhalation
Ocular
The robust nature and stability of Nanobodies allows administration through multiple delivery routes, including intravenous and subcutaneous injection (currently 5 Nanobodies in the clinic) and nebulisation directly into the respiratory tract (currently 1 Nanobody in the clinic), as well as potentially through the ocular route and orally for local treatment in the gut.
Oral-to topical
Able to bind and block challenging targets Nanobodies can interact with epitopes on targets which are hidden or shielded from the much larger conventional antibodies. Functional selective Nanobodies have been generated against GPCRs as well as against ion-gated, ligand-gate and voltage-gated ion channels (multiple programmes on-going, both internally and with partners including Merck & Co., Inc., Novartis and Genzyme).
Nanobodies against ion channels and GPCRs
* glycine-serine linker
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CORPORATE OVERVIEW
Customised half-life Hours/days/weeks
Albumin-binding Nanobody
Fc
Ability to customise the in vivo half-life of a Nanobody from a few hours to over 3 weeks to achieve the desired properties, such as the use in chronic versus acute indications. Ablynx’s proprietary half-life extension technology is based on a Nanobody that binds to human serum albumin, thereby increasing the in vivo serum half-life of the therapeutic molecule. Two clinical proof-of-concepts have been achieved in patients with rheumatoid arthritis with two Nanobodies that incorporate this proprietary half-life extension technology.
Manufacturing
High-yield high-concentration, low-viscosity, microbial production
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Nanobodies (including multi-specific, multivalent and bi-paratopic constructs) are encoded by single genes and are efficiently produced with high-yields in prokaryotic and eukaryotic hosts, including bacteria, yeast, and mammalian cells. They can be formulated at high concentrations and maintain low viscosity, enabling multiple routes of administration, including low volume injectables.
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CORPORATE OVERVIEW
THE PRODUCT PIPELINE – MULTIPLE SHOTS ON GOAL >40 R&D PROGRAMMES – 6 NANOBODIES IN CLINICAL DEVELOPMENT
Ablynx’s product pipeline currently includes over 40 wholly-owned and partnered programmes across various stages of development. At the date of this report, six Nanobodies were in clinical development in a wide range of diseases, including haematology, inflammation, respiratory disease and oncology.
Product
Indication
Target
caplacizumab
aTTP
vWF
ALX-0061
RA
IL-6R
RA
IL-6R
SLE
IL-6R
ALX-0171
RSV
RSV
Up to 17 programmes
Immuno-oncology
Various
BI 836880
Oncology
VEGF/Ang2
ozoralizumab
RA
TNFa
RA
TNFa
ALX-0141
Bone disorders
RANKL
ALX-0761
Psoriasis
IL-17A/IL-17F
Pre-clinical
~ 15 wholly-owned and partnered
Various
programmes
The current status and upcoming near term milestones of the Company’s major pre‑clinical and clinical value drivers are described in the following sections. More detailed information is also available on the Ablynx website www.ablynx.com.
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CORPORATE OVERVIEW
Phase I
Phase II
Phase III
Filing
+
Japan Greater China Greater China
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CORPORATE OVERVIEW
KEY CLINICAL VALUE DRIVERS
CAPLACIZUMAB (ANTI-VON WILLEBRAND FACTOR; vWF) FIRST-IN-CLASS BIVALENT NANOBODY FOR THE TREATMENT OF ACQUIRED TTP • • • • • •
Wholly-owned Nanobody with Orphan Drug Status in the United States and Europe Potential to become a critical new component in the current standard of care Filing for conditional approval in Europe in early 2017, based on Phase II study results Worldwide Phase III HERCULES study on-going to support BLA submission in the USA in 2018 Ablynx to lead commercialisation in Europe and in the United States Market potential of approx. €300 million with first potential launch in Europe in 2018
Acquired thrombotic thrombocytopenic purpura Life-threatening, ultra-rare, acute blood clotting disorder ×× Auto-immune disorder characterised by impaired activity of ADAMTS13 (<10% of that in normal plasma) ×× Impaired ADAMTS13 activity leaves ultra-large vWF multimers (UL-vWF) uncleaved ×× UL-vWFs bind to platelets, resulting in severe thrombocytopenia (very low platelet count), and micro-clot formation in the small blood vessels of vital organs ×× Leads to small blood vessel occlusion, tissue ischaemia and organ damage Incidence rate ×× Up to 11 patients per 1 million people Current standard of care ×× Daily plasma exchange plus immunosuppressive treatments High unmet need with no drug specifically approved for this indication ×× Mortality high (10-20%), with vast majority within 2 weeks post diagnosis ×× Approximately 36% of patients have a recurrence ×× Major morbidities after TTP episode, including vital organ damage ×× Impacts life expectancy and quality of life
There remains a high need for a therapeutic that immediately inhibits micro-clot formation in the acute phase of the disease. Caplacizumab has been developed to address that need. It has a unique mode of action by inhibiting the interaction between ultra-large vWF and platelets through binding with the A1 domain of vWF. It thereby immediately prevents platelet aggregation and the formation of micro-clots in the acute, critical phase of acquired TTP.
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CORPORATE OVERVIEW
Three aTTP experts describe the impact of the NEJM publication: “Despite the advances in immunosuppressive therapy, better plasma exchange, better supportive care, the 10% to 15% acute mortality in acquired TTP in an acute episode has not been impacted. I think caplacizumab has the potential to do that.”
“With this drug I can quickly control the patient’s symptoms. I can detach the platelet from the ultralarge von Willebrand Factor and not have the consequences or damage due to microthrombosis, giving me more time to treat the patient. That is fantastic. This is the reason why this paper is very much appreciated by the physician and the patient.”
Dr Flora Peyvandi University of Milan, Italy
“
“The importance of this paper is twofold. Firstly, it’s the method of action of the compound, which is really quite unique. It’s not associated with significant side effects. It doesn’t appear to be immunogenic. The second important and probably the most important reason for this trial is that we’ve always been stuck in the acute scenario of trying to achieve a rapid increase in the platelet count, which in itself is associated with a better outcome for patients, and that’s exactly what’s been demonstrated in this paper.”
“
“
“
“
Caplacizumab’s effect has been demonstrated in a worldwide, Phase II TITAN study in 75 patients with acquired TTP. Recently published in The New England Journal of Medicine: • Treatment with caplacizumab resulted in a nearly 40% reduction in median time to platelet count normalisation (p=0.005), reduced the use of daily plasma exchange, and prevented further consumption of platelets in the microclots and small blood vessel occlusion. • Caplacizumab’s clinical effect has been shown by a low number of recurrences requiring re-initiation of daily plasma exchange during treatment with caplacizumab (N=3) versus placebo (N=11). • Caplacizumab had an acceptable safety profile: manageable mild bleeding tendency; with no requirement for substitution therapy.
“
Dr Spero Cataland Ohio State University, Columbus, USA
Dr Marie Scully University College Hospital, London, UK
2015 achievements In August, the commercial strategy was defined whereby Ablynx retains full control over the commercialisation in Europe and the United States. In September, a confirmatory, international, Phase III HERCULES study of caplacizumab was initiated in patients with acquired TTP. Ablynx plans to recruit 92 patients into this study by 2017.
Potential near term milestones 2017 × Filing of caplacizumab for conditional approval in Europe × Phase III HERCULES top line results
2016 × Prepare filing for conditional approval in Europe × Continue recruitment in Phase III HERCULES study × Define full commercialisation plan × Initiate a three-year follow-up study
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2018 × First launch in Europe × BLA submission in the United States
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CORPORATE OVERVIEW
ALX-0171 (ANTI-RSV) FIRST-IN-CLASS TRIVALENT INHALED NANOBODY FOR THE TREATMENT OF RESPIRATORY SYNCYTIAL VIRUS (RSV) INFECTION • • • • •
Wholly-owned Nanobody delivered through inhalation Potential breakthrough for the treatment of RSV infections Recruitment of first-in-infant Phase I/IIa safety study completed with results expected in Q2 2016 Phase II dose-ranging study to start by end 2016 Opportunity in a multi-billion dollar market
Respiratory syncytial virus infection Major cause of acute upper (colds) and lower (pneumonia and bronchiolitis) respiratory tract infections in infants, young children, and the elderly Leading cause of infant hospitalisation ×× >3 million children (<5 years) hospitalised worldwide each year High incidence rate ×× 60%-70% of children will have been infected by the age of 1 year Current standard of care ×× Only symptomatic treatments available, including corticosteroids and bronchodilators ×× Monoclonal antibody (Synagis®) used as prophylaxis and only approved in high-risk, pre-term infants High unmet need ×× 3,000-8,500 deaths in infants <2 years globally, each year ×× Long-term disease burden (prolonged wheezing and increased risk for asthma development later in life) ×× No specific treatment option available
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CORPORATE OVERVIEW
ALX-0171 has shown a potent anti-viral effect against a broad range of RSV strains and it demonstrated to have a strong therapeutic effect following administration via nebulisation in a neonatal animal model for infant RSV infection. Repeated daily inhalation of ALX-0171 was proven to be well-tolerated in multiple Phase I clinical studies in adult volunteers, including a study in subjects with hyper-reactive airways.
There remains a high need for an effective and specific therapeutic to treat RSV infections. ALX-0171 has been developed to address this unmet need and has firstin-class potential for the treatment of RSV infection. It is administered via nebulisation directly to the site of infection, i.e. the respiratory tract including the lungs, where it inhibits RSV replication and neutralises RSV activity by blocking virus uptake into cells.
2015 achievements In December, the Phase I/IIa safety study of inhaled ALX-0171 completed recruitment in 35 infants, aged 3-24 months, who were hospitalised with an RSV infection. Also in December, an independent Data Monitoring Committee reviewed safety data available for the first 15 infants from the placebo-controlled part of this Phase I/IIa study and confirmed that the inclusion age for recruitment could be lowered to 1 month of age. Post year-end, in January 2016, the Phase I/IIa study was expanded to include an expansion cohort of 18 additional infants, aged 1-5 months. Recruitment of this expansion cohort was completed ahead of schedule post year-end, in February 2016.
Potential near term milestones 2016 × Top line Phase I/IIa results in 53 hospitalised RSV infected infants × Start Phase II dose-ranging study in approximately 120 hospitalised RSV infected infants, aged 1-24 months
2017 × Complete recruitment of the Phase II dose-ranging study 2018 × Top line results from the Phase II dose ranging study
References: Nair et al, Lancet 2010; Byington et al, Pediatrics 2014; Shi et al, J Med Econ 2011; Sigurs et al, Thorax 2010; Beckman et al, Acta Pediatr 2014
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CORPORATE OVERVIEW
ALX-0061 (ANTI-IL-6R) HALF-LIFE EXTENDED NANOBODY FOR THE TREATMENT OF AUTO-IMMUNE DISORDERS • • • • •
Compelling Phase IIa results, demonstrating best-in-class potential Results from Phase IIb RA monotherapy and combination therapy studies expected in Q3 2016 Decision by AbbVie for an exclusive, global license in RA expected by the end of 2016 Phase II study in SLE on-going with results anticipated in 2018 Opportunity in multi-billion dollar markets
Rheumatoid arthritis (RA) Chronic, progressive, inflammatory disease of the joints and surrounding tissues ×× RA is an inflammatory disease that occurs when a person’s immune system mistakenly starts attacking healthy joints, causing symptoms that may range in severity from patient to patient. These symptoms may include pain, swelling, stiffness, and loss of physical function ×× Patients with RA may also experience systemic symptoms, such as low-grade fever, fatigue, or weight loss ×× Over time, rheumatoid arthritis symptoms can worsen, everyday tasks may become difficult, and permanent joint damage may occur High incidence rate ×× 1.5 million patients in the United States ×× Approximately 6 million people expected to suffer from RA by 2021 in the 7 major markets Current treatment options ×× Two broad categories: 1) symptomatic treatments (e.g. corticosteroids); 2) disease modifying agents (DMARDs) to halt the destructive course of RA and prevent debilitating joint damage ×× Market-leading drugs include anti-TNFα biological DMARDs ×× RA drugs had >US$500 million in sales in 2014 Unmet need ×× Many patients respond initially to their treatment but relapse between 10 and 13 months ×× >30% of patients do not respond to TNFα inhibitors, the market leading biological DMARDs ×× Need for new, differentiating treatments with fewer treatment failures and fewer inadequate responders ×× Need for disease modifying therapies with substantial efficacy, particularly on higherdemanding measures such as remission, ACR50 and ACR70
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CORPORATE OVERVIEW
There remains a high need for new, differentiating treatment options with substantial efficacy. ALX-0061 has been developed to address this unmet need and the results from the Phase IIa study in 37 patients with RA demonstrated that ALX-0061 has best-in-class potential:
•
• •
Highly efficacious: treatment with ALX-0061 showed ACR20, ACR50 and ACR70 scores of up to 100%, 75% and 63% respectively, with first onset of activity as of week 2. Convenient dosing: wide therapeutic window with potential to dose subcutaneously once a month. Favourable safety profile: no dose dependent increase in frequency or severity of adverse events.
2015 achievements In March, Ablynx initiated a Phase IIb study of ALX-0061, in combination with methotrexate, in patients with RA. Recruitment of 345 patients was completed on schedule in December. In April, Ablynx initiated a Phase IIb monotherapy study of ALX-0061 in RA patients. Recruitment of 251 patients was completed on schedule post year-end, in February 2016. In July, the first eligible patients from the Phase IIb RA studies with ALX-0061 rolled-over into the open-label extension study. In August, Ablynx initiated a Phase II study of ALX-0061 in patients with SLE. The Company plans to recruit 300 patients into this study by 2017.
Potential near term milestones 2016 × Results Phase IIb RA monotherapy study (251 patients) × Results Phase IIb RA combination therapy study (345 patients) × AbbVie’s opt-in decision to license ALX-0061 in RA
2017 × Potential start Phase III RA study 2018 × Top line results RA open-label extension study × Top line results Phase II SLE study × AbbVie’s opt-in decision to license ALX-0061 in SLE
Global exclusive licensing option deal with AbbVie In September 2013, Ablynx and AbbVie entered into a global license agreement worth up to US$840 million plus double-digit royalties, to develop and commercialise ALX-0061 in RA and SLE. Ablynx received an US$175 million upfront payment and is responsible for Phase II clinical development of ALX-0061 in both RA and SLE. AbbVie will pay a fee for each indication if they exercise the right to license ALX-0061 after completion of the Phase II studies. AbbVie will then be responsible for Phase III development, registration and commercialisation in each indication. References: Datamonitor Healthcare; Sagient Research/BioMedTracker; Decision Resources
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CORPORATE OVERVIEW
KEY PRE-CLINICAL VALUE DRIVERS
IMMUNO-ONCOLOGY CHANGING THE CANCER TREATMENT PARADIGM • •
Extensive early-stage pipeline with Merck & Co., Inc., which includes up to 17 fullyfunded programmes Multiple wholly-owned programmes in early development
WHY NANOBODIES? • • • • • •
Ideally suited to bind simultaneously to multiple different epitopes or targets with a single Nanobody construct “Mix and match” approach allows for the rapid generation of multi-specific Nanobody constructs Rapid exploration of combinations: in vivo proof-of-concept in 12-18 months Multi-specific Nanobody combinations have the potential to increase efficacy and avoid escape mechanisms Ease and cost-effective manufacturing Further formatting flexibility: choice of half-life and potential to combine with Fc receptor
Extensive immuno-oncology collaboration with Merck & Co., Inc. In February 2014, Ablynx entered into a research collaboration and licensing agreement with a subsidiary of Merck & Co., Inc., focused on the discovery and development of 5 predefined Nanobody candidates (including multi-specific Nanobody combinations) directed toward so-called immune checkpoint modulators. In July 2015, Ablynx and Merck & Co., Inc. significantly expanded their collaboration to include up to 12 additional Nanobody programmes against individual protein targets and target combinations (mono-specific and multi-specific Nanobodies). Under the terms of both the original and expansion agreements, Ablynx received €33 million in upfront payments and is potentially entitled to receive up to €5.7 billion in future development, regulatory and sales milestone payments, plus royalties. Merck & Co., Inc. will be responsible for clinical development, manufacturing and commercialisation of any products resulting from the collaboration.
ANNUAL REPORT 2015 / ABLYNX
30.
CORPORATE OVERVIEW
Immuno-oncology “Immuno” in immuno-oncology refers to a person’s own immune system. Immuno-oncology drugs, known as immunotherapies, target the patient’s own immune system to help fight cancer Cancer is the most common cause of death globally ×× Each year, approximately 14 million people are diagnosed with cancer ×× Approximately 8 million patients die of cancer each year ×× It is expected that in the next 2 decades the number of cancer cases will increase by 70% to approximately 22 million per year Current immuno-oncology treatment options ×× Immunotherapies have a proven substantial survival impact and are expected to treat 60% of cancers ×× First antibody drugs that hit the market target the immune checkpoint modulators CTLA4 and PD1 Next generation ×× The number of targets in immuno-oncology is increasing ×× Combination therapies are the next generation immunotherapies ×× Market in immuno-oncology drugs expected to grow to >US$43 billion by 2020
2015 achievements In July, Ablynx significantly expanded its immuno-oncology collaboration with Merck & Co., Inc., which was originally signed in February 2014, to include up to 12 additional programmes with focus on multi-specific Nanobodies. The expansion agreement triggered a €13 million upfront payment to Ablynx, comprising exclusivity fees and FTE payments. In October, pre-clinical proof-of-concept was achieved with a bi-specific Nanobody programme as part of the immuno-oncology collaboration with Merck & Co., Inc. This Nanobody construct is a selective bi-specific molecule that potently binds to two different immune modulators. The results from the pre-clinical study in relevant tumour models demonstrated that this bi-specific Nanobody construct potently inhibits tumour growth.
Potential near term milestones 2016 - 2018 × Pre-clinical milestones (wholly-owned and with Merck & Co., Inc.) × Start of clinical development with the first programme(s) both internally and as part of the collaboration Merck & Co., Inc.
References: BofA Merrill Lynch, July 2015; MSD Belgium & Luxembourg
ANNUAL REPORT 2015 / ABLYNX
31.
CORPORATE OVERVIEW
SHAREHOLDERS’ INFORMATION
KEY FIGURES AND PERFORMANCE INDICATORS
(EUR'000)
2009
2010
2011
2012
2013
2014
2015
R&D income
28,068
29,196
19,861
25,645
33,181
47,710
76,761
1,615
2,263
2,008
1,082
2,761
1,587
779
Total revenue and grant income
29,683
31,432
21,869
26,727
35,942
49,297
77,540
R&D expenses
(42,800)
(48,512)
(56,307)
(46,868)
(43,699)
(54,488)
(83,084)
G&A expenses
(9,044)
(8,882)
(10,423)
(9,409)
(10,044)
(11,052)
(11,405)
Total expenses
(51,844)
(57,394)
(66,730)
(56,277)
(53,743)
(65,540)
(94,495)
Other operating income/(expense)
1
97
(668)
(222)
128
0
0
Operating result
(22,160)
(25,865)
(45,529)
(29,772)
(17,673)
(16,238)
(16,955)
Net financial result
2,165
1,395
1,634
1,264
1,797
3,508
(37,592)
(19,995)
(24,470)
(43,895)
(28,508)
(19,470)
(12,730)
(54,547)
0
0
0
0
0
0
0
Net result of the year
(19,995)
(24,470)
(43,895)
(28,508)
(19,470)
(12,730)
(54,547)
Basic and diluted loss per share
(0.54)
(0.58)
(1.01)
(0.65)
(0.41)
(0.24)
(1.00)
Grants
Result before taxes Income tax expense
ANNUAL REPORT 2015 / ABLYNX
35.
CORPORATE OVERVIEW
TOTA L RE V ENUE A ND GR A N T INCOME (€ MIL L ION)
49
36 30
31
27 22
YEAR 2009
2010
2 0 11
2 012
2013
2014
78
T OTA L RE V E N U E AND G R A NT IN COME
€30 MILLION €31 MILLION €22 MILLION €27 MILLION €36 MILLION €49 MILLION €78 MILLION
2 015
2009 2010 2 0 11 2 012 2013 2014 2 015
NUMBER OF EMPLOYEES
321 2 61
344
284
YEAR 2 012
2013
2014
2 015
NUMBER OF EMPLOYEES
G & A + R & D = T O T A L ...... Y E A R 40 40 41 43
+ 221 + 24 4 + 280 + 301
= = = =
2 61 284 321 344
2 012 2013 2014 2 015
15 D I F F E R E N T N AT I O N A L I T I E S W O R K I N G TOGETHER: AMERICAN, BELGIAN, BRITISH, CANADIAN, DANISH, DUTCH, FRENCH, GERMAN, HUNGARIAN, INDIAN, IRISH, ITALIAN, POLISH, PORTUGUESE AND SENEGALESE G&A R&D TOTAL
PRODUCTS IN THE CLINIC
7
7
6
5* 5 5 4 3
YEAR
*
PRODUCTS IN THE CLINIC
3 4 5 7 5 7 6 5*
2008 2009 2010 2 0 11 2 012 2013 2014 2 015
* N ot inc ludin g ant i - R A NK L Nanob o d y (A L X- 0141) lic en s e d t o Eddingphar m in Gr e at er C hina (in pr e - c linic al de velopment in C hina b u t c omple t e d Pha s e I s t ud y in Eur op e b e f or e i t w a s lic en s e d t o Eddingphar m)
C A SH - INCOME, OPER AT ING E X PENSE S A ND Y E A R- END C A SH P OSI T ION (€ MIL L ION)
OPER ATING EXPENSES & CASH INCOME
10 0
50
0
YEAR 2008
CASH POSITION OPER ATING E XPENSES CASH INCOME
2009
2010
2 0 11
2 012
2013
2014
2 015
CASH POSITION
250
200
CASH INCOME, OPER ATING EXPENSES AND YEAR-END CASH POSITION C A SH & E X PENSE S (€ MIL L ION)
15 0
10 0
50
0
IN 2015, TOTA L C A SH INCOME FROM COL L A BOR A T IONS C A ME IN AT € 24.8 MIL L ION (€ 30.1 MIL L ION IN 2014). TOTA L OPER AT ING E X PENSE S INCRE A SED TO €94.5 MIL L ION (€65.5 MIL L ION IN 2014), M A INLY A S A RE SULT OF HIGHER R& D E X PENSE S W HICH A RE IN L INE W I T H GROW T H IN E X T ERN A L DE V ELOPMEN T COS T S REL AT ED TO CL INIC A L T RI A L S E X PENDI T URE FOR C A PL AC IZUM A B, A L X- 0 0 61 A ND A L X- 0171. A BLY N X ENDED T HE Y E A R 2015 W I T H € 236. 2 MIL L ION IN C A SH, C A SH EQUI VA L EN T S, RES T RIC T ED C A SH A ND OT HER SHOR T T ERM IN V E S TMEN T S (€ 20 6. 2 MIL L ION IN 2014).
N ot e: 2013 c a sh inc ome inc lude s US$175 million up f r ont p ay ment r e c ei ve d f r om A bbV ie.
BREAKDOWN OF SHARE C APITAL
PERCEPTIVE ADVISORS
BOEHRINGER INGELHEIM TAUBE HODSON STONEX AVIVA INVESTORS
JP MORGAN ASSET MANAGEMENT OPPENHEIMER FUNDS POL AR CAPITAL FUNDS PLC
FIDELIT Y MANAGEMENT RESEARCH
ABINGWORTH MANAGEMENT
OTHER SHAREHOLDERS
BREAKDOWN OF SHARE C APITAL
5% 5% 5% 4% 4% 4% 3% 3% 3%
A B I N G W O R T H M A N A G E M E N T UK F I D E L I T Y M A N A G E M E N T R E S E A R C H USA AV I VA I N V E S T O R S UK TA U B E H O D S O N S T O N E X UK B O E H R I N G E R I N G E L H E I M DE P E R C E P T I V E A D V I S O R S USA J P M O R G A N A S S E T M A N A G E M E N T UK O P P E N H E I M E R F U N D S USA P O L A R C A P I TA L F U N D S P L C UK
64%
OTHER SHAREHOLDERS
% OF INSTITUTIONAL SHAREHOLDERS BY GEOGRAPHY (REPRESENTING 70% OF TOTAL SHARES OUTS TANDING)
USA
OTHER UK
FRANCE SC ANDINAVIA
BENELUX
PERCENTAGE OF INSTITUTIONAL SHAREHOLDERS BY GEOGRAPHY
35% 28% 27% 3% 2% 5%
USA BENELUX UK FRANCE SC ANDINAVIA OTHER
THE SHARES IN 2015
On 31 December 2015, there were 54,812,374 shares representing a total share capital of the Company of €102,442,297. The total number of rights (warrants) to subscribe to not yet issued securities conferring voting rights currently was 2,675,031 at 31 December 2015. This number equals the total number of voting rights that may result from the exercise of these warrants. Currently 1,000 convertible bonds are outstanding entitling the holders thereof to 7,733,952 shares of the Company in the aggregate, upon conversion of such convertible bonds. The total number of fully diluted shares of the Company at 31 December 2015 was 65,221,357. Ablynx’s shares are traded on Euronext Brussels, under the ticker symbol ABLX.
2011
2012
2013
2014
2015
Average daily volume
69,642
116,296
190,926
121,006
165,910
Average daily value
353,980
503,372
1,343,892
1,045,748
1,914,721
Total traded volume
17,975,216
29,771,718
48,686,030
30,795,240
42,472,998
Total traded value
90,972,838
128,863,121
342,692,372
265,619,949
490,168,666
ANNUAL REPORT 2015 / ABLYNX
49.
CORPORATE OVERVIEW
A B S O L U T E P E R F O R M A N C E I N 2 015
+7 5 . 9 4 %
MONTH JANUARY
JUNE
DECEMBER
ABSOLUTE PERFORMANCE I N 2 015
80% 60% 40% 20% 0%
1.5M 1.0M 0.5M 0.0M
R E L AT I V E P E R F O R M A N C E I N 2 015
MONTH JANUARY JUNE
A BLY N X
BEL PHARMA BIO
NEXT BIOTECH
BEL MID
DECEMBER
REL ATIVE PERFORMANCE I N 2 015 80% 60% 40% 20% 0%
+7 5 . 9 4 % +40.72% +3 8 . 5 7 % +2 1. 6 5 %
A BLY N X NEXT BIOTECH BEL PHARMA BIO BEL MID
FINANCIAL CALENDAR 2016 • • • • •
31 March – online publication annual report 2015 28 April – annual general meeting 2016 12 May – results Q1 2016 25 August – half year results 2016 23 November – results Q3 2016
SHAREHOLDERS’ CLUBS AT ABLYNX 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 2016 will be held in the Dutch language and are scheduled on the following days: • • •
18 May at 5.45pm 14 September at 5.45pm 7 December at 5.45pm
To attend an event, please register via email: investors@ablynx.com, stating your name and preferred day.
ANNUAL REPORT 2015 / ABLYNX
54.
CORPORATE OVERVIEW
ANALYST COVERAGE At present, Ablynx is covered by six analysts: Broker Berenberg Bank Bryan Garnier Jefferies KBC Securities Kempen & Co Degroof Petercam
Analyst Alistair Campbell Hugo Solvet Peter Welford Jan De Kerpel Sachin Soni Roderick Verhelst
Rating Buy 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
ANNUAL REPORT 2015 / ABLYNX
55.
CORPORATE OVERVIEW
GLOSSARY
Ang2 angiopoietin-2 (Ang2) - an important protein involved in the formation of new blood vessels from pre-existing vessels (angiogenesis), a vital mechanism in the growth of tumours
and possibly even a non-redundant role in vivo. IL-6R receptor of interleukin-6 (IL-6R) - a cytokine involved in a wide range of biological activities
Bi-specific Nanobody Nanobody construct which binds to two different targets
Multi-specific Nanobody Nanobody construct which binds to multiple different targets
Bivalent Nanobody Nanobody construct comprising two Nanobodies that bind with the same targets
Nanobody® protein that is composed of one or more binding domains with the structural and functional characteristics of naturally occurring heavy chain variable domains (VHH’s) from Camelidae. Nanobody® is a registered trademark of Ablynx
BLA Biologics License Application - request for permission to introduce, or deliver for introduction, a biologic product into interstate commerce
Orphan drug drug treating a rare disease - the grant of orphan drug status by the authorities provides certain privileges, intended to stimulate the research, development and commercialisation of orphan drugs including market exclusivity of ten years in Europe and seven years in the USA
DMARDs disease modifying anti-rheumatic drugs (defined by their use in RA to slow down disease progression) Free float 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
Phase I first stage of testing in human subjects. Normally, a small (20-100) group of healthy volunteers 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
IL-17A/F T Helper 17 (Th17) cells and interleukine-17 (IL-17) are associated with the pathology of many human inflammatory and autoimmune disorders like psoriasis, rheumatoid arthritis and multiple sclerosis and have proved to play an important role in animal models mimicking these and other auto-immune disorders. Although IL-17A is the most characterised family member, its closest relative IL-17F has similar biological activity
ANNUAL REPORT 2015 / ABLYNX
Phase III Phase III studies are randomised controlled multi-centre trials on large patient groups (300-3,000 or more
58.
GLOSSARY
TTP thrombotic thrombocytopenic purpura - a rare thrombotic disorder
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
UL-vWF ultra-large vWF multimers VEGF vascular endothelial growth factor (VEGF), an important protein involved in the formation of new blood vessels from pre-existing vessels (angiogenesis), a vital mechanism in the growth of tumours
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
vWF von Willebrand factor - a blood glycoprotein involved in haemostasis
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 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 SLE systemic lupus erythematosus (SLE) - complex, multiorgan, autoimmune disorder characterised by the production 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
ANNUAL REPORT 2015 / ABLYNX
59.
GLOSSARY
TABLE OF CONTENTS ANNUAL REPORT 2015 / ABLYNX
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 2016 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 Company 1.10. Circumstances that could considerably affect the Development of the Company 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
116
03. STATUTORY AUDITOR’S REPORT
117
04. BALANCE SHEET
120
05. STATEMENT OF COMPREHENSIVE INCOME
121
06. CASH FLOW STATEMENTS
122
07. STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
123
08. NOTES TO THE FINANCIAL STATEMENTS 8.1. General Information 8.2. Summary of Significant Accounting Policies 8.3. Financial Risk Management
124
62.
CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
8.4. Critical Accounting Estimates and Judgements 8.5. Segment Information 8.6. Intangible Fixed Asset 8.7. Property, Plant and Equipment 8.8. Restricted Cash 8.9. Non-current 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
189
10. CONDENSED STATUTORY FINANCIAL STATEMENTS OF ABLYNX
190
11. SUMMARY OF VALUATION RULES AND ADDITIONAL INFORMATION 11.1. Principles 11.2. Specific Rules
195
ANNUAL REPORT 2015 / ABLYNX
63.
CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
01. REPORT OF THE BOARD OF DIRECTORS
Dear Shareholders, We are pleased to present the financial statements for the fiscal year ended 31 December 2015 which have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU.
1.1. STRATEGIC HIGHLIGHTS In 2015, total revenues and grant income increased by 57% to €77.5 million (2014: €49.3 million) driven by increased funding for full-time equivalents and increased recognised income, mainly from the upfront payment by AbbVie made in 2013. Total research and development costs increased to €83.1 million (2014: €54.5 million) in line with growth in external development costs, which are largely related to clinical trials expenditure for caplacizumab, ALX-0061 and ALX-0171. General and administrative costs remained broadly unchanged at €11.4 million (2014: €11.0 million). The operating loss increased to €17.0 million (2014: €16.2 million). The net loss for the period was €54.5 million (2014: €12.7 million). The net cash burn in 2015 (excluding the net proceeds of €97.2 million from the convertible bonds, announced on 20 May 2015) was €67.2 million. The Company ended the year with €236.2 million in cash, cash equivalents, restricted cash and other short-term investments. Pipeline update At the end of 2015, there were five Nanobodies in clinical development, both internally and as part of collaborations. In March 2015, Ablynx initiated a Phase IIb study of the anti-IL-6R Nanobody (ALX‑0061), in combination with methotrexate, in patients with rheumatoid arthritis (RA). Recruitment of 345 patients was completed on schedule at year-end. In April 2015, Ablynx initiated a Phase IIb monotherapy study of ALX-0061 in RA patients. Recruitment of 251 patients was completed in February 2016, also on schedule. In July 2015, the first eligible patients from the Phase IIb RA studies with ALX-0061 rolled over into the open-label extension study. In August 2015, Ablynx initiated a Phase II study with ALX-0061 in patients with systemic lupus erythematosus (SLE). The Company plans to recruit 300 patients in this study by 2017. In September 2015, Ablynx initiated the confirmatory, international Phase III
ANNUAL REPORT 2015 / ABLYNX
64.
CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
HERCULES study of the anti-vWF Nanobody, caplacizumab, in patients with acquired TTP (aTTP). The Company plans to recruit 92 patients into this study by 2017. In February 2016, the Phase II TITAN study of caplacizumab was published in the New England Journal of Medicine. In October 2015, pre-clinical proof-of-concept was achieved with a bi-specific Nanobody programme as part of the extensive immuno-oncology collaboration with Merck & Co., Inc., which triggered a €3.5 million milestone payment to Ablynx. In November 2015, Ablynx's partner Boehringer Ingelheim presented compelling preclinical proof-of-mechanism data with the bi-specific anti-VEGF/Ang2 Nanobody in multiple in vivo cancer models. A Phase Ib study with this anti-VEGF/Ang2 Nanobody in patients with solid tumours was initiated by Boehringer Ingelheim in January 2016, triggering a €8 million milestone payment to Ablynx. Boehringer Ingelheim expects to recruit 80 patients in this study with top line efficacy results expected in 2018. In addition, a Phase II study with this Nanobody is expected to start in 2017, which would trigger a milestone payment to Ablynx. In December 2015, the Phase I/IIa safety study with the inhaled anti-RSV Nanobody, ALX-0171, completed recruitment in 35 infants, aged 3-24 months, who were hospitalised with a respiratory syncytial virus (RSV) infection. Also in this month, an independent Data Monitoring Committee reviewed safety data available for the first 15 infants from the placebo-controlled part of this Phase I/IIa study and confirmed that the inclusion age for recruitment could be lowered to 1 month. The Company then decided to generate additional data during the current RSV season in the Northern Hemisphere by expanding the Phase I/IIa study to include up to 18 additional infants, aged 1-5 months. Recruitment of this expansion cohort was completed ahead of schedule in February 2016. Partnerships update In March 2015, Ablynx announced an extension of its initial two-year research collaboration with Merck & Co., Inc. to develop and commercialise Nanobodies directed towards an undisclosed voltage gated ion channel. Merck & Co., Inc. extended their funding to the end of September 2016. This ion channel collaboration was announced in October 2012 and included a €6.5 million upfront payment and €2 million in initial research funding. In May 2015, a research and option agreement was signed with Genzyme to explore the potential of a Nanobody targeting an ion channel that may play a role in multiple sclerosis, triggering an undisclosed exclusivity payment to Ablynx. In June 2015, Ablynx and Taisho Pharmaceuticals signed an exclusive license
ANNUAL REPORT 2015 / ABLYNX
65.
CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
agreement to develop and commercialise the anti-TNFα Nanobody, ozoralizumab, in Japan. Ablynx received an upfront payment of US$3 million and is entitled to receive development and commercial milestone payments plus royalties. In July 2015, Ablynx significantly expanded its immuno-oncology partnership with Merck & Co., Inc. which was originally signed in February 2014, to include a total of up to 17 programmes with a focus on multi-specific Nanobodies. As part of both the original and expansion agreements, Ablynx received €33 million in upfront payments and is entitled to receive up to €5.7 billion in future milestone payments, plus royalties. In November 2015, Ablynx and Novo Nordisk entered into a drug discovery collaboration to investigate multi-specific Nanobodies in an undisclosed indication. Ablynx received an upfront payment of €5 million in early 2016, and is entitled to receive €4 million in research funding during the initial three-year term of the collaboration and up to €182 million in potential milestones, plus royalties. Corporate developments In November 2015, Ablynx announced that Dr Robert K. Zeldin had joined the Company as the new Chief Medical Officer (CMO), effective 1 December 2015, to lead the Company’s global clinical development, regulatory and medical affairs activities. Dr Zeldin brings significant industry experience, having held senior level clinical development positions with Merck & Co., Inc. and Novartis Pharmaceuticals Corp. Dr Zeldin replaces Dr Dominique Tersago who previously held the CMO position.
1.2. ANALYSIS OF RESULTS OF OPERATIONS Total income Total revenues and grant income increased by 57% to €77.5 million (2014: €49.3 million), driven by increased FTE funding and increased recognised income, mainly from the upfront payment by AbbVie made in 2013. Research and development expenses Total research and development costs increased to €83.1 million (2014: €54.5 million) in line with growth in external development costs, which are largely related to clinical trials expenditure for caplacizumab, ALX-0061 and ALX-0171.
ANNUAL REPORT 2015 / ABLYNX
66.
CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
General and administrative expenses General and administrative costs remained broadly unchanged at €11.4 million (2014: €11.0 million). Operating result As a result of the foregoing, the operating loss increased to €17.0 million (2014: €16.2 million). Net financial result The net financial loss of €37.6 million comprises finance income of €1.8 million, which relates to interest income and exchange gains, and finance costs of €39.4 million. These finance costs mainly include non-cash expenditure resulting from the fair value calculation and amortisation of the convertible bond components (as a result of the higher share price at year-end compared to the share price at the time of the convertible bonds issuance), and the semi-annual interest paid on the convertible bonds of €1.6 million. Net result As a result of the foregoing, the net loss for 2015 increased to €54.5 million (2014: €12.7 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 intangible assets also include software licenses. The Company expenses all its research and development activities. The Company’s non-current tangible assets include the Company’s laboratory and office equipment, the investments in its facilities, tax receivables and €1.6 million restricted cash, which is a cash pledge that the Company has provided for the lease of its headquarter building. The Company owns one small facility (which it previously rented) and continues to invest in equipment for its research activities. Non-current tax
ANNUAL REPORT 2015 / ABLYNX
67.
CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
receivables include an R&D tax credit receivable of €14.5 million. The Company’s current assets of €246.1 million consist mainly of cash and cash equivalents and other short-term financial investments. Current tax receivables include an R&D tax receivable of €1.2 million. Shareholders’ equity decreased from €75.5 million at the end of 2014 to €27.9 million at the end of 2015, mainly as a result of the incorporation of the loss for the period. Non-current liabilities relate to the senior unsecured bonds due on 27 May 2020 with a principal value of €100 million. Current liabilities consist mainly of trade payables and deferred income related to the upfront payments received from partners.
1.4. CASH FLOW ANALYSIS Cash flow from operating activities represented a net outflow of €69.0 million in 2015 compared to a net outflow of €32.3 million in 2014. The difference primarily relates to the higher number of clinical trials being run by the Company. Cash flow from investing activities represented a net outflow of €39.7 million compared to a net outflow of €6.2 million in 2014. The net cash outflow comprises primarily the net movements in cash and cash equivalents (on deposit with a term of less than 1 month) and other short-term financial investments (on deposit with a term greater than 1 month). Cash flow from financing activities represented a net inflow of €100.6 million compared to a net inflow of €39.7 million in 2014. The difference primarily relates to €97.2 million net proceeds from the issuance of convertible bonds and €5.2 million from the exercise of warrants. The Company ended the period with a total liquidity position of €236.2 million (2014: €206.2 million) which consists of cash and cash equivalents of €3.6 million, other short-term financial investments of €231.0 million and restricted cash of €1.6 million.
1.5. OUTLOOK 2016 In the second quarter of 2016, the Company expects to report Phase I/IIa results from its study of the wholly-owned, inhaled anti-RSV Nanobody, ALX-0171, in 53 infants, who had been hospitalised with an RSV infection.
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In the first half of 2016, it is expected that the results will be announced from the Phase Ib study of the bi-specific anti-IL-17A/F Nanobody (ALX-0761), exclusively licensed to Merck KGaA (Merck Serono), in patients with moderate to severe psoriasis. In the third quarter of 2016, the Company expects that the first patients from the Phase III HERCULES study of its wholly-owned anti-vWF Nanobody, caplacizumab, will have rolled-over into a three-year follow-up study to evaluate the long term safety and clinical effect of caplacizumab. In the third quarter of 2016, Ablynx expects to communicate top line results from the monotherapy and combination therapy studies with the anti-IL-6R Nanobody, ALX‑0061, in patients with RA. Following a review of the complete RA data package, AbbVie is expected to decide before the end of 2016 whether it wishes to exercise its option to license ALX-0061 in RA. If AbbVie decides to exercise its option, Ablynx will receive a US$75 million milestone payment and AbbVie will then be responsible for providing all the resources to further develop and commercialise ALX-0061 in this indication. Ablynx will then be eligible to receive regulatory and sales milestones plus double-digit royalties. In the fourth quarter of 2016, Ablynx intends to initiate a worldwide, Phase II dose ranging study with inhaled ALX-0171 in approximately 120 infants, aged 1-24 months, who are hospitalised with an RSV infection. During 2016, the Company expects that up to 4 new partnered programmes could enter the clinic (Boehringer Ingelheim already started a Phase Ib trial with the antiVEGF/Ang2 Nanobody in January 2016) and additional pre-clinical data with partners may be obtained, thereby triggering milestone payments to Ablynx. The net cash burn for the full year 2016 is expected to be in the range of €65-75 million, not including the potential licensing payment of US$75 million by AbbVie for ALX-0061 in RA.
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 via the following link: http://www.ablynx.com/investors/corporate-governance/principles-codes-andguidelines/. The Company’s Corporate Governance Charter and this Corporate
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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 CGC: 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. • Provision 2.9 CGC: 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
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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 2015: On 19 January 2015, the Company issued 115,946 new shares in exchange for €909,426.07 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €216,819.02 and €692,607.05 respectively. On 16 March 2015, the Company issued 174,302 new shares in exchange for €1,292,682.18 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €325,944.74 and €966,737.44 respectively. On 17 April 2015, the Company issued 20,165 new shares in exchange for €112,425.70 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €37,603.55 and €74,822.15 respectively. On 27 May 2015, the Company raised €100 million through a private placement of €100 million senior unsecured bonds due 27 May 2020. The bonds were placed through an accelerated book building placement with qualified investors outside the United States, in accordance with Regulation S under the Securities Act. The bonds will mature on 27 May 2020 (5 years), are in dematerialised form in the denomination of €100,000 each, are issued at par and will be redeemed at par at maturity. The bonds will pay a coupon of 3.25% per annum, payable semi-annually in arrears on 27 November and 27 May of each year, beginning on 27 November 2015. The annual yield to maturity of the bonds is 3.25%. The initial price for the conversion of the bonds into ordinary shares of the Issuer shall be €12.93, representing approximately a 26.5% premium above the reference price of €10.2219, being the VWAP of the ordinary shares on Euronext Brussels on 20 May 2015. At the initial conversion price, the convertible bonds will be convertible into 7,733,952 fully paid-up ordinary shares of the Issuer. Conversion of the convertible bonds in Ablynx ordinary shares is at the option of the holder. In case of conversion: a cash alternative election (at the option of the issuer) is available including a number of restrictions. As the issuer has the cash alternative election, it has a choice over how the share conversion option will be settled (i.e. net in cash or by exchanging shares for cash). Therefore the share conversion option is a derivative at Fair Value Through Profit and Loss (“FVTPL”) according to IAS 39, not an own equity instrument (cf. IAS 32.26).
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On 3 June 2015, the Company issued 83,000 new shares in exchange for €410,955 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €155,210 and €255,745 respectively. On 17 July 2015, the Company issued 79,885 new shares in exchange for €600,491.30 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €149,384.95 and €451,106.35 respectively. On 29 July 2015, the Company issued 24,967 new shares in exchange for €199,086.96 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €46,688.29 and €152,398.67 respectively. On 19 October 2015, the Company issued 5,200 new shares in exchange for €41,249 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €9,724 and €31,525 respectively. On 7 December 2015, the Company issued 7,250 new shares in exchange for €61,390 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €13,557.50 and €47,832.50 respectively. On 15 December 2015, the Company issued 287,500 new shares in exchange for €1,532,750 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €535,000 and €997,750 respectively. 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 2014 • Number of new shares (exercise of warrants) • Number of shares on 31 December 2015
54,014,159 798,215 54,812,374
During the Extraordinary General Shareholders Meeting of 16 March 2015, the issuance of a maximum number of 850,000 warrants was approved and 541,499 warrants have subsequently been granted, of which 442,801 have been accepted on 3 June 2015 and on 17 July 2015 (129,490 warrants at €9.5/warrant, 20,000 warrants at €10.13/warrant for employees and 293,311 warrants at €10.22/warrant for consultants).
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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 shares 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 7 years as of the issue date of the warrants. 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 of 1 January 2019 until 15 January 2022). 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 7 years of their creation become null and void. During the Board Meeting of 14 September 2015, the issuance of a maximum number of 290,000 warrants was approved and 257,500 warrants have subsequently been granted, of which 233,000 have been accepted on 7 December 2015 and on 18 January 2016 (68,000 warrants at €12.29/warrant, 15,000 warrants at €11.67/warrant for employees and 150,000 warrants at €12.10/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. The warrants vest over 3 years: 28% of the warrants vest after one year; after that date the remaining 72% become vested on a quarterly basis (9% per quarter).
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The duration of the warrants is 7 years as of the issue date of the warrants. 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 offered (thus starting as of 1 January 2019 until 15 January 2022). 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 first fifteen days of the quarter in which the end of the employment Agreement, Consultant Agreement or Director’s Appointment falls, even if such exercise period precedes the beginning of the fourth year following the calendar year in which the Date of the Offer lies. The tax consequences of such exercise will exclusively be borne by the relevant warrant holder. 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 7 years of their creation become null and void. The Company had a total of 2,675,031 outstanding warrants at the end of 2015.
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1.6.3. SHAREHOLDERS AND SHAREHOLDER STRUCTURE As at 31 December 2015, the shareholding structure is as follows (based on the most recent transparency declarations):
Shareholder
Address
Voting rights
% of voting rights
Aviva Investors Global Services Limited
No 1, Poultry London, EC2R 8EJ UK
2,442,496
4.50%
Abingworth Management Limited and Abingworth LLP
38, Jermyn Street London, SW1Y 6DN UK
2,632,150
4.80%
C.H. Boehringer Sohn AG & Co. KG
Binger Strasse 173 55216, Ingelheim am Rhein Germany
2,142,857
3.90%
Perceptive Advisors
51, Astor Place 10th floor New York, NY 10003 USA
2,077,590
3.80%
Polar Capital Funds Plc (UK)
4, Matthew Parker Street London, SW1H9NP UK
1,654,827
3.00%
FMR LLC (US)
245, Summer Street Boston, MA 02210 USA
2,753,606
5.00%
Taube Hodson Stonex Partners LLP (UK)
Cassini House, 57-59, St. James’s Street London, SW1A 1LD UK
2,410,681
4.40%
Oppenheimer Funds, Inc. (OFI) (US)
225, Liberty Street 11th Floor New York, NY 10281 USA
1,672,262
3.10 %
JP Morgan Asset Management Holdings Inc.
270, Park Avenue New York, NY 1007 USA
1,813,725
3.30%
35,212,180
64.20%
Other
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1.6.4. BOARD OF DIRECTORS
1.6.4.1. COMPOSITION OF THE BOARD The Board of Directors consists of eight members, one of whom is an executive Director, seven of whom are independent non-executive Directors.
From left to right: Dr Peter Fellner, Dr Edwin Moses, Dr Russell G. Greig, Dr Bo Jesper Hansen, Dr William Jenkins, Mrs Catherine Moukheibir, Mr Remi Vermeiren, Prof Dr Lutgart Van den Berghe
Peter Fellner Chairman of the Board Dr Peter Fellner is Chairman of the Boards of the medical technology company Consort Medical plc, and the biotech companies Vernalis plc and Mereo BioPharma Group. He was also, until recently a member of the Novo A/S Advisory Group. He was Chairman of Optos plc until its acquisition by Nikon Corporation during 2015, and served as Vice Chairman of Astex Pharmaceuticals Inc. until its acquisition by Otsuka Pharmaceuticals in 2013. He was a Director of the global biopharmaceutical company UCB SA from 2005 to 2014. Dr Fellner previously served as Chairman of Acambis plc from 2006 until its acquisition by Sanofi in 2008, and of Premier Research Group plc from 2007 to 2008 when it was acquired by a private equity-backed group. He was Chairman of Celltech Group plc from 2003 to 2004, when it was acquired for €2.3 billion by UCB having been CEO from 1990 onwards. During this time he oversaw the company’s growth from a small research-based company into the UK’s largest biotech company. Before joining Celltech, he was CEO of Roche UK from 1986 to 1990. He was appointed as Chairman of the Board of Ablynx in 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 RaggioItalgene. 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, Dr Moses 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 was Chairman of Ablynx from 2004 till 2013, and was appointed Chief Executive Officer of the Company in 2006. 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 35 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), Mint Solutions (The Netherlands), Bionor (Norway) and Sanifit (Spain), a Board Member of Onxeo (France), as well as a Director of Tigenix (Belgium). 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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Remi Vermeiren Independent Director Before Remi Vermeiren became an independent Director of Ablynx, he had a 43year 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 non-quoted companies and of charitable organisations, such as Pro Vives, Vives and ‘Foundation RV’ set up and funded by himself. He is currently a member of the Board of ACP II SCA (Luxembourg) (Liquidator). 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 strategies 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-executive Board member of Creabilis, a non-executive Board member at Zealand Pharma and Chair of the Audit Committee, non-executive Board member and member of the Audit Committee at Cerenis and Ablynx and Advisory Board member at the Imperial College Business School. 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
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Director of a number of biotech and pharma companies including Orphazyme ApS, Newron Pharmaceuticals SpA, CMC AB, Genspera Inc. and Azanta A/S. Dr Hansen served as CEO and President and as Director to the Board of Swedish Orphan International AB until the merger with Biovitrum, forming Swedish Orphan Biovitrum AB (SOBI AB). He also was non-executive Director of Gambro until its acquisition by Baxter, and of 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 Synthélabo, 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. Lutgart Van den Berghe Independent Director Lutgart Van den Berghe is executive Director of GUBERNA (Belgian Governance Institute) and Extra-Ordinary Professor in Corporate Governance at the University of Ghent. She is a Partner of the Vlerick Business School where she served as Chairman of the Competence Center “Entrepreneurship, Governance and Strategy” for many years. She has an extensive governance experience gained as member of the Belgian Commission for Corporate Governance and non-executive Director in several companies, such as Proximus and Belfius. At EcoDA (European Confederation of Directors’ Association), she is a Member of the Board and chairman of its policy committee. Formerly she served as a non-executive Director of Electrabel (Belgium, 20032014), the ING Group (The Netherlands, 1991-2003), KLM (The Netherlands, 20012004), Solvay (Belgium, 2003-2007), CSM (The Netherlands, 1998 -2010), SHV (The Netherlands, 1997-2013), Capco nv (Belgium, 2000-2003), DVV (Belgium, 19951997), member of the Audit Committee of the Flemish Government (2000-2004) and Chairman of the Proximus Foundation (until 2005). She was also a Member of the Advisory Board of Lazard (Benelux, 2007-2010). Lutgart Van den Berghe is doctor in Business Economics of the University of Ghent.
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Name
Year of Birth
Position
Term(1)
Board Committee Memberships
Dr Peter Fellner
1943
Independent Director and Chairman
2017
Dr Edwin Moses(2)
1954
Director and Chief Executive Officer
2019
Member of the Research and Development Committee
Remi Vermeiren
1940
Independent Director
2019
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
Feadon nv represented by its permanent representative, Baroness Prof Dr Lutgart Van den Berghe
1951
Independent Director
2019
(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 and by the Annual General Meeting of Shareholders held on 30 April 2015. 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 2015, seventeen 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 these meetings. All other Board meetings were related to the exercise of warrants, the issuance of the convertible bond 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 decisionmaking 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 a meeting. The Board has discussed its composition and performance on several occasions during 2015. 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.
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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. In 2015 the Audit Committee was 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 2015. During these meetings the financial results, budgets, treasury, topics related to risk management and the financial press releases were discussed. The attendance was as follows: Remi Vermeiren (100 %), Dr Russell Greig (100%) and Catherine Moukheibir (75%). 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’ website in the Corporate Governance Charter and in the Terms of Reference of the Audit Committee.
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
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Nomination and the Compensation and Benefit programmes of executive & nonexecutive 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. COMPOSITION The Nomination and Remuneration Committee consists of three members: 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 represented by its permanent representative Dr Bo Jesper Hansen. These Directors are all members of Boards of other companies and as a result have broad knowledge of remuneration policies. 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 benefitrelated matters, since they are associates of Boards of other companies and as a result have knowledge of remuneration 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 nonvoting capacity on all matters. They do not attend 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 Vice President Human Resources. The members of the Committee declare that they dedicate a significant amount of their time to the Committee’s activities. The Remuneration & Nomination Committee of Ablynx advises the Board of Directors on all aspects of the Compensation and Benefit programmes for the executive and
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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 stockrelated 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 with the Chairman any and all activities involved in planning for CEO succession. Any recommendations made in respect of the recruitment or succession planning requires discussion and endorsement by the Board of Directors before becoming effective.
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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 finalise 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. ACTIVITY REPORT In 2015 the Nomination & Remuneration Committee officially met three times to fulfill 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 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.
1.6.7. THE RESEARCH AND DEVELOPMENT COMMITTEE The Research and Development Committee of the Board advises 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 Company’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
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(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 Research and Development Committee officially met four times in 2015. During these meetings the projects in research and development were discussed in detail and strategic decisions were prepared to be discussed at the Board Meeting.
1.6.8. EXECUTIVE COMMITTEE
1.6.8.1. COMPOSITION
From left to right: Dr Edwin Moses, Dr Robert K. Zeldin, Dr Antonin de Fougerolles, Mr Johan Heylen, Mr Wim Ottevaere, Mr Guido Gielen, Mr Gerrit Franciscus Landolt
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.
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The current members of the Executive Committee are listed in the table below.
Name
Function
Year of Birth
Nationality
Edwin Moses
Chief Executive Officer
1954
British
Johan Heylen
Chief Commercial Officer
1967
Belgian
Wim Ottevaere(1)
Chief Financial Officer
1956
Belgian
Antonin Rollet de Fougerolles
Chief Scientific Officer
1965
Canadian
Kim Simonsen(2)
Chief Operations Officer
1957
Danish
Dominique Tersago (3)
Chief Medical Officer
1962
Belgian
Robert K. Zeldin(4)
Chief Medical Officer
1963
American
Guido Gielen
VP Human Resources
1960
Belgian
Gerrit Franciscus Landolt
VP IP and Legal
1964
Dutch
(1) Mr Ottevaere acts as the permanent representative of Woconsult BVBA (2) Mr Simonsen left the company on 31 May 2015 (3) Dr Tersago has left the company on 31 March 2016 (4) Dr Zeldin is CMO from 1 December 2015
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.
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1.6.9. REMUNERATION REPORT
1.6.9.1. DIRECTORS Procedure applied in 2015 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 received a fixed remuneration in consideration of their membership of the Board and the Committees of which they are members. They have not received, any performance-related remuneration, nor have any options or warrants been 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 has — until the end of 2013 and upon advice of the Nomination and Remuneration Committee — proposed to the Shareholders Meeting to deviate from the latter principle and grant warrants in order to attract and retain highly qualified independent Directors. The CEO as member of the Board did not receive any compensation for serving as member of the Board.
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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 2015 During 2015 Ablynx obtained salary market data for the members of the Board via its 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. 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.
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The total amount of the remunerations and the benefits to which the independent Directors (in such capacity) were entitled in 2015 was €327,500 (gross, excluding VAT), see table below. Committee Name
Board
Dr Peter Fellner
100,000
Remi Vermeiren
30,000
10,000
Greig Biotechnology Global Consulting Inc. represented by its permanent representative Dr Russell Greig
30,000
5,000
Catherine Moukheibir
30,000
5,000
William Jenkins Pharma Consulting represented by its Principal Dr William J. Jenkins
30,000
10,000
5,000
45,000
Orfacare Consulting represented by its permanent representative Dr Bo Jesper Hansen
30,000
5,000
5,000
40,000
Feadon nv represented by its permanent representative Prof Dr Lutgart Van den Berghe
22,500
272,500
R&D
Audit
Remuneration
Total 100,000 40,000
10,000
45,000
35,000
22,500
15,000
20,000
20,000
327,500
There is no performance-related remuneration for non-executive Directors.
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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(1)
Shares
Name
Number
%(3)
Number
Dr Peter Fellner
50,000
0.08
Dr Edwin Moses
682,936
1.05
184,200
Remi Vermeiren
28,571
0.04
25,000(8)
Catherine Moukheibir
5,028
Greig Biotechnology Global Consulting Inc., represented by its permanent representative Dr Russell Greig
Warrants(1) %(3)
Number
%(3)
50,000(2)
0.08
0.28
498,736(5)
0.76
0.04
3,571(6)
0.01
0.01
5,028(2)
0.01
6,434
0.01
6,434(7)
0.01
William Jenkins Pharma Consulting represented by its Principal Dr William J. Jenkins
4,781
0.01
4,781 (4)
0.01
Orfacare Consulting represented by its permanent representative Dr Bo Jesper Hansen
4,781
0.01
4,781 (4)
0.01
(1) Reflecting the number of shares of the Company to which such warrants give right to subscription 2) Warrants granted in 2013 with an exercise price of €7.32 (3) Percentage on a fully diluted basis (4) Warrants granted in 2013 with an exercise price of €7.32 (5) Warrants granted from 2006 onwards with an exercise price between €2 and €10.22 (6) Warrants granted in 2007 with an exercise price of €7.00 (7) Warrants granted in 2012 with an exercise price of €5.44 (8) 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 2015 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 2015 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 own research, Ablynx obtained mid 2015 salary market data for the members of the Executive Committee, in order to understand the compensation market. The data confirm 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 performances, 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 performance-driven 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 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
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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 (except for warrants issued under the authorised capital). 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, plans issued until September 2015 stated that 25% of the warrants granted vested after 1 year, 2.08% vested additionally after each full month, however, vested warrants would in principle not be exercisable within less than three full calendar years. From September 2015 new plans state that as a rule, 28% of the warrants will vest after 1 year from the date of the offer, 9% vest additionally after each full quarter, 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 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
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warrants is 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. In 2015 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 €2,261,942.97 (gross, excluding VAT and share-related payments), of which a detailed breakdown is shown in the table below: Total
of which CEO
Basic Salary
1,616,275.19
484,520.40
Variable Remuneration(1)
411,323.39
190,944.00
Group Insurance (pension, invalidity, life)
155,539.55
49,836.36
Other (car, cell phone, hospitalisation insurance)(2)
78,804.84
14,696.04
2,261,942.97
739,996.80
Total (1) paid in cash (2) not including share based payments mentioned under point 8.15
The insurance plan, for which the above amounts have been paid, is a defined contribution plan for which 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.
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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
184,200
673,736 warrants giving the right to subscribe for 498,736 shares
Johan Heylen
Chief Commercial Officer
Wim Ottevaere/Woconsult BVBA
Chief Financial Officer
Antonin Rollet de Fougerolles
Chief Scientific Officer
189,508 warrants giving the right to subscribe for 189,508 shares
Dominique Tersago
Chief Medical Officer
46,416 warrants giving the right to subscribe for 46,416 shares
Gerrit Franciscus Landolt
VP IP and Legal
134,558 warrants giving the right to subscribe for 134,558 shares
Guido Gielen
VP Human Resources
131,475 warrants giving the right to subscribe for 131,475 shares
175,000 warrants giving the right to subscribe for 175,000 shares 21,605
393,952 warrants giving the right to subscribe for 288,952 shares
During 2015 Edwin Moses CEO exercised 575,000 warrants and sold 332,500 shares; Wim Ottevaere, permanent representative of Woconsult BVBA and CFO, exercised 18,750 warrants and sold 18,750 shares. Guido Gielen, VP HR, exercised 18,750 warrants and sold 18,750 shares and Frank Landolt, VP IP & Legal, exercised 50,000 warrants and sold 50,000 shares. The most important characteristics of the warrants, which were allocated in 2015, are detailed below. During the Extraordinary General Shareholders Meeting of 16 March 2015, the issuance of a maximum number of 850,000 warrants was approved and 541,499 warrants have subsequently been granted of which 442,801 have been accepted on 3 June 2015 and on 17 July 2015 (129,490 warrants at €9.5/warrant, 20,000 warrants at €10.13/warrant for employees and 293,311 warrants at €10.22/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
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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 7 years as of the issue date of the warrants. 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 of 1 January 2019 until 15 January 2022). In case of a normal termination of 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 7 years of their creation become null and void. During the Board Meeting of 14 September 2015, the issuance of a maximum number of 290,000 warrants was approved and 257,500 warrants have subsequently been granted of which 233,000 have been accepted on 7 December 2015 and on 18 January 2016 (68,000 warrants at €12.29/warrant, 15,000 warrants at €11.67/warrant for employees and 150,000 warrants at €12.10/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. The warrants vest over 3 years: 28% of the warrants vest after one year; after that date the remaining 72% become vested on a quarterly basis (9% per quarter). The duration of the warrants is 7 years form the date of the issue. 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 offered (thus starting as of 1 January 2019 until 15 January 2022). 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 first fifteen days of the quarter in which the end of the Employment Agreement, Consultant Agreement or Director’s Appointment falls, even if such Exercise Period precedes the beginning of the fourth year following the calendar year in which the Date of the Offer lies. The tax consequences of such
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exercise will exclusively be borne by the relevant Warrant holder. 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 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 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. No other termination remunerations are 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. Except for Dr Edwin Moses, who is entitled to an exit remuneration which is equal to one (1) time his fixed annual compensation, all other Executive Committee members (Mr Ottevaere, permanent representative of Woconsult BVBA, CFO; Dr Robert K Zeldin, CMO; Dr Antonin Rollet de Fougerolles; CSO; Mr Johan Heylen, CCO; Mr Gielen, VP HR and Mr Gerrit Franciscus Landolt, VP IP and Legal) are entitled to an exit remuneration of one quarter (1/4) of their fixed annual compensation. Claw-back provisions There are no provisions allowing the Company to reclaim any variable remuneration paid to the executive management based on incorrect financial information. Miscellaneous Furthermore the company has no intention to compensate in a subjective or discretionary manner.
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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: • 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, based upon “COSO’s internal Control-integrated Framework of 2013” which is monitored by the Audit Committee. The role of the Audit Committee is stipulated in the Corporate Governance Statement and in the terms of reference of the Audit Committee. 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 2015, the management of the Company assessed its operational risks and challenged and compared these with the COSO 2013 risk intelligence framework. Following this exercise, appropriate actions will be proposed to the Executive Committee.
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The Company 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 Company’s ability to achieve regulatory approval and commence product sales as currently contemplated. • The Company’s drug candidates may not obtain regulatory approval when expected, if at all, and even after obtaining approval; the drugs will be subject to ongoing regulation. To date, one of the Company’s drug candidates has reached the stage of submission or evaluation for regulatory approval. • The Company has a history of operating losses and an accumulated deficit; the Company may never become profitable or may not be able to sustain profitability in subsequent periods. • The Company is reliant on collaborative partners for the development and commercialisation of most of its existing and future drug candidates. • The Company’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 Company 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 Company 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 Company relies on outsourcing arrangements with third parties for some of its activities including manufacturing and clinical trials management. • The Company may not have adequate insurance cover, particularly in connection with product liability risk. • The commercial success of the Company will depend on attaining significant market acceptance of its drug candidates among physicians, patients, healthcare payers and the medical community. The Company has not yet commercialised any product. • If the Company 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 Company 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. • Fair value measurements that cannot be fully based on market parameters are based on judgment and could potentially affect the fair value estimation, including the embedded derivative linked to the convertible bond issued in May 2015.
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Our financial risk management consists of: Liquidity risk management The Company makes use of term accounts and treasury notes. The maturities of the term deposits are limited to a maximum of one year. The Company has €1.6 million restricted cash related to a cash pledge. On 27 May 2015, the Company raised €100 million through a private placement of €100 million senior unsecured bonds due 27 May 2020. The bonds will mature on 27 May 2020 (5 years) and will pay a coupon of 3.25% payable semi-annually. The convertible bonds are convertible in Ablynx ordinary shares at the option of the holder. In case of conversion: a cash alternative election (at the option of the issuer) is available including a number of restrictions. Because the issuer has the cash alternative election, it has a choice over how the share conversion option will be settled (i.e. net in cash or by exchanging shares for cash). Therefore the share conversion option is a derivative at Fair Value Through Profit and Loss (“FVTPL”) according to IAS 39 and not an own equity instrument (cf. IAS 32.26). Interest rate risk As the Company 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 Company’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 Company has sales transactions from research and collaboration agreements denominated in USD and purchase transactions denominated in AUD, CAD, CHF, DKK, GBP, JPY, MXN, RUB, SEK and USD. The Company did not enter into any currency hedging arrangements in order to cover this risk.
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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 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. 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 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.
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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. However, this clause is 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 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’ option to co-promotion rights expires. This clause was approved by the Extraordinary Shareholders Meeting of 12 October 2007 in accordance with Art. 556 of the Belgian Company Code. The Agreement was extended with two years in March 2012 and the same change of control clause was approved by the Company’s Annual Shareholders Meeting of 26 April 2012. On 21 August 2014 the agreement was extended one last time until 31 December 2014, being the end of the Discovery Term of this Agreement.
1.6.12.2. MERCK KGaA AGREEMENTS The Merck KGaA 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 KGaA may at its sole discretion invite the controlling shareholder of Ablynx to continue to contribute to such joint research and development programme. If Merck KGaA does not extend such invitation or if Ablynx's controlling shareholder does not accept such invitation, the change of control results in a full opt-out by Ablynx. This clause was approved by the Company’s Annual
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Shareholders Meeting held on 29 April 2010 in accordance with Art. 556 of the Belgian Company Code. The Merck KGaA agreement signed in October 2010 states that (i) in the event of a change of control over Ablynx during the research term, Merck KGaA 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 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 KGaA, at its sole discretion, invites the new controlling shareholder of Ablynx to continue to contribute to such programme. If Merck KGaA 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 KGaA 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 KGaA collaboration agreement which was signed in September 2013 states that in certain cases of change of control of the Company Merck KGaA is entitled at their option either to (i) proceed with the relevant collaboration, it being understood that Merck KGaA 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 KGaA shall enter into separate agreements in respect of these programmes and Merck KGaA shall be exempted from further payments (without any right, however, to 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. MERCK & CO., INC. AGREEMENTS The agreement Ablynx entered into in 2012 with Merck & Co., Inc. (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., Inc. (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 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. In July 2015, Ablynx significantly expanded its immuno-oncology partnership with Merck & Co., Inc. which was originally signed in February 2014, to include a total of up to 17 programmes with a focus on multi-specific Nanobodies.
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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: • terminate the joint committees in respect of these programmes and assume their tasks; • oblige the Company to take the appropriate measures to avoid the disclosure of confidential information; • terminate co-promotion rights; • decide to either (i) assume or (ii) allow the Company to continue, the initial development activities in respect of the programme; • 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.
1.6.12.5. ISSUANCE OF A 3.25% CONVERTIBLE BOND The Terms and Conditions of the 3.25% Convertible Bond issued by the Company on 27 May 2015 and maturing on 27 May 2020 (ISIN BE 6278650344) state that in case of a change of control over the Company: • the conversion price will be adjusted in proportion to the already elapsed time since the issue date (ie 27 May 2015) and • the bondholders may request the early redemption of their bonds at the redemption price plus accrued interest. This clause was approved by the Company’s Special General Shareholders Meeting on 10 July 2015 in accordance with Art. 556 of the Belgian Company Code.
1.6.12.6. NOVO NORDISK AGREEMENT The agreement with Novo Nordisk signed on 25 November 2015 states that during the research programme, Novo Nordisk will have the right to terminate the agreement in full or on a programme-by-programme basis in the event of a change of control of Ablynx. This clause will be submitted for approval to the shareholders during the General Meeting of 28 April 2016 in accordance with Art. 556 of the Belgian Company Code.
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1.7. TRANSACTIONS WITHIN THE AUTHORISED CAPITAL In 2015, two transactions have occurred within the framework of the authorised capital that are required to be reported in accordance with Art. 608 of the Belgian Companies Code. In May 2015, Ablynx completed the placement of €100 million senior unsecured convertible bonds due 27 May 2020, with a 3.25% coupon rate and a conversion price of €12.93, representing a 26.5% premium above reference price of €10.2219 being the VWAP (“Volume Weighted Average price”) of Ablynx’ Ordinary Shares on the Brussels Stock Exchange on 20 May 2015. At the initial conversion price, the Convertible Bonds will be convertible into 7,733,952 fully paid up Ordinary Shares of Ablynx. During the Board Meeting of 14 September 2015, the issuance of a maximum number of 290,000 warrants was approved and 257,500 warrants have subsequently been granted of which 233,000 have been accepted on 7 December 2015 and on 18 January 2016 (68,000 warrants at €12.29/warrant, 15,000 warrants at €11.67/warrant for employees and 150,000 warrants at €12.10/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. The warrants vest over 3 years: 28% of the warrants vest after one year; after that date the remaining 72% become vested on a quarterly basis (9% per quarter). The duration of the warrants is 7 years as of the issue date of the warrants. 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 offered (thus starting as from 1 January 2019 until 15 January 2022). 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 first fifteen days of the quarter in which the end of the Employment Agreement, Consultant Agreement or Director’s Appointment falls, even if such exercise period precedes the beginning of the fourth year following the calendar year in which the Date of the Offer lies. The tax consequences of such exercise will exclusively be borne by the relevant warrant holder. 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 7 years of their creation become null and void.
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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 profit-sharing certificates or any other certificates.
1.9. USE OF FINANCIAL INSTRUMENTS BY THE COMPANY In May 2015, Ablynx raised gross €100 million through the placement of 1000 senior unsecured convertible bonds due May 2020, with a 3.25% coupon rate and a conversion price of €12.93, representing a 26.5% premium above the reference price of €10.2219 being the VWAP (“Volume Weighted Average price”) of Ablynx’ Ordinary Shares on the Brussels Stock Exchange on 20 May 2015. At the initial conversion price, the Convertible Bonds will be convertible into 7,733,952 fully paid up Ordinary Shares of Ablynx.
1.10. CIRCUMSTANCES THAT COULD CONSIDERABLY AFFECT THE DEVELOPMENT OF THE COMPANY No special events have occurred that could considerably affect the development of the Company.
1.11. RESEARCH AND DEVELOPMENT The Company is committed to fully exploiting its technology platform to develop a diverse and broad portfolio of therapeutic Nanobodies, and to exploring next generation Nanobody-based technologies. It will continue to leverage the advantages of the Company’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. It will invest in further advancing the technology platform in terms of performance, applicability and scale. The Company expects that research and development expenditures for the discovery, development and commercialisation of drug candidates will continue to increase as the Company progresses its clinical and pre-clinical programmes into the next phase. In addition, Ablynx intends to initiate new discovery programmes and is committed to seek to maintain and expand its proprietary Nanobody technology and intellectual property position.
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1.12. CONFLICTING INTERESTS OF DIRECTORS (ART. 523 OF THE BELGIAN COMPANIES CODE) The Directors report that since the last General Meeting three decisions have been taken which 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 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 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.
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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 the Executive Committee, the Board of Directors unanimously granted discharge to the members of the Executive Committee for 2014. Meeting of the Board of Directors of 24 February 2016 Mr Moses did not participate in the deliberations and resolution of the Board with respect to this item on the agenda.
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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 22 February 2016, of the declaration by Edwin Moses in respect of his conflict of interest in relation to this item on the agenda, as follows: "Dear Mr. Vanhees and Board members, I write to you in my capacity as member of the Board of Directors (the “Board”) of Ablynx nv (the “Company”). I refer to the meeting of the Board scheduled for 24 February 2016, 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 Article 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 and consultants 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 Article 583 of the Belgian Company Code." Meeting of the Board of Directors of 25 March 2016 Mr Moses did not participate in the deliberations and resolution of the Board with respect to this item on the agenda.
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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 2016, 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 2015 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 2015 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
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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 2015, which counts as “Annual Activity Report” as described in the Charter of the Executive Committee, the Board of Directors unanimously granted discharge to the members of the Executive Committee for 2015.
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 Commercial 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 Company. Currently, Mr Vermeiren is also member of a number of non-quoted companies and of charitable organisations, such as Pro Vives, Vives and ‘Foundation RV’ set up and funded by himself. He is currently a member of the Board or supervisory bodies of ACP II SCA (Luxembourg) (Liquidator). 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. 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 35 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
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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), Mint Solutions (The Netherlands), Bionor (Norway), and Sanifit (Spain), a Board Member of Onxeo (France), as well as a Director of Tigenix (Belgium). 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). 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 non-executive Board member of Creabilis, non-executive Board member at Zealand Pharma and Chair of the Audit Committee, non-executive Board member and member of the Audit Committee at Cerenis and Ablynx and Advisory Board member at the Imperial College Business School. 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, established in 2001, is a biotechnology company. For the further successful expansion of the research and development activities, the Company is, among others, dependent on sufficient financial funding, the results obtained from research and the Company’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.
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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). In June 2014 the Company raised another €41.7 million through a private placement of new shares via an accelerated bookbuilding procedure. In May 2015, Ablynx raised €100 million gross through the placement of 1,000 senior unsecured convertible bonds due 27 May 2020, with a 3.25% coupon rate and a conversion price of € 12.93, representing a 26.5% premium above reference price of €10.2219 being the VWAP (“Volume Weighted Average price”) of Ablynx's Ordinary Shares on the Brussels Stock Exchange on 20 May 2015. At the initial conversion price, the Convertible Bonds will be convertible into 7,733,952 fully paid up Ordinary Shares of Ablynx. The cash position at 31 December 2015 of €236.2 million, which includes cash, other short-term investments, restricted cash and cash equivalents, will allow the Company 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. The Company’s equity under IFRS amounted to €27.9 million at 31 December 2015. Based on the projected cash burn for 2016 and the volatility of the share price which impacts the fair value of the embedded derivate of the convertible bond, the equity could substantially change. On the other hand the Company’s equity could be positively impacted by the licensing fee that would be paid by AbbVie if they decide to exercise their option to license ALX-0061 in RA, as well as the conversion of the bonds into equity.
1.15. APPROPRIATION OF RESULTS Ablynx nv ended the financial year 2015 with a net loss of €13,447,008.39. The Board of Directors proposed to appropriate the loss of the year of €13,447,008.39 to retained losses, the latter amounting to €111,534,698.34. This brings the total amount of retained losses to €124,981,706.73.
1.16. IMPORTANT EVENTS SUBSEQUENT TO THE ACCOUNTING REFERENCE DATE On 21 January 2016, Ablynx announced the issuance of an additional 288,170 common shares in exchange for €1,192,292.70 as the result of the exercise of warrants by some
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employees and consultants of the Company. On 29 January 2016, Ablynx announced that Boehringer Ingelheim had administered the first dose in a Phase I dose escalation study with the half-life extended bi-specific anti-VEGF/Ang2 Nanobody in adult patients with advanced solid tumours, which triggered a €8 million milestone payment to Ablynx. The aim of the study is to evaluate the safety profile and dosing schedule for this Nanobody. On 23 February 2016, Ablynx announced the issuance of an additional 7,521 common shares in exchange for €34,726.41 as the result of the exercise of warrants. During the Board Meeting of 24 February 2016, the issuance of a maximum number of 590,000 warrants for the benefit of certain employees and consultants was approved. The duration of the warrants is 7 years as of the issue date of the warrants. 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 offered. On 22 March 2016, Ablynx announced the issuance of an additional 210,741 common shares in exchange for € 740,375.82 as the result of the exercise of warrants. As a result of this transaction, Ablynx now has 55,318,806 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 2015. This report will be deposited according to the legal requirements and can be consulted at the Company’s address.
Ghent, 25 March 2016 For the Board of Directors, Dr Peter Fellner Chairman
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02. RESPONSIBILITY STATEMENT ANNUAL REPORT 2015 / ABLYNX
We hereby certify that, to the best of our knowledge, the financial statements as of 31 December 2015, 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 Company and that the management report includes a fair review of the development and the performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that they face. On behalf of the Board of Directors, Ghent, 25 March 2016
Dr Peter Fellner
Woconsult BVBA represented by
Chairman
Wim Ottevaere, CFO
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03. STATUTORY AUDITOR’S REPORT
Statutory Auditor's Report to the Shareholders' Meeting on the Financial Statements for the year ended 31 December 2015 To the Shareholders, 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 financial statements together with our report on other legal and regulatory requirements. These financial statements comprise the balance sheet as at 31 December 2015, the statement of comprehensive income, the statement of changes in shareholders’ equity and the cash flow statement for the year then ended, as well as the summary of significant accounting policies and other explanatory notes. Report on the financial statements – Unqualified opinion We have audited the financial statements of Ablynx nv (“the Company”), 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 balance sheet shows total assets of 265,272 (000) EUR and the statement of comprehensive income shows a loss for the year then ended of 54,547 (000) EUR. Board of Directors’ responsibility for the preparation of the financial statements The Board of Directors is responsible for the preparation and fair presentation of 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 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 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 financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the statutory auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the statutory auditor considers internal control relevant to the Company’s preparation and fair presentation of 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 company’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 financial statements. We have obtained from the Company’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 financial statements of Ablynx nv give a true and fair view of the Company’s net equity and financial position as of 31 December 2015, 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 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 financial statements: • The Directors’ report on the financial statements includes the information required by law, is consistent with the financial statements and is free from material inconsistencies with the information that we became aware of during the performance of our mandate. Diegem, 25 March 2016 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. BALANCE SHEET
As at 31 December (€'000)
2015
2014
Non-current assets
19,124
16,550
339
439
(Note 8.6)
Property, plant and equipment
2,620
2,301
(Note 8.7)
Restricted cash
1,648
1,980
(Note 8.8)
R&D tax credit receivable
14,517
11,830
(Note 8.9)
246,148
206,796
Trade receivables
6,782
19
(Note 8.10)
Other current assets
1,976
571
(Note 8.10)
Tax receivables
1,766
454
(Note 8.10)
Accrued income and deferred charges
1,030
1,549
(Note 8.10)
230,992
192,542
(Note 8.11)
3,602
11,661
(Note 8.12)
Total assets
265,272
223,346
Equity attributable to equity holders
27,909
75,474
Share capital
96,287
91,975
Share premium account
187,316
183,645
6,610
7,615
Retained earnings
(262,304)
(207,761)
Non-current liabilities
134,828
0
Borrowings
134,828
0
Current liabilities
102,535
147,872
0
141
(Note 8.16)
Trade payables
11,656
10,408
(Note 8.17)
Other current liabilities
4,756
4,826
(Note 8.17)
Deferred income
86,123
132,497
(Note 8.17)
Total liabilities
237,363
147,872
Total equity and liabilities
265,272
223,346
Intangible fixed assets
Current assets
Other short-term financial investments Cash and cash equivalents
Share-based payment reserve
Borrowings
(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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05. STATEMENT OF COMPREHENSIVE INCOME
Year ended 31 December (€ '000)
2015
2014
76,761
47,710
779
1,587
Total revenue and grant income
77,540
49,297
Research and development expenses
(83,084)
(54,488)
(Note 8.21)
General and administrative expenses
(11,405)
(11,052)
(Note 8.22)
Total operating expenses
(94,489)
(65,540)
Other operating income
0
14
(Note 8.23)
Other operating expenses
(6)
(9)
(Note 8.23)
Operating result
(16,955)
(16,238)
Financial result (net)
(37,592)
3,508
1,768
4,294
(Note 8.26)
Finance cost
(39,360)
(786)
(Note 8.26)
Loss before taxes
(54,547)
(12,730)
Loss for the year
(54,547)
(12,730)
Total comprehensive income for the period
(54,547)
(12,730)
Loss attributable to equity holders
(54,547)
(12,730)
Total comprehensive loss attributable to equity holders
(54,547)
(12,730)
(1.00)
(0.25)
Revenue: Research and development Grants
Finance income
Basic and diluted loss per share
(Note 8.20)
(Note 8.28)
The notes from point 8.1 to point 8.31 are an integral part of these financial statements.
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06. CASH FLOW STATEMENTS
Year ended 31 December (€'000)
2015
2014
(54,547)
(12,730)
Amortisation
201
183
(Note 8.6)
Depreciation
1,140
1,354
(Note 8.7)
Share-based payment expense
1,821
1,540
Net financial income
(1,100)
(1,534)
Net loss arising on the convertible bond designated as at fair value through profit and loss
34,646
Finance expense recognised in respect of the convertible bond
4,623
Net movement in trade and other receivables
(11,648)
(3,955)
Net movement in trade and other payables
(45,197)
(18,730)
Cash used in/provided by operations
(70,061)
(33,872)
(1)
(88)
(Note 8.26)
1,101
1,622
(Note 8.26)
(68,961)
(32,338)
(1,459)
(1,261)
(Note 8.7)
(101)
(294)
(Note 8.6)
Sale / (Purchase) of short-term financial investments
(38,118)
(4,683)
(Note 8.11)
Net cash (used in)/provided by investing activities
(39,678)
(6,238)
Cash flows from operating activities Loss before income tax Adjustments for:
Interest paid Interest received Net cash (used in)/provided by operating activities
(Note 8.26)
Cash flows from investing activities Purchases of property, plant and equipment Purchases of intangible assets
Cash flows from financing activities Proceeds from issuance of ordinary shares
39,926
Proceeds from exercise of warrants
5,160
Proceed from issue of convertible bond (net of issue costs)
97,185
Interest paid convertible bond
(1,625)
Repayments of borrowings
566
(141)
(786)
Net cash generated from financing activities
100,579
39,706
Net (decrease)/increase in cash and cash equivalents
(8,060)
1,130
Cash and cash equivalents at beginning of the period
11,661
10,531
Cash and cash equivalents at end of the period
3,601
11,661
The notes from point 8.1 to point 8.31 are an integral part of these financial statements.
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07. STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
(€'000)
Share capital
Share premium
Sharebased payments
Retained loss
Total Equity
Balance at 31 December 2013
84,004
150,747
6,736
(195,314)
46,173
Loss of the period
(12,730)
Warrant plans Share-based payments
1,257
283
Transactions with owners Capital increase
9,178
Issuance costs
(1,795)
Exercise of warrants Balance at 31 December 2014
32,542
588
356
(378)
91,975
183,645
7,615
Loss of the period
(207,761)
75,474
(54,547)
Warrant plans Share-based payments
1,817
4
Transactions with owners Exercise of warrants Balance at 31 December 2015
4,311
3,671
(2,821)
96,286
187,316
6,611
(262,304)
27,909
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 FINANCIAL STATEMENTS
8.1. GENERAL INFORMATION 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 real difference to society. Today, the Company has more than 40 proprietary and partnered programmes in development in various therapeutic areas including inflammation, haematology, immuno-oncology, oncology and respiratory disease. 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). At 31 December 2015, the Company employed 344 people at its headquarters in Zwijnaarde. The Company has on-going collaborations with various pharmaceutical companies including AbbVie, Boehringer Ingelheim, Eddingpharm, Merck & Co., Inc., Merck KGaA (Merck Serono), Novartis, Genzyme, Taisho Pharmaceuticals and Novo Nordisk, which today have generated over €380 million in non-dilutive cash to the Company. To date, the Company has raised €71.5 million in private equity, including the exercise of warrants, raised an additional €85.2 million as a result of its IPO on Euronext in November 2007, and raised €50.0 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). In May 2015, Ablynx raised gross €100 million through the placement of 1,000 senior unsecured convertible bonds due 27 May 2020, with a 3.25% coupon rate and a conversion price of €12.93, representing a 26.5% premium above reference price of €10.2219.
8.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
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8.2.1. BASIS OF PREPARATION The 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 Company. The financial statements are presented in thousands of euro (unless stated otherwise). The financial statements for the financial year ended 31 December 2015 have been approved for issue by the Board of Directors on 25 March 2016. The financial statements have been prepared under the assumption that the Company 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 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 Company’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 2015 • Improvements to IFRS (2011-2013) (applicable for annual periods beginning on or after 1 January 2015) • IFRIC 21 Levies (applicable for annual periods beginning on or after 17 June 2014) Standards and interpretations published, but not yet applicable for the annual period beginning on 1 January 2015 • 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 2018, but not yet endorsed in EU) • IFRS 16 Leases (applicable for annual periods beginning on or after 1 January 2019, 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 (2012-2014) (applicable for annual periods beginning on or after 1 January 2016)
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• Amendments to 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 IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (the effective date has been deferred indefinitely, but not yet endorsed in the EU) • Amendments to IAS 1 Presentation of Financial Statements – Disclosure Initiative (applicable for annual periods beginning on or after 1 January 2016) • 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) • Amendments to IAS 19 Employee Benefits - Employee Contributions (applicable for annual periods beginning on or after 1 February 2015) Standards and interpretations published, but not yet applicable for the annual period beginning on 1 January 2015, and mainly new IFRS 15 Revenue from contracts with customers (applicable for annual periods beginning on or after 1 January 2018, but not yet endorsed by EU), and IFRS 16 Leases (applicable for annual periods beginning on or after 1 January 2019, but not yet endorsed by EU), could have an impact on our future financials. The evaluation of this impact is currently under assessment.
8.2.2. CONSOLIDATION SCOPE Ablynx controlled a sole 100%-owned subsidiary (Ablynx SA with registered offices in Rua do Campo Alegre 1021, 4150-180 Porto, Portugal) up until February 2014, the date on which the liquidation of the subsidiary was closed. The financial statements of Ablynx nv are presented in euro and rounded to the nearest thousand.
8.2.3. SEGMENT REPORTING The Company 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 financial statements are presented in euro, which is the functional and presentation currency of the Company.
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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 yearend exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. 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. The following foreign exchange rates have been used for the preparation of the accounts: 1 Euro = X foreign currency
Closing rate
Average rate
2015
2014
2015
2014
US Dollar
1.087
1.211
1.113
1.335
GB Pound
0.736
0.777
0.727
0.808
8.2.5. REVENUE RECOGNITION The Company generates revenue from research collaboration agreements and from government grants. The Company 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 Company’s activities as described below. The Company 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, non-refundable upfront 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 Company 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 Company has a continuing involvement during the license period, license fees are recognised rateably over the term of the agreement. • Non-refundable upfront fees for access to prior research results and databases are recognised when earned, if the Company has no continuing performance obligations and all conditions and obligations are fulfilled (this means after the delivery of the required information). If the Company 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. As at 31 December (€'000)
2015
2014
Upfront fees
58,559
33,772
R&D Service fees
14,403
13,784
Milestone payments
3,500
License fees
100
100
Grants
780
1,587
Royalties
198
54
77,540
49,297
Total
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
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that they are intended to compensate, and when there is reasonable assurance the Company 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.
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 Company 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 day-to-day servicing of the item are recognised in the income statement as incurred. Gains and losses on the disposal of
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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. However, land is not depreciated. 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:
Buildings
10 year
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 Company 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 Company 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 Company 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 Company 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.
8.2.15. EQUITY INSTRUMENTS Equity instruments issued by the Company are recorded at the proceeds received, net of direct issuance costs.
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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. CONVERTIBLE BONDS The convertible bond is considered as a financial liability with an embedded derivative liability consistent with IAS 32 based on the net share settlement, accounted for as follows: • Debt component recognised at amortised cost; • Embedded derivative accounted for at fair value. The fair value of the conversion feature needs to be determined at each reporting date and the fair value changes are recognised in profit or loss. As the fair value of the convertible bond as a whole can reliably be estimated, as well as the fair value of the host debt, the fair value of the embedded derivative is calculated as the difference between these two elements. The fair value of the convertible bond is obtained from public sources (e.g. Bloomberg) which are deemed sufficiently representative of prices for actual market transactions. The fair value of the host debt is determined by discounting the contractual cash flows using a market benchmark rate plus a market credit spread for a corresponding plain vanilla bond issued by Ablynx with same cash flows and same remaining term to maturity.
8.2.17.1. FAIR VALUE MEASUREMENT IFRS 7 requires disclosure of fair value measurements by level of the following hierarchy: • Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities; • Level 2: Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; • Level 3: Techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
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The characteristics of the convertible bond issued in May 2015 are such that, in accordance with “IAS 39, Financial Instruments: Recognition and Measurement”, it is broken down into two components in the balance sheet: (1) the host contract or plain vanilla debt (i.e. without the conversion option), which is measured at amortised cost and (2) the embedded derivative, i.e. the conversion option, which is measured at fair value through profit or loss. The fair value of the host contract is determined by discounting the contractual cash flows with the reference swap rate plus the appropriate credit spread and the transaction costs allocated to the host debt component. This fair value at inception is also the initial amortised cost of the plain vanilla debt. The fair value of the embedded derivative (i.e. the conversion option) is determined as the difference between the fair value of the total convertible debt and the fair value of the plain vanilla debt.
8.2.17.2. ADDITIONAL INFORMATION WITH REGARD TO FAIR VALUE OF THE FINANCIAL INSTRUMENTS The table below lists the different classes of financial assets and liabilities with their carrying amounts in the balance sheet and their respective fair value and analysed by their measurement category in accordance with “IAS 39, Financial Instruments”. Cash and cash equivalents, short-term deposits, trade and other receivables, loans and receivables primarily have short terms to maturity; hence, their carrying amounts at the reporting date approximate the fair values. Trade and other payables also generally have short times to maturity and, hence, their carrying amounts also approximate their fair values. The following categories and abbreviations are used in the table below: Abbreviation
Category in accordance with IAS 39
FLMaAC
Financial Liabilities Measured at Amortised Cost
FLFVTPL
Financial Liabilities at Fair Value Through Profit or Loss
FVTPL
Fair Value Through Profit or Loss
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Carrying amount
Amounts recognised in balance sheet
(€'000)
Amortised cost
Fair value
FVTPL
At 31 December 2015 Financial liabilities Convertible bond Host debt
FLMaAC
80,682
80,682
84,798
Embedded derivative
FLFVTPL
54,146
Trade payables
FLMaAC
11,664
11,664
11,664
Other current liabilities
FLMaAC
4,756
4,756
4,756
Financial liabilities measured at amortised cost
FLMaAC
97,102
97,102
97,102
Financial liabilities at fair value through profit or loss
FLFVTPL
54,146
Borrowings
FLMaAC
141
141
141
Trade payables
FLMaAC
10,408
10,408
10,408
Other current liabilities
FLMaAC
4,826
4,826
4,826
FLMaAC
15,375
15,375
15,375
54,146
54,146
Aggregated by category in accordance with IAS 39
54,146
54,146
At 31 December 2014 Financial liabilities Convertible bond
Aggregated by category in accordance with IAS 39 Financial liabilities measured at amortised cost
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8.2.17.3. OVERVIEW MUTATIONS OF LEVEL 3 FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE IN THE BALANCE SHEET At the balance sheet date, the quotation of the convertible bond on Bloomberg was deemed reliable as a fair value measurement. The loss in fair value of the embedded derivative amounted to €34.6 million.
8.2.17.4. DERIVATIVE LIABILITY W.R.T. THE CONVERSION OPTION (€’000) At issue of the convertible bond (Gain)/loss in fair value At 31 December 2015
19,500 34,646 54,146
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. 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.
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8.2.19. EMPLOYEE BENEFITS The Company 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 Company 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 Company are based on defined contributions for which the insurance company guarantees a defined interest until retirement (type 'branche 21/tak21'). As a consequence of the law of 18 December 2015, minimum returns are guaranteed by the employer as follows: • for the contributions paid as from 1 January 2016, a new variable minimum return based on OLO rates, with a minimum of 1.75% and a maximum of 3.75%. In view of the low rates of the OLO in the last years, the return has been initially set to 1.75; • for the contributions paid until end December 2015, the previously applicable legal returns (3.25% and 3.75% respectively on the employer and employee contributions) continue to apply until retirement date of the participants. In view of the minimum returns guarantees, those plans qualify as Defined Benefit plans. In 2014, under the previous legal framework, the application of the PUC method was considered problematic, and there was uncertainty with respect to the future evolution of the minimum guaranteed rates of return. As a consequence, the Group adopted a retrospective approach whereby the net liability recognised in the statement of financial position was based on the sum of the positive differences, determined by individual plan participant, between the minimum guaranteed reserves and the accumulated contributions based on the actual rates of return at the closing date. Based on the limited difference of €2,944, the Company has concluded that the application of the PUC method would have an immaterial impact. In 2015, the sum of the positive differences per plan participant between the minimum guaranteed reserves (€6,256,832.58) and the accumulated reserves (€6,243,661.6) as of 31 December 2015 is €13,170.98. As a consequence, in view of the immaterial difference between the accumulated reserves and the minimum reserves as of 31 December 2015, no provision has been recognised.
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8.2.20. PROVISIONS A provision is recognised only when: the Company 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 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 Company 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 Company 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 Company 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 Company 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,
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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. 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 Company 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 Company 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 weighted-average number of ordinary shares outstanding including the dilutive effect of warrants and bonds. Warrants and bonds 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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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
8.3. FINANCIAL RISK MANAGEMENT 8.3.1. FINANCIAL RISK FACTORS Liquidity risk management The Company makes use of term accounts and treasury notes. The maturities of the term deposits are limited to a maximum of one year. The Company has €1.6 million restricted cash related to a cash pledge. On 27 May 2015, the company raised €100 million through a private placement of €100 million senior unsecured bonds due 27 May 2020. The bonds will mature on 27 May 2020 (5 years) and will pay a coupon of 3.25% semi-annually. The convertible bonds are convertible in Ablynx ordinary shares at the option of the holder. In case of conversion: a cash alternative election (at the option of the issuer) is available including a number of restrictions. Because the issuer has the cash alternative election, it has a choice over how the share conversion option will be settled (i.e. net in cash or by exchanging shares for cash). Therefore the share conversion option is a derivative at Fair Value Through Profit and Loss (“FVTPL”) according to IAS 39, not an own equity instrument (cf. IAS 32.26). Interest rate risk The Company has a significant interest-bearing liability related to the private placement of €100 million senior unsecured bonds with a 3.25% coupon rate and a conversion price of €12.93. However, 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 Company’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. Available liquidities are placed with several financial institutions. The financial institutions have credit ratings varying from A+, over A to A-. No cash credit lines were available.
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Credit quality of financial assets (€’000)
Rating(1)
2015
2014
A+
3,522
11,345
A
38
143
A-
41
173
3,601
11,661
A+
56,026
50,870
A
73,500
84,000
A-
101,469
57,672
230,995
192,542
Cash and cash equivalents
Total
Short-term investments
Total (1) source at 11 February 2016: Standard & Poor’s.
Foreign exchange risk The Company has sales transactions from research and collaboration agreements denominated in USD and purchase transactions denominated in AUD, CAD, CHF, DKK, GBP, JPY, MXN, RUB, SEK and USD. The Company did not enter into any currency hedging arrangements in order to cover this risk. As per 31 December 2015, 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 €196,385 (2014: €610,456) 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 €191,835 (2014: €662,848) lower.
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The table below provides an indication of the Company’s open net foreign currency position as per year end: (€’000)
2015
2014
Liabilities denominated in USD
142
0
Liabilities denominated in GBP
76
59
Assets denominated in USD
2,678
6,687
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 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 Company 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.
8.4.1. CONVERTIBLE BOND On 27 May 2015 Ablynx issued Senior Unsecured Convertible Bonds due May 2020 for an amount of €100.000.000 at an issue price of 100%. The convertible bonds are convertible in Ablynx ordinary shares at the option of the holder. In case of conversion, a cash alternative election is available at the option of the issuer including a number of restrictions. Because the issuer has the cash alternative election,
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it has a choice over how the share conversion option will be settled (i.e. net in cash or by exchanging shares for cash). Therefore the share conversion option is a derivative at Fair Value Through Profit and Loss (“FVTPL”) according to IAS 39 and not an own equity instrument (cf. IAS 32.26). An estimate of the value for the convertible bond is available on Bloomberg, the embedded derivative has been valued as the difference between the value of the convertible bond and the value of the bond floor. The fair value is based on indicative (i.e. non-executable) quotes provided by 9 market participants resulting in indicative prices. The number of participants (and thus the Bloomberg reliability score) may still fluctuate overtime and impact the level of subjectivity of this method. As long as no observable data (and grades) are available, a credit spread provided by Ablynx’ bank (i.e. JP Morgan –“JPM”) is being applied. This spread is to be updated for every valuation date. As of the issue date, JPM uses a spread of 700bp for Ablynx. JPM bases the spread of 700bp on observations of debt issued by a number of comparable companies but considerable judgement remains.
8.4.2. TAX CREDIT The Company has accounted for a total tax receivable of €15.7 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 statement of comprehensive income. We expect to receive this amount progressively over 5 years, starting as from accounting year 2016 onwards. Beginning of 2016 €1.2 million has been refunded. The remaining amount of €14.5 million is expected in the following years. (€’000) Fiscal year
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Year amount can be claimed
Year amount should be reimbursed
Amount
2011
2016
2017
1,879
2012
2017
2018
2,450
2013
2018
2019
2,940
2014
2019
2020
3,340
2015
2020
2021
3,859
Total
14,468
142.
CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
The collection of the outstanding non-current R&D tax credit receivable remains dependent upon the completeness of the necessary formalities and the quality of the documentation available to support tax credit claimed.
8.4.3. DEFERRED TAXES The total temporary differences amount to €337.0 million which may result in a potential deferred tax asset of €115.0 million. Based upon the tax planning this deferred tax asset was not recognised as the midterm planning demonstrated significant uncertainty to realise taxable profits in the foreseeable future.
8.4.4. SHARE-BASED COMPENSATION 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.
8.4.5. GOING CONCERN For the further successful expansion of the research and development activities, Ablynx is, among others, dependent on sufficient financial funding, the results obtained from research and Ablynx capacity to obtain and maintain adequate protection of its intellectual property. In addition, further progress of the clinical tests is planned in the next years, which will increase the operational costs. On the other hand, commercial deals were closed which have already generated and which will generate important revenues as milestones are earned. Going concern is assured as no liquidity problems are expected because the convertible bonds are convertible in Ablynx ordinary shares at the option of the issuer. In case of conversion, a cash alternative election is available at the option of the issuer, including a number of restrictions. Because the issuer has the cash alternative election, it has a choice over how the share conversion option will be settled (i.e. net in cash or by exchanging shares for cash). 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 €236.2 million including cash, other investments, restricted cash and deposits will allow the Company 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 Company does not distinguish different operating segments. The income stems from nine pharmaceutical partners, namely Boehringer Ingelheim, Merck KGaA, Merck & Co., Inc., Novartis, AbbVie, Eddingpharm, Genzyme, Taisho Pharmaceuticals and Novo Nordisk. Moreover, in 2015, more than 90% of the income originated from 3 parties, one party was responsible for more than 50% of the income, two other parties represented between 15% and 25% each. In 2014, 1 party represented more than 40% of the revenues, two other parties represented between 20% and 25% each.
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8.6. INTANGIBLE FIXED ASSET (€’000)
Patents
Software
Total
101
227
328
294
294
Year ended 31 December 2014 Opening net book amount Additions 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
94
345
439
101
101
As at 31 December 2014 Cost Accumulated amortisation and impairment Net book amount
Year ended 31 December 2015 Opening net book amount Additions Amortisation charge
(7)
(193)
(200)
Closing net book amount
87
253
340
2,174
2,574
4,748
(2,087)
(2,321)
(4,408)
87
253
340
As at 31 December 2015 Additions 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 (€’000)
Land and Buildings
Equipment
Furniture
Equipment under leasing
Leasehold improve- ments
709
208
1,396
81
2,394
Additions
2,350
323
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
(1,848)
(363)
Transfer costs
(188)
275
(87)
Transfer Depreciations
22
(72)
50
Closing net book amount
1,045
371
793
92
2,301
11,418
2,049
2,181
847
16,495
Accumulated depreciation and impairment
(10,373)
(1,678)
(1,388)
(755)
(14,194)
Net book amount
1,045
371
793
92
2,301
1,045
371
793
92
2,301
36
1,459
PPE under construction
Total
Year ended 31 December 2014 Opening net book amount
(601)
(16)
(2,828)
As at 31 December 2014 Cost
Year ended 31 December 2015 Opening net book amount Additions
413
960
50
Depreciation charge
(24)
(642)
(223)
(230)
(23)
(1,142)
Closing net book amount
389
1,363
198
563
105
2,618
Cost
413
12,378
2,099
2,181
883
17,954
Accumulated depreciation and impairment
(24)
(11,015)
(1,901)
(1,618)
(778)
(15,336)
Net book amount
389
1,363
198
563
105
2,618
146.
CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
As at 31 December 2015
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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)
2015
2014
Restricted cash
1,648
1,980
8.9. NON-CURRENT R&D TAX INCENTIVE RECEIVABLES As at 31 December (€’000)
2015
2014
Tax credit related to research expenditure capitalised under BE GAAP (>1 year)
14,468
11,830
The Company has accounted for an R&D tax credit receivable of €15.7 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 statement of comprehensive income. We expect to receive this amount progressively over 5 years, starting as from accounting year 2016 onwards. Beginning of 2016 €1.2 million has been refunded. The remaining amount of €14.5 million is expected in the following years.
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8.10. TRADE RECEIVABLES AND OTHER CURRENT ASSETS As at 31 December (€'000)
2015
2014
Trade receivables
6,762
0
Invoices to be made
20
19
6,782
19
VAT receivables
626
553
Other receivables
1,350
18
Total
1,976
571
Witholding taxes on interest income
576
454
R&D tax credit receivable (< 1 year)
1,238
Total
1,814
454
Accrued income
568
1,070
Deferred expenses
461
479
1,029
1,549
Trade receivables
Total
Other current assets
Tax receivables
Accrued income and 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 current assets and tax receivables mainly consist of taxes to be recovered and prepayments for ordered tangible assets. 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.
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All carrying amounts of the Company’s trade and other receivables are denominated in euro. 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 Euro
2015
2014
230,992
185,936
Term deposits in foreign currency Term deposits > 3 months
6,606 230,992
192,542
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)
2015
2014
Cash at bank and on hand
3,604
11,661
924
11,579
2,680
82
3,604
11,661
Cash at bank and on hand in Euro Cash at bank and on hand in foreign currency Total
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)
2015
Loans and Receivables
Total
1,648
1,648
Trade receivables - other current assets
25,040
25,040
Other short-term deposits
230,992
230,992
Cash and cash equivalents
3,604
3,604
Trade payables
11,656
11,656
Loans and Receivables
Total
Restricted cash
1,980
1,980
Trade receivables - other current assets
12,874
12,874
Other short-term deposits
192,542
192,542
Cash and cash equivalents
11,661
11,661
(10,408)
(10,408)
Restricted cash
(€ '000)
2014
Trade payables
8.14. SHARE CAPITAL 8.14.1. CAPITAL TRANSACTIONS DURING THE YEAR The following capital increases took place in 2015: On 19 January 2015, the Company issued 115,946 new shares in exchange for €909,426.07 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €216,819.02 and €692,607.05 respectively. On 16 March 2015, the Company issued 174,302 new shares in exchange for €1,292,682.18 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €325,944.74 and €966,737.44 respectively. On 17 April 2015, the Company issued 20,165 new shares in exchange for €112,425.70 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €37,603.55 and €74,822.15 respectively.
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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
On 27 May 2015, the Company raised €100 million through a private placement of €100 million senior unsecured bonds due 27 May 2020. The bonds were placed through an accelerated book building placement with qualified investors outside the United States, in accordance with Regulation S under the Securities Act. The bonds will mature on 27 May 2020 (5 years), are in dematerialised form in the denomination of €100,000 each, are issued at par and will be redeemed at par at maturity. The bonds will pay a coupon of 3.25% per annum, payable semi-annually in arrears on 27 November and 27 May of each year, beginning on 27 November 2015. The initial price for the conversion of the bonds into ordinary shares of the issuer is €12.93, representing approximately a 26.5% premium above the reference price of €10.2219, being the VWAP of the ordinary shares on Euronext Brussels on 20 May 2015. At the initial conversion price, the convertible bonds will be convertible into 7,733,952 fully paid-up ordinary shares of the issuer. Conversion of the convertible bonds in Ablynx ordinary shares is at the option of the holder. In case of conversion: a cash alternative election (at the option of the issuer) is available including a number of restrictions. As the issuer has the cash alternative election, it has a choice over how the share conversion option will be settled (i.e. net in cash or by exchanging shares for cash). Therefore the share conversion option is a derivative at Fair Value Through Profit and Loss (“FVTPL”) according to IAS 39 and not an own equity instrument (cf. IAS 32.26). On 3 June 2015, the Company issued 83,000 new shares in exchange for €410,955 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €155,210 and €255,745 respectively. On 17 July 2015, the Company issued 79,885 new shares in exchange for €600,491.30 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €149,384.95 and €451,106.35 respectively. On 29 July 2015, the Company issued 24,967 new shares in exchange for €199,086.96 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €46,688.29 and €152,398.67 respectively. On 19 October 2015, the Company issued 5,200 new shares in exchange for €41,249 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €9,724 and €31,525 respectively.
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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
On 7 December 2015, the Company issued 7,250 new shares in exchange for €61,390 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €13,557.50 and €47,832.50 respectively. On 15 December 2015, the Company issued 287,500 new shares in exchange for €1,532,750 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €535,000 and €997,750 respectively. 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 2014 54,014,159 • Number of new shares (exercise of warrants) 798,215 • Number of shares on 31 December 2015 54,812,374
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Shareholder
Address
Voting rights
% of voting rights
Aviva Investors Global Services Limited
No 1, Poultry London, EC2R 8EJ UK
2,442,496
4.50%
Abingworth Management Limited and Abingworth LLP
38, Jermyn Street London, SW1Y 6DN UK
2,632,150
4.80%
C.H. Boehringer Sohn AG & Co. KG
Binger Strasse 173 55216, Ingelheim am Rhein Germany
2,142,857
3.90%
Perceptive Advisors
51, Astor Place 10th floor New York, NY 10003 USA
2,077,590
3.80%
Polar Capital Funds Plc (UK)
4, Matthew Parker Street London, SW1H9NP UK
1,654,827
3.00%
FMR LLC (US)
245, Summer Street Boston, MA 02210 USA
2,753,606
5.00%
Taube Hodson Stonex Partners LLP (UK)
Cassini House, 57-59, St. James’s Street London, SW1A 1LD UK
2,410,681
4.40%
Oppenheimer Funds, Inc. (OFI) (US)
225, Liberty Street 11th Floor New York, NY 10281 USA
1,672,262
3.10 %
JP Morgan Asset Management Holdings Inc.
270, Park Avenue New York, NY 1007 USA
1,813,725
3.30%
35,212,180
64.20%
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 of €6.43 and €6.44 per warrant. 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
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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
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 (€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. In May 2015, Ablynx completed the placement of €100 million senior unsecured convertible bonds due May 2020, with a 3.25% coupon rate and a conversion price of €12.93, representing a 26.5% premium above reference price of €10.2219 being the VWAP (“Volume Weighted Average price”) of Ablynx’ ordinary shares on the Brussels Stock Exchange on 20 May 2015. At the initial conversion price, the convertible bonds will be convertible into 7,733,952 fully paid up ordinary shares of Ablynx. During the Board Meeting of 14 September 2015, the issuance of a maximum number of 290,000 warrants was approved and 257,500 warrants have subsequently been granted, of which 233,000 have been accepted on 7 December 2015 and on 18 January 2016 (68,000 warrants at €12.29/warrant, 15,000 warrants at €11.67/warrant for employees and 150,000 warrants at €12.10/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. The warrants vest over 3 years: 28% of the warrants vest after one year; after that date the remaining 72% become vested on a quarterly basis (9% per quarter). The duration of the warrants is 7 years as of the issue date of the warrants. 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 offered (thus starting as of 1 January 2019 until 15 January 2022). 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 first fifteen days of the quarter in which the end of the Employment Agreement, Consultant Agreement or Director’s Appointment falls, even if such exercise Ppriod precedes the beginning of the fourth year following the calendar year in which the Date of the Offer lies. The tax consequences of such exercise will exclusively be borne by the relevant warrant holder. 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 7 years of
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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
their creation become null and void. As per 31 December 2015, the authorised capital amounts to €66,520,042.13
AUTHORISED CAPITAL ABLYNX nv in € Authorised capital 31/12/2012 Issue of January 2013
Shares
Par Value
467,500
1.87
4,377,919
1.87
79,695,739.59 (874,225) 78,821,514.59
ABO of February 2013
(8,186,709) 70,634,806.06
Renewal E.O. General Assembly of 18/7/2013
90,695,406.12
for five years from 8/8/2013 till 07/8/2018
publication in BS 8/8/2013
ABO of July 2014
(9,178,581)
4,908,332
1.87
Authorised capital 31/12/2014
81,516,825.28
Convertible bond May 2015
(14,454,772)
7,733,952
1.87
Issue of September 2015
(542,012)
290,000
1.87
Authorised Capital 31/12/2015
66,520,042.13
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.
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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
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 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 2015, 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 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 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 of 1 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.
ANNUAL REPORT 2015 / ABLYNX
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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
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.
8.15.2. WARRANTS ISSUED ON 16 MARCH 2015 FOR CERTAIN EMPLOYEES AND CONSULTANTS During the Extraordinary General Shareholders Meeting of 16 March 2015, the issuance of a maximum number of 850,000 warrants was approved and 541,499 warrants have subsequently been granted of which 442,801 have been accepted on 3 June 2015 and on 17 July 2015 (129,490 warrants at €9.5/warrant, 20,000 warrants at €10.13/warrant for employees and 293,311 warrants at €10.22/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 7 years as of the issue date of the warrants. 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 of 1 January 2019 until 15 January 2022). 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 7 years of their creation become null and void.
ANNUAL REPORT 2015 / ABLYNX
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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
8.15.3. WARRANTS ISSUED ON 14 SEPTEMBER 2015 FOR CERTAIN EMPLOYEES AND CONSULTANTS During the Board Meeting of 14 September 2015, the issuance of a maximum number of 290,000 warrants was approved and 257,500 warrants have subsequently been granted, of which 233,000 have been accepted on 7 December 2015 and on 18 January 2016 (68,000 warrants at €12.29/warrant, 15,000 warrants at €11.67/warrant for employees and 150,000 warrants at €12.10/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. The warrants vest over 3 years: 28% of the warrants vest after one year; after that date the remaining 72% become vested on a quarterly basis (9% per quarter). The duration of the warrants is 7 years as of the issue date of the warrants. 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 of 1 January 2019 until 15 January 2022). 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 first fifteen days of the quarter in which the end of the Employment Agreement, Consultant Agreement or Director’s Appointment falls, even if such Exercise Period precedes the beginning of the fourth year following the calendar year in which the Date of the Offer lies. The tax consequences of such exercise will exclusively be borne by the relevant Warrant holder. 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 7 years of their creation become null and void.
ANNUAL REPORT 2015 / ABLYNX
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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
8.15.4. 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 “Economische Herstelwet”. 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.
ANNUAL REPORT 2015 / ABLYNX
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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
Warrants
2008
2009
2009
2009
2009
2010
2010
2011
54,314
68,500
85,000
249,973
80,500
333,892
62
14,925
19,500
95,833
523
235,048
61,000
238,059
10
44
2,084
4,511
18
329,381
60
21,800
157
45
At 31 December 2013 Outstanding
200,833
Non-vested Exercisable
200,833
54,314
68,500
85,000
Granted Forfeited Exercised
32,916
19,000
17,750
15,578
Expired
72,892
10,416
161,459
68,000
At 31 December 2014 Outstanding
167,917
35,314
50,750
85,000
Non-vested Exercisable
167,917
35,314
50,750
85,000
161,459
68,000
307,581
93,167
35,314
43,300
75,000
161,377
32,250
207,307
Granted Forfeited Exercised Expired
82
882
At 31 December 2015 Outstanding
74,750
7,450
10,000
35,750
121,192
Non-vested Exercisable
2 74,750
7,450
10,000
35,750
121,192
The weighted average price at the date of exercise for warrants exercised during 2014 was €6.02 per share and for warrants exercised during 2015 was €7.51 per share
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607
160.
CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
58
2012
2012
2012
2013
2013
27,661
46,875
11,434
312,330
8,337
312,330
3,845
03,816
46,875
Total number
Average Exercise price (in Euro)
302,778
2,374,090
5.99
302,778
1,277,548
5.41
8,047
2015
1,096,542
6.68
399,286
8.51
31,917
5.05
85,244
6.02
83,308
7.67
50,000
327,224
46,875
46,875
11,434
305,099
324,840
50,000
327,224
2,572,907
6.34
5,497
157,203
216,560
31,944
327,224
917,524
6.89
5,937
147,896
108,280
18,056
1,655,383
6.03
525,801
10.34
67,569
7.16
647,715
7.51
964
8.59
442,801 1,660
7,954
4,960
46,875
21,808
86,146
2015
7,231
7,296
52,318
2014
3,097
22,062
09,614
2014
46,875
44,897
83,000
16,052
11,434
300,139
279,943
50,000
311,172
442,801
83,000
2,382,460
6.88
2,620
77,954
102,017
15,278
177,711
442,801
83,000
923,189
9.10
8,814
222,185
177,926
34,722
133,461
1,459,271
5.48
ANNUAL REPORT 2015 / ABLYNX
161.
CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
Warrants
2012
2012
2012
Number of warrants granted
748,750
162,500
17,868
Number of warrants not vested at 31/12/2015
21,808
0
2,620
3.21
3.23
5.44
0
0
0
55%
55%
49%-56%
5
Risk-free interest rate
2.35%-2.84%
2.83-3.65%
1.09%-1.78
1
Expected duration
5.00-7.00
5.00-7.00
5.00-7.00
Fair value (in €) at grant date
1.38-1.64
1.47-1.74
2.15-2.89
Exercise price (in €)(1)
Expected dividend yield Expected stock price volatility
(1) Equals the fair market value of the underlying shares on the grant date.
ANNUAL REPORT 2015 / ABLYNX
162.
CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
2013
2013
2013
2014
2015
2015
391,330
302,778
50,000
327,224
442,801
83,000
77,954
102,017
15,278
177,711
442,801
83,000
6.46
6.79
7.27
8.81
9.98
12.29
0
0
0
0
0
0
53.4% - 54.0%
52.7%-53.8%
52.7%-53.8%
40.9%
40.6%
40.9%
1.54% - 1.88%
1.56%-2.08%
1.56%-2.08%
0.91%-1.50%
0.22%
0.57%
6.60-7.00
6.70-7.00
6.70-7.00
5.00-7.00
7.00
7.00
3.18-4.04
3.86-4.07
3.86-4.07
3.06-3.80
3.71-3.92
5.20
ANNUAL REPORT 2015 / ABLYNX
163.
CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
8.16. BORROWINGS
As at 31 December (€’000)
2015
2014
0
0
Non-current Secured Non-secured
134,828
Total
134,828
0
0
141
0
141
Current Secured Non-secured Total
Borrowings relate to the senior unsecured bonds due on 27 May 2020 with a principal value of €100 million. The financial leasing amounts were fully paid back in the course of 2015.
8.16.1. MATURITY TABLE The maturity of non-current borrowings (including financial lease) is as follows: As at 31 December (€’000)
2015
2014
Between 1 and 2 years
0
141
Between 2 and 5 years
134,828
0
134,828
141
Borrowings
Over 5 years Total
On 27 May 2015, the Company raised €100 million through a private placement of €100 million senior unsecured bonds due 27 May 2020. The bonds will mature on 27 May 2020 (5 years) and will pay a coupon of 3.25% semi-annually.
ANNUAL REPORT 2015 / ABLYNX
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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
The convertible bonds are convertible in Ablynx ordinary shares at the option of the holder. In case of conversion: a cash alternative election (at the option of the issuer) is available including a number of restrictions. Because the issuer has the cash alternative election, it has a choice over how the share conversion option will be settled (i.e. net in cash or by exchanging shares for cash). Therefore the share conversion option is a derivative at Fair Value Through Profit and Loss (“FVTPL”) according to IAS 39 and not an own equity instrument (cf. IAS 32.26). As at 31 December (€’000)
2015
2014
Within one year
0
142
In the second to the fifth year
0
0
Total
0
142
Less future finance charges
0
(1)
Present value of lease obligations
0
141
ANNUAL REPORT 2015 / ABLYNX
165.
Finance lease obligations Future lease payments
After five years
CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
8.17. TRADE PAYABLES AND OTHER CURRENT LIABILITIES Trade payables
As at 31 December
(€'000)
2015
2014
Trade payables
4,263
3,004
Accruals for invoices to be received
7,393
7,404
Total
11,656
10,408
Other current liabilities
As at 31 December
(€'000)
2015
2014
Social security
561
1,106
Payroll accruals
4,194
3,615
Other liabilities
1
105
4,756
4,826
Total
Deferred income
As at 31 December
(€'000)
2015
2014
Deferred income
86,123
132,308
Within one year
55,738
68,188
In the second to the fifth year
30,385
64,120
Accrued expenses
189
Total
86,123
132,497
Deferred income mainly relates to cash received from research collaboration agreements prior to completion of the earnings process.
ANNUAL REPORT 2015 / ABLYNX
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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
8.18. DEFERRED INCOME TAX Sources of temporary differences (assets)/liabilities As at 31 December (€’000)
2015
2014
Tax loss carried forward
(162,691)
(144,768)
Notional interest deduction(1)
(15,371)
(21,319)
Other temporary differences
5,631
7,439
(165,061)
(129,786)
0
(1)
Total temporary differences
(337,492)
(288,435)
Unrecognised deferred tax asset (33,99%)
(114,714)
(98,039)
Net book value of capitalised R&D assets Depreciation of tangible assets
(1) The application of Notional Interest Deduction is restricted as it has an expiry term of 7 years
The Company has unused tax losses carry forward, without expiry date. This, combined with the other temporary differences, results in a net deferred tax asset position. The Company has accounted for a total R&D tax credit receivable of €15.7 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 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 Company’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 Company 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 Company are covered by external insurance companies, where premiums are paid annually and charged to the income statement as they were incurred.
ANNUAL REPORT 2015 / ABLYNX
167.
CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
The post-employment pension plans granted to employees of the Company are based on defined contributions for which the insurance company guarantees a defined interest until retirement (type 'branche 21/tak21'). As a consequence of the law of 18 December 2015, minimum returns are guaranteed by the employer as follows: • for the contributions paid as from 1 January 2016, a new variable minimum return based on OLO rates, with a minimum of 1.75% and a maximum of 3.75%. In view of the low rates of the OLO in the last years, the return has been initially set to 1.75; • for the contributions paid until end December 2015, the previously applicable legal returns (3.25% and 3.75% respectively on the employer and employee contributions) continue to apply until retirement date of the participants. In view of the minimum returns guarantees, those plans qualify as Defined Benefit plans. In 2014, under the previous legal framework, the application of the PUC method was considered problematic, and there was uncertainty with respect to the future evolution of the minimum guaranteed rates of return. As a consequence, the Group adopted a retrospective approach whereby the net liability recognized in the statement of financial position was based on the sum of the positive differences, determined by individual plan participant, between the minimum guaranteed reserves and the accumulated contributions based on the actual rates of return at the closing date. Based on the limited difference of €2,944, the Company has concluded that the application of the PUC method would have an immaterial impact. In 2015, the sum of the positive differences per plan participant between the minimum guaranteed reserves (€6,256,832.58) and the accumulated reserves (€6,243,661.6) as of 31 December 2015 is €13,170.98. As a consequence, in view of the immaterial difference between the accumulated reserves and the minimum reserves as of 31 December 2015, no provision has been recognised.
ANNUAL REPORT 2015 / ABLYNX
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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
8.20. REVENUE RECOGNITION As at 31 December (€’000)
2015
2014
Upfront fees
58,559
33,772
R&D service fees
14,403
13,784
Milestone payments
3,500
License fees & other
298
154
76,760
47,710
Total
In 2015, revenues increased to €76.8 million (2014: €47.7 million), mainly driven by higher recognised income from the upfront payments received from AbbVie and Merck & Co., Inc.
8.21. RESEARCH AND DEVELOPMENT EXPENSES Year ended 31 December (€'000)
2015
2014
Consumables
4,448
4,022
Outsourcing
53,897
26,289
Patent costs
2,177
1,655
22,799
22,131
Share-based payments
751
428
Other operating expenses
5,281
5,302
Withholding tax (Reduction Tax Scientist)
(3,381)
(3,133)
R&D tax credit
(3,873)
(3,336)
Subtotal
82,099
53,358
985
1,130
83,084
54,488
Personnel costs
Depreciation and amortisation Total research and development expenses
The increase in outsourcing is largely related to clinical trials expenditure for caplacizumab, ALX-0061 and ALX-0171.
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8.22. GENERAL AND ADMINISTRATIVE EXPENSES Period ended 31 December (€’000)
2015
2014
Personnel costs
3,091
2,802
Share-based payments
1,069
1,112
Executive Committee(1) compensation
3,341
3,419
Consultancy
1,870
1,464
Other operating expenses
1,881
1,609
Reduction withholding tax scientist / Retribution(2)
(204)
239
Subtotal
11,048
10,645
357
407
11,405
11,052
Depreciation and amortisation Total general and administrative expenses (1) The Executive Committee consists of key management members and entities controlled by them (2) In 2014 the Company had to reimburse €505,828.32 of Reduction Tax Scientist over the previous years
8.23. OTHER INCOME AND EXPENSES Year ended 31 December (€’000)
2015
2014
Other operating income
0
14
Other operating expenses
6
9
Total
(6)
5
Other operating expenses mainly consist of expenses related to non-deductible VAT and county taxes. Other operating income mainly consists of recuperation of non-deductible VAT of previous years.
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8.24. EMPLOYEE BENEFIT EXPENSE Year ended 31 December (€’000)
2015
2014
Salaries, wages and bonuses
18,233
16,644
Social security
4,779
5,180
881
1,047
Share-based payments
1,820
1,540
Other employment costs
1,997
2,061
Executive Committee compensation(2)
3,341
3,813
Withholding tax (Reduction Tax Scientist)
(3,585)
(3,287)
Total
27,466
26,998
8
8
R&D personnel
301
280
General and administrative staff
43
41
Average FTE
325
317
Group and hospitalisation insurance cost(1)
Headcount Executive Committee(2)
(1) Post-employment benefits (2) 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)
2015
2014
Current lease payments
3,310
3,225
Within one year
3,277
3,208
In the second to the fifth year
4,750
7,100
0
0
Future lease payments
After five years
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)
2015
2014
Interest income on financial assets
1,101
1,622
Other finance income
667
2,672
Total
1,768
4,294
1
88
Finance expenses Interest charges on financial liabilities Finance cost convertible bond: Changes fair value derivative Interest amortisation
4,074
Financing charges
549
Other finance expenses
90
698
39,360
786
Total
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34,646
172.
CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
In 2015, the line ‘Finance cost convertible bond’ mainly includes non-cash expenditure resulting from the fair value calculation and amortisation of the convertible bond components (as a result of the higher share price at year-end compared to the share price at the time of the convertible bonds issuance), and the semi-annual interest paid on the convertible bonds of €1.6 million. In 2015, the line ‘Other finance expenses’ includes realised exchange losses of €100,687 (2014: €683,791). In 2015, the line ‘Other finance income’ includes unrealised foreign exchange gains of €428,820 (2014: €681,940 unrealised foreign exchange losses) and realised foreign exchange gains of €1,063,941 (2014: €1,525,455).
8.27. INCOME TAX EXPENSE Year ended 31 December (€’000)
2015
2014
Current income taxes
0
0
Total
0
0
(54,547)
(12,730)
0
1,795
Share-based payments
1,821
1,540
Other permanent differences
3,733
4,595
Expected income tax credit
(16,675)
(13,804)
Impact unrecognised deferred tax asset
(16,675)
(13,804)
0
0
Loss of the year Stock issuance costs
Effective income taxes
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8.28. LOSS PER SHARE Year ended 31 December (€’000)
2015
2014
(54,547)
(12,730)
Weighted average number of shares outstanding
54,382,147
51,105,884
Basic and diluted loss per share after reverse split (in €)
(1.00)
(0.25)
Loss of the year
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 Company is suffering operating losses, warrants have an anti-dilutive 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.
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 upfront 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 that following the termination of the Phase I study with BI 1034020 (anti-Abeta Nanobody) in Alzheimer’s disease, and after a full review of the programme, Boehringer Ingelheim (BI) decided not to move forward with the
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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 is entitled to receive an upfront payment and received research license payments, milestones and royalties. Additionally, Boehringer Ingelheim subscribed for €15 million in the IPO in November 2007. Ablynx has 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. In November 2015, Boehringer Ingelheim presented compelling pre-clinical proofof-concept data with the bi-specific anti-VEGF/Ang2 Nanobody in multiple in vivo cancer models. A Phase Ib study with this anti-VEGF/Ang2 Nanobody in patients with solid tumours was initiated by Boehringer Ingelheim in January 2016, triggering a €8 million milestone payment to Ablynx.
8.30.1.2. NOVARTIS AGREEMENT • The agreement with Novartis was signed in December 2005. Under this agreement, Ablynx will discover Nanobodies against a number of targets nominated by Novartis in a 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 8 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 KGaA AGREEMENTS Agreement signed in 2008 • On 4 September 2008, Ablynx and Merck KGaA announced a co-discovery 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.
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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 codevelopment project with Merck KGaA on ALX-0761 in inflammation. At the same time, Merck KGaA initiated a Phase I study with ALX-0761, triggering a €2.5 million milestone to Ablynx. In August 2014, Ablynx announced that Merck KGaA further advanced ALX-0761 and initiated a Phase Ib study in patients with psoriasis, which completed recruitment at the end of 2015. The study is expected to read out in the first half of 2016. • In August 2014, Ablynx announced that it had exercised its opt-out option for the co-development project with Merck KGaA on ALX-0751 in oncology (the second of the two targets as part of the 2008 agreement between Merck KGaA and Ablynx). • In February 2015 Merck KGaA returned all assets and rights for the pre-clinical oncology programme to Ablynx. Agreement signed in 2010 • On 11 October 2010, Ablynx and Merck KGaA announced that they have expanded their relationship and entered into a second agreement to co-discover and codevelop Nanobodies against an inflammatory disease target. • Under the terms of the agreement, Ablynx has received an upfront 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 KGaA, Ablynx will be eligible for a €15 million milestone payment. Ablynx has the option to continue with Merck KGaA 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.
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Agreement signed in 2011 • On 9 November 2011, Ablynx and Merck KGaA 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 received an upfront 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 KGaA, Ablynx will be eligible for a €30 million milestone payment. Ablynx has the option to continue with Merck KGaA 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 KGaA announced that they had signed a multi-year research alliance that could lead to at least four co-discovery and co-development collaborations. Under the terms of the agreement, Merck KGaA 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 KGaA core research and development fields, including oncology, immuno-oncology, immunology and neurology. • In February 2015, Ablynx announced that Merck KGaA had 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) had already been provided by Merck KGaA. • In May 2015, both parties agreed to amend this 2013 alliance and to focus on two particular bi-specific Nanobody programmes going forward. Ablynx regained, at no cost, full ownership of three other promising pre-clinical programmes which have been generated under this 2013 agreement. Merck KGaA has provided full financial support and Ablynx is eligible to receive future milestone payments and royalties related to the two specific programmes being pursued.
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8.30.1.4. MERCK & CO., INC. AGREEMENTS • On 2 October 2012 Ablynx announced a collaboration with a subsidiary of Merck & Co., Inc. 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 paid 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 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. In March 2015 Ablynx announced an extension of this initial two-year research collaboration with Merck & Co., Inc. whereby Merck & Co., Inc. extended their funding of the research collaboration with Ablynx to the end of September 2016. • On 3 February 2014, Ablynx announced that they had entered into a second research collaboration and licensing agreement with a subsidiary of Merck & Co., Inc. This new exclusive collaboration and licensing agreement is focused on the discovery and development of several predefined Nanobody candidates (including bi- and tri-specifics) 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 received 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. • On 22 July 2015 Ablynx announced an expansion of this immuno-oncology collaboration with Merck & Co., Inc. to address an increased number of immune checkpoint modulator targets. As part of this expansion agreement, Ablynx will be responsible for the discovery and development of up to 12 additional Nanobody programmes against individual protein targets and target combinations (monospecific and multi-specific Nanobodies) through to the in vivo pre-clinical proof-
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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
of-concept stage, after which Merck will have the option to advance specified lead candidates. Under the terms of this four year expansion, Ablynx received a €13 million upfront payment comprising exclusivity fees and FTE payments as well as further research funding over the term of the collaboration. In addition, Ablynx will be eligible to receive additional exclusivity fees, depending on the number of programmes for which Merck decides to exercise its licensing option, plus development, regulatory and commercial milestone payments of up to €340 million per programme, as well as tiered royalties on annual net sales upon commercialisation of any Nanobody products. Merck will be responsible for clinical 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 was discovered and developed by Ablynx and it successfully completed a Phase IIa study in February 2013, reporting compelling 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 predefined 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, The Netherlands and Luxembourg. Ablynx has received an upfront payment of US$175 million which is partly being 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. • In March 2015, Ablynx initiated a Phase IIb study of the anti-IL-6R Nanobody (ALX‑0061), in combination with methotrexate, in patients with rheumatoid arthritis (RA). Recruitment of 345 patients was completed on schedule by year-end. • In April 2015, Ablynx initiated a Phase IIb monotherapy study of ALX-0061 in RA patients. Recruitment of 251 patients was completed in February 2016, also on schedule.
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• In July 2015, the first eligible patients from the Phase IIb RA studies with ALX-0061 rolled-over into the open-label extension study. • In August 2015, a Phase II study with ALX-0061 was initiated in patients with systemic lupus erythematosus (SLE). The Company plans to recruit 300 patients in this study by 2017.
8.30.1.6. EDDINGPHARM AGREEMENTS • On 18 October 2013 Ablynx granted an exclusive, royalty-bearing license to Eddingpharm, to develop and commercialise its anti-RANKL Nanobody, ALX0141, 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 had expanded its relationship with Eddingpharm, by granting Eddingpharm an exclusive, royalty-bearing license to develop and commercialise Ablynx’ anti-TNFα Nanobody, ozoralizumab (ATN103), 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 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 €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. Ablynx received an undisclosed exclusivity payment.
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8.30.1.7. GENZYME AGREEMENT • On 18 May 2015 Ablynx announced that it had entered into an exclusive option and research agreement with Genzyme, a Sanofi company, to investigate Nanobodies against a target that plays an important role in multiple sclerosis (MS) and specifically aligns with Genzyme’s early-stage MS research programmes involving neuroprotection and CNS repair. Ablynx received an undisclosed exclusivity payment.
8.30.1.8. TAISHO PHARMACEUTICALS AGREEMENT • On 30 June 2015 Ablynx announced that it had entered into an exclusive license agreement with Taisho Pharmaceutical Co., Ltd. (“Taisho”) for the development and commercialisation of Ablynx's anti-TNFα Nanobody, ozoralizumab, in Japan, for the treatment of RA. • Under the terms of the agreement, Taisho will be responsible for development, registration and commercialisation of anti-TNFα Nanobody therapeutics in Japan. Ablynx received an upfront payment of US$3 million and is entitled to receive development and commercial milestone payments plus royalties based on annual net sales of anti-TNFα Nanobody therapeutics generated in Japan.
8.30.1.9. NOVO NORDISK AGREEMENT • On 25 November 2015, Ablynx announced that it had entered into a global exclusive collaboration and licensing agreement with Novo Nordisk to discover and develop novel multi-specific Nanobody drug candidates for use in an undisclosed disease area, with an option to expand the agreement to include a second Nanobody programme. • Under the terms of the agreement, Ablynx received an upfront license fee of €5 million and will receive up to €4 million in research funding during the initial three year research term of the collaboration. If Novo Nordisk decides to exercise the option to the second programme, the Company will pay Ablynx an exercise fee of €4 million. In addition, Ablynx is eligible to receive potential development, regulatory and commercial milestone payments of up to €182 million per programme plus tiered royalties on the annual net sales on any products resulting from the collaboration. Novo Nordisk will be responsible for the development, manufacturing and commercialisation of any products resulting from this agreement.
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8.30.1.10. 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 Company’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.
8.30.1.11. CONVERTIBLE BOND On 27 May 2015, the Company raised €100 million through a private placement of €100 million senior unsecured bonds due 27 May 2020. The bonds will mature on 27 May 2020 (5 years) and will pay a coupon of 3.25% semi-annually. In accordance with “IFRS 13, Fair Value Measurement”, Ablynx presents information on fair value measurement of financial assets and liabilities in its financial statements as follows: (€‘000)
Level 1
Level 2
Level 3
Total
Financial Liabilities Measured at Amortised Cost Convertible Bond - Host Debt
80,682
80,682
Financial Liabilities at Fair Value Through Profit or Loss Convertible Bond Embedded derivative Total liabilities
80,682
54,146
54,146
54,146
134,828
The level-3 input with the most significant effect on the fair value calculation of the embedded derivative of the convertible bond is the applied credit spread of Ablynx. The potential effect of using reasonable assumptions to the most significant level 3 inputs is as follows:
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Assumptions at 31 December 2015 Credit spread
Fair Value Convertible Bond (€’000) 700 bps
138,944
+200 bps
900 bps
136,341
-200 bps
500 bps
142,073
Sensitivity analysis Credit spread
An increase (decrease) in fair value of the convertible bond will result in a loss (profit). There will be no impact in other comprehensive income.
8.30.2. PRINCIPAL GOVERNMENT GRANTS AND INCENTIVES
8.30.2.1. GRANTS Grant
Assigned
Received at 31/12/2015
Recognised as income 2014
Recognised as income 2015
Still to receive
IWT 15
157,773
157,773
157,773
18,991
IWT 16
747,648
747,648
747,648
151,648
IWT 17
1,680,765
1,581,768
1,581,768
432,759
IWT 18
885,597
885,597
708,000
167,489
IWT 19
2,093,845
2,093,845
1,116,000
583,970
484,356
977,845
IWT 20
445,027
445,027
267,000
192,428
74,572
178,027
IWT 21
460,181
460,181
276,000
39,723
220,486
184,181
177,597
Altogether, the Company received a fixed percentage of the expenses incurred in the following R&D projects:
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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
1) 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
2) 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 3) 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 4) 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 5) 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: €1,068,326 Amount received: €1,116,000
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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
6) 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: €267,000 Amount received: €267,000 7) 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: €260,209 Amount received: €276,000
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 nv 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 €1.6 million in the framework of additional investments which nv Bio-Versneller made in the Bio-Versneller building at the request of Ablynx. The pledge is being reduced every year over a period of five years as from January 2012 and per 31 December 2015 an amount of €0.35 million was still outstanding. The amount of the pledge is considered as restricted cash.
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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
Ablynx rented 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 gave the Company the option to purchase the land and the facilities 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 and owns the facility from 5 May 2015. Ablynx has signed a contract with Devgen nv, who provides the Company with 970.68 m2 of laboratory facilities within the Technologiepark 30 as from May 2016, with an initial term of five years which can be extended.
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 nonexecutive Directors and the entities controlled by any of them.
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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
Remuneration key management: As at 31 December (€'000)
2015
2014
8
8
2,295
2,519
Post-employment benefits (group insurance)
166
157
Share-based compensation
834
926
Other employee costs
124
144
Management fees
451
334
Retribution(1)
(31)
394
Total
3,839
4,474
Number of warrants granted (in units)
293,311
153,168
Cumulative outstanding warrants (in units)
1,744,645
1,814,418
Shares owned (in units)
205,805
100,805
Number of management members
Short-term employee benefits (salaries, social security bonuses, lunch vouchers)
(1) In 2014 the Company had to reimburse €505,828.32 of Retribution over the previous years
Transactions with non-executive Directors: As at 31 December (€'000)
2015
2014
41
0
Management fees
305
140
Total benefits
346
140
0
0
Cumulative outstanding warrants (in units)
74,595
74,595
Non-vested warrants
22,831
44,756
Shares owned (in units)
25,000
25,000
Share-based compensation
Number of warrants offered or granted (in units)
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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
8.32. EVENTS AFTER THE BALANCE SHEET DATE On 21 January 2016, Ablynx announced the issuance of an additional 288,170 common shares in exchange for €1,192,292.70 as the result of the exercise of warrants by some employees and consultants of the Company. On 29 January 2016, Ablynx announced that Boehringer Ingelheim started with the Phase I dose escalation study with the half-life extended bi-specific anti-VEGF/Ang2 Nanobody in adult patients with advanced solid tumors, triggering an €8 million milestone payment to Ablynx. The aim of the study is to evaluate the safety profile and dosing schedule for this Nanobody. On 23 February 2016, Ablynx announced the issuance of an additional 7,521 common shares in exchange for €34,726.41 as the result of the exercise of warrants. During the Board Meeting of 24 February 2016, the issuance of a maximum number of 590,000 warrants for the benefit of certain employees and consultants was approved. The duration of the warrants is 7 years as of the issue date of the warrants. 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 offered. On 22 March 2016, Ablynx announced the issuance of an additional 210,741 common shares in exchange for €740,375.82 as the result of the exercise of warrants. As a result of this transaction, Ablynx now has 55,318,806 shares outstanding.
ANNUAL REPORT 2015 / ABLYNX
188.
CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
09. DISCLOSURE AUDIT FEES
€ Auditor’s fees
53,190
Legal missions (pre-emptive rights, warrant exercise, training convertible bond, ...)
37,118
Other assurance services
7,700
Total non-audit fees Deloitte and related parties (direct and indirect tax compliance, global employer services)
28,521
ANNUAL REPORT 2015 / ABLYNX
189.
CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
10. CONDENSED STATUTORY FINANCIAL STATEMENTS OF ABLYNX ANNUAL REPORT 2015 / ABLYNX
As of, and for the Year ended 31 December 2015 In accordance with Art. 105 of the Belgian Companies’ Code, the condensed statutory standalone financial statements of Ablynx 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 at and for the year ending 31 December 2015 in Belgian GAAP. The management report, the statutory financial statements of Ablynx 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. The complete set of the statutory financial statements of Ablynx is also available on the Company’s website www.ablynx.com.
190.
CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
SUMMARY BALANCE SHEET OF ABLYNX nv Assets as at (€’000)
2015
2014
Fixed assets
167,932
132,434
Intangible fixed assets
165,314
130,133
Tangible fixed assets
2,618
2,301
Current assets
262,321
220,606
Amounts receivable
25,048
12,874
Current investments
232,643
194,535
Cash at bank and in hand
3,601
11,648
Deferred charges and accrued income
1,029
1,549
430,253
353,040
(€’000)
2015
2014
Equity
164,776
173,062
Capital
102,442
100,952
Share premium account
187,316
183,645
Accumulated profits (losses)
(124,982)
(111,535)
Amounts payable after more than one year
100,000
0
Current liabilities
165,477
179,978
Amounts payable within one year
16,420
15,375
Deferred charges and accrued income
149,057
164,603
Total Liabilities
430,253
353,040
Total Assets
Liabilities as at
Current investments include €1,647,541,38 restricted Cash in 2015 (€1,980,000 in 2014).
ANNUAL REPORT 2015 / ABLYNX
191.
CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
SUMMARY INCOME STATEMENT OF ABLYNX nv (€’000)
2015
2014
144,740
92,507
Turnover
45,161
23,490
Own construction capitalised
89,405
60,528
Other operating income
10,174
8,489
155,243
116,580
Services and other goods
72,410
42,377
Remuneration, social security costs and pensions
27,361
26,528
Depreciation of and amounts written off formation expenses, intangible and tangible fixed assets
55,466
47,666
6
9
Operating Profit
(10,503)
(24,073)
Financial result
(2,935)
1,713
Financial income
2,196
4,298
Financial charges
(5,131)
(2,585)
(13,438)
(22,360)
Extraordinary result
0
(62)
Extraordinary cost
0
(86)
Extraordinary income
0
24
(13,438)
(22,422)
(9)
(19)
(13,447)
(22,441)
Operating Income
Operating charges
Other operating charges
Gain (loss) on ordinary activities before taxes
Profit (loss) for the year before taxes Taxes Profit (loss) for the period available for appropriation
ANNUAL REPORT 2015 / ABLYNX
192.
CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
APPROPRIATION ACCOUNT (€’000)
2015
2014
Profit (loss) to be appropriated
(124,982)
(111,535)
Profit (loss) to be appropriated
(13,447)
(22,441)
Profit (loss) to be carried forward
(111,535)
(89,094)
Profit (loss) to be carried forward
(124,982)
(111,535)
ANNUAL REPORT 2015 / ABLYNX
193.
CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
CAPITAL STATEMENT (position as at 31 December 2015) (€’000)
Amounts
Number of shares
A. Capital 1. Issued capital - At the end of the previous year
100,952
- Changes during the year
1,490
- At the end of this year
102,442
2. Capital representation
54,812,374
2.1. Shares without par value - Bearer and dematerialised
54,812,374
B. Own shares held by
0
C. Commitments to issue shares(1)
0
D. Autorised capital not issued
66,520
(1) See chapter 11, Additional information, the number of outstanding warrants amounts to 2,675,031.
ANNUAL REPORT 2015 / ABLYNX
194.
CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
11. SUMMARY OF VALUATION RULES AND ADDITIONAL INFORMATION
11.1. PRINCIPLES 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 33.33 % 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. 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.
ANNUAL REPORT 2015 / ABLYNX
195.
CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
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 Buildings
L
NR
10%
4 Installations, machinery and equipment
L
NR
33.3%
5 Office equipment and furniture
L
NR
20%
6 Other tangible fixed assets
L
NR
33.3%
Subsequent costs (min-max)
1 Formation cost
7 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.
ANNUAL REPORT 2015 / ABLYNX
196.
CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
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. In accordance with the CBN recommendation issued in 2010, the reduction in withholding tax has been directly recorded in other operating income. Amounts Payable after One Year In accordance with the CBN recommendation issued in 1995, a convertible bond, convertible at the discretion of the bondholder, is valued at issue price. Related interest expenses are included in P&L over the respective periods. 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 ‘Other Financial Charges and Income’. Turnover Turnover from research contracts is recognised over the duration of the contract in accordance with the progress of the work and contractual terms.
ANNUAL REPORT 2015 / ABLYNX
197.
CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
Additional Information Warrants
Warrants
2008
2009
2009
2009
2009
2010
2010
2011
54,314
68,500
85,000
249,973
80,500
333,892
62
14,925
19,500
95,833
523
235,048
61,000
238,059
10
44
2,084
4,511
18
329,381
60
21,800
157
45
At 31 December 2013 Outstanding
200,833
Non-vested Exercisable
200,833
54,314
68,500
85,000
Granted Forfeited Exercised
32,916
19,000
17,750
15,578
Expired
72,892
10,416
161,459
68,000
At 31 December 2014 Outstanding
167,917
35,314
50,750
85,000
Non-vested Exercisable
167,917
35,314
50,750
85,000
161,459
68,000
307,581
93,167
35,314
43,300
75,000
161,377
32,250
207,307
Granted Forfeited Exercised Expired
82
882
At 31 December 2015 Outstanding
74,750
7,450
10,000
35,750
121,192
Non-vested Exercisable
2 74,750
7,450
10,000
35,750
121,192
The weighted average price at the date of exercise for warrants exercised during 2014 was €6.02 per share and for warrants exercised during 2015 was €7.51 per share
ANNUAL REPORT 2015 / ABLYNX
607
198.
CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
58
2012
2012
2012
2013
2013
27,661
46,875
11,434
312,330
8,337
312,330
3,845
03,816
46,875
Total number
Average Exercise price (in Euro)
302,778
2,374,090
5.99
302,778
1,277,548
5.41
8,047
2015
1,096,542
6.68
399,286
8.51
31,917
5.05
85,244
6.02
83,308
7.67
50,000
327,224
46,875
46,875
11,434
305,099
324,840
50,000
327,224
2,572,907
6.34
5,497
157,203
216,560
31,944
327,224
917,524
6.89
5,937
147,896
108,280
18,056
1,655,383
6.03
525,801
10.34
67,569
7.16
647,715
7.51
964
8.59
442,801 1,660
7,954
4,960
46,875
21,808
86,146
2015
7,231
7,296
52,318
2014
3,097
22,062
09,614
2014
46,875
44,897
83,000
16,052
11,434
300,139
279,943
50,000
311,172
442,801
83,000
2,382,460
6.88
2,620
77,954
102,017
15,278
177,711
442,801
83,000
923,189
9.10
8,814
222,185
177,926
34,722
133,461
1,459,271
5.48
ANNUAL REPORT 2015 / ABLYNX
199.
CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
Warrants
2012
2012
2012
Number of warrants granted
748,750
162,500
17,868
Number of warrants not vested at 31/12/2015
21,808
0
2,620
3.21
3.23
5.44
0
0
0
55%
55%
49%-56%
5
Risk-free interest rate
2.35%-2.84%
2.83-3.65%
1.09%-1.78
1
Expected duration
5.00-7.00
5.00-7.00
5.00-7.00
Fair value (in €) at grant date
1.38-1.64
1.47-1.74
2.15-2.89
Exercise price (in €)(1)
Expected dividend yield Expected stock price volatility
(1) Equals the fair market value of the underlying shares on the grant date.
ANNUAL REPORT 2015 / ABLYNX
200.
CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
2013
2013
2013
2014
2015
2015
391,330
302,778
50,000
327,224
442,801
83,000
77,954
102,017
15,278
177,711
442,801
83,000
6.46
6.79
7.27
8.81
9.98
12.29
0
0
0
0
0
0
53.4% - 54.0%
52.7%-53.8%
52.7%-53.8%
40.9%
40.6%
40.9%
1.54% - 1.88%
1.56%-2.08%
1.56%-2.08%
0.91%-1.50%
0.22%
0.57%
6.60-7.00
6.70-7.00
6.70-7.00
5.00-7.00
7.00
7.00
3.18-4.04
3.86-4.07
3.86-4.07
3.06-3.80
3.71-3.92
5.20
ANNUAL REPORT 2015 / ABLYNX
201.
CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
Grants
Grant
Assigned
Received at 31/12/2015
Recognised as income 2014
Recognised as income 2015
Still to receive
IWT 15
157,773
157,773
157,773
18,991
IWT 16
747,648
747,648
747,648
151,648
IWT 17
1,680,765
1,581,768
1,581,768
432,759
IWT 18
885,597
885,597
708,000
167,489
IWT 19
2,093,845
2,093,845
1,116,000
583,970
484,356
977,845
IWT 20
445,027
445,027
267,000
192,428
74,572
178,027
IWT 21
460,181
460,181
276,000
39,723
220,486
184,181
177,597
Appropriation account
APPROPRIATION ACCOUNT (€’000)
2015
2014
Profit (loss) to be appropriated
(124,982)
(111,535)
Profit (loss) to be appropriated
(13,447)
(22,441)
Profit (loss) to be carried forward
(111,535)
(89,094)
Profit (loss) to be carried forward
(124,982)
(111,535)
ANNUAL REPORT 2015 / ABLYNX
202.
CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
ADRESSES Ablynx’s registered office 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
ANNUAL REPORT 2015 / ABLYNX
203.
CORPORATE GOVERNANCE AND FINANCIAL INFORMATION