ANNUAL REPORT
INDEX
1. BUSINESS SECTION
07.
INTRODUCTION Achievements in 2013 Interview with the Chairman and CEO Strategy and outlook for 2014
09.
NANOBODIES® CREATING BETTER MEDICINES Uniqueness and competitive advantages Product pipeline
ANNUAL REPORT 2013 / ABLYNX
SHAREHOLDERS’ INFORMATION Key figures The shares in 2013 Financial calendar Contact the IR department
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37.
2. CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
59.
REPORT OF THE BOARD OF DIRECTORS
64.
RESPONSIBILITY STATEMENT
122.
STATUTORY AUDITOR’S REPORT
123.
CONSOLIDATED FINANCIAL STATEMENTS
126.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
130.
3. GLOSSARY
197.
3.
INDEX
ABLYNX AT A GLANCE
Ablynx is a biopharmaceutical company focused on the discovery and development of Nanobodies® , a novel class of antibody-derived therapeutic proteins based on single-domain antibody fragments, for the treatment of a range of serious human diseases in inflammation, haematology, oncology and pulmonology.
~ 30 PROGRAMMES in the R&D pipeline
7 PROGRAMMES in clinical development
>500 granted and pending patents
PARTNERSHIPS WITH 6 MAJOR PHARMA COMPANIES which generated >€300 million in non-dilutive cash to date
284 EMPLOYEES €200.4 MILLION in cash at 31 December 2013
€137.6 MILLION net cash inflow for 2013
LISTED ON NYSE EURONEXT BRUSSELS ticker: ABLX
ANNUAL REPORT 2013 / ABLYNX
5.
BUSINESS SECTION
BUSINESS SECTION
INTRODUCTI
ION
2013 HAS BEEN A TRANSFORMATIONAL YEAR FOR ABLYNX
R&D MILESTONES ALX‑0061 (anti-IL-6R) //
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Very encouraging Phase IIa results in patients with rheumatoid arthritis (February 2013) Second clinical proof-of-concept for Ablynx’s Nanobodies
Caplacizumab (anti-vWF) //
Implemented a protocol amendment to facilitate recruitment in the ongoing Phase II study in patients with acquired TTP (August 2013)
ALX‑0171 (anti-RSV) //
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Phase I safety study initiated in subjects with hyper-responsive airways (July 2013) Phase I PK study initiated to measure ALX‑0171 concentrations in lungs after inhalation (July 2013)
ALX‑0761 (anti-IL-17A&F) //
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Ablynx’s partner, Merck Serono, started a Phase I study with ALX‑0761, the first bispecific Nanobody that entered clinical development and that has potential to treat rheumatoid arthritis (June 2013) Ablynx received a €2.5 million milestone payment
BI 1034020 //
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ANNUAL REPORT 2013 / ABLYNX
Ablynx’s partner Boehringer Ingelheim started a Phase I study with BI 1034020, a Nanobody to treat Alzheimer’s disease (October 2013) Ablynx received a €5 million milestone payment
10.
BUSINESS SECTION
STRATEGIC PARTNERSHIPS Ablynx and AbbVie entered into a global license agreement to develop and commercialise ALX‑0061 for the treatment of inflammatory diseases. The deal was the largest clinical asset deal of the year and is potentially worth US$840 million in milestone payments to Ablynx plus double-digit royalties (September 2013). Ablynx and Merck Serono further expanded their relationship through a multi-year research alliance that could lead to at least four co-discovery and co-development collaborations. This is the fourth deal between the companies and could generate >€100 million in cash inflow for Ablynx during the next six and a half years (September 2013). Ablynx granted an exclusive, royalty-bearing license to Eddingpharm to develop and commercialise its anti-RANKL Nanobody, ALX‑0141, in the mainland of the People’s Republic of China, the Hong Kong and Macao Special Administrative Regions, and Taiwan, for all indications, including osteoporosis and bone metastases. This is Ablynx’s first step towards accessing opportunities in emerging markets (October 2013).
CORPORATE The Executive Committee of the Company has changed with
ANNUAL REPORT 2013 / ABLYNX
two promotions and one new appointment. Kim Simonsen was appointed to the newly created position of Chief Operations Officer. Dominique Tersago, who previously held the position of Senior Medical Director, was appointed Chief Medical Officer. Tony de Fougerolles was appointed Chief Scientific Officer, joining from Moderna Therapeutics in Boston and also having worked at Alnylam and Biogen Idec. EvaLotta Allan (Chief Business Officer), Josi Holz (Chief Medical Officer) and Andreas Menrad (Chief Scientific Officer) left the Company during 2013. Also during 2013, Ablynx established a reorganised Board of Directors with significant industry experience. Four new independent Directors were appointed (Dr Peter Fellner, Catherine Moukheibir, Dr William Jenkins and Dr Bo Jesper Hansen). The roles of Chairman and CEO were separated with Dr Edwin Moses remaining CEO and Dr Peter Fellner appointed as his successor as Chairman. The three remaining nonexecutive Directors representing the venture capital shareholders (Jim Van heusden, Denis Lucquin and Stephen Bunting) resigned, as did three independent Directors (Dr Roger Perlmutter who resigned to avoid conflicts of interest following his appointment at Merck & Co, and Mats Pettersson and Dr Geert Cauwenbergh who retired after five years on the Ablynx Board).
11.
FINANCIAL
€200.4
MILLION
CASH, CASH EQUIVALENTS RESTRICTED CASH AND SHORTTERM INVESTMENTS
€157.6
MILLION
CASH INCOME FROM COLLABORATIONS
€31.5
MILLION
RAISED THROUGH PRIVATE PLACEMENT OF NEW SHARES
FLOAT 85% FREE 17 MILLION VC SHARES SUCCESSFULLY PLACED
BUSINESS SECTION
INTERVIEW WITH THE CHAIRMAN AND CEO OF THE COMPANY
IN 2013, WE CONTINUED OUR EVOLUTION INTO ONE OF EUROPE’S LEADING BIOPHARMACEUTICAL COMPANIES, WITH A MARKET-LEADING LICENSING DEAL, A BROAD CLINICAL PRODUCT PIPELINE, KEY PHARMA PARTNERSHIPS, A DIVERSIFIED INTERNATIONAL AND BLUE-CHIP INVESTOR BASE, A STRONG CASH POSITION AND A FULLY INDEPENDENT BOARD OF DIRECTORS.
ANNUAL REPORT 2013 / ABLYNX
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BUSINESS SECTION
WHAT WAS IN YOUR VIEW THE MAJOR ACHIEVEMENT FOR THE COMPANY IN 2013? We signed the year’s largest product licensing deal for a clinical asset worth up to US$840 million plus doubledigit royalties. This deal with AbbVie, for the development and commercialisation of our antiIL-6R Nanobody (ALX‑0061) to treat inflammatory diseases, not only provides us with substantial financial resources but also enables us to further expand our expertise and capabilities in late-stage clinical development. It was a major milestone for our Company and we look forward to working together with AbbVie to develop a potential competitive therapy for patients suffering from chronic inflammatory conditions such as rheumatoid arthritis (RA) and systemic lupus erythematosus (SLE) and to making a real difference to the quality of their lives.
ANNUAL REPORT 2013 / ABLYNX
DID 2013 MEET YOUR EXPECTATIONS?
validating the entire Nanobody platform.
Absolutely! The past year was a success for the Company scientifically, operationally and financially right across our business.
Also in September, we further expanded and strengthened our relationship with Merck Serono through a major alliance that may generate more than €100 million cash inflow during the first 6.5 years and that could result in co-ownership of the programmes for Ablynx. Over the past five years, we have enjoyed a close working relationship with Merck Serono and this fourth deal is a clear proof of the performance of our technology. It is a very interesting deal model that could create substantial value for both parties and one which we believe could be applicable for us in other partnerships.
We achieved our financial targets and ended the year with a strong cash position of €200 million and maintained our net cash burn at €20 million (excluding €31.5 million from the private placement and the US$175 million up-front payment from AbbVie), which is at the low end of the full year net cash burn guidance we provided at the beginning of 2013. In February, we published very encouraging Phase IIa results for our anti-IL-6R Nanobody (ALX‑0061) from a study in RA patients. These data allowed us to enter into our first clinical asset deal, licensing ALX‑0061 to our chosen partner, AbbVie, in September. This programme and the resulting deal underlines the exciting potential of ALX‑0061 to offer an alternative and possibly differentiating treatment option for RA and SLE, as well as further
13.
We made our first step in exploring business opportunities in emerging markets through an exclusive license agreement with Eddingpharm, a leading Chinese pharmaceutical company. This agreement is for the development and commercialisation of our antiRANKL Nanobody in the mainland of the People’s Republic of China, the Hong Kong and Macao Special Administrative Regions, and
BUSINESS SECTION
Taiwan, for all indications, including osteoporosis and bone metastases. China is a huge potential market with unique characteristics which could be very important for this and other assets we have. With seven Nanobody programmes at the clinical development stage, our clinical pipeline continues to develop positively and this is complemented by ongoing investments in early stage discovery programmes on our own and with partners. In total, there are about 30 R&D programmes in our pipeline in a combination of partnered, co-owned and whollyowned structures, which represents a balanced risk portfolio.
TELL US ABOUT THE DEVELOPMENTS IN ABLYNX’S SHAREHOLDER BASE? Well, not only did we make great progress in our commercial and R&D operations but we also saw an important evolution in our shareholder base. An orderly process allowed the exit of a large proportion of our remaining historic venture
ANNUAL REPORT 2013 / ABLYNX
14.
BUSINESS SECTION
capital shareholders and they were replaced by international, long-term, blue-chip financial institutions. As a result, the free float of the Company increased to 85% at the end of 2013 (from 53% at the end of 2012). This improved liquidity is important in attracting new shareholders. As part of this corporate maturing of Ablynx, we have split the roles of Chairman and CEO, and with the resignation of three Directors who represented our original venture capital investors, and the appointment of four new independent Directors, we now have established a reorganised Board with significant industry experience.
the subcutaneous formulation of the anti-IL-6R Nanobody (ALX‑0061); two Phase I studies with our anti-RSV Nanobody (ALX‑0171); the Phase I study with the bispecific anti-IL-17A/F Nanobody (partnered with Merck Serono); and the Phase I study in Alzheimer’s disease (partnered with Boehringer Ingelheim). In addition, we anticipate being able to announce potential proof-of-concept Phase II results for our anti-vWF Nanobody, caplacizumab, to treat acquired TTP.
LOOKING FORWARD, WHAT WILL 2014 BRING FOR ABLYNX?
Furthermore, we expect to start the first-in-infant Phase II study with our anti-RSV Nanobody and to start the preparations for the Phase IIb study with the anti-IL6R Nanobody in RA and the Phase IIa study in SLE, both of which are expected to be initiated in 2015.
In 2014, we expect to build upon the successes from 2013 and maximise the strength of our Nanobody platform. 2014 is an important year for key data at Ablynx and we expect results from five programmes in Phase I clinical development, including the Phase I study with
In parallel, we will continue our business development activities and expect to sign additional collaborative deals, either at the discovery stage where we provide partners access to our proprietary platform to generate potential therapeutics in areas of complex technical challenges
ANNUAL REPORT 2013 / ABLYNX
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and high unmet medical need, or at the development stage when we have demonstrated clinical efficacy and then require a partner to help us take the programme through development and commercialisation. For the full year, we expect a net cash burn in the range of €30-€35 million. In closing, we would like to thank all Ablynx employees, partners and shareholders for their commitment and support. We are confident that Ablynx will continue to strive to deliver continued innovation and potentially differentiated treatment options for patients together with sustained performance and returns for shareholders. Sincerely,
Dr Peter Fellner Dr Edwin Moses Chairman CEO
BUSINESS SECTION
STRATEGY
Ablynx’s strategy is to maximise the use of the Company’s unique Nanobody technology in therapeutic areas and diseases where Nanobodies offer a clear promotable advantage over existing products and technologies. Ablynx will wholly-fund some programmes, in its core disease areas, to proof-of-concept prior to partnering in order to maximise value creation. Outside of the Company’s core areas, Ablynx enters into various forms of shared-risk discovery collaborations with pharmaceutical partners in order to fully exploit the use of the platform. Ablynx’s overall goal is to create differentiated and innovative medicines which have the potential to make a difference to patients’ lives.
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BUSINESS SECTION
THREE-PRONGED APPROACH
FULLY FUNDED PROGRAMMES
CO-DISCOVERY/
WHOLLY-OWNED
WITH MILESTONES AND
CO-DEVELOPMENT
PRODUCT
ROYALTIES
PARTNERSHIPS
PIPELINE
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19 programmes in oncology, neurology, inflammation, pulmonology and bone disorders 5 discovery deals 3 licensing deals >€260 million in cash received
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4 programmes in oncology, inflammation and osteoarthritis 50:50 ownership Potential to convert into licensing deals >€45 million in cash received
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7 programmes in inflammation, haematology, oncology and infection Aim to partner after clinical proof-of-concept has been achieved
BALANCING RISK AND REWARD
ANNUAL REPORT 2013 / ABLYNX
19.
BUSINESS SECTION
Ablynx is well positioned for further growth during the course of 2014. We have a strong cash position that will enable us to continue to invest in our early stage product pipeline as well as to further advance our key pre-clinical and clinical programmes.
OUTLOOK 2014
In 2014, up to four partnered Nanobodies have the potential to enter clinical development. In parallel, we will continue our business development activities to partner programmes at appropriate stages, to maximise our ability to exploit our Nanobody platform and assets, while also generating cash income to support our overall activities and control our net cash burn.
EXPECTED CLINICAL DATA Caplacizumab (anti-vWF)
Potential proof-of-concept results in acquired TTP mid-2014 ALX‑0061 (anti-IL-6R)
Phase I results from Phase I study with subcutaneous formulation ALX‑0171 (anti-RSV)
Phase I results from safety and PK studies ALX‑0761 (anti-IL-17A&F)
Phase I results BI 1034020
Phase I results
START OF CLINICAL TRIALS ALX‑0171 (anti-RSV)
Start of Phase I/II paediatric study ALX‑0061 (anti-IL-6R)
Start of Phase I with subcutaneous formulation Preparation for start of Phase II RA and SLE studies in 2015 Start of up to four partnered Phase I programmes
BUSINESS AND FINANCIAL Potential milestone payments and additional collaborative deals Net cash burn of €30-€35 million
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BUSINESS SECTION
NANOBODIES CREATING BETTER MEDIC
S
速
CINES
UNIQUENESS AND COMPETITIVE ADVANTAGES ANNUAL REPORT 2013 / ABLYNX
Nanobodies are a novel class of antibody-derived therapeutic proteins that contain the unique structural and functional properties of naturally-occurring heavy-chain antibodies via a single-domain antibody fragment. The Nanobody technology was originally developed following the discovery and identification that Camelidae (e.g. camels and llamas) possess fully functional antibodies that only possess heavy chains and therefore lack light chains. These heavy-chain only antibodies contain a single variable domain and two constant domains. Importantly, the cloned and isolated single variable domain has full antigen binding capacity and is very stable.
optimisation, formatting, manufacturing, administration, formulation and clinical use of Nanobodies, as well as covering its clinical development programmes and product candidates. This, combined with the extensive experience and expertise that Ablynx has developed in the 12 years since it was established, make the Company the worldleader in the use of Nanobodies in healthcare applications.
These single variable domains, with their unique structural and functional properties, form the basis of a new generation of therapeutic molecules which Ablynx has named ‘Nanobodies’. Due to their small size, unique structure and extreme stability, Ablynx’s Nanobodies combine the advantages of conventional antibody therapeutics with the key features of small molecules.
Flexible formatting: multivalent, multispecific, biparatopic Nanobodies
Robustness allows for alternative delivery such as nebulisation
Ablynx has a strong and broad patent portfolio of 550 granted patents and patent applications covering various aspects of the discovery, generation,
Excellent manufacturing (yeast and bacteria), high concentration formulations and low viscosity (excellent syringeabilty)
24.
Nanobodies’ uniqueness and competitive advantages can be summarised as follows: Broad target applicability, including challenging targets such as GPCRs and ion channels
Half-life engineering technology to achieve desired properties (acute vs chronic diseases) (T1/2 from 2h to 20 days)
BUSINESS SECTION
PRODUCT PIPELINE
Ablynx’s goal is to address high unmet medical needs across a broad range of diseases, including inflammation, haematology, oncology and pulmonology.
RESPIRATORY SYNCYTIAL VIRUS (RSV) //
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Respiratory virus that infects the respiratory tract, including the lungs Most common cause of bronchiolitis and pneumonia in children under 1 year of age 310,000 children (<5 years) are hospitalised per year in the 7 major markets 3.5% mortality rate in those hospitalised with high-risk conditions; 400 deaths/year in US Children hospitalised for RSV disease during infancy have been shown to have abnormal pulmonary function tests and/or increased episodes of wheezing up to 10 years later Only symptomatic treatment options currently available
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ALZHEIMERâ&#x20AC;&#x2122;S DISEASE //
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THROMBOTIC THROMBOCYTOPENIC PURPURA (TTP) //
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Rare thrombotic disorder causing extensive string-like clots that block small blood vessels throughout the body Life threatening condition
26.
Progressive, neurodegenerative disease of the brain which leads to loss of memory and cognitive functions Most common form of dementia in adults 36 million people worldwide suffer from dementia 115 million people are expected to suffer from dementia in 2050 Today, no cure is available
OSTEOPOROSIS //
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10,000 acute events per year 11.3 patients per million people worldwide suffer from TTP Currently no drugs specifically approved to treat TTP
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Progressive bone disease characterised by a decrease in bone mass and density which can lead to an increased risk of fracture 163 million people over 50 years of age suffer from osteoporosis across the 7 major markets By 2020, the female osteoporosis population is expected to grow 15.5% to reach 188 million
BUSINESS SECTION
patients in the seven major markets
ONCOLOGY //
SYSTEMIC LUPUS ERYTHEMATOSUS (SLE) //
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Complex, multi-organ, autoimmune disorder 5 million people worldwide suffer from a form of lupus 90% of diagnosed people are women High unmet need for novel treatment options for patients with severe disease
RHEUMATOID ARTHRITIS (RA) //
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Chronic, progressive, inflammatory disease of the joints and surrounding tissues 1% of adult population in the US suffer from RA 6 million people expected to suffer from RA in the 7 major markets in 2021 Need for new, differentiating products as patients become refractory to therapies
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Broad group of cancerous diseases involving unregulated cell growth Cells divide and grow uncontrollably, forming malignant tumours, and invade nearby parts of the body >14 million new cases worldwide per year 8 million deaths worldwide per year Urgent need to find new treatment options
OSTEOARTHRITIS (OA) //
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Also known as degenerative joint disease A group of mechanical abnormalities involving degradation 81 million people in the 7 major markets suffer from OA 90 million people in the 7 major markets are expected to suffer from OA in 2020
27.
BUSINESS SECTION
Fully owned Fully partnered
50% Co-Co
BROAD PIPELINE: MULTIPLE SHOTS ON GOAL ANNUAL REPORT 2013 / ABLYNX
Therapeutic area Haematology
Product name Target caplacizumab vWF
Inflammation/ Immunology/
ozorelizumab TNFÎą ALX-0962 IgE
Dis
Infection Various Oncology Various Various Bone disorders ALX-0141
RANKL
Pulmonary ALX-0171 RSV Various Various Oncology ALX-0751 Inflammation/ NA Immunology NA NA Oncology/Neurology Various Immunology Various Immunology ALX-0761 IL-17F/IL-17A ALX-0061 IL-6R Bone disorders ALX-0141 RANKL Neurology BI 1034020 NA Oncology NA Pulmonary NA Various NA NA
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BUSINESS SECTION
scovery
Pre-clinical
Phase I
Phase II
Phase III
Filing
ex greater China
potential to evolve into at least 4 co-co programmes
in Greater China
Validated targets (clinic) 1st in class
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BUSINESS SECTION
PROGRAMMES IN PHASE II CLINICAL DEVELOPMENT
ANTI-IL-6R – ALX‑0061 – MONOVALENT NANOBODY WITH HALF-LIFE EXTENSION //
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Phase II proof-of-concept achieved in patients with RA Global exclusive licensing deal with AbbVie Opportunity for differentiation in RA and SLE
ALX‑0061 targets the interleukin 6 pathway - which plays a key role in the inflammation process in RA by binding to the IL-6 receptor (IL-6R). Its small size (26kD) may potentially allow ALX‑0061 to penetrate more effectively into tissues. The potent monovalent interaction of the Nanobody with its target is the basis for excellent in vivo efficacy and its high specificity reduces the possibility for off-target effects. Its binding to human serum albumin prolongs the in vivo halflife of the product and can lead to improved trafficking to areas of inflammation. The Nanobody has
ANNUAL REPORT 2013 / ABLYNX
a very strong affinity for soluble IL-6R which should ensure fast target engagement and could result in a fast onset of effect. ALX‑0061 has shown very low immunogenic potential in the first clinical trials in patients.
LARGEST CLINICAL ASSET DEAL IN 2013 ALX‑0061, administered intravenously, successfully completed a Phase IIa study in February 2013 reporting strong efficacy and safety data in patients with moderately to severely active RA on a stable background of methotrexate. Results of a Phase I study with the subcutaneous formulation are expected in late 2014 and the Phase II studies in RA and SLE are anticipated to start in 2015.
KEY PHASE IIb RESULTS IN RA EXPECTED END 2016
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ALX‑0061 GLOBAL EXCLUSIVE LICENSING DEAL WITH ABBVIE
In September 2013, Ablynx and AbbVie entered into a global licensing agreement to develop and commercialise ALX‑0061, to treat inflammatory diseases including RA and SLE. Ablynx is responsible for completing Phase II clinical development in both RA and SLE. If the predefined success criteria of Phase II studies are met, AbbVie will exercise its right to in-license ALX‑0061 and be responsible for subsequent Phase III clinical development and commercialisation. Ablynx has received an upfront payment of US$175 million, which will partly be used to fund clinical development of ALX‑0061 up to the point where AbbVie may inlicense the programme. Upon achievement of certain development, regulatory, commercial and sales-based targets, Ablynx will be eligible to receive additional milestone payments totalling up to US$665 million as well as double-digit tiered royalties on net sales upon
BUSINESS SECTION
commercialisation. Ablynx will retain an option for co-promotion rights in Belgium, the Netherlands and Luxembourg.
POTENTIAL PROOFOF-CONCEPT RESULTS EXPECTED MID-2014
ANTI-VON WILLEBRAND FACTOR (vWF) – CAPLACIZUMAB – BIVALENT NANOBODY //
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Potential Phase II proof-ofconcept in patients with acquired TTP expected mid-2014 First-in-class opportunity with Orphan Drug Status
Caplacizumab is a highly potent bivalent anti-vWF Nanobody that can be administered intravenously and subcutaneously. Caplacizumab selectively inhibits the interaction of platelets with ultra-large, multimeric precursors of vWF (UL-vWF). Caplacizumab has a well-understood PK and PD profile with fast onset of activity. It received Orphan Drug Designation from the EMA (EU) and the FDA (US) in 2009.
ANNUAL REPORT 2013 / ABLYNX
ANTI-TNFα – OZORALIZUMAB – BIVALENT NANOBODY WITH HALFLIFE EXTENSION //
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The first sites for the worldwide international Phase II clinical trial (TITAN) opened in September 2010 and the protocol of the study was adapted in September 2013 to facilitate recruitment. In January 2014, some improvement in recruitment had been seen since amending the clinical protocol, nevertheless, Ablynx decided to stop recruitment of the trial to allow earlier analysis of the data for potential proof-of-concept. Phase II proof-of-concept data are now expected by mid-2014 and if the results are promising, a Phase III study is anticipated to commence in 2015. Ablynx will in parallel continue business development activities to explore the potential partnering possibilities for this programme.
31.
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Phase II proof-of-concept achieved in patients with RA Ongoing licensing discussions in emerging markets Next generation TNFα blocker with unique potential
Ozoralizumab is a bivalent Nanobody that potently neutralises TNFα. Clinical Phase IIa proof-of-concept was achieved in May 2011 in patients with active RA.
BUSINESS SECTION
PROGRAMMES IN PHASE I CLINICAL DEVELOPMENT
ANTI-RSV – ALX‑0171 – FIRST INHALED TRIVALENT NANOBODY //
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Phase I safety study in healthy adults completed Additional Phase I studies in adults on-going Potential transformational treatment for RSV infection in infants
ALX‑0171 is a trivalent Nanobody that neutralises viral replication in the respiratory tract. Its physical robustness allows delivery directly into the lungs, i.e. the site of infection, through nebulisation. An initial safety study in healthy volunteers was successfully completed and demonstrated that ALX‑0171 was well‑tolerated and had no clinically relevant effect on lung function. Furthermore, no doselimiting toxicity, no treatment emergent immunogenicity and no bronchoconstriction occurred.
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FIRST THERAPEUTIC NANOBODY DELIVERED THROUGH INHALATION
The anti-RSV Nanobody, ALX‑0171, demonstrated preclinical proof-of-concept in a neonatal lamb model. This model is a good mimic of the infant with respect to size, breathing characteristics, lung architecture and RSV induced lower respiratory tract infection. RSV infected animals were treated once daily with inhaled ALX‑0171, starting at the peak viral load, in a manner which is believed to be representative of the situation which will be investigated in the first-in-infant study. Treatment with ALX‑0171 led to a strong reduction in viral titres and inflammation in the lungs. In addition, ALX‑0171 was effective on various clinical signs and symptoms, such as behavioural activity and general well-being. A safety study in adults with hyper-responsive airways, and a local and systemic PK study in healthy volunteers are currently ongoing with results expected in Q2 2014.
BUSINESS SECTION
CLINICAL PROOF-OFCONCEPT RESULTS FROM FIRST-ININFANT STUDY EXPECTED IN 2015
Ablynx is on track to initiate a first-in-infant study in hospitalised infants infected with RSV in the autumn of 2014. ANTI-RANKL – ALX‑0141 – BIVALENT NANOBODY WITH HALF-LIFE EXTENSION //
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Phase I study in postmenopausal women successfully completed Exclusive licensing agreement with Eddingpharm in Greater China
This bivalent anti-RANKL construct is linked to a Nanobody that binds to human serum albumin, extending the drug’s in vivo half-life, which may in turn lead to preferential targeting of diseased tissue. A Phase I study in healthy postmenopausal women showed that a single administration of ALX‑0141 had a strong and very long lasting inhibitory effect on bone resorption biomarkers and was well tolerated with no serious adverse events or dose-limiting toxicity being observed.
FIRST LICENSING AGREEMENT IN EMERGING MARKETS
ALX‑0141 EXCLUSIVE LICENSING DEAL WITH EDDINGPHARM IN GREATER CHINA
ALX‑0141 is a bivalent therapeutic molecule that targets the Receptor Activator of Nuclear factor Kappa-B Ligand (RANKL).
ANNUAL REPORT 2013 / ABLYNX
In October 2013, Ablynx granted an exclusive license to Eddingpharm, a leading Chinese specialty pharmaceutical company, to develop and commercialise its anti-RANKL Nanobody, ALX‑0141, in the mainland of the People’s Republic of China, the Hong Kong and
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Macao Special Administrative Regions, and Taiwan, for all indications, including osteoporosis and bone metastases. Eddingpharm is responsible for the clinical development, registration and commercialisation in Greater China of anti-RANKL Nanobody therapeutics and Ablynx will have access to the data generated by Eddingpharm to support potential licensing discussions in other geographic regions. Ablynx received a €2 million upfront payment from Eddingpharm and is entitled to receive commercial milestone payments plus tiered, doubledigit royalties of up to 20%, based on annual net sales of ALX‑0141 generated by Eddingpharm in Greater China. ANTI-IL-17A/F – ALX‑0761 – BISPECIFIC NANOBODY WITH HALF-LIFE EXTENSION //
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Pre-clinical proof-of-concept achieved in animal RA model Phase I study in healthy volunteers ongoing Exclusively licensed to Merck Serono
BUSINESS SECTION
ALXâ&#x20AC;&#x2018;0761 is a bispecific Nanobody that neutralises both IL-17A and IL-17F and that binds to human serum albumin for in vivo half-life extension.
Pre-clinical proof-of-concept data from a cynomolgus monkey model that mimics human rheumatoid arthritis demonstrated that both IL-17A and IL-17F play a role in the onset and/or maintenance of rheumatoid arthritis and that ALXâ&#x20AC;&#x2018;0761 improved the clinical endpoints: X-ray score B (the score for bone erosion or architectural joint destruction accompanied by bone erosion) and the arthritis score (the total of the swelling scores for the individual joints). Furthermore, promising biomarkers were identified to aid further clinical development.
FIRST BISPECIFIC NANOBODY IN CLINICAL DEVELOPMENT
ANNUAL REPORT 2013 / ABLYNX
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BUSINESS SECTION
A Phase I study in healthy volunteers is currently ongoing and results are expected later this year. Ablynx’s partner Merck Serono, a division of Merck KGaA, Darmstadt, Germany, is fully responsible for the development and commercialisation of this programme. ALX‑0761 GLOBAL EXCLUSIVE LICENSING DEAL WITH MERCK SERONO
In September 2008, Ablynx entered into an agreement with Merck Serono under which Merck Serono and Ablynx would co-discover and co-develop Nanobodies against two targets in immunology and oncology. Both companies agreed to share equally all research and development costs and the resulting profits but the collaboration agreement also allowed Ablynx to convert, at certain time-points in development, the 50:50 codiscovery and co-development collaboration into a license agreement. In June 2013, at the time of the initiation of the Phase I study for ALX‑0761, the most advanced Nanobody under the Merck Serono agreement, Ablynx announced that it had converted the collaboration into a license agreement. As a result, Merck Serono now has an exclusive worldwide license agreement for ALX‑0761.
ANNUAL REPORT 2013 / ABLYNX
Ablynx is eligible to receive additional development milestone payments associated with the progress of the product in multiple indications as well as regulatory and commercial milestones plus tiered royalties upon approval of the product. The start of the Phase I study triggered a €2.5 million milestone payment to Ablynx. BI 1034020 – NON-DISCLOSED NANOBODY FORMAT //
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Nanobody with potential to treat Alzheimer’s disease Phase I study in healthy volunteers ongoing Boehringer Ingelheim fully responsible for the programme
POTENTIAL AS A VALUABLE TREATMENT OPTION FOR PATIENTS SUFFERING FROM THIS COMPLEX DISEASE FOR WHICH NO ADEQUATE DRUGS ARE CURRENTLY AVAILABLE
35.
In October 2013, Ablynx announced that its partner Boehringer Ingelheim dosed the first healthy volunteers in a Phase I clinical trial as part of the evaluation of a Nanobody for the treatment of Alzheimer’s disease. This is the first clinical programme that emerged from the collaboration and resulted in a milestone payment of €5 million to Ablynx. Results of the Phase I study are expected in late 2014. ALZHEIMER’S DISEASE COLLABORATION WITH BOEHRINGER INGELHEIM
In January 2007, Ablynx announced a single target research and licensing agreement with Boehringer Ingelheim with a potential deal value of €206 million plus royalties. Both companies are collaborating to identify Nanobodies to a specific biological target believed to be relevant in Alzheimer’s disease and Boehringer Ingelheim gained the exclusive worldwide license to develop and commercialise such Nanobodies. Ablynx received an upfront payment and R&D payments and will also receive milestone payments and royalties when Nanobodies proceed through development and reach the market.
BUSINESS SECTION
SHAREHOLDE INFORMATION
ERS’ N
FREE FLOAT
14%
2008
15%
2009
85%
53% 36% 27%
2010
2011
2012
2013
PRODUCTS IN THE CLINIC
4 3
2008
2009
7
5
2010
7
5
2011
2012
2013
REVENUES (€ MILLIONS)
30
17
2008
2009
36 31 27 22
2010
2011
2012
2013
NUMBER OF EMPLOYEES
300
26 TOTAL
250
233
G&A R&D
200
205 192 174
150
100
50
32
38
2008
2009
0
292
284
62
261 250 244 224
221
38
42
40
40
2010
2011
2012
2013
200
CASH AND EXPENSES (€ MILLIONS) CASH POSITION
150
CASH INCOME OPEX
113.53 92.32
100
57.39 51.84
50 37.34
31.09 22.57
19.29 0
2008
2009
200.37
157.57
115.84
83.82 62.77
66.73 56.28
53.77
36.46 28.51
2010
2011
2012
2013
KEY FIGURES
(€’000)
2013
R&D income Grants
33,181 2,761
Total revenues R&D expenses G&A expenses
35,942 (43,699) ( (10,044) (
Total expenses Other operating income/(expense)
(53,743) ( 128
Operating result Net financial result Result before taxes
(17,673) ( (1,797) (19,470) (
Income tax expense Net result of the year Basic and diluted loss per year
ANNUAL REPORT 2013 / ABLYNX
48.
0
(19,470) ( (0)
BUSINESS SECTION
2012 2011 2010 2009 2008
25,645 19,861 29,196 28,068 15,557
1,082 2,008 2,263 1,615 1,198
26,727 21,869 31,432 29,683 16,755 (46,868) (56,307) (48,512) (42,800) (29,889) (9,409) (10,423) (8,882) (9,044) (7,447)
(56,277) (66,730) (57,394) (51,844) (37,336) (222) (668) 97 1 6
(29,772) (45,529) (25,865) (22,160) (20,575) 1,264 1,634 1,395 2,165 5,352 (28,508) (43,895) (24,470) (19,995) (15,223) 0 0 0 0 0
(28,508) (43,895) (24,470) (19,995) (15,223) (1) (1) (1) (1) (0)
ANNUAL REPORT 2013 / ABLYNX
49.
BUSINESS SECTION
THE SHARES IN 2013
10.01% Abingworth (UK)
On 31 December 2013, there were 48,992,646 shares representing a total share capital of the Company of â&#x201A;Ź91,563,916.40 . The total number of outstanding warrants (in number of shares) at 31 December 2013 was 2,845,098 with the total number of fully diluted shares being 51,837,744. Ablynxâ&#x20AC;&#x2122;s shares are traded on NYSE Euronext Brussels, under the ticker symbol ABLX. Based on the most recent notifications received until 31 December 2013, the shareholder structure of the Company is as follows:
73.14% Other institutional and retail investors
5.21% Biotech Value Fund (US)
4.37% Boehringer Ingelheim (DE)
4.24% Perceptive Advisors (US)
3.03% Aviva (UK)
THE SHARES IN 2013 ( IN €)
9
ABLX
8
7
6
5
4 March 2013
May 2013
3
July 2013
September 2013
November 2013
THE SHARES IN 2013
60%
ABLX BEL MID BEL PHARMA
40%
NEXT BIOTECH
20%
0%
-20%
-40% March 2013
May 2013
3
July 2013
September 2013
November 2013
ANALYST COVERAGE Ablynx is covered by six analysts: BROKER ANALYST Berenberg Bank Charles Cooper Bryan Garnier Mathieu Chabert Helvea Olav Zilian KBC Securities Jan De Kerpel Kempen & Co Sachin Soni Petercam Roderick Verhelst
RATING END 2013 Buy Buy Buy Buy Buy Add
FINANCIAL CALENDAR 2014 DATE EVENT 24 April Annual General Meeting 14 May Results Q1 2014 28 August Half year results 2014 13 November Results Q3 2014
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BUSINESS SECTION
SHAREHOLDERS’ CLUBS AT ABLYNX’S HEADQUARTERS In 2014, Ablynx will organise quarterly events for individual investors at its headquarters in Ghent during which a group presentation will be given followed by a guided visit to the laboratories and a networking drink. The events will be held in Dutch and will start at 5.45pm on the following days: 21 May 17 September 10 December If you would like to attend a shareholders club, please email investors@ablynx.com, mentioning your name and preferred day. The events are on a “first come, first served” basis.
INVESTOR RELATIONS CONTACT Marieke Vermeersch Associate Director Investor Relations Ablynx nv Technologiepark 21 9052 Zwijnaarde (Ghent) Belgium Email: marieke.vermeersch@ablynx.com Tel: +32 9 262 00 82 Website: www.ablynx.com
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CORPORATE GOVERNANCE AND FINANCIAL INFORMATION
CONTENTS ANNUAL REPORT 2013 / ABLYNX
1. REPORT OF THE BOARD OF DIRECTORS 1.1. Strategic Highlights 1.2. Analysis of Results of Operations 1.3. Balance Sheet Analysis 1.4. Cash Flow Analysis 1.5. Outlook 2014 1.6. Corporate Governance Statement 1.7. Transactions within the Authorised Capital 1.8. Acquisition of Own Securities 1.9. Use of Financial Instruments by the Group 1.10. Circumstances that could considerably affect the Development of the Group 1.11. Research and Development 1.12. Conflicting Interests of Directors (Art. 523 of the Belgian Companies Code) 1.13. Risks 1.14. Independence and Expertise of at least one Member of the Audit Committee 1.15. Justification of the Valuation Rules 1.16. Appropriation of Results 1.17. Important Events subsequent to the Accounting Reference Date 1.18. Grant of Discharge to the Directors and the Statutory Auditor
64.
2.
RESPONSIBILITY STATEMENT 122.
3.
STATUTORY AUDITOR’S REPORT TO 123. THE SHAREHOLDERS’ MEETING ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013
4.
CONSOLIDATED BALANCE SHEET 126.
5.
CONSOLIDATED STATEMENT OF 127. COMPREHENSIVE INCOME
6.
CONSOLIDATED CASH FLOW STATEMENT 128.
7.
CONSOLIDATED STATEMENT OF 129. CHANGES IN SHAREHOLDER’S EQUITY
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CORPORATE GOVERNANCE & FINANCIAL REVIEW
8. 9. 10. 11.
NOTES TO THE CONSOLIDATED 130. FINANCIAL STATEMENTS 8.1. General Information 8.2. Summary of Significant Accounting Policies 8.3. Financial Risk Management 8.4. Critical Accounting Estimates and Judgements 8.5. Segment Information 8.6. Intangible Fixed Assets 8.7. Property, Plant and Equipment 8.8. Restricted Cash 8.9. Tax 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. Research and Development Expenses 8.21. General and Administrative Expenses 8.22. Other Income and Expenses 8.23. Employee Benefit Expense 8.24. Operating Leases 8.25. Finance Income and Expenses 8.26. Income Tax Expense 8.27. Loss Per Share 8.28. Contingencies and Arbitrations 8.29. Commitments 8.30. Related Party Transactions 8.31. Events after Balance Sheet Date DISCLOSURE AUDIT FEES 182. CONDENSED STATUTORY FINANCIAL 183. STATEMENTS OF ABLYNX AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2013 SUMMARY OF VALUATION RULES AND 186. ADDITIONAL INFORMATION
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01. REPORT OF THE BOARD OF DIRECTORS
Dear Shareholders, We are pleased to present to you the consolidated financial statements for the fiscal year ended 31 December 2013 prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU.
1.1. STRATEGIC HIGHLIGHTS During 2013, revenues were €35.9 million (2012: €26.7 million) comprising milestone payments, upfront payment recognitions, payments for full-time equivalents and grants. Cash-income for the period of €157.6 million showed a fourfold increase compared with 2012 (2012: €36.5 million). Total research and development costs were €43.7 million (2012: €46.9 million) and general and administrative costs remained well under control at €10.0 million (2012: €9.4 million). The loss from continuing operations (before tax and net financial result) decreased by 41% to €17.7 million (2012: €29.8 million). The net loss for the period was €19.5 million (2012: €28.5 million). The net cash burn (excluding the proceeds from the private placement completed in February 2013 and the upfront payment of US$175 million received from AbbVie in October 2013) for the period was €20.0 million. The Company ended the year with €200.4 million in cash, cash equivalents, restricted cash and short-term investments. Pipeline update At the end of 2013, Ablynx had seven wholly-owned and partnered Nanobodies in the clinic, three in Phase II and four in Phase I clinical development compared to five Nanobody-based products in the clinic at the end of 2012. In February, the Company reported compelling Phase IIa data for its anti-IL-6R Nanobody, ALX-0061, demonstrating that intravenous administration of ALX-0061 in patients with RA resulted in a strong therapeutic effect at week 24. The Nanobody treatment was well tolerated at all doses, there was no increase in adverse events upon extension of treatment and no anti-drug antibodies were detected. In June, Merck Serono initiated a Phase I study with the bispecific anti-IL-17A/F Nanobody, ALX-0761, which triggered a milestone payment of €2.5 million to Ablynx. At the time of the start of the Phase I
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study, Ablynx announced that it had converted this co-discovery/ co-development arrangement into a classical licensing deal with milestone payments and royalties. As such, Merck Serono now has an exclusive license to the programme and is fully responsible for its further development and commercialisation. ALX-0761 has the potential to treat inflammatory diseases. In July, two Phase I studies with the inhaled anti-RSV Nanobody, ALX0171, were initiated. The first was a safety study in subjects with hyperresponsive airways to determine the potential occurrence and then reversibility of bronchoconstriction following inhalation of ALX-0171. The second was a PK study in healthy adults to measure and to investigate the concentration of the Nanobody locally and systemically with the goal to obtain additional PK parameters for further dose selection. In August, the study protocol for the worldwide Phase II TITAN study, using the anti-vWF Nanobody, caplacizumab to treat acquired TTP, was adapted to facilitate recruitment. At the end of 2013, some improvement in recruitment was observed. In October, Boehringer Ingelheim initiated a Phase I study with BI 1034020 to treat Alzheimer’s disease. The start of the study triggered a €5 million milestone payment to Ablynx. Partnerships update In September, Ablynx and AbbVie entered into an exclusive, global license agreement to develop and commercialise ALX-0061 for the treatment of inflammatory diseases, including RA and SLE. Under the terms of the agreement, Ablynx received an upfront payment of US$175 million of which a large portion will be spent over the next four years to execute the programme. In addition, Ablynx is eligible to receive up to US$665 million in milestone payments plus tiered double-digit royalties. Also in September, Ablynx and Merck Serono further expanded their relationship through the signing of a major research alliance to discover and develop Nanobodies against a number of disease targets that play a role in oncology, immuno-oncology, immunology and neurology. The research alliance could evolve into at least four co-discovery and co-development agreements and could generate >€100 million in cashincome for Ablynx in the next 6.5 years.
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In October, Ablynx signed an exclusive license agreement with Eddingpharm for the development and commercialisation of the antiRANKL Nanobody, ALX-0141, in the mainland of the People’s Republic of China, the Hong Kong and Macao Special Administrative Regions, and Taiwan, for all indications, including osteoporosis and bone metastases. Ablynx received an upfront payment of €2 million and is eligible to receive up to 20% royalties on net sales generated by Eddingpharm. In addition, the Company will have access to the clinical data generated by Eddingpharm to support potential licensing discussions in other geographic regions. This deal represents Ablynx’s first entry into the emerging markets. The feasibility studies with Spirogen (PBD toxin-Nanobody drug conjugates in cancer therapy) and Algeta (thorium277-Nanobody drug conjugates in cancer therapy) continue to move forward following AstraZeneca’s acquisition of Spirogen and Bayer’s acquisition of Algeta. Corporate developments During 2013, Ablynx further strengthened its management team with two promotions and one new appointment. Kim Simonsen, who was previously Director of Project Management, was appointed to the newly created position of Chief Operations Officer, and Dominique Tersago, who previously held the position of Senior Medical Director, was appointed Chief Medical Officer. Tony de Fougerolles was appointed Chief Scientific Officer, joining from Moderna Therapeutics in Boston, having also worked at Alnylam and Biogen Idec. Eva-Lotta Allan (Chief Business Officer), Josi Holz (Chief Medical Officer) and Andreas Menrad (Chief Scientific Officer) left the Company during 2013. Also during 2013, Ablynx established a reorganised Board of Directors with significant industry experience. Four new independent Directors were appointed (Dr Peter Fellner, Catherine Moukheibir, Dr William Jenkins and Dr Bo Jesper Hansen). The roles of Chairman and CEO were separated with Dr Edwin Moses remaining CEO and Dr Peter Fellner appointed as his successor as Chairman. The three remaining nonexecutive Directors representing the venture capital shareholders (Jim Van heusden, Denis Lucquin and Stephen Bunting) resigned, as did three independent Directors (Dr Roger Perlmutter who resigned to avoid
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conflicts of interest following his appointment at Merck & Co, and Mats Pettersson and Dr Geert Cauwenbergh who retired after five years on the Ablynx Board). Approximately 17 million venture capital held shares were placed during the year with institutional investors in Europe and the United States. At the end of 2013, only Abingworth, of all the founding venture capital shareholders, retained its holding in Ablynx stock.
1.2. ANALYSIS OF RESULTS OF OPERATIONS Revenues In 2013, revenues increased by 34% to €35.9 million (2012: €26.7 million), driven by FTE funding, milestone payments from Boehringer Ingelheim and Merck Serono, recognised income from the upfront payment received from AbbVie, and higher grant income. Research and development expenses Total research and development costs decreased to €43.7 million (2012: €46.9 million), in line with lower external development costs which are largely related to the timing of clinical trials spending. General and administrative expenses General and administrative costs remained well under control at €10.0 million (2012: €9.4 million). Other operating Income Other operating income was €0.1 million (2012: operating expenses of €0.2 million). Operating result As a result of the foregoing, the loss from continuing operations, before tax and net financial result, decreased substantially to €17.7 million (2012: €29.8 million). Net financial result Finance income (€0.9 million) primarily comprises interest income from bank deposits and floating and fixed rate notes. Finance expenses (€2.7 million) relate to the impact of discounting the tax credit, the realised exchange rate losses of €0.7 million on US$ sold in 2013 and the unrealised exchange rate losses of €1.3 million at the end of 2013 on
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the remaining US$92 million from the US$175 million upfront payment received from AbbVie in October 2013. As a result, the net finance result in 2013 was -€1.8 million (2012: net finance result of €1.3 million). Net result As a result of the foregoing, the net loss decreased to €19.5 million (2012: €28.5 million). Loss for the period As the Company incurred losses in all of the relevant periods, the Company had no taxable income, and therefore paid no taxes.
1.3. BALANCE SHEET ANALYSIS The Company’s intangible assets include a portfolio of patents which are being amortised over approximately 12 years and technology licenses which are being amortised over 5, 18 and 20 years. The Company has not capitalised any other patents and it expenses all its research and development activities in the IFRS consolidated financial statements. The intangible assets also include software licenses. The Company’s non-current tangible assets include the Company’s laboratory and office equipment, the investments in its facilities and €2.3 million restricted cash, which is a cash pledge that the Company has provided for the lease of its building. The Company does not own any real estate but continues to invest in equipment for its research activities. Tax receivables include a tax credit of €8 million. The Company’s current assets consist mainly of €198 million other short term investments, cash and cash equivalents, including US$92 million. Current liabilities consist mainly of trade payables and deferred income related to the upfronts received from the partners. The Company’s equity increased from €31.7 million to €46.2 million mainly as a result of the net proceeds of €30.1 million from the private placement in February 2013. The equity increase has partially been offset by the net loss for the year (€19.5 million).
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1.4. CASH FLOW ANALYSIS There was a net cash inflow from operating activities of €105.6 million in 2013, compared to a net outflow of €21.2 million in 2012. The change is mainly related to an increase in net working capital resulting from the US$175 million upfront payment received from AbbVie in October 2013. There was a net cash outflow from investing activities of €132.0 million in 2013, as compared to a net cash inflow of €22.9 million in 2012. The net cash outflow in 2013 comprises primarily the net movements in short-term financial investments as a result of the transfer of cash received to deposit accounts. There was a net cash inflow from financing activities of €32.4 million, as compared to a net cash outflow of €0.7 million in 2012, mainly as a result of the net proceeds of €30.1 million from the private placement in February 2013.
1.5. OUTLOOK 2014 Ablynx is well positioned for further growth during the course of 2014, due to its world-leading Nanobody technology, broad pipeline and strong cash position. Ablynx’s cash position will enable the Company to continue to invest in its earlier stage discovery product pipeline and Nanobody technology as well as further advancing its lead whollyowned and partnered programmes. By mid-2014, Ablynx expects to announce potential proof-of-concept results from the Phase II study with caplacizumab (anti-vWF) in patients with acquired TTP. During the year 2014, Ablynx expects to report clinical results for the Phase I study with the subcutaneous formulation of ALX-0061 (anti‑IL‑6R), and two Phase I studies with ALX-0171 (anti-RSV). The Company also expects that two partnered programmes will have completed Phase I development: the Phase I study performed by Merck Serono with ALX-0761 (anti-IL-17A/F); and the Phase I study with the Nanobody for Alzheimer’s disease (BI 1034020) performed by Boehringer Ingelheim.
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In addition, Ablynx expects to start the first-in-infant Phase II study with ALX-0171 to treat RSV infection in infants and to advance the preparations for the Phase II studies in RA and SLE with the subcutaneous form of ALX-0061. Ablynx also expects to receive potential milestone payments from ongoing collaborations and potentially enter into additional partnering deals. Finally, good cash management continues to be a priority for the Company, with a strong focus on net cash burn and the generation of cash to support the ongoing development of the Company. For the full year 2014, Ablynx expects to have a net cash burn in the range of €30€35 million.
1.6. CORPORATE GOVERNANCE STATEMENT 1.6.1. REFERENCE CODE – COMPLY OR EXPLAIN
The Corporate Governance of the Company has been organised pursuant to the Belgian Companies Code and the Company’s Articles of Association. The Company’s Corporate Governance Charter is available on the Ablynx website. The Company’s Corporate Governance Charter and this Corporate Governance Statement have been adopted in accordance with the recommendations set out in the Belgian Corporate Governance Code (the “CGC”) that was issued on 9 December 2004 by the Belgian Corporate Governance Committee and subsequently amended on 12 March 2009. The Charter is regularly updated and the date of modification is mentioned each time. The Company has opted for a two-tier governance structure. As a result, the governance structure of Ablynx is based on a distinction between: • The management of Ablynx (including the daily management), a task conducted by the Executive Committee (“Directiecomité”) within the meaning of Art. 524bis of the Belgian Companies Code and within the framework of the general strategy defined by, and under the supervision of the Board of Directors; and • The development of the general strategy of Ablynx, the supervision of the Executive Committee and the exercise of specific powers attributed
ANNUAL REPORT 2013 / ABLYNX
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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 1.13. 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 1.5 CGC: for reasons of continuity in the management of the Company, the Chairman of the Board of Directors and the CEO were one and the same individual until 12 November 2013. On 12 November 2013, Dr Peter Fellner took over the role of Chairman of the Board. • Provision 2.1: gender diversity. Since the IPO, the Board was always composed of men. The Company commits to build a diverse list of candidates for new positions in the future. In this view Catherine Moukheibir has joined the Board since 2 September 2013. She is also a member of the Audit Committee. • Provision 2.9: the Company has no Company Secretary. The CFO acts as Company Secretary with the assistance of external counsels. • Provision 5.2 CGC: the Company has no overall formal internal auditor because of the size of the Company, however, the Audit Committee regularly evaluates the need for this function and/or commissions external parties to conduct specific internal audit missions and report back to the Audit Committee. • Provision 7.7 CGC: only the independent Directors shall receive a fixed remuneration in consideration of their membership to the Board of Directors and their attendance in the meetings of the committees of which they are members. In principle, they will not receive any performance-related remuneration, nor will any options or warrants be granted to them in their capacity as Director. However, upon recommendation of the Nomination and Remuneration Committee, the Board of Directors may propose to the Shareholders Meeting to deviate from that principle in application of Art. 554 BCC, if, to the Board of Directors’ reasonable opinion, the granting of options or warrants would be necessary or useful to attract or retain independent Directors with the most relevant experience and expertise.
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1.6.2. CAPITAL AND SHARES
The following capital increases took place in 2013: On 18 January 2013, the Company issued 61,812 new shares in exchange for €329,619.51 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €115,588.44 and €214,031.07 respectively. On 28 February 2013 the Company raised €31.5 million through a private placement of new shares via an accelerated bookbuilding procedure. The company placed 4,377,919 new shares in exchange for €31,521,016.8. The par value and share premium amounted to €8,186,708.53 and €23,334,308.27 respectively. On 5 March 2013, the Company issued 348,400 new shares in exchange for €858,087 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €651,508 and to €206,579 respectively. On 18 April 2013, the Company issued 22,686 new shares in exchange for €74,651.94 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €41,547.82 and to €33,104.12 respectively. On 18 July 2013, the Company issued 273,913 new shares in exchange for €884,476.40 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €512,217.31 and €372,259.09 respectively. On 17 October 2013, the Company issued 25,531 new shares in exchange for €147,161.69 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €47,742.97 and €99.418,72 respectively. On 25 November 2013, the Company issued 165,000 new shares in exchange for €330,000 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €308,550 and €21,450 respectively. The share capital consists of shares, which are fully paid up, with a par value of €1.87 per share.
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• • • •
Number of shares on 31 December 2012 Number of new shares (exercise of warrants) Number of new shares (private placement) Number of shares on 31 December 2013
43,717,385 897,342 4,377,919 48,992,646
During the Board meeting of 29 January 2013 the issuance of a maximum number of 295,000 warrants in favour of certain employees and also the issue of 172,500 warrants in favour of certain consultants was approved and 467,000 warrants have been issued. Each warrant gives the beneficiaries the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the average closing share price over a period of 30 days before the date of the grant (from €5.93 to €7.37 per warrant). The warrants vest rateably over 4 years: 25 % of the warrants vest after one year; thereafter, the remaining 75 % become vested on a monthly basis (2.083 % per month). The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants have been granted (thus starting as from 1 January 2017 until October 2019). In case of normal termination of the employee contract or the consulting agreement, all the vested warrants need to be exercised during the current or next exercise period. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed upon termination of the agreement. The duration of the warrants is seven years as of the issue date of the warrants. Any warrants that have not been exercised within seven years of their creation become null and void. During the Extraordinary General Meeting of Shareholders of 5 August 2013, the issuance of a maximum number of 50,000 warrants in favour of certain employees and also the issuance of 570,000 warrants in favour of certain consultants and Directors was approved and 334,340 warrants have been issued. Each warrant gives the beneficiaries the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the average closing share price over a
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CORPORATE GOVERNANCE & FINANCIAL REVIEW
period of 30 days before the date of the grant (from €6.65 to €7.54 per warrant). The warrants vest rateably over 4 years: 25 % of the warrants vest after one year; thereafter, the remaining 75 % become vested on a monthly basis (2.083 % per month). The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants have been granted (thus starting as from 1 January 2017 until April 2020). In case of normal termination of the employee contract, the consulting agreement or mandate, all the vested warrants need to be exercised during the current or next exercise period. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed upon termination of the agreement or mandate. The duration of the warrants is seven years as of the issue date of the warrants. Any warrants that have not been exercised within seven years of their creation become null and void. During the Extraordinary General Meeting of Shareholders of 25 November 2013, the issuance of a maximum of 50.000 warrants in favour of a certain Director was approved. Each warrant gives the beneficiary the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the average closing share price over a period of 30 days before the date of the grant (€7.27 per warrant). The warrants vest rateably over 3 years: 33.33 % of the warrants vest after one year; thereafter, the remaining 66.67 % become vested on a monthly basis (2.78 % per month). The warrants can only be exercised when vested and as from the beginning of the third calendar year following the year in which the warrants have been granted (thus starting as from 1 January 2017 until July 2018). In case of normal termination of the mandate all the vested warrants need to be exercised during the current or next exercise period. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed upon termination of the mandate. The duration of the warrants is five years. Any warrants that have not been exercised within five years of their creation become null and void.
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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. The Company had a total of 3,312,535 outstanding warrants at the end of 2013.
1.6.3. SHAREHOLDERS AND SHAREHOLDER STRUCTURE
As at 31 December 2013, the shareholding structure is as follows (based on the most recent transparency declarations): Shareholder Address Voting rights % Voting rights Aviva Investors Global No 1 Poultry, 1,482,342 3.03% Services Limited EC2R 8EJ London, United Kingdom Abingworth 38 Jermyn Street, 4,902,951 10.01% Management Limited SW1Y 6DN London, and Abingworth LLP United Kingdom C.H. Boehringer Binger Strasse 173, 2,142,857 4.37% Sohn AG & Co. KG 55216 Ingelheim am Rhein, Germany Biotech Value Fund 1 Sansome Street 2,554,521 5.21% 30th Floor, San Francisco CA 94104, USA Perceptive Advisors Park Avenue, 2,077,590 4.24% 25th Floor, New York, NY 10022, USA Other 42,354,101 73.14%
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from left to right: Russell G. Greig, Peter Fellner, William J. Jenkins, Catherine Moukheibir, Bo Jesper Hansen, Edwin Moses, Remi Vermeiren
1.6.4. BOARD OF DIRECTORS 1.6.4.1. COMPOSITION OF THE BOARD
The Board of Directors consists of seven members, one of whom is an executive Director, six of whom are independent non-executive Directors. Peter Fellner member of the Board of Directors since 7 November 2013 Chairman of the Board since 12 November 2013 Dr Peter Fellner is currently Chairman of the Board of Consort Medical and Optos. In addition, he serves as Chairman of the biotech companies Vernalis and Biotie Therapies, and was Vice Chairman of Astex Pharmaceuticals which has been acquired by Otsuka Pharmaceuticals for US$886 million. He is currently a Director of the global biopharmaceutical company UCB, where he is Chairman of the Science Committee of the Board, and is a member of the Novo A/S Advisory Group. Dr Fellner previously served as Chairman of Acambis from 2006 until its acquisition by Sanofi Aventis in 2008, and of Premier Research Group from 2007 to 2008, when it was acquired by a private-equity backed group. He also served as Chairman of Celltech Group from 2003 to July 2004, until its acquisition for €2.3 billion by UCB, having been CEO from 1990 onwards during which he oversaw the Company’s growth from a small research-based company to UK’s largest biotech company. Before joining Celltech, he was CEO of Roche UK from 1986 to 1990. Peter Fellner was nominated Chairman of the Board on 12 November 2013.
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Edwin Moses member of the Board of Directors and Chief Executive Officer After completing his post-doctoral research in Germany, Edwin Moses began a commercial career with successful periods spent at Amersham International, Enzymatix and Raggio-Italgene. From 1993-2001, first as CEO and later as Chairman, he was responsible for the growth of Oxford Asymmetry (OAI) through a series of venture rounds cumulating in a flotation (LSE) in 1998 at a value of £120 million. This was followed by a sale of the company to Evotec Biosystems in 2000 for £316 million. During this period, OAI grew from four people to over 250. Over the past fourteen years, Edwin has played an important role at Board level (primarily as Chairman) in over 15 European life science companies. During this time he has been involved in a number of financing rounds, a series of M&A transactions and four IPOs. He has been Chairman of Ablynx from 2004 till 2013, and in 2006 he was appointed Chief Executive Officer of the Company. Apart from and in addition to his duties as CEO of the Company, Edwin Moses is the Chairman of the Board of Capricorn Health-tech Fund (Belgium).Furthermore, in addition to Ablynx, he has held Board memberships with the following companies: Clinphone Group plc (UK), Fusion IP plc (formerly Biofusion plc) (UK), Phoqus Pharmaceuticals Ltd (UK), Pharmaceutical Profiles Ltd (UK), Proimmune Ltd (UK), Paradigm Therapeutics Ltd (UK), Avantium Technologies (the Netherlands), Ionix Pharmaceuticals Ltd (UK), Evotec OAI AG (Germany), Bioimage A/S (Denmark), Inpharmatica Ltd (UK), Prolysis Ltd (UK), ProPharma Ltd (UK), Lectus Therapeutics Ltd. (UK) and the European Biopharmaceutical Enterprises. Russell G. Greig Dr Greig has more than 30 years’ experience in the pharmaceutical industry, with knowledge and expertise in research and development, business development and commercial operations. He spent the majority of his career at GlaxoSmithKline, where he held a number of positions including GSK’s President of Pharmaceuticals International from 2003 to 2008 and Senior Vice President Worldwide Business Development. From 2008 to 2010, Dr Greig was also President of SR One, GSK’s Corporate Venture Group. He is currently Chairman of AM Pharma (The Netherlands) and Board Member of Novavax AB (Sweden) and of BioAlliance (France), as well as a Director of Tigenix (Belgium) and of Edinburgh BioQuarter (Scotland). He also acts as a consultant to
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Genocea BioSciences (Boston, USA), BigDNA (Scotland) and to Scottish Enterprises, and is Venture Partner to Kurma Life Sciences (France). He served as acting CEO at Genocea and Isconova for an interim period. He was also a member of the Scottish Scientific Advisory Committee and was Chairman of Syntaxin (UK), which was acquired by Ipsen. Remi Vermeiren Before Remi Vermeiren became an independent Director of Ablynx, he had a 43 year long career at Kredietbank NV, which in 1998 merged with Cera Bank and ABB Insurance into KBC Bank and Insurance Group. In the earlier years, he was mainly involved in Asset Management, Trading and Administration of Securities, Treasury and International and Investment banking. From 1989 on, he was a member of the Executive Committee responsible for the day-to-day management of the bank. From 1998 until 2003, he held the function of Chairman of the KBC Bank and Insurance Group and of KBC Bank. During this period, he was mainly involved in defining the strategy of the new group, integration of the banking and insurance activities, implementation of the merger of the two banks and the cost reduction going with it, and expansion of KBC into Central Europe where it became one of the most important Western European investors in the banking and insurance industry. Currently, Mr Vermeiren is also member of a number of quoted and non-quoted companies and of charitable organisations, including of ‘‘Foundation RV’’ set up and funded by himself. He is currently a member of the Board or supervisory bodies of the following companies: ACP II SCA (Luxembourg) (Liquidator) and Zinner NV (Belgium). In the past five years, he has held positions as a member of the Board or administrative, management or supervisory bodies of the following companies: Devgen NV (Belgium), Afinia Plastics NV (Belgium), IFB SPA (Italy), Cumerio NV (Belgium) and MCS NV. Remi Vermeiren holds a degree in commercial and financial sciences. Catherine Moukheibir member of the Board of Directors since 2 September 2013 Catherine Moukheibir has been in C-level positions in several European biotech companies after an initial career in strategy consulting and investment banking in Boston and London. Her particular experience lies in aligning corporate and financial strategy appropriate to various stages of a biotech’s development, on the continuum from venture
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capital funding to public market or M&A. She is currently a nonexecutive Board member of Creabilis and Ablynx and 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 member of the Board of Directors since 7 November 2013 Dr Bo Jesper Hansen, M.D., PhD, currently serves as Executive Chairman of the Boards of SOBI AB (Swedish Orphan Biovitrum AB) and TopoTarget A/S. He is also non-executive Director of a number of biotech and pharma companies including Orphazyme ApS, Newron Pharmaceuticals SpA, CMC AB, Hyperion Therapeutics Inc. and Genspera Inc. Dr Hansen served as CEO and President and as Director to the Board of Swedish Orphan International until the merger with Biovitrum, forming Swedish Orphan Biovitrum. He also was nonexecutive Director of Gambro until its acquisition by Baxter, and Zymenex, until its acquisition by Chiesi. He founded Scandinavian Medical Research during which he served as Medical Advisor for SynthĂŠlabo, Pfizer, Pharmacia and Yamanouchi Pharmaceutical. William J. Jenkins member of the Board of Directors since 7 November 2013 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, member of the Board of Allecra Therapeutics GmbH and of Allocyte Pharmaceuticals AG, an ad hoc member of the Board of Evotec and a member of the Advisory Board of Chiesi Farmaceutici. In addition, he is a member of the Scientific Advisory Boards of BB Biotech Ventures II and III funds, and until recently of Nicholas Piramal India.
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Stephen Bunting, Abingworth Management member of the Board of Directors until 7 October 2013 Denis Lucquin, Sofinnova Partners member of the Board of Directors until 7 October 2013 Geert Cauwenbergh member of the Board of Directors until 25 April 2013 Roger Perlmutter member of the Board of Directors until 8 March 2013 Mats Pettersson member of the Board of Directors until 26 February 2013 Jim Van heusden, Gimv member of the Board of Directors until 20 February 2013
Name Year Position Term Board Committee of birth (1) Memberships (3) Peter Fellner 1943 Independent 2017 Director since 7 November 2013 and Chairman since 12 November 2013 Edwin Moses (2) 1954 Chairman 2015 until 12 November 2013 and Chief Executive Officer Remi Vermeiren 1940 Independent 2015 Chairman of the Audit Director Committee Greig Biotechnology 1952 Independent 2016 Member of the Global Consulting Director Nomination and Inc, represented Remuneration by its permanent Committee and Audit representative , Committee Russell Greig
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Catherine 1959 Independent 2017 Member of the Audit Moukheibir Director from Committee 2 September 2013 William Jenkins (3) 1947 Independent 2017 Member of the Pharma Consulting, Director from Nomination and represented by its 7 November Remuneration Principal William 2013 Committee J. Jenkins Orfacare Consulting 1958 Independent 2017 Member of the represented by Director from Nomination and Bo Jesper Hansen (3) 7 November Remuneration 2013 Committee Stephen Bunting 1953 Non-executive - Member of the Director until Nomination and 7 October Remuneration 2013 Committee Sofinnova Partners 1957 Non-executive - S.A., represented Director until by its permanent 7 October representative, 2013 Denis Lucquin Geert Cauwenbergh 1954 Independent - Member of the Director until Nomination and 25 April 2013 Remuneration Committee Roger Perlmutter 1952 Independent - Director until 8 March 2013 Jim Van heusden 1971 Non-executive- Member of the Audit Director until Committee 20 February 2013 Mats Pettersson 1945 Independent Chairman of the Director until Nomination and 26 February Remuneration 2013 Committee and Member of the Audit Committee Notes: (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. Mr. Moses has taken up the position of CEO on 6 June 2006. Mr. Moses was also Chairman of the Board until November 2013. (3)
Newly appointed Directors during the Extraordinary Shareholders Meeting held on 7 November 2013
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1.6.4.2. ACTIVITY REPORT
In 2013, eighteen Board meetings have been held. In five of these meetings, the strategy and/or the company results have been discussed. All members of the Board were present at all meetings except Bo Jesper Hansen. All other Board meetings related to the exercise of warrants and the preparation of General Assemblies.
1.6.4.3. PERFORMANCE EVALUATION OF THE BOARD
Under the lead of the Chairman, the Board started a performance evaluation in 2011 to determine whether the Board and its Committees are functioning effectively. The evaluation process has the following objectives: assessing how the Board operates; verifying that important issues are adequately prepared and discussed; evaluating the actual composition of each Director’s work, the Director’s presence in the Board and Committee meetings and his/her constructive involvement in discussions and decision-making and verifying the Board’s current composition against the Board’s desired composition. The non-executive Directors will assess their interactions with the Executive Committee. At least once a year, they meet in the absence of the CEO. No formal Board decision can be taken in such meeting. The Board has discussed the composition and performance of the Board at several occasions in 2013. Also during 2013, Ablynx established a reorganised Board of Directors with significant industry experience. Four new independent Directors were appointed (Dr Peter Fellner, Catherine Moukheibir, Dr William J. Jenkins and Dr Bo Jesper Hansen). The roles of Chairman and CEO were separated with Dr Edwin Moses remaining CEO and Dr Peter Fellner appointed as his successor as Chairman. The three remaining non-executive Directors representing the venture capital shareholders (Jim Van heusden, Denis Lucquin and Stephen Bunting) resigned, as did three independent Directors (Dr Roger Perlmutter who resigned to avoid conflicts of interest following his appointment at Merck & Co, and Mats Pettersson and Dr Geert Cauwenbergh who retired after five years on the Ablynx Board). 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
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at the time of the appointment or the re-election of the Chairman (of the Board and of the Board’s Committees). The Board shall act on the results of the performance evaluation by recognising its strengths and addressing its weaknesses. Where appropriate, this will involve proposing new members for appointment, proposing not to re-elect existing members or taking any measure deemed appropriate for the effective operation of the Board. Since the IPO, the Board was always composed of men. The Company commits to build a diverse list of candidates for new positions in the future. The nomination of Catherine Moukheibir in September is proof of this commitment.
1.6.5. AUDIT COMMITTEE
As of 8 January 2009 (the date on which the Law of 17 December 2008 with regard to the incorporation of an Audit Committee in listed companies and financial companies entered into effect), “large” listed companies (as defined in Art. 526bis of the Belgian Companies Code) are legally obliged to establish an Audit Committee within their Boards of Directors. The Board of Directors has set up an Audit Committee. The Audit Committee was in 2013 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), Jim Van heusden (until 20 February 2013), Mats Pettersson (until 8 March 2013), Russell Greig and Catherine Moukheibir (from 2 September 2013). 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 4 times in 2013. At these meetings the financial results, budgets, treasury and the financial press releases are discussed.
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The attendance was as follows: Remi Vermeiren (100â&#x20AC;&#x2030;%), Russel Greig (100%) , Catherine Moukheibir (100% of meetings since nomination) and Mats Pettersson (0%, resigned) 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 Ablynxâ&#x20AC;&#x2122;s website in the Corporate Governance Charter (Schedule D).
1.6.6. NOMINATION AND REMUNERATION COMMITTEE
The Nomination and Remuneration Committee is appointed by the Board of Directors of Ablynx to advise the Board in its duties and responsibilities relating to the Nomination and the Compensation and Benefit programmes of Executive & non-executive Directors, the Chief Executive Officer and the Executive Committee including other terms of employment for the CEO and the Executive Committee. The Nomination and Remuneration Committee at the same time reviews possible warrant plans for Employees. The basic principle is that the level of remuneration should be sufficient to attract, retain and motivate on each level the most talented individuals for the job.
1.6.6.1. MEMBERSHIP AND CHAIRMANSHIP
The Nomination and Remuneration Committee consists of three members. All members of the Nomination and Remuneration Committee are also a member of the Board of Directors. All members are independent non-executive Directors. Russell Greigg has been designated as Chairman of the Committee by the Board of Directors. Each member of the Committee has appropriate knowledge and experience in compensation and benefit-related matters, since they are associates of Boards of other companies and as a result have knowledge of pay policies across the world. The CEO and the Vice-President Human Resources are invited to attend the meetings of the Nomination and Remuneration Committee in an
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advisory and non-voting capacity on all matters. They will not attend during discussions concerning their own remuneration. The Chairman leads all meetings of the Committee, coordinates the evaluation of the performance of the CEO and acts as Secretary, although he can delegate this duty or parts thereof to the 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 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 nonexecutive 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.
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As it is the Nomination and Remuneration Committeeâ&#x20AC;&#x2122;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. The Nomination & Remuneration Committee (or designated members) has the option to schedule exit interviews with departing members of the Executive Committee. The Nomination & Remuneration Committee, with the input of the Executive Committee, annually reviews and presents the annual goals/ objectives for the Board of Directors in order to finalize and approve the final goals and objectives by the Board of Directors. The Nomination & Remuneration Committee also advises the Board of Directors on the accomplishment of the targets set earlier and consequently initiates a discussion on the Board which finally adjusts and/or approves the recommendations.
1.6.6.2. COMPOSITION
The following Directors are members of the Nomination and Remuneration Committee: Russel Greig, William Jenkins and Bo Jesper Hansen. Matts Petterson, Geert Cauwenbergh and Stephen Bunting were a member until the date of their resignation from the Board in 2013. All Directors are members of Boards of other companies and as a result have knowledge of pay policies across the world.
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1.6.6.3. ACTIVITY REPORT
The Nomination & Remuneration Committee met officially four times in 2013 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 nomination of new members of the Board of Directors, were discussed.
1.6.7. EXECUTIVE COMMITTEE 1.6.7.1. COMPOSITION
The Board of Directors has established an Executive Committee (“Directiecomité”) within the meaning of Art. 524bis of the Belgian Companies Code and Art. 24 of the Company’s Articles of Association. The Executive Committee consists of seven members, the Chief Executive Officer (CEO), the Chief Financial Officer (CFO), the Chief Scientific Officer (CSO), the Chief Business Officer (CBO), to be nominated, the Chief Medical Officer (CMO), The Chief Operations Officer (COO), The VP Human Resources and the VP IP and Legal. The current members of the Executive Committee are listed in the table below.
from left to right: Wim Ottevaere, Dominique Tersago, Frank Landolt, Kim Simonsen, Tony de Fougerolles, Guido Gielen, Edwin Moses
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Name Edwin Moses Wim Ottevaere (1) Antonin Rollet de Fougerolles Dominique Tersago Kim Simonsen Guido Gielen Gerrit Franciscus Landolt Andreas Menrad Josefin-Beate Holz Eva-Lotta Allan
Function Chief Executive Officer Chief Financial Officer Chief Scientific Officer from 1 October 2013 Chief Medical Officer from 1 July 2013 Chief Operations Officer from 1 July 2013 VP Human Resources from 1 April 2013 VP IP and Legal from 1 April 2013 Chief Scientific Officer until 12 August 2013 Chief Medical Officer until 30 June 2013 Chief Business Officer until 30 April 2013
Year of birth 1954 1956 1965
Nationality British Belgian Canadian
1962
Belgian
1957
Danish
1960
Belgian
1964
Dutch
1958
German
1965
German
1959
Swedish
(1) Mr Ottevaere acts as the permanent representative of Woconsult NV
1.6.7.2. ACTIVITY REPORT
In principle, the Executive Committee meets at least once every month. Additional meetings may be called at any time by the CEO or at the request of two members. The Executive Committee shall constitute a quorum when all members have been invited and the majority of the members are present or represented at the meeting. The resolutions of the Executive Committee shall be passed unanimously. If unanimity cannot be reached, the matter shall be referred to the Board of Directors, which shall decide upon the matter in its next meeting.
1.6.8. REMUNERATION REPORT
Directors Procedure applied in 2013 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
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is subject to approval by the Board and, subsequently, by the Annual Shareholders Meeting. All Directors are members of Boards of other companies and as a result have knowledge of pay policies across the world. The Nomination and Remuneration Committee benchmarks the Directors’ compensation against peer companies to ensure competitiveness. Without prejudice to the powers granted by law to the Shareholders Meeting, the Board sets and revises at regular intervals the rules and the level of compensation for Directors executing a special mandate or having a seat in one of the committees, as well as the rules for reimbursement of the Directors’ business-related out-of-pocket expenses. Apart from the remuneration for independent Directors, all Directors will be entitled to a reimbursement of out-of-pocket expenses actually incurred as a result of their participation in meetings of the Board of Directors. The remuneration of the Directors will be disclosed to the Company’s shareholders in accordance with the applicable laws and regulations. The level of remuneration should be sufficient to attract, retain and motivate Directors who match the profile determined by the Board. Only independent Directors shall receive a fixed remuneration in consideration of their membership of the Board and their attendance to the meetings of the Committees of which they are members. They will not receive, in principle, any performance-related remuneration, nor will any options or warrants be granted to them. However, upon advice of the Nomination and Remuneration Committee, the Board may propose to the Shareholders Meeting to deviate from the latter principle in the event that, in the Board’s reasonable opinion, the granting of warrants would be necessary or useful to attract or retain independent Directors with the most relevant experience and expertise. The other Directors receive no compensation for serving as a member of the Board. Executive Committee members receive no additional compensation when invited to the Board. The Directors’ mandate may be terminated ad nutum (at any time) without any form of compensation.
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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 2013 The fixed annual remuneration of independent Directors as part of their membership of the Board of Directors, is thirty thousand euro, and the additional fixed annual remuneration of the Chairman of the Nomination and Remuneration Committee and the Chairman of the Audit Committee is ten thousand euro. The additional fixed remuneration related to the membership of the Nomination and Remuneration Committee or the Audit Committee for the independent Directors remains unchanged at five thousand euro per committee. The Extraordinary General Meeting of Shareholders of 2 September 2013 decided to offer 5,028 warrants to Catherine Moukheibir. The Extraordinary General Meeting of Shareholders of 7 November 2013 decided to adapt the fixed remuneration of the Chairman of the Board of Directors to €100.000 per year on the condition that the Chairman of the Board is a different person from the CEO of the Company. The Extraordinary General Meeting of Shareholders of 7 November 2013 also decided to offer 4,781 warrants to William Jenkins and 4,781 to Bo Jesper Hansen. The Extraordinary General Meeting of Shareholders of 25 November 2013 decided to offer 50,000 warrants to Peter Fellner. The total amount of the remunerations and the benefits paid in 2013 to the independent Directors (in such capacity) was €164,506 (gross, excluding VAT), € 25,000 was paid to Peter Fellner, €40,000 to Remi Vermeiren, €8,762 to William Jenkins Pharma Co; €8,750 to Orfacare Consulting, €17,500 to Catherine Moukheibir, €45,119 to Russell Greig €6,250 to Geert Cauwenbergh, €8,750 to Roger Perlmutter and €4,375 to Mats Petterson.
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Name
Position
Peter Fellner
Chairman
Edwin Moses(2)
Chief Executive Officer
Remi Vermeiren
Remuneration received as member of the Board
Remuneration received as member of the Audit Committee
Remuneration received as member of the Nomination and Remuneration Committee
25,000.00
-
-
-
-
-
Independent Director
30,000.00
10,000.00
Russell Greig
Independent Director
30,079.50
5,013.00
10,026.50
William Jenkins Pharma Consulting represented by its Principal Wiliam J. Jenkins
Independent Director
7,509.00
-
1,253.00
Orfacare Consulting
Independent Director
7,500.00
-
1,250.00
Catherine Moukheibir
Independent Director
15,000.00
2,500.00
-
Stephen Bunting
Non-executive Director
-
-
-
Sofinnova Partners S.A., represented by its permanent representative, Denis Lucquin
Non-executive Director
-
-
-
Jim Van heusden
Non-executive Director
-
-
-
Mats Pettersson
Independent Director
4,375.00
-
-
Geert Cauwenbergh
Independent Director
6,250.00
-
-
Roger Perlmutter
Independent Director
7,500.00
-
1,250.00
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There is no performance-related remuneration for non-executive Directors. 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. Name Peter Fellner Edwin Moses William J. Jenkins Bo Jesper Hansen Catherine Moukheibir Remi Vermeiren Russell Greig
Total shares Shares Warrants(i) and warrants(i) Number %(iii) Number %(iii) Number %(iii) 50,000 0.10% 50,000 (ii) 0.10% 916,700 1.77% 79,200 0.15% 837,500(v) 1.62% 4,781 0.01% 4,781(iv) 0.01% 4,781 0.01% 4,781(iv) 0.01% 5,028 0.01% 0 0 5,028(ii) 0.01% 28,571 0.06% 25,000(viii) 0.05% 3,571(vi) 0.01% 6,434 0.01% 0 0 6,434 0.01%
(i) Reflecting the number of shares of the Company to which such warrants give right to subscription (ii) Warrants granted in 2013 with an exercise price of €7.32 (iii) Percentage on a fully diluted basis (iv) Warrants granted in 2013 with an exercise price of €7.32 (v) Warrants granted from 2004 onwards with an exercise price between €1.8 and €8.68 (vi) Warrants granted in 2007 with an exercise price of €7.00 (vii) Warrants granted in 2012 with an exercise price of €5.44 (viii) of which 7,500 held by spouse
With respect to the following two years, Ablynx does not foresee changes in its remuneration policy. Executive Committee Procedure applied in 2013 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 biotech market.
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Remuneration policy applied during 2013 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 external compensation and benefit consultants or own research, Ablynx annually receives market salary data. Biotech/ Pharma industry, or if not available or less relevant, general industry data will determine the compensation market. The level and structure of the remuneration of the members of the Executive Committee shall be such that qualified and expert professionals can be recruited, retained and motivated taking into account the nature and scope of their individual responsibilities. An appropriate proportion of the remuneration package of a member of the Executive Committee shall be structured so as to link rewards to corporate and individual performance, thereby aligning on an annual basis the interests of a member of the Executive Committee with the interests of the Company and its shareholders. An Executive Committee member can receive maximum 30% of the annual base remuneration as a performance-driven bonus. The Extraordinary General Meeting of 26 April 2012 has approved that the CEOâ&#x20AC;&#x2122;s variable remuneration, which is part of his yearly remuneration, may include a bonus in cash which will not exceed 50% of his annual base remuneration and which will be spread over a period of one year. The Extraordinary General Meeting of 26 April 2012 has also approved that for members of the Executive Committee the variable remuneration, also if this variable remuneration equals or exceeds one fourth of the annual remuneration, will be based on objective performance criteria determined in advance, which are 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 e.g. financial indicators, progress in the pipeline, the completion and/or extension of important collaborations and other measures. The specific yearly goals and the criteria for the variable remuneration of the CEO and members of the Executive Committee are in advance
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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 Annual General Shareholders Meeting. The approval shall relate to the scheme itself and not to the grant to individuals of share-based benefits under the scheme. As a rule, 25% of the warrants granted vest after 1 year, 2.08% vest additionally after each full month, however, vested warrants shall in principle not be exercisable within less than three calendar years. The remuneration policy for the Executive Committee shall at least include the main contractual terms including the main characteristics of pension schemes which are defined contribution plans for which 10â&#x20AC;&#x2030;% of the base salary is contributed on a yearly basis and termination arrangements (which do not contain any exit remuneration higher than 12 months), the key elements for determining the remuneration, including (i) the relative importance of each component of the remuneration, (ii) the performance criteria chosen for the variable elements and (iii) the fringe benefits. The total amount of remunerations and benefits paid to the CEO and the other members of the Executive Committee and to the persons they are represented by, amounted to â&#x201A;Ź2,075,184.35 (gross, excluding VAT and share-related payments) in 2013, of which a detailed breakdown is shown in the table below: Basic salary Variable remuneration (*) Group insurance (pension, invalidity, life) Other (car, cell phone, hospitalisation insurance) (**) Total
Total of which CEO 1,582,607.51 450,500.01 318,561.65 140,250.01 145,878.50 51,562.68 28,136.69
9,745.20
2,075,184.35 652,057.90
(*) paid in cash (**) not including share based payments mentioned under point 8.15
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The pension plan, for which the above amounts have been paid, is a defined contribution plan for which 10 % of the base salary is contributed on a yearly basis. With respect to the two financial years to come, Ablynx does not foresee changes in its remuneration policy. The table below provides an overview of the shares and warrants held by the members of the Executive Committee, including the Executive Director. During 2013 Edwin Moses and Wim Ottevaere/Woconsult NV each exercised warrants, 575,000 and 105,000 warrants respectively The key features of the warrants attributed in 2013 are indicated below. Name Function Shares Warrants Edwin Moses Chief Executive 79,200 1,150,000 warrants giving the right Officer to subscribe for 837,500 shares Wim Ottevaere/ Chief Financial 21,605 376,250 warrants giving the right Woconsult NV Officer to subscribe for 271,750 shares Antonin Rollet Chief Scientific 150,000 warrants giving the right de Fougerolles Officer to subscribe for 150,000 shares Dominique Chief Medical 60,000 warrants giving the right Tersago Officer to subscribe for 60,000 shares Kim Simonsen Chief Operations 72,500 warrants giving the right Officer to subscribe for 72,500 shares Gerrit Franciscus VP IP & Legal 165,374 warrants giving the right Landolt to subscribe for 157,687 shares Guido Gielen VP Human 1,230 120,000 warrants giving the right Resources to subscribe for 120,000 shares
During the Board meeting of 29 January 2013 the issuance of a maximum number of 295,000 warrants in favour of certain employees and also the issue of 172,500 warrants in favour of certain consultants was approved and 467,000 warrants have been issued. Each warrant gives the beneficiaries the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the average closing share price over a period of 30 days before the date of the grant (from €5.93 to €7.37 per warrant). The warrants vest rateably over 4 years: 25 % of the warrants vest after one year; thereafter, the remaining 75 % become vested on a monthly basis (2.083 % per month).
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The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants have been granted (thus starting as from 1 January 2017 until October 2019). In case of normal termination of the employee contract or the consulting agreement, all the vested warrants need to be exercised during the current or next exercise period. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed upon termination of the agreement. The duration of the warrants is seven years as of the issue date of the warrants. Any warrants that have not been exercised within seven years of their creation become null and void. During the Extraordinary General Meeting of Shareholders of 5 August 2013, the issuance of a maximum number of 50,000 warrants in favour of certain employees and also the issuance of 570,000 warrants in favour of certain consultants and Directors was approved and 334,340 warrants have been issued. Each warrant gives the beneficiaries the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the average closing share price over a period of 30 days before the date of the grant (from €6.65 to €7.54 per warrant). The warrants vest rateably over 4 years: 25 % of the warrants vest after one year; thereafter, the remaining 75 % become vested on a monthly basis (2.083 % per month). The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants have been granted (thus starting as from 1 January 2017 until April 2020). In case of normal termination of the employee contract, the consulting agreement or mandate all the vested warrants need to be exercised during the current or next exercise period. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed upon termination of the agreement or mandate. The duration of the warrants is seven years of the issue date of the warrants. Any warrants that have not been exercised within seven years of their creation become null and void. During the Extraordinary General Meeting of Shareholders of 25 November 2013, the issuance of a maximum of 50.000 warrants in favour of a certain Director was approved.
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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 average closing share price over a period of 30 days before the date of the grant (€7.27 per warrant). The warrants vest rateably over three years: 33.33 % of the warrants vest after one year; thereafter, the remaining 66.67 % become vested on a monthly basis (2. 78 % per month). The warrants can only be exercised when vested and as from the beginning of the third calendar year following the year in which the warrants have been granted (thus starting as from 1 January 2017 until July 2018). In case of normal termination of the mandate, all the vested warrants need to be exercised during the current or next exercise period. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed upon termination of the mandate. The duration of the warrants is five years. Any warrants that have not been exercised within five years of their creation become null and void. 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. There are no other termination remunerations foreseen. All service agreements contain non-competition clauses, as well as confidentiality obligations and obligations relating to the transfer of intellectual property. The Corporate Governance Charter requires that every contractual settlement agreed upon before or after 1 July 2009 concerning the remuneration of the CEO or any other member of the Executive Committee, clearly states that the amount of the exit remuneration, which is granted when the contract is prematurely terminated, should not exceed the basic and variable remuneration of twelve months. All existing contractual settlements reached with the CEO or any other member of the Executive Committee do not contain any exit remuneration higher than 12 months. Claw-back provisions There are no provisions allowing the Company to reclaim any variable remuneration paid to executive management based on incorrect financial information.
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1.6.9. 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, which is monitored by the Audit Committee. The role of the Audit Committee is stipulated in the Corporate Governance Statement. The Audit Committee decided not to create an internal audit role for the time being, since the scope of the business does not justify a full-time role. The role of the Audit Committee shall be to assist the Board in fulfilling its monitoring responsibilities in respect of control in the broadest sense, including responsibilities for the financial reporting process, the system
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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 2011, the management of the Company assessed its operational risks and challenged and compared these with the risk intelligence framework. In the course of 2012, the risks have been evaluated again and appropriate actions have been proposed to the Executive Committee. The risks have been further reviewed and analysed during 2013. The Group is potentially subject to the following inherent risks: • Nanobody-based drug candidates must undergo rigorous pre-clinical and clinical testing, the results of which are uncertain and could substantially delay or prevent the drug candidates from reaching the market. • Delays in clinical trials are common and may have many causes. Such delays could result in increased costs and jeopardise or delay the Group’s ability to achieve regulatory approval and commence product sales as currently contemplated. • The Group’s drug candidates may not obtain regulatory approval when expected, if at all, and even after obtaining approval, the drugs will be subject to ongoing regulation. To date, none of the Group’s drug candidates have reached the stage of submission or evaluation for regulatory approval. • The Group has a history of operating losses and an accumulated deficit; the Group may never become profitable or may not be able to sustain profitability in subsequent periods. • The Group is reliant on collaborative partners for the development and commercialisation of most of its existing and future drug candidates. • The Group’s patents and other intellectual property rights may not adequately protect its products and drug candidates, which may impede the Company’s ability to compete effectively. • The Group may infringe the patents or other intellectual property rights of others and may face patent or other intellectual property litigation, which may be costly and time consuming. • The Group faces, and will continue to face, significant competition and rapid technological change, which could limit or eliminate the market opportunity for its products and drug candidates.
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• The Group relies on outsourcing arrangements with third parties for some of its activities including manufacturing and clinical trials management. • The Group may not have adequate insurance cover, particularly in connection with product liability risk. • The commercial success of the Group will depend on attaining significant market acceptance of its drug candidates among physicians, patients, healthcare payers and the medical community. The Group has not yet commercialised any product. • If the Group fails to attract and retain qualified personnel, it may be unable to successfully develop its technologies, conduct its clinical trials and commercialise drug candidates. • The Group may need additional funding, which may not be available on acceptable terms when required, if at all. • The revenue is generated by a limited number of clients. • Tax legislation in Belgium might change over time. Our financial risk management consists of: Liquidity risk management The Group makes use of term accounts and treasury notes. The maturities of the term deposits are limited to a maximum of one year. The Group has €2.3 million restricted cash related to a cash pledge. The Group has limited financial debt relating to investments in the building and in equipment. Interest rate risk As the Group has no significant interest-bearing assets or liabilities, its income and operating cash flows are independent of changes in the market interest rates. Credit risk The credit risk arises from outstanding transactions with customers. It is the Group’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 financial institutions have credit ratings varying from A+ to A-. Available liquidities are placed with several banks.
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No cash credit lines were available. Foreign exchange risk The Group has sales transactions from research and collaboration agreements denominated in USD and purchase transactions denominated in GBP, SEK, CHF and USD. The Group did not enter into any currency hedging arrangements in order to cover this risk. Control activities The Board of Directors yearly approves the strategy and the goals. Each year, a business plan is elaborated for the next three years, as well as a detailed budget for the next year, which is submitted to the Board of Directors for approval. The budget is systematically followed up at each Audit Committee and Board of Directors meeting, and regularly adjusted to changing prospects. A process is in place which enables the finance department to prepare consolidated financial statements on a quarterly basis. ERP support systems have been implemented generating consistent financial and operational information. Systems are in place in order to verify the accuracy of the reporting figures and are compared with the previous year, budgets and forecasts. Supervision and monitoring Supervision and monitoring activities are performed by the senior management on a daily basis.
1.6.10. 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 appointed as Statutory Auditor of Ablynx on 28 April 2011 for a term of three years ending immediately after the Shareholders Meeting to be held in 2014 that will have deliberated and resolved on the financial statements for the financial year ended 31 December 2013.
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1.6.11. STATEMENTS REQUIRED BY ART. 34 OF THE ROYAL DECREE OF 14 NOVEMBER 2007
All shares are ordinary shares and represent the entire capital. There are no preference shares. Some of the important agreements that Ablynx has entered into may be amended or terminated in the event of a change of control over Ablynx.
1.6.11.1 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. Under the Boehringer Ingelheim Strategic Alliance Agreement signed in September 2007, in the event of a change of control over Ablynx, Boehringer Ingelheim is also entitled to terminate the research (without being released from the obligation to pay royalties on licensed products, if any) and is no longer held to participate in joint committees, to share its development and commercialisation plans or to start new programmes. However, Boehringer Ingelheim is entitled to continue the research independently, and Ablynx’s option to co-promotion rights expires. This clause was approved by the Extraordinary Shareholders Meeting of 12 October 2007. The Agreement was extended with two years in March 2012 and the same change of control clause was approved by the Company’s Annual Shareholders Meeting of 26 April 2012.
1.6.11.2 MERCK SERONO AGREEMENTS
The Merck Serono Agreement signed in September 2008 states that a change of control may result automatically, in the case of early joint research and development programmes, in a full opt-out by Ablynx. In the event of further advanced joint research and development programmes, Merck Serono may at its sole discretion invite the controlling shareholder of Ablynx to continue to contribute to such
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joint research and development programme. If Merck Serono does not extend such invitation or if Ablynx’s controlling shareholder does not accept such invitation, the change of control results in a full optout by Ablynx. This clause was approved by the Company’s Annual Shareholders’ Meeting held on 29 April 2010 in accordance with Art. 556 of the Belgian Company Code. The Merck Serono Agreement signed in October 2010 states that (i) in the event of a change of control over Ablynx during the research term, Merck Serono is entitled to terminate the programmes and to assume sole responsibility for further discovery, development and commercialisation; and (ii) in the event of a change of control over Ablynx (a) in respect of early programmes, Ablynx will be deemed to have exercised its opt-out right in full (if the first opt-out point had been reached; if the first opt-out point had not yet been reached, as of the time that the first opt-out point will have been reached); and (b) in respect of further advanced programmes, Ablynx will be deemed to have exercised its opt-out right under the agreement in full, provided that Merck Serono, at its sole discretion, invites the new controlling shareholder of Ablynx to continue to contribute to such programme. If Merck Serono does not extend such invitation or if Ablynx’s new controlling shareholder does not accept such invitation, the change of control results in an opt-out in full by Ablynx (in which case, however, the entitlement to royalties will be replaced by an entitlement to a share of net income calculated according to the percentage of resources provided by Ablynx to a programme until the first commercial sale). The clauses under (ii) cease to have effect, on a programme-by-programme basis, as of the first commercial sale of a product resulting from a programme. This clause was approved by the Company’s Extraordinary General Meeting of Shareholders of 11 January 2011. In November 2011, a third agreement with Merck Serono was signed with the same change of control clause as mentioned above. This clause was approved by the Company’s Annual Shareholders Meeting held on 26 April 2012 in accordance with Art. 556 of the Belgian Company Code. The Merck Serono Collaboration agreement which was signed in September 2013 states that in certain cases of change of control of the company Merck Serono is entitled at their option either to (i) proceed with the relevant collaboration, it being understood that Merck Serono shall have the right to unilaterally decide upon the composition and the continued existence of the joint committees in respect of this collaboration agreement, or (ii) terminate the collaboration agreement
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and to oblige the Company to transfer all or parts of the ongoing programmes under this collaboration agreement, in which case the joint committees and Merck Serono shall enter into separate agreements in respect of these programmes and Merck Serono shall be exempted from further payments (without any right to, however, reimbursement by the Company). This clause was approved by the Company’s Extraordinary General Shareholders Meeting on 7 November 2013 in accordance with Art. 556 of the Belgian Company Code.
1.6.11.3 MERK & CO AGREEMENT
The agreement Ablynx entered into in 2012 with Merck & Co (known as MSD outside the United States and Canada), through a subsidiary of Merck, states that in the event of a change of control over Ablynx, Merck is entitled to elect any one or more of the following options: (i) to immediately discontinue any or all then-ongoing research programmes under the agreement; (ii) terminate Ablynx’s involvement on any joint committees; (iii) limit Merck’s reporting obligations such that Merck is only required to provide reports relating to Merck’s obligation to pay royalties; and/or (iv) if such change of control involves a company that has initiated an IND enabling study for a competing product (i.e. a compound or molecule directed against the same target), to terminate the agreement. The clause was approved during the Extraordinary General Meeting of Shareholders of 5 August 2013 in accordance with Art. 556 of the Belgian Company Code..
1.6.11.4. ABBVIE AGREEMENT
The Agreement with Abbvie which was signed in September 2013 states that in certain cases of a change of control over the Company, and depending on the stage of the research of the programmes under this collaboration agreement Abbvie is entitled to: i. terminate the joint committees in respect of these programmes and assume their tasks; ii. oblige the Company to take the appropriate measures to avoid the disclosure of confidential information; iii. terminate co-promotion rights; iv. decide to either (i) assume or(ii) allow the Company to continue, the initial development activities in respect of the programme; v. oblige the Company to either transfer or terminate the ongoing clinical trials.
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This clause was approved by the Company’s Extraordinary General Meeting of Shareholders on 7 November 2013 in accordance with Art. 556 of the Belgian Company Code.
1.7. TRANSACTIONS WITHIN THE AUTHORISED CAPITAL In 2013, one transaction has occurred within the authorised capital that is required to be reported in accordance with Art. 608 of the Belgian Companies Code. During the Board meeting of 29 January 2013, the issuance of a maximum number of 295,000 warrants in favour of certain employees and also the issue of 172,500 warrants in favour of certain consultants was approved and 467,000 warrants have been issued. Each warrant gives the beneficiaries the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the average closing share price over a period of 30 days before the date of the grant (from €5.93 to €7.37 per warrant). The warrants vest rateably over four years: 25 % of the warrants vest after one year; thereafter, the remaining 75 % become vested on a monthly basis (2.083 % per month). The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants have been granted (from 1 January 2017 until October 2019). In case of normal termination of the employee contract or the consulting agreement, all the vested warrants need to be exercised during the current or next exercise period. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed upon termination of the agreement. The duration of the warrants is seven years as of the issue date of the warrants. Any warrants that have not been exercised within seven years of their creation become null and void. By virtue of the resolution of the Extraordinary General Meeting of Shareholders held on 18 July 2013, the Board of Directors has been expressly authorised 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
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the Company, i.e., ninety million six hundred ninety-five thousand four hundred and six euro, twelve cents (EUR 90,695,406.12). The Board of Directors may exercise this power for a period of five (5) years as of the date of publication of the relevant resolution of the Extraordinary General Meeting of Shareholders held on 18 July 2013 in the Annexes to the Belgian Official Gazette. The publication took place on 8 August 2013. This authorisation may be renewed in accordance with the relevant legal provisions During the Extraordinary General Meeting of Shareholders held on 18 July 2013, the Board of Directors has also been expressly authorised to increase the share capital in one or more transactions following a notification by the Belgian Financial Services and Markets Authority (FSMA) that it has been informed of a public takeover bid on the company’s financial instruments, through contributions in cash with cancellation or limitation of the preferential subscription rights of the shareholders (including for the benefit of one or more specific persons who are not employees of the company or of its subsidiaries (to the extent the company should incorporate subsidiaries)) or through contributions in kind, with issuance of shares, warrants or convertible bonds, subject to the mandatory terms and conditions provided for in the Belgian Company Code. The Board of Directors may exercise this power, provided that the relevant notification by the Belgian Financial Services and Markets Authority (FSMA) has been received within a period of three (3) years as of the date of the relevant resolution of the Extraordinary General Meeting of Shareholders held on 18 July 2013. In February 2013 the Company raised €31.5 million through a private placement of new shares via an accelerated bookbuilding procedure.
1.8. ACQUISITION OF OWN SECURITIES Neither Ablynx nv nor any direct affiliate or any nominee acting in his own name but on behalf of the Company or of any direct affiliate, have acquired any of the Company’s shares. Ablynx nv has not issued profitsharing certificates or any other certificates.
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1.9. USE OF FINANCIAL INSTRUMENTS BY THE GROUP The Group did not use any financial instruments.
1.10. CIRCUMSTANCES THAT COULD CONSIDERABLY AFFECT THE DEVELOPMENT OF THE GROUP No special events have occurred that could considerably affect the development of the Group.
1.11. RESEARCH AND DEVELOPMENT We are committed to fully exploiting our technology platform to develop a diverse and broad portfolio of therapeutic Nanobodies, and to exploring next generation Nanobody-based technologies. We will continue to leverage the advantages of the Groupâ&#x20AC;&#x2122;s Nanobody technology in view of identifying potential drug candidates across a range of therapeutic areas and exploring and developing the potential of Nanobodies in areas where they have specific advantages. We will invest in further advancing the technology platform in terms of performance, applicability and scale. We expect that research and development expenditures for the discovery, development and commercialisation of drug candidates will continue to increase as the Group progresses its clinical and pre-clinical programmes into the next phase. In addition, we intend to initiate new discovery programmes and we are committed to seek to maintain and expand our proprietary Nanobody technology and intellectual property position.
1.12. CONFLICTING INTERESTS OF DIRECTORS (ART. 523 OF THE BELGIAN COMPANIES CODE) The Directors report that during the financial year five decisions have been taken that fall within the provisions of Art. 523 of the Belgian Companies Code. As required by Art. 523 of the Belgian Companies Code, the full minutes of said meeting of the Board of Directors relating to such conflict of interests are to be reproduced hereunder:
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Meeting of the Board of Directors of 29 January 2013 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 24 January 2013, of the declaration by Edwin Moses in respect of his conflict of interest in relation to this item on the agenda, as follows: “I write to you in my capacity of Chairman of the Board of Directors (the “Board”) of Ablynx nv (the “Company”). I refer to the meeting of the Board scheduled for 29 January 2013, which will resolve on the issue of warrants for the benefit of certain employees and consultants of the Company (the “Stock Option Plan”). In accordance with Art. 523 of the Belgian Company Code, I would like to report that I have a financial conflict of interest in respect of this agenda item. In my capacity of member of the Executive Committee of the Company, I am selected as one of the beneficiaries of the Stock Option Plan and will accordingly be offered a certain number of warrants. However, I believe that the approval by the Board of the Stock Option Plan is in the interest of the Company, given the limited financial consequences for the Company (as the issue of the warrants shall have no immediate financial impact on the Company), as well as the purpose thereof. The purpose of this Stock Option Plan is (i) to create a long-term incentive for the selected employees, consultants and Directors who are able to contribute substantially to the success and growth of the Company; (ii) to provide the Company with the necessary means to recruit and retain competent and experienced staff members; and (iii) to create a common interest between the selected participants on the one hand and the shareholders of the Company on the other, aimed at an increase in the value of the Company’s shares. The consequences of the Stock Option Plan for the existing shareholders and warrant holders, and more in particular the dilution that would result from the exercise of all offered warrants, are clearly indicated in Art. 4 of the special report of the Board in accordance with Art. 583 of the Belgian Company Code.”
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Meeting of the Board of Directors of 26 February 2013 Mr. Edwin Moses did not participate in the deliberations and resolution of the Board with respect to this item on the agenda. Mr Edwin Moses reported to the members of the Board of Directors that he is faced with a financial conflict of interest in respect of the proposed decision to create an additional exercise window in the framework of the ABO and the fundamental decision that, if need be, certain warrant holders will be allowed to offer existing shares in the framework of the ABO. He pointed out to the members of the Board of Directors that, as a beneficiary of the warrant issue referred to in these agenda items, he is faced with a financial conflict of interest. This statement will also be submitted to the statutory auditor of the Company. The financial consequences of the proposed decision is twofold: 1. The costs of organising the additional exercise window, and 2. The fact that the cost structure of the ABO has been set up in such a manner that the existing shareholders and warrant holders, who would possibly be invited to participate in the ABO, will only have to pay the underwriting fee and the selling fee of the supervising financial institutions (on the shares they have sold), while the Company (as initiating party of the ABO) will in addition have to pay a management fee and possibly a discretionary fee of 0.75% respectively on the shares placed. Insofar as the shareholders and warrant holders do not have to pay these fees, the existing shareholders and warrant holders acquire an indirect advantage from these fees paid by the Company. Also, the decision to extend the ABO with additional shares (depending on the structure of the offers received in the framework of the ABO), can have a negative influence on the final offer price granted during the entire ABO. Insofar as such an influence exists, the financial consequences of this decision will equal the price difference multiplied with the number of new shares which are issued. The Board of Directors is of the opinion that this decision and its financial consequences are justified with a view to enlarging the shareholders’ base of the Company, securing a stable shareholder structure in the future and decreasing ‘overhang’ (i.e. the risk, as perceived by the financial markets, that larger volumes would be put on the market in an uncontrolled manner). Moreover, the Board of Directors points out that it is in the interest of the Company to ensure that the warrant holders having larger volumes of warrants can put on the market shares in a controlled and centralised manner during an exercise period, and the ABO is an ideal opportunity to do so. After deliberation, the Board of Directors unanimously decided to grant discharge.
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Meeting of the Board of Directors of 25 March 2013 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 18 March 2013, of the declaration by Edwin Moses in respect of his conflict of interest in relation to this item on the agenda, as follows: â&#x20AC;&#x153;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 2012 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 2012 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-Ă -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.
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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 2012, which counts as “Annual Activity Report” as described in the Charter of Executive Committee, the Board of Directors unanimously granted discharge to the members of the Executive Committee for 2012. Meeting Board of Directors of 26 February 2014 Mr. Moses did not participate in the deliberations and resolution of the Board with respect to this item on the agenda. Prior to the deliberation on this item, the other members of the Board acknowledge that they have been informed, in accordance with Art. 523 of the Belgian Companies Code, by e-mail dated 21 February 2014, of the declaration by Edwin Moses in respect of his conflict of interest in relation to this item on the agenda, as follows: “I write to you in my capacity of Director of the Board of Directors (the “Board”) of Ablynx nv (the “Company”).
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I refer to the meeting of the Board scheduled for 26 February 2014, which will resolve on the issue of warrants for the benefit of certain employees and consultants of the Company (the “Stock Option Plan”). In accordance with Art. 523 of the Belgian Company Code, I would like to report that I have a financial conflict of interest in respect of this agenda item. In my capacity of member of the executive committee of the Company, I am selected as one of the beneficiaries of the Stock Option Plan and will accordingly be offered a certain number of warrants. However, I believe that the approval by the Board of the Stock Option Plan is in the interest of the Company, given the limited financial consequences for the Company (as the issue of the warrants shall have no immediate financial impact on the Company), as well as the purpose thereof. The purpose of this Stock Option Plan is (i) to create a long-term incentive for the selected employees, consultants and Directors who are able to contribute substantially to the success and growth of the Company; (ii) to provide the Company with the necessary means to recruit and retain competent and experienced staff members; and (iii) to create a common interest between the selected participants on the one hand and the shareholders of the Company on the other, aimed at an increase in the value of the Company’s shares. The consequences of the Stock Option Plan for the existing shareholders and warrant holders, and more in particular the dilution that would result from the exercise of all offered warrants, are clearly indicated in the special report of the Board in accordance with Art. 583 of the Belgian Company Code.” Meeting of the Board of Directors of 28 March 2014 Mr. Moses did not participate in the deliberations and resolution of the Board with respect to this item on the agenda. Prior to the deliberation on this item, the other members of the Board acknowledge that they have been informed, in accordance with Art. 523 of the Belgian Companies Code, by e-mail dated 25 March 2014, of the declaration by Edwin Moses in respect of his conflict of interest in relation to this item on the agenda, as follows: “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.
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The decision to grant discharge to the members of the Executive Committee entails in principle a lapse of the right of the Company to submit a liability claim against (the members of) the Executive Committee in respect of the actions or decisions (in their capacity as members) of the Executive Committee during the 2013 fiscal year. As I am a member of the Executive Committee, the decision to grant discharge to the members of the Executive Committee entails a conflict of interest of a financial nature between the Company and myself: as a result of such decision, I will no longer be subject to such liability claims in respect of my function as a member of the Executive Committee in the 2013 fiscal year, while the Company loses the opportunity to claim against me and the other members of the Executive Committee, which may lead to potential negative financial consequences for the Company. The exact amount of the financial impact on the Company of this decision cannot be determined at this time, as it cannot be known, at this time, whether the Company would wish, in the future, to assert any liability claim vis-à-vis myself or the Executive Committee and, if so, in what amount. The financial impact on the Company consists of the loss of this particular possibility. However, I believe that the decision to grant discharge to the members of the Executive Committee is in the interest of the Company. Through such decision, the Company expresses its confidence in the members of the Executive Committee and offers such members a measure of security, which will allow the Company to attract and retain capable managers within the Company, as well as keep the current members of the Executive Committee motivated, committed and focused on their tasks. The Company’s statutory auditor has been copied on this e-mail, thereby notifying him of this conflict of interest.” The Board confirmed that the financial impact on the Company of the decision to grant discharge to the members of the Executive Committee cannot be determined at this time, but consists in the lapse of the right of the Company to submit a liability claim against the (members of the) Executive Committee. The Board was of the opinion that the decision to grant discharge to the members of the Executive Committee is in the interest of the Company, because it expresses the confidence in the members of the Executive Committee, which will allow the Company to attract and retain capable managers.
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The Board of Directors considered that the decision to grant discharge is in the interest of the Company, because it keeps the current members of the Executive Committee motivated, committed and focused on their tasks. In that perspective, the Board declared that it believes that the decision to grant discharge to the members of the Executive Committee is in the interest of the Company. After deliberation on the basis of the draft of the annual accounts and the annual report of the fiscal year 2013, which counts as “Annual Activity Report” as described in the Charter of Executive Committee, the Board of Directors unanimously granted discharge to the members of the Executive Committee for 2013.
1.13. RISKS The Group is potentially subject to the following inherent risks: • Nanobody-based drug candidates must undergo rigorous pre-clinical and clinical testing, the results of which are uncertain and could substantially delay or prevent the drug candidates from reaching the market. • Delays in clinical trials are common and may have many causes. Such delays could result in increased costs and jeopardise or delay the Group’s ability to achieve regulatory approval and commence product sales as currently contemplated. • The Group’s drug candidates may not obtain regulatory approval when expected, if at all, and even after obtaining approval, the drugs will be subject to ongoing regulation. To date, none of the Group’s drug candidates have reached the stage of submission or evaluation for regulatory approval. • The Group has a history of operating losses and an accumulated deficit; the Group may never become profitable or may not be able to sustain profitability in subsequent periods. • The Group is reliant on collaborative partners for the development and commercialisation of most of its existing and future drug candidates. • The Group’s patents and other intellectual property rights may not adequately protect its products and drug candidates, which may impede the Company’s ability to compete effectively. • The Group may infringe the patents or other intellectual property rights of others and may face patent or other intellectual property litigation, which may be costly and time consuming. • The Group faces, and will continue to face, significant competition and
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• • •
• • • •
rapid technological change, which could limit or eliminate the market opportunity for its products and drug candidates. The Group relies on outsourcing arrangements with third parties for some of its activities including manufacturing and clinical trials management. The Group may not have adequate insurance cover, particularly in connection with product liability risk. The commercial success of the Group will depend on attaining significant market acceptance of its drug candidates among physicians, patients, healthcare payers and the medical community. The Group has not yet commercialised any product. If the Group fails to attract and retain qualified personnel, it may be unable to successfully develop its technologies, conduct its clinical trials and commercialise drug candidates. The Group may need additional funding, which may not be available on acceptable terms when required, if at all. The revenue is generated by a limited number of clients. Tax legislation in Belgium might change over time.
Our financial risk management consists of: Liquidity risk management The Group makes use of term accounts and treasury notes. The maturities of the term deposits are limited to a maximum of one year. The Group has €2.3 million restricted cash related to a cash pledge. The Group has limited financial debt relating to investments in the leasehold improvements and in equipment. Interest rate risk As the Group has no significant interest-bearing assets or liabilities, its income and operating cash flows are independent of changes in the market interest rates. Credit risk The credit risk arises from outstanding transactions with customers. It is the Group’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 financial institutions have credit ratings varying from A+ to A-.
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Available liquidities are placed with several banks. No cash credit lines were available. Foreign exchange risk The Group has sales transactions from research and collaboration agreements denominated in USD and purchase transactions denominated in GBP, SEK, CHF and USD. The Group did not enter into any currency hedging arrangements in order to cover this risk as the exposure is limited.
1.14. INDEPENDENCE AND EXPERTISE OF AT LEAST ONE MEMBER OF THE AUDIT COMMITTEE Remi Vermeiren has been appointed as independent Director of Ablynx. He is Chairman of the Audit Committee and holds a degree in Economic and Financial Sciences. Before he became an independent Director of Ablynx, he had a 43 year long career at Kredietbank nv, which in 1998 merged with Cera Bank and ABB Insurance into KBC Bank and Insurance Group. Currently, Mr. Vermeiren is also member of a number of quoted and non-quoted companies and of charitable organisations, including of ‘‘Foundation RV’’ set up and funded by himself. He is currently a member of the Board or supervisory bodies of the following companies: ACP II SCA (Luxembourg) (Liquidator) and Zinner NV (Belgium). Russell Greig has been appointed as independent Director of Ablynx in 2012 and joined the Audit Committee in February 2013. Dr. Greig has more than 30 years’ experience in the pharmaceutical industry, with knowledge and expertise in research and development, business development and commercial operations. He spent the majority of his career at GlaxoSmithKline, where he held a number of positions including GSK’s President of Pharmaceuticals International from 2003 to 2008 and Senior Vice President Worldwide Business Development. From 2008 to 2010, Dr. Greig was also President of SR One, GSK’s Corporate Venture Group. He is currently Chairman of AM Pharma (The Netherlands) and Board Member of Novavax AB (Sweden) and of BioAlliance (France), as well as a Director of Tigenix (Belgium) and of Edinburgh BioQuarter (Scotland). He also acts as a consultant to Genocea BioSciences (Boston, USA), BigDNA (Scotland) and to Scottish Enterprises, and is Venture Partner to Kurma Life Sciences (France). He served as acting CEO at Genocea and Isconova for an interim period. He was also a member of the Scottish Scientific Advisory Committee and was Chairman of Syntaxin (UK), which was acquired by Ipsen.
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Catherine Moukheibir has been appointed as independent Director of Ablynx on 2 September 2013 and joined the Audit Committee on 12 November 2013. She has been in C-level positions in several European biotech companies after an initial career in strategy consulting and investment banking in Boston and London. Her particular experience lies in aligning corporate and financial strategy appropriate to various stages of a biotech’s development, on the continuum from venture capital funding to public market or M&A. She is currently a nonexecutive Board member of Creabilis and Ablynx and 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 . Mats Pettersson was independent Director of Ablynx and was a member of the Audit Committee until his resignation on 26 February 2013.
1.15. JUSTIFICATION OF THE VALUATION RULES Ablynx nv, established in 2001, is a biotechnology Company. For the further successful expansion of the research and development activities, the Group is, among others, dependent on sufficient financial funding, the results obtained from research and the Group’s capacity to obtain and maintain adequate protection of its intellectual property. In addition, several clinical tests are planned in the next years, which will increase the operational costs. On the other hand, major commercial deals were closed which have already generated and which will generate important revenues as milestones have been achieved. In view of the above, the Company initiated an IPO on Euronext in November 2007 and raised €85.2 million and initiated an SPO on Euronext in March 2010 and raised €50 million. In February 2013 the Company raised €31.5 million through a private placement of new shares via an accelerated bookbuilding procedure. The current cash position of €200.4 million including cash, other investments, restricted cash and deposits will allow the Group to keep up with the financial obligations for at least the following 12 months. Consequently, the annual accounts have been prepared on the assumption that the Company is a going concern.
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1.16. APPROPRIATION OF RESULTS Ablynx nv, the parent Company, ended the financial year 2013 with a net loss of €13,896,180.22. The Board of Directors proposed to appropriate the loss of the year of €13,896,180.22 to retained losses, the latter amounting to €75,197,906.28. This brings the total amount of retained losses to €89,094,054.75.
1.17. IMPORTANT EVENTS SUBSEQUENT TO THE ACCOUNTING REFERENCE DATE On 13 January 2014, Ablynx provided an update on its anti-vWF Nanobody, caplacizumab, to treat acquired TTP, a rare thrombotic disease. Ablynx announced that it had stopped recruitment of the worldwide Phase II TITAN trial to allow earlier analysis of the data for potential proof-of-concept. Phase II data are now expected by mid2014 and if the results are promising, a Phase III study is anticipated to commence in 2015. On 17 January 2014, the Company issued 5,583 new shares in exchange for €27,440.04 as the result of the exercise of warrants by some employees and consultants of the Company. On 3 February 2014, Ablynx announced that it had entered into a second research collaboration and licensing agreement with Merck & Co, known as MSD outside the United States and Canada. This new alliance is focused on the discovery and development of Nanobodies in cancer immunotherapy. Under the terms of the agreement, Ablynx will receive an upfront payment of €20 million and up to €10.7 million in research funding during the initial three year research term of the collaboration. In addition, Ablynx is eligible to receive development, regulatory and commercial milestone payments on achieved sales thresholds for a number of products with ultimate potential to accrue as much as €1.7 billion plus tiered royalties. Merck will be responsible for the development, manufacturing and commercialisation of any products resulting from the collaboration. The anti-RSV Nanobody, ALX-0171, demonstrated pre-clinical proof-ofconcept in a neonatal lamb model. This model is a good mimic of the infant with respect to size, breathing characteristics, lung architecture
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and RSV induced lower respiratory tract infection. RSV infected animals were treated once daily with inhaled ALX-0171, starting at the peak viral load, in a manner which is believed to be representative of the situation which will be investigated in the first-in-infant study. Treatment with ALX-0171 led to a strong reduction in viral titres and inflammation in the lungs. In addition, ALX-0171 was effective in improving various clinical signs and symptoms, such as behavioural activity and general wellbeing. Pre-clinical results with the anti-IgE Nanobody, ALX-0962, for use in the treatment of severe allergic asthma had demonstrated that ALX-0962 has a novel dual mode of action, but upon review of the final pre-clinical data package, it was clear that results were not sufficiently compelling to ensure a significant competitive advantage compared with the benchmark and so the programme has been stopped.
1.18. 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 2013. This report will be deposited according to the legal requirements and can be consulted at the Companyâ&#x20AC;&#x2122;s address.
Ghent, 28 March 2014 For the Board of Directors, Dr Peter Fellner Chairman
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02. RESPONSIBILITY STATEMENT ANNUAL REPORT 2013 / ABLYNX
We hereby certify that, to the best of our knowledge, the consolidated financial statements as of 31 December 2013, prepared in accordance with the International Financial Reporting Standards, as adopted by the European Union, and the legal requirements applicable in Belgium, give a true and fair view of the assets, liabilities, financial position and loss of the Group and the undertakings included in the consolidation taken as a whole, and that the management report includes a fair review of the development and the performance of the business and the position of the Group and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. On behalf of the Board of Directors Dr Peter Fellner NV Woconsult represented by Chairman Wim Ottevaere, CFO
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As required by law, we report to you in the context of our appointment as the company’s statutory auditor. This report includes our report on the consolidated financial statements together with our report on other legal and regulatory requirements. These consolidated financial statements comprise the consolidated balance sheet as at 31 December 2013, the consolidated statement of comprehensive income, the consolidated statement of changes in shareholders’ equity and the consolidated statement of cash flows for the year then ended, as well as the summary of significant accounting policies and other explanatory notes. Report on the consolidated financial statements – Unqualified opinion We have audited the consolidated financial statements of Ablynx NV (“the company”) and its subsidiaries (jointly “the group”), prepared in accordance with International Financial Reporting Standards as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium. The consolidated balance sheet shows total assets of 213,560 (000) EUR and the consolidated income statement shows a consolidated loss for the year then ended of 19,470 (000) EUR.
TO THE GENERAL SHAREHOLDERS MEETING ON THE CONSOLIDATED ACCOUNTS OF THE GROUP AS OF AND FOR THE YEAR ENDING 31 DECEMBER 2013
To the shareholders
03. STATUTORY AUDITOR’S REPORT
REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS – UNQUALIFIED OPINION
Board of directors’ responsibility for the preparation of the consolidated financial statements The board of directors is responsible for the preparation and fair presentation of consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium, and for such internal control as the board of directors determines is necessary to enable the preparation of consolidated financial statements that are free from material
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misstatement, whether due to fraud or error. Statutory auditor’s responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing (ISA). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the statutory auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the statutory auditor considers internal control relevant to the group’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the group’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the board of directors, as well as evaluating the overall presentation of the consolidated financial statements. We have obtained from the group’s officials and the board of directors the explanations and information necessary for performing our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Unqualified opinion In our opinion, the consolidated financial statements of Ablynx NV give a true and fair view of the group’s net equity and financial position as of 31 December 2013, and of its results and its cash flows for the year then ended, in accordance with International Financial Reporting Standards as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium.
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Report on other legal and regulatory requirements The board of directors is responsible for the preparation and the content of the directors’ report on the consolidated financial statements. As part of our mandate and in accordance with the Belgian standard complementary to the International Standards on Auditing applicable in Belgium, our responsibility is to verify, in all material respects, compliance with certain legal and regulatory requirements. On this basis, we make the following additional statement, which does not modify the scope of our opinion on the consolidated financial statements: • The directors’ report on the consolidated financial statements includes the information required by law, is consistent with the consolidated financial statements and is free from material inconsistencies with the information that we became aware of during the performance of our mandate. However, we are unable to express an opinion on the description of the principal risks and uncertainties confronting the group, or on the status, future evolution, or significant influence of certain factors on its future development. We can, nevertheless, confirm that the information given is not obvious contradiction with any information obtained in the context of our appointment. Diegem, 31 March 2014 The statutory auditor DELOITTE Bedrijfsrevisoren / Reviseurs d’Entreprises BV o.v.v.e. CVBA / SC s.f.d. SCRL Represented by Gert Vanhees
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04. CONSOLIDATED BALANCE SHEET
CONSOLIDATED FINANCIAL STATEMENTS
As at 31 December (€’000) 2013 2012 Non-current assets 13,068 12,304 Intangible fixed assets 328 600 (Note 8.6) Property, plant and equipment 2,394 3,450 (Note 8.7) Restricted cash 2,320 2,660 (Note 8.8) Tax receivables 8,026 5,594 (Note 8.9) Current assets 200,492 62,691 Trade receivables 515 591 (Note 8.10) Other current assets 502 729 (Note 8.10) Tax receivables 448 608 (Note 8.10) Accrued income and deferred charges 977 656 (Note 8.10) Other short-term financial investments 187,519 55,810 (Note 8.11) Cash and cash equivalents 10,531 4,297 (Note 8.12) Total assets 213,560 74,995 Equity attributable to equity holders 46,173 31,722 Share capital 84,004 73,465 Share premium account 150,747 126,466 Share-based payment reserve 6,736 8,078 Retained earnings (195,314) (176,287) Non-current liabilities 141 927 Borrowings 141 927 (Note 8.16) Current liabilities 167,246 42.346 Borrowings 786 825 (Note 8.16) Trade payables 11,336 8,070 (Note 8.17) Other current liabilities 3,299 3,214 (Note 8.17) Deferred income 151,825 30,237 (Note 8.17) Total liabilities 167,387 43,273 Total equity and liabilities 213,560 74,995
The notes from point 8.1 to point 8.31 are an integral part of these financial statements.
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05. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended 31 December (â&#x201A;Źâ&#x20AC;&#x2122;000) 2013 2012 Revenue: Research and development 33,181 25,645 Grants 2,761 1,082 Total revenue 35,942 26,727 Research and development expenses (43,699) (46,868) (Note 8.20) General and administrative expenses (10,044) (9,409) (Note 8.21) Total operating expenses (53,743) (56,277) Other operating income 131 204 (Note 8.22) Other operating expenses (3) (426) (Note 8.22) Operating result (17,673) (29,772) Financial result (net) (1,797) 1,264 Finance income 949 1,452 (Note 8.25) Finance cost (2,746) (188) (Note 8.25) Loss before taxes (19,470) (28,508) Income tax expense 0 0 (Note 8.26) Loss for the year (19,470) (28,508) Other comprehensive loss Fair value gains/losses on available-for-sale 0 0 financial assets, net of tax Total comprehensive income for the period (19,470) (28,508) Loss attributable to equity holders (19,470) (28,508) Total comprehensive loss attributable (19,470) (28,508) to equity holders Basic and diluted loss per share (0.41) (0.65) (Note 8.27)
The notes from point 8.1 to 8.31 are an integral part of these financial statements.
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06. CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 December (€’000) 2013 2012 Cash flows from operating activities Loss before income tax (19,470) (28,508) Adjustments for: Amortisation 462 727 (Note 8.6) Depreciation 1,508 326 (Note 8.7) (Profit)/loss on disposal of property, plant and equipment Share-based payment expense 699 1,542 Financial result - net 1,797 (1,337) (Note 8.25) Net movement in trade and other receivables (2,289) 527 Net movement in trade and other payables 124,938 4,179 Cash used in operations 107,645 (22,544) Interest paid (2,746) (74) (Note 8.25) Interest received 949 1,411 (Note 8.25) Income tax paid 0 0 (Note 8.26) Net cash used in /provided by 105,848 (21,207) operating activities Cash flows from investing activities Purchases of property, plant and equipment (599) (700) (Note 8.7) Proceeds from sale of property, plant and equipment 147 1908 (Note 8.7) Purchases of intangible assets (190) (309) (Note 8.6) Purchases of short-term financial investments (Note 8.11) Sale of available-for-sale financial assets Sale of short-term financial investments (131,369) 22,030 (Note 8.13) Transfer to non-current asset 0 0 Net cash used in /provided by (132,011) 22,929 investing activities Cash flows from financing activities Proceeds from issuance of ordinary shares Proceeds from exercise of warrants 33,222 58 Proceed of borrowings Repayments of borrowings (825) (805) Net cash generated from financing activities 32,397 (747) Net (decrease)/increase in cash 6,234 975 and cash equivalents Cash and cash equivalents 4,297 3,322 at beginning of the period Cash and cash equivalents at end of the period 10,531 4,297 The notes on pages from point 8.1 to point 8.31 are an integral part of these financial statements.
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07. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER’S EQUITY
(€’000) Share Share Share- Retained Total capital premium based loss Equity payments Balance at 73,304 126,457 6,648 (147,779) 58,630 31 December 2011 Loss of the period (28,508) Other comprehensive income Available-for-sale financial assets Total Comprehensive Income Warrant plans Share-Based Payments 1,542 Transactions with owners Capital increase Issuance costs Exercise of warrants 161 9 (112) Balance at 73,465 126,466 8,078 (176,287) 31,722 31 December 2012 Loss of the period (19,470) Other comprehensive income Available-for-sale financial assets Total Comprehensive Income Warrant plans Share-Based Payments 699 443 Transactions with owners Capital increase Issuance costs Exercise of warrants 10,539 24,281 (2,041) Balance at 84,004 150,747 6,736 (195,314) 46,173 31 December 2013
The notes from point 8.1 till point 8.31 are an integral part of these financial statements.
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08. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8.1. GENERAL INFORMATION The Company was incorporated on 4 July 2001 under the name “MatchX”. It changed its name to “Ablynx” on 12 June 2002. Ablynx is a public limited liability company (“naamloze vennootschap” or “NV”) organised and existing under the laws of Belgium with registered offices at Technologiepark 21, 9052 Zwijnaarde, Belgium (company number 0475.295.446 (RPR Ghent)). Ablynx is focused on the discovery and development of Nanobodies, a novel class of antibody-derived therapeutic proteins based on singledomain antibody fragments, for a range of serious life-threatening human diseases. Ablynx is developing a portfolio of Nanobody-based therapeutic programmes in a number of major disease areas, including inflammation, thrombosis, oncology and pulmonology disease. The unique structure and stability of Nanobodies has allowed Ablynx, and its partners, to pursue targets that are typically difficult to reach with conventional antibodies. To date, the Company has raised €71.5 million private equity financing including the exercise of warrants, raised an additional €85.2 million as a result of its IPO on Euronext in November 2007, and raised €50 million resulting from its SPO on Euronext in March 2010. On 28 February 2013 the Company raised an additional €31.5 million through a private placement of new shares via an accelerated bookbuilding procedure. It has research facilities in Ghent (Belgium) and, as at 31 December 2013, it employed 283 staff. The Board of Directors decided in the meeting of November 2011 to stop all operations in Porto. The subsidiary was operationally closed down in the 1st quarter of 2012 and was liquidated end of February 2014.
8.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
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8.2.1. BASIS OF PREPARATION
The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards as adopted by the European Union (IFRS), as adopted by the EU, IFRIC Interpretations and Belgian legal requirements applicable to the Group. The consolidated financial statements are presented in thousands of euro (unless stated otherwise). The consolidated financial statements for the financial year ended 31 December 2013 have been approved for issue by the Board of Directors on 26 February 2014. The consolidated financial statements have been prepared under the assumption that the Group is a going concern and under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss. The preparation of consolidated financial statements in conformity with IFRS, as adopted by the EU, requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement 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 2013. • IFRS 13 Fair Value Measurement (applicable for annual periods beginning on or after 1 January 2013) • Improvements to IFRS (2009-2011) (normally applicable for annual periods beginning on or after 1 January 2013) • Amendments to IFRS 7 Financial Instruments: Disclosures – Offsetting Financial Assets and Financial Liabilities (applicable for annual periods beginning on or after 1 January 2013) • Amendments to IAS 1 Presentation of Financial Statements Presentation of Items of Other Comprehensive Income (applicable for annual periods beginning on or after 1 July 2012) • Amendments to IAS 12 Income Taxes – Deferred Tax: Recovery of
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Underlying Assets (applicable for annual periods beginning on or after 1 January 2013) • Amendments to IAS 19 Employee Benefits (applicable for annual periods beginning on or after 1 January 2013) Standards and interpretations published, but not yet applicable for the annual period beginning on 1 January 2013. • IFRS 9 Financial Instruments and subsequent amendments (not yet endorsed in EU) • IFRS 10 Consolidated Financial Statements (applicable for annual periods beginning on or after 1 January 2014) • IFRS 11 Joint Arrangements (applicable for annual periods beginning on or after 1 January 2014) • IFRS 12 Disclosures of Interests in Other Entities (applicable for annual periods beginning on or after 1 January 2014) • IAS 27 Separate Financial Statements (applicable for annual periods beginning on or after 1 January 2014) • IAS 28 Investments in Associates and Joint Ventures (applicable for annual periods beginning on or after 1 January 2014) • Improvements to IFRS (2010-2012) (normally applicable for annual periods beginning on or after 1 January 2014, but not yet endorsed in EU) • Improvements to IFRS (2011-2013) (normally applicable for annual periods beginning on or after 1 January 2014, but not yet endorsed in EU) • Amendments to IFRS 10, IFRS 12 and IAS 27 – Consolidated Financial Statements and Disclosure of Interests in Other Entities: Investment Entities (applicable for annual periods beginning on or after 1 January 2014) • Amendments to IAS 19 Employee Benefits – Employee Contributions (applicable for annual periods beginning on or after 1 July 2014, but not yet endorsed in EU) • Amendments to IAS 32 Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities (applicable for annual periods beginning on or after 1 January 2014) • Amendments to IAS 36 – Impairment of Assets – Recoverable Amount Disclosures for Non-Financial Asset (applicable for annual periods beginning on or after 1 January 2014) • Amendments to IAS 39 – Financial Instruments – Novation of Derivatives and Continuation of Hedge Ac-counting (applicable for annual periods beginning on or after 1 January 2014) • IFRIC 21 – Levies (applicable for annual periods beginning on or after 1 January 2014, but not yet endorsed in EU)
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8.2.2. CONSOLIDATION SCOPE
Ablynx nv controlled a sole 100â&#x20AC;&#x2030;%-owned subsidiary (Ablynx SA with registered offices in Rua do Campo Alegre 1021, 4150-180 Porto, Portugal). The consolidated financial statements are presented in euro and rounded to the nearest thousand. The subsidiary was operationally closed down in the 1st quarter of 2012 and was liquidated end of February 2014.
8.2.3. SEGMENT REPORTING
The Group operates as a single operating segment.
8.2.4. FOREIGN CURRENCY TRANSLATION
Functional and presentation currency Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (functional currency). The consolidated financial statements are presented in euro, which is the functional and presentation currency of the Group. Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. 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.
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Group companies The subsidiary had the same functional currency as the parent and no translation differences arose on consolidation. The following foreign exchange rates have been used for the preparation of the accounts: 1 euro = X foreign currency Closing rate 2013 2012 US Dollar 1.3776 1.3185 GB Pound 0.8312 0.8112
Average rate 2013 2012 1.3252 1.2891 0.8467 0.8123
8.2.5. REVENUE RECOGNITION
The Group generates revenue from research collaboration agreements and from government grants. The Group recognises revenue when the amount of revenue can be reliably measured, when it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the Group’s activities as described below. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. Research collaboration agreements These research agreements typically contain license fees, nonrefundable up-front access fees, research and development service fees and milestone payments. The revenue recognition policy for research projects can be summarised as follows: • License fees are recognised when the Group has fulfilled all conditions and obligations. The license fee will not be recognised if the amount cannot be reasonably estimated and if the payment is doubtful. As the Group has a continuing involvement during the license period, license fees are recognised rateably over the term of the agreement. • Non-refundable up-front fees for access to prior research results and databases are recognised when earned, if the Group has no continuing performance obligations and all conditions and obligations are fulfilled (this means after the delivery of the required information). If the Group has continuing performance obligations towards the client research fees, the fee will be recognised on a straight-line basis over the contractual performance period (with adjustment to the actual performance period
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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. Government grants Grants related to research projects received from governmental agencies are recognised at their fair value over the period necessary to match them with the costs that they are intended to compensate, and when there is reasonable assurance the Group will comply with the conditions attached to the grants, but not prior to the formal grant approval. These grants are separately presented in the income statement as revenue.
8.2.6. 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
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R&D expenses are not capitalised because the criteria under IFRS are not met. As no internally generated assets are recognised, all costs with respect to the protection of intellectual property are expensed as R&D expenses. Purchased intangible assets Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised on a straight-line basis over their estimated useful lives of maximum three years. Acquired knowledge in the form of licenses and patents is recorded at cost less accumulated amortisation and impairment. It is amortised on a straight-line basis over the shorter of the term of the license agreement and its estimated useful life. The Group does not have intangible fixed assets with an indefinite useful life.
8.2.7. 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 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 assetâ&#x20AC;&#x2122;s future economic benefits are expected to be consumed by the entity. The residual value and the useful life of an asset is reviewed each financial year-end for possible impairment. Depreciation is charged to the income statement on the following basis: Equipment Hardware Furniture Equipment under leasing Leasehold improvements
3 years 3 years 5 years the shorter of the useful life or the minimum leasing term the shorter of the useful life or the minimum rent term
Property, plant and equipment under construction are not depreciated.
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8.2.8. 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 assetâ&#x20AC;&#x2122;s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an assetâ&#x20AC;&#x2122;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.
8.2.9. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
The Group has no derivative financial instruments, in all material respect, to hedge interest rates and foreign currency risks.
8.2.10. TRADE RECEIVABLES
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables.
8.2.11. OTHER SHORT-TERM INVESTMENTS
Term deposits with an initial term of more than three months are held to maturity and measured at amortised cost.
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8.2.12. 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.
8.2.13. EQUITY INSTRUMENTS
Equity instruments issued by the Group are recorded at the proceeds received, net of direct issuance costs.
8.2.14. 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.
8.2.15. BORROWINGS
Interest-bearing bank loans are initially recorded as the proceeds received, net of transaction costs, and subsequently carried at amortised cost: the financial charges are accounted for on an accrual basis using the effective interest rate method and added to the carrying amount of the borrowing to the extent that they are not settled in the period in which they occur.
8.2.16. 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
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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.
8.2.17. EMPLOYEE BENEFITS
The Group offers several post-employment, death, disability and healthcare benefit schemes. All employees have access to these schemes. The death, disability and healthcare benefits granted to employees of the Group are covered by external insurance companies, where premiums are paid annually and charged to the income statement as they were incurred. The post-employment pension plans granted to employees of the Group are defined contribution plans. A defined contribution plan is a pension plan under which the Group pays a fixed contribution into a separate entity. The contribution obligations to the defined contribution plans are expensed by the Group in the income statement as they were incurred. Although defined contribution plans in Belgium are legally subject to a minimum guaranteed return according to Belgian legislation, the postemployment pension plans are accounted for as defined contribution plans, since the legally required return is basically guaranteed by the external insurance company. Nevertheless temporary small debt might occur. However temporary debt at this point might occur but given the nonmaterial nature we do not consider this at this point in time as a liability to the Company.
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8.2.18. PROVISIONS
A provision is recognised only when: the Group has a present obligation to transfer economic benefits as a result of past events; it is probable (more likely than not) that such a transfer will be required to settle the obligation; and a reliable estimate of the amount of the obligation can be made. When the impact is likely to be material (for long-term provisions), the amount recognised as a provision is estimated on a net present value basis (discount factor). The increase in provision due to the passage of time is recognised as an interest expense. A present obligation arises from an obligating event and may take the form of either a legal obligation or a constructive obligation (a constructive obligation exists when the Group has an established pattern of past practice that indicates to other parties that it will accept certain responsibilities and as a result has created a valid expectation on the part of those other parties that it will discharge those responsibilities). An obligating event leaves the Group no realistic alternative to settling the obligation, independently of its future actions. Provisions for decommissioning costs and restoring sites are recorded as appropriate in application of the above. Provisions for future operating losses are strictly prohibited. If the Group has onerous contracts (the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it), the present obligations under the contract are recognised as a provision. A provision for restructuring is only recorded if the Group demonstrates a constructive obligation to restructure at the balance sheet date. The constructive obligation should be demonstrated by: (a) a detailed formal plan identifying the main features of the restructuring; and (b) raising a valid expectation to those affected that it will carry out the restructuring by starting to implement the plan or by announcing its main features to those affected.
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8.2.19. LEASES
A financial lease is a lease that substantially transfers all the risks and rewards incident to ownership of an asset. The cost of assets acquired by way of a finance lease is measured at the lower of the fair value of the leased asset and the present value of the minimum lease payments, using the interest rate implicit in the lease as the discount rate, both determined at the inception of the lease. Initially incurred costs, directly attributable to the arrangement of the finance lease, are added to the amount recognised as an asset. 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.
8.2.20. SHARE-BASED PAYMENT TRANSACTIONS
The Group has offered equity-settled, share-based compensation plans to its employees, executive management and consultants. The cost with respect to the employee services received in compensation for the grant of these warrants is recognised as an expense. The total amount of the expense is recognised over the vesting period and determined on the basis of the fair value of the warrants at grant date. The fair value of each warrant is estimated on the date of grant using the Black-Scholes model. The total cost is initially estimated on the basis of the number warrants that will become exercisable. At each balance date, the Group revises its estimates of the number of warrants that will become exercisable. The impact of the revision is recognised in the income statement over the remaining vesting period with a corresponding adjustment to equity.
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8.2.21. EARNINGS PER SHARE
Basic net profit/(loss) per share is computed on the basis of the weighted average number of ordinary shares outstanding during the period, excluding treasury shares. Diluted net profit/(loss) per share is computed based on the weightedaverage number of ordinary shares outstanding including the dilutive effect of warrants. Warrants should be treated as dilutive, when and only when their conversion to ordinary shares would decrease the net profit per share from continuing operations.
8.3. FINANCIAL RISK MANAGEMENT 8.3.1. FINANCIAL RISK FACTORS
Liquidity risk management The Group makes use of term accounts and treasury notes. The maturities of the term deposits are limited to a maximum of one year. The Group has â&#x201A;Ź2.3 million restricted cash related to a cash pledge. The Group has limited financial debt related to investments in the building. Interest rate risk As the Group has no significant interest-bearing assets or liabilities, its income and operating cash flows are independent of changes in market interest rates. Credit risk The credit risk arises from outstanding transactions with customers. It is the Groupâ&#x20AC;&#x2122;s policy to deal with creditworthy partners to avoid significant risk exposure. The trade receivables relate to a limited number of high-ranked international customers for whom there is no recent history of default. The financial institutions have credit ratings varying from A+ to A-. Available liquidities are placed with several banks.
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No cash credit lines were available. Credit quality of financial assets € ‘000 Rating (*) 2013 2012 Cash and cash equivalents A+ 9,761 1,782 A- 770 2,515 Total 10,531 4,297 Short-term investments A+ 65,210 23,753 A- 122,309 32,057 Total 187,519 55,810 (*) source at 23 January 2014: Standard & Poor’s.
Foreign exchange risk The Group has sales transactions from research and collaboration agreements denominated in USD and purchase transactions denominated in GBP, SEK, CHF and USD. The Group did not enter into any currency hedging arrangements in order to cover this risk. As per 31 December 2013 , 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 €11,774,000 (2012: €223,000) higher. Conversely, if the EUR had strengthened 10 % against the GBP and weakened 10 % against the USD with all other variables held constant, the loss of the period would have been €12,911,000 (2012: €203,000) lower. The table below provides an indication of the Group’s open net foreign currency position as per year end: (€’000) Liabilities denominated in USD Liabilities denominated in GBP Assets denominated in USD
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2013 2012 327 143 571 67 66,920 0
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8.3.2. CAPITAL RISK MANAGEMENT
The Company manages its capital to ensure that it will be able to continue as a going concern. The capital structure of the Company consists of limited financial debt, cash and cash equivalents, restricted cash and short-term investments and equity attributed to the holders of equity instruments of the Company, such as capital, reserves and results carried forward as mentioned in the consolidated statements of changes in equity. The Company makes the necessary adjustments in the light of changes in the economic circumstances, risks associated to the different assets and the projected cash needs of the current and projected research activities. The current cash situation and the anticipated cash generation are the most important parameters in assessing the capital structure. The Company objective is to maintain the capital structure at a level to be able to finance its activities for at least twelve months. Cash income from existing and new partnerships is taken into account and, if needed and possible, the Company can issue new shares or enter into financing agreements.
8.4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS At each reporting date, the Group makes assumptions and estimates with respect to the impact of past events on the future resulting in a number of accounting estimates, which at present have a very limited impact. In September 2013, Ablynx and AbbVie entered into a global license agreement to develop and commercialise ALX-0061 for the treatment of inflammatory diseases. The deal was the largest clinical asset deal globally at that time in 2013 and is potentially worth US $840 million plus double-digit royalties. In September 2013, Ablynx and Merck Serono further expanded their relationship through a multi-year research alliance that could lead to at least four co-discovery and co-development collaborations. This is the fourth partnership between both companies and could generate >â&#x201A;Ź100 million in cash inflow for Ablynx during the next six and a half years. In October 2013 Ablynx granted an exclusive, royalty-bearing license to Eddingpharm to develop and commercialise its anti-RANKL Nanobody, ALX-0141, in the mainland of the Peopleâ&#x20AC;&#x2122;s Republic of China, the Hong Kong and Macao Special Administrative Regions, and Taiwan, for all
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indications, including osteoporosis and bone metastases. This is the Company’s first step to explore opportunities in emerging markets. The Company has accounted for a tax receivable of €8.0 million. The achievements of a number of assumptions may impact the recoverability, such as the future peak sales, the market share, the sales prices of the underlying R&D projects. The Company has €118 million of available tax losses carried forward. Based upon a tax planning, the Company did not recognise a deferred tax asset as the mid-term planning demonstrated significant uncertainty to realise taxable profits in the foreseeable future. The Company used the Black & Scholes model for share-based payment calculation purposes and based the volatility parameter on the volatility of the Ablynx share. We did not consider the rotation of employees as a parameter for sharebased payment calculations. 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.
8.5. SEGMENT INFORMATION The Group does not distinguish different operating segments. The income stems from six pharmaceutical partners, namely Boehringer Ingelheim, Merck Serono, Merck & Co, Novartis, AbbVie and Eddingpharm. Moreover, in 2013, almost 90% of the income originated from AbbVie, Boehringer Ingelheim, Merck Serono and Merck & Co.
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8.6. INTANGIBLE FIXED ASSET (€’000) Patents Software Total Year ended 31 December 2012 Opening net book amount 351 667 1,018 Additions 0 259 259 Transfer (*) 0 50 50 Amortisation charge (134) (593) (727) Closing net book amount 217 383 600 As at 31 December 2012 Cost 2,174 1,989 4,163 Accumulated amortisation and impairment (1,957) (1,606) (3,563) Net book amount 217 383 600 Year ended 31 December 2013 Opening net book amount 217 383 600 Additions 0 190 190 Transfer 0 0 0 Amortisation charge (116) (346) (462) Closing net book amount 101 227 328 As at 31 December 2013 Cost 2,174 2,179 4,353 Accumulated amortisation and impairment (2,073) (1,952) (4,025) Net book amount 101 227 328 (*) Transfer from PPE (Property, Plant and Equipment) under construction to software (Intangible Fixed Assets)
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) Equipment Furniture Equipment Leasehold PPE under Total under leasing improvements construction Year ended 31 December 2012 Opening net book amount 1,563 307 2,856 221 37 4,984 Additions 396 193 0 61 50 700 Disposals - acquisition value (1,655) (108) (89) (6) (1,858) Disposals - accumulated depreciation 1,594 102 89 5 1,790 and impairment Depreciation charge (977) (277) (730) (132) (2,116) Transfer (*) (50) (50) Closing net book amount 921 217 2,126 149 37 3,450 As at 31 December 2012 Cost 12,241 1,198 3,657 870 675 18,641 Accumulated depreciation and impairment (11,320) (981) (1,531) (721) (638) (15,191) Net book amount 921 217 2,126 149 37 3,450 Year ended 31 December 2013 Opening net book amount 921 217 2,126 149 37 3,450 Additions 346 253 599 Disposals - acquisition value (110) (37) (147) Disposals - accumulated depreciation 110 110 and impairment Depreciation charge (558) (262) (730) (68) (1,618) Transfer 0 Closing net book amount 709 208 1,396 81 0 2,394 As at 31 December 2013 Cost 12,587 1,451 3,657 870 675 19,240 Accumulated depreciation and impairment (11,878) (1,243) (2,261) (789) (675) (16,846) Net book amount 709 208 1,396 81 0 2,394 (*) Transfer from PPE (Property, Plant and Equipment) under construction to software (Intangible Fixed Assets)
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 8.29.3). (€’000) Restricted cash
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As at 31 December 2013 2012 2,320 2,660
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8.9. TAX RECEIVABLES (€’000) Tax credit related to research expenditure capitalised under BE GAAP
As at 31 December 2013 2012 8,026 5,594
The Company has accounted for a tax receivable of €8.0 million following an R&D incentive scheme in Belgium under which the tax can be refunded after five years if not offset against taxable basis over that period. The R&D incentives are recorded net against the relating R&D expenses in the consolidated statement of comprehensive income. We expect to receive this amount gradually as from year 2015 onwards.
8.10. TRADE RECEIVABLES AND OTHER CURRENT ASSETS
As at 31 December (€’000) 2013 2012 Trade receivables Trade receivables 272 368 Invoices to be made 243 223 Total 515 591 Other current assets VAT receivables 478 363 Other receivables 24 366 Total 502 729
Tax receivables Witholding taxes on interest income 448 608 Total 448 608 Accrued income and deferred expenses Accrued income 626 451 Deferred expenses 351 205 Total 977 656
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Trade receivables consist of amounts due from research collaboration partners. The nominal amount of both trade and other receivables approximates the fair value. Other receivables mainly consist of interests to be received and taxes to be recovered. Trade receivables that were past due are not impaired. The trade receivables relate to a limited number of high-ranked international customers for whom there is no recent history of default. The ageing analysis of the past due trade receivables is as follows: (€’000) Over 3 months
As at 31 December 2013 2012 0 211
The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies: (€’000) €
As at 31 December 2013 2012 272 368
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 (€’000) Term deposits in EUR Term deposits in foreign currency Term deposits > 3 months
As at 31 December 2013 2012 120,723 55,810 66,796 0 187,519 55,810
These are term deposits with banks with an initial term between 3 and 12 months.
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8.12. CASH AND CASH EQUIVALENTS As at 31 December (€’000) 2013 2012 ≤ 3 months 0 0 Cash at bank and on hand 10,531 4,297 Cash at bank and on hand in EUR 10,404 4,254 Cash at bank and on hand in foreign currency 127 43 Total 10,531 4,297
The cash and cash equivalents heading consists of cash, deposits held at call with banks and short-term deposits.
8.13. FINANCIAL INSTRUMENTS BY CATEGORY € ‘000 2013 Restricted cash Trade receivables - other current assets Other short-term deposits Cash and cash equivalents
Loans and Receivables 2,320 9,491
Total 2,320 9,491
187,519 10,531
187,519 10,531
€ ‘000 2012 Restricted cash Trade receivables - other current assets Other short-term deposits Cash and cash equivalents
Loans and Receivables 2,660 7,523
Total 2,660 7,523
55,810 4,297
55,810 4,297
8.14. SHARE CAPITAL 8.14.1. CAPITAL TRANSACTIONS DURING THE YEAR
The following capital increases took place in 2013: On 18 January 2013, the Company issued 61,812 new shares in exchange for €329,619.51 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €115.588,44 and €214,031.07 respectively.
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On 28 February 2013, the Company raised €31.5 million through a private placement of new shares via an accelerated bookbuilding procedure. The Company placed 4,377,919 new shares in exchange for €31,521,016.8. The par value and share premium amounted to €8,186,708.53 and €23,334,308.27 On 5 March 2013, the Company issued 348,400 new shares in exchange for €858,087 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €651,508 and to €206,579 respectively. On 18 April 2013, the Company issued 22,686 new shares in exchange for €74,651.94 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €41,547.82 and to €33,104.12 respectively. On 18 July 2013, the Company issued 273,913 new shares in exchange for €884,476.40 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €512,217.31 and €372,259.09 respectively. On 17 October 2013, the Company issued 25,531 new shares in exchange for €147,161.69 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €47,742.92 and €99,418.72 respectively. On 25 November 2013, the Company issued 165,000 new shares in exchange for €330,000 as a result of the exercise of warrants by some employees and consultants of the Company. The par value and share premium amounted to €308,550.00 and €21,450.00 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 2012 Number of new shares (exercise of warrants) Number of new shares (private placement) Number of shares on 31 December 2013
ANNUAL REPORT 2013 / ABLYNX
43,717,385 897,342 4,377,919 48,992,646
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CORPORATE GOVERNANCE & FINANCIAL REVIEW
As at 31 December 2013 the shareholder structure is as follows (based on the most recent transparency declarations): Shareholder Address
Number of % voting voting rights rights
Aviva Investors Global No 1 Poultry, 1,482,342 3.03% Services Limited EC2R8EJ London, United Kingdom Abingworth 38 Jermyn Street, 4,902,951 10.01% Management Limited SW1Y 6DN London, and Abingworth LLP United Kingdom C.H. Boehringer Binger Strasse 173, 2,142,857 4.37% Sohn AG & Co. KG 55216 Ingelheim am Rhein, Germany Biotech Value Fund 1 Sansome Street, 2,554,521 5.21% 30th floor, San Francisco, CA 94104, USA Perceptive Advisors Park Avenue, 2,077,590 4.24% 25th Floor, New York, NY 10022, USA Other 42,354,101 73.14%
8.14.2. AUTHORISED CAPITAL
The Extraordinary General Assembly of 29 April 2010 authorised the Board of Directors to carry out capital transactions during a period of five years for a total amount of €81,486,264.59. In December 2010, the Board of Directors issued a new warrant plan with a total number of 97,500 warrants at an exercise price of €8.24 per warrant effective as from 2011. In January 2012, the Board of Directors issued a new warrant plan with a total number of 860,000 warrants and 748,750 warrants were granted at an exercise price of €3.21 per warrant. The Extraordinary General Meeting of Shareholders of 18 July 2013, authorised the Board of Directors to increase the share capital, including by way of the issue of warrants and convertible bonds, in one or more transactions with a total amount equal to the total share capital of the company, i.e., ninety million six hundred ninety-five thousand four hundred and six euro, twelve cents (EUR 90,695,406.12).
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In February 2013, the Company raised €31.5 million through a private placement of new shares via an accelerated bookbuilding procedure. As per 31 December 2013, the authorised capital amounts to €90,695,406.12 (in €) E.O. General Assembly of 29/4/2010 issue of December 2010 authorised capital 31/12/2011 issue of January 2012 authorised capital 31/12/2012 issue of January 2013
81,486,264.59
(182.325,00)
for five years from 20/4/2010 till 20/4/2015 warrants
€/warrant
97,500.00
1.87
860,000.00
1.87
467,500.00
1.87
4,377,919.00
1.87
81,303,939.59 (1,608,200.00) 79,695,739.59 (874,225.00) 78,821,514.59
ABO of February 2013
(8,186,708.53) 70,634,806.06
Renewal E.O. General Assembly of 18/7/2013
90,695,406.12
8.14.3. VOTING RIGHTS
Each share gives right to one vote. If the share is encumbered by usufruct, the voting rights attached to the share shall be exercised by the usufructuary. The voting rights attached to pledged shares shall be exercised by the owner-pledgor.
8.14.4. DIVIDENDS AND MINIMUM SHARE CAPITAL
The Company has never distributed any dividends to its shareholders. According to Belgian company law, the Company is required to deduct 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 2013, 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.
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8.15. SHARE-BASED PAYMENTS 8.15.1. WARRANTS ISSUED IN APRIL 2011 FOR EMPLOYEES AND CONSULTANTS
During the General Shareholders Meeting of 28 April 2011, the issuance of a maximum number of 640,000 warrants was approved and 387,050 warrants have been issued. Each warrant gives the beneficiaries the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the average closing share price over a period of 30 days before the date of the grant (€8.68 per warrant). The warrants vest rateably over four years: 25 % of the warrants vest after one year; thereafter, the remaining 75 % become vested on a monthly basis (2.083 % per month). The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants have been granted (thus starting as from 1 January 2015 until April 2016 for consultants and as from 1 January 2015 until April 2018 for employees). In case of normal termination of the employee contract or the consulting agreement, all the vested warrants need to be exercised during the current or next exercise period. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed upon termination of the agreement. The duration of the warrants is five years for consultants and seven years for employees as of the issue date of the warrants. Any warrants that have not been exercised within five or seven years of their creation become null and void.
8.15.2. WARRANTS ISSUED IN FEBRUARY 2012 FOR EMPLOYEES AND CONSULTANTS
During the Board meeting of 1 February 2012, the issuance of a maximum number of 860,000 warrants was approved and 748,750 warrants have been issued. Each warrant gives the beneficiaries the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and
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have an exercise price equal to the average closing share price over a period of 30 days before the date of the grant (€3.21 per warrant). The warrants vest rateably over four years: 25 % of the warrants vest after one year; thereafter, the remaining 75 % become vested on a monthly basis (2.083 % per month). The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants have been granted (thus starting as from 1 January 2016 until October 2016 for consultants and as from 1 January 2016 until October 2018 for employees). In case of normal termination of the employee contract or the consulting agreement, all the vested warrants need to be exercised during the current or next exercise period. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed upon termination of the agreement. The duration of the warrants is five years for consultants and seven years for employees as of the issue date of the warrants. Any warrants that have not been exercised within five or seven years of their creation become null and void.
8.15.3. WARRANTS ISSUED IN APRIL 2012 FOR EMPLOYEES AND CONSULTANTS
During the General Shareholders Meeting of 26 April 2012, the issuance of a maximum number of 180,000 warrants was approved and 162,500 warrants have been issued. Each warrant gives the beneficiaries the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the average closing share price over a period of 30 days before the date of the grant (€3.23 per warrant). The warrants vest rateably over four years: 25 % of the warrants vest after one year; thereafter, the remaining 75 % become vested on a monthly basis (2.083 % per month). The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants have been granted (thus starting as from 1 January 2016 until January 2017 for consultants and as from 1 January 2016 until January 2019 for employees). In case of normal termination of the employee
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contract or the consulting agreement, all the vested warrants need to be exercised during the current or next exercise period. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed upon termination of the agreement. The duration of the warrants is five years for consultants and seven years for employees as of the issue date of the warrants. Any warrants that have not been exercised within five or seven years of their creation become null and void.
8.15.4. WARRANTS ISSUED IN NOVEMBER 2012 FOR EMPLOYEES AND CONSULTANTS
During the Extraordinary General Shareholders Meeting of 6 November 2012, the issuance of a maximum number of 35,000 warrants and a maximum number of warrants relating to a number of shares worth €35,000 was approved and 17,868 warrants have been issued. Each warrant gives the beneficiaries the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the average closing share price over a period of 30 days before the date of the grant (€5.44 per warrant). The warrants vest rateably over four years: 25 % of the warrants vest after one year; thereafter, the remaining 75 % become vested on a monthly basis (2.083 % per month). The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants have been granted (thus starting as from 1 January 2016 until July 2017 for independent Directors and as from 1 January 2016 until July 2019 for employees). In case of normal termination of the Director’s mandate or the employee contract, all the vested warrants need to be exercised during the current or next exercise period. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed upon termination of the agreement. The duration of the warrants is five years for independent directors and seven years for employees as of the issue date of the warrants. Any warrants that have not been exercised within five or seven years of their creation become null and void.
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8.15.5. WARRANTS ISSUED IN JANUARY 2013 FOR EMPLOYEES AND CONSULTANTS
During the Board meeting of 29 January 2013, the issuance of a maximum number of 295,000 warrants in favour of certain employees and also the issue of 172,500 warrants in favour of certain consultants was approved and 467,000 warrants have been issued. Each warrant gives the beneficiaries the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the average closing share price over a period of 30 days before the date of the grant (from €5.93 to €7.37 per warrant). The warrants vest rateably over 4 years: 25 % of the warrants vest after one year; thereafter, the remaining 75 % become vested on a monthly basis (2.083 % per month). The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants have been granted (thus starting as from 1 January 2017 until October 2019). In case of normal termination of the employee contract or the consulting agreement, all the vested warrants need to be exercised during the current or next exercise period. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed upon termination of the agreement. The duration of the warrants is seven years as of the issue date of the warrants. Any warrants that have not been exercised within seven years of their creation become null and void.
8.15.6. WARRANTS ISSUED IN AUGUST 2013 FOR EMPLOYEES, CONSULTANTS AND DIRECTORS
During the Extraordinary General Meeting of Shareholders of 5 August 2013, the issuance of a maximum number of 50,000 warrants in favour of certain employees and also the issuance of 570,000 warrants in favour of certain consultants and Directors was approved and 334,340 warrants have been issued. Each warrant gives the beneficiaries the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the average closing share price over a
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period of 30 days before the date of the grant (from €6.65 to €7.54 per warrant). The warrants vest rateably over 4 years: 25 % of the warrants vest after one year; thereafter, the remaining 75 % become vested on a monthly basis (2.083 % per month). The warrants can only be exercised when vested and as from the beginning of the fourth calendar year following the year in which the warrants have been granted (thus starting as from 1 January 2017 until April 2020). In case of normal termination of the employee contract, the consulting agreement or the mandate, all the vested warrants need to be exercised during the current or next exercise period. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed. All non-vested warrants become lapsed upon termination of the agreement or mandate. The duration of the warrants is seven years as of the issue date of the warrants. Any warrants that have not been exercised within seven years of their creation become null and void.
8.15.7. WARRANTS ISSUED IN NOVEMBER 2013 FOR A CERTAIN DIRECTOR
During the Extraordinary General Meeting of Shareholders of 25 November 2013, the issuance of a maximum of 50,000 warrants in favour of a certain Director was approved. Each warrant gives the beneficiary the right to subscribe to one share of the Company (equity-settled). The warrants are granted for free and have an exercise price equal to the average closing share price over a period of 30 days before the date of the grant (€7.27 per warrant). The warrants vest rateably over 3 years: 33.33 % of the warrants vest after one year; thereafter, the remaining 66.7 % become vested on a monthly basis (2.78 % per month). The warrants can only be exercised when vested and as from the beginning of the third calendar year following the year in which the warrants have been granted (thus starting as from 1 January 2017 until July 2018). In case of normal termination of the mandate all the vested warrants need to be exercised during the current or next exercise period. Vested warrants which have not been exercised in the foreseen period cannot be transferred to future exercise periods and become lapsed.
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All non-vested warrants become lapsed upon termination of the mandate. The duration of the warrants is five years. Any warrants that have not been exercised within five years of their creation become null and void.
8.15.8. 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.
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Warrants
2006
2006
2007
2007
2008
2009
2009
2009
2009
2010
21,500
330,814
10,713
343,119
95,000
116,875
90,994
160,000
274,414
53,334
25,729
36,615
39,134
73,333
157,558
289,785
69,271
80,260
51,860
86,667
116,856
13,000
37,286
25,000
5,730
3,324
10,314
833
At 31 December 2011 Outstanding
1,650,000
Non-vested Exercisable
1,650,000
21,500
330,814
10,713
Granted Forfeited Exercised
30,000
6,461
Expired At 31 December 2012 Outstanding
1,620,000
21,500
307,500
10,713
305,000
70,000
111,145
87,670
160,000
267,953
Non-vested
0
0
0
0
0
1,458
9,844
15,000
33,334
85,233
Exercisable
1,620,000
21,500
307,500
10,713
305,000
68,542
101,301
72,670
126,666
182,720
336
7,813
17,980
Granted Forfeited Exercised
7,142 840,000
3,000
300,000
104,167
70,000
56,831
Expired
7,031 11,803
67,187
At 31 December 2013 Outstanding
780,000
18,500
7,500
3,571
200,833
0
54,314
68,500
85,000
249,973
Non-vested
0
0
0
0
0
0
0
0
0
14,925
Exercisable
780,000
18,500
7,500
3,571
200,833
0
54,314
68,500
85,000
235,048
The weighted average share price at the date of exercise for warrants exercised during 2012 was €3.85 per share and for warrants exercised during 2013 was €6.84 per share.
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CORPORATE GOVERNANCE & FINANCIAL REVIEW
2010
2011
85,500
177,100
209,950
64,125
177,100
209,950
21,375
0
0
5,000
2,100
2011
2012
0
2012
0
2012
0
2012
2012
0
0
0
0 0
2013
0 0
Total number
Average Exercise price (in €)
3,565,979
3.67
836,878
7.82
2,729,101
2.40
0
0
0
350,000
398,750
150,000
12,500
911,250
3.21
12,500
134,456
4.86
41,147
1.18
0
-
13,500
0
2013
0
10,555
0
2012
80,500
175,000
199,395
350,000
385,250
150,000
0
0
0
0
0
4,301,626
3.56
39,000
102,083
114,042
350,000
385,250
150,000
0
0
0
0
0
1,285,244
4.77
41,500
72,917
85,353
0
0
0
0
0
0
0
0
3,016,382
3.05
12,868
5,000
391,330
302,778
711,976
6.58
369,922
4.94
1,381,029
1.79
78,990
8.01
35,938
4,565
103,125
4,464
103,125
79,000
6,434
80,500
139,062
194,830
246,875
380,786
46,875
0
6,434
5,000
312,330
302,778
3,183,661
4.73
19,500
33,333
62,500
108,333
207,756
0
0
4,691
3,646
312,330
302,778
1,069,792
5.83
61,000
105,729
132,330
138,542
173,030
46,875
0
1,743
1,354
0
0
2,113,869
4.18
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Warrants Number of warrants granted
2006
2006
2007
2007
2008
2009
2009
2009
2009
1,750,000
135,000
425,000
10,713
375,000
135,000
187,500
205,400
170,000
1.00
1.40
1.40
7.00
4.88
4.52
5.79
6.99
8.19
0
0
0
0
0
0
0
0
0
60%
60%
60%
60%
60%
60%
60%
60%
60%
3.95%
3.95%
4.63%
4.22%
4.42%
3.79%
3.20%
3.14%
3.11%
Number of warrants not vested at 31/12/2013 Exercise price (in €)* Expected dividend yield Expected stock price volatility Risk-free interest rate Expected duration
7.00
7.00
7.00
4.78
7.00
5.00
7.00
7.00
7.00
Fair value (in €) at grant date
0.63
0.88
0.90
3.78
3.11
2.06
3.51
5.25
5.07
Incremental Fair Value (in €) at extension
0.26
0.31
0.30
1.13
0.84
0
0
0
0
0
60%
60%
60%
60%
60%
Risk-free interest rate
3.41%
3.46%
3.50%
3.33%
4.08%
Expected duration at extension
9.29
9.75
10.21
8.54
11.17
Expected dividend yield Expected stock price volatility
*Equals the fair market value of the underlying shares on the grant date
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2010
2010
2011
2011
2012
2012
2012
2012
2012
2012
2013
2013
287,700
85,500
175,000
212,050
350,000
398,750
150,000
12,500
12,868
5,000
391,330
302,778
14,925
19,500
33,333
62,500
108.333
207,756
0
0
4,691
3,646
312,330
302,778
7.59
8.24
8.68
8.68
3.21
3.21
3.23
3.23
5.44
5.44
6.46
6.79
0
0
0
0
0
0
0
0
0
0
0
0
50%
50%
50%
50%
55%
55%
55%
55%
49%
56%
53.4% - 54.0%
52.7%-53.8%
2.75%
3.46%
3.65%
3.89%
2.35%
2.84%
3.65%
2.83%
1.09%
1.78%
1.54% - 1.88%
1.56%-2.08%
5.00
7.00
5.00
7.00
5.00
7.00
5.00
7.00
5.00
7.00
6.60-7.00
6.70-7.00
3.23
4.49
3.78
4.48
1.38
1.64
1.47
1.74
2.15
2.89
3.18-4.04
3.86-4.07
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8.16. BORROWINGS
As at 31 December (€’000) 2013 2012 Non-current Secured 141 927 Total 141 927 Current Secured 786 825 Total 786 825
Borrowings comprise the financial leasing, which has been secured with the asset it provides financing for. The asset is an investment in the building and equipment.
8.16.1. MATURITY TABLE
The maturity of non-current borrowings (including financial lease) is as follows: As at 31 December (€’000) 2013 2012 Borrowings Between 1 and 2 years 927 1,611 Between 2 and 5 years 0 141 Total 927 1,752
The details on the borrowings are summarised below: Year
Nominal Currency Amount
Secured (s) / Non secured (ns)
First installments
2010
1,641,920
2011
Number Periodicity of install- of installments ments
€
s
18/06/10
60
Monthly
281,055
€
s
18/10/11
36
Monthly
2011
85,799
€
s
6/12/11
36
Monthly
2011
1,110,022
€
s
6/12/11
36
Monthly
The carrying amounts of borrowings approximate their fair value.
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As at 31 December (€’000) 2013 2012 Finance lease obligations Future lease payments Within one year 796 856 In the second to the fifth year 142 1,044 Total 938 1,900 Less future finance charges (11) (148) Present value of lease obligations 927 1,752
8.17. TRADE PAYABLES AND OTHER CURRENT LIABILITIES Trade payables (€’000) Trade payables Accruals for invoices to be received Total
As at 31 December 2013 2012 4,642 2,820 6,694 5,250 11,336 8,070
Other current liabilities As at 31 December (€’000) 2013 2012 Taxes other than income taxes payable Social security 194 138 Payroll accruals 3,138 3,101 Other liabilities (33) (25) Total 3,299 3,214 Deferred income (€’000) Deferred income Within one year In the second to the fifth year Accrued expenses Total
As at 31 December 2013 2012 151,636 29,853 37,901 14,005 113,735 15,848 189 384 151,825 30,237
Deferred income mainly relates to cash received from research collaboration agreements prior to completion of the earnings process.
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8.18. DEFERRED INCOME TAX (€’000) Tax loss carried forward Notional interest deduction(*) Other temporary differences Net book value of capitalised R&D assets Depreciation of tangible assets Total temporary differences
As at 31 December 2013 2012 (118,576) (101,486) (22,044) (26,865) 8,268 7,943 (115,471) (108,415) (1) (538) (247,824) (229,361)
Unrecognised deferred tax asset (33,99%)
(84,235) (77,960)
(*) The application of Notional Interest Deduction is restricted as it has an expiry term of 7 years
The Group has unused tax losses carry forward. This, combined with the other temporary differences, results in a net deferred tax asset position. Due to the uncertainty surrounding the Group’s ability to realise taxable profits in the near future, the Company did not recognise any deferred tax assets.
8.19. RETIREMENT BENEFIT OBLIGATIONS The Group has set up several post-employment benefit schemes covering all staff members. The major plan is a cafeteria plan in which the employees can opt to receive on top of their pension benefits an additional death and disability coverage (waiver of premium and disability annuity). The premiums needed to finance this additional coverage are limited to the total premium budget (4 % and 2 % of the annual salary for the employer and employee contributions respectively). This plan is to be considered as a defined contribution plan. The Group has recognised an expense of €741,911.24 in the year 2012 and €888,593.24 in the year 2013.
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8.20. RESEARCH AND DEVELOPMENT EXPENSES (€’000) Consumables Outsourcing Patent costs Personnel costs Share-based payments Other operating expenses Withholding tax (reduction tax scientist) R&D tax credit Subtotal Depreciation and amortisation Total research and development expenses
Year ended 31 December 2013 2012 2,950 2,697 19,533 20,584 1,711 1,911 17,688 18,467 504 510 5,023 5,663 (2,590) (2,580) (2,939) (2,613) 41,880 44,639 1,819 2,229 43,699 46,868
The decrease in outsourcing is mainly related to lower technology and preclinical development costs.
8.21. GENERAL AND ADMINISTRATIVE EXPENSES (€’000) Personnel costs Share-based payments Executive Committee* compensation Consultancy Other operating expenses Retribution Subtotal Depreciation and amortisation Total general and administrative expenses
Year ended 31 December 2013 2012 3,326 3,357 639 1,033 2,690 2,026 1,599 1,034 1,604 1,509 (289) (163) 9,569 8,796 475 613 10,044 9,409
* The Executive Committee consists of key management members and the entities controlled by them.
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8.22. OTHER INCOME AND EXPENSES (€’000) Other operating income Other operating expenses Total
Year ended 31 December 2013 2012 131 204 3 426 128 (222)
Changes in other operating expenses relate to the closing of the Porto site. Other operating expenses mainly consist of expenses related to nondeductible VAT. Other operating income mainly consists of gain on disposal of fixed assets.
8.23. EMPLOYEE BENEFIT EXPENSE
Year ended 31 December (€’000) 2013 2012 Salaries, wages and bonuses 14,127 14,951 Social security 4,095 4,272 Group and hospitalisation insurance cost* 761 692 Share-based payments 1,142 1,542 Other employment costs 2,031 1,909 Executive Committee** compensation 2,579 2,001 Retribution (2,768) (2,717) Total 21,967 22,650 Headcount Executive Committee** 7 5 R&D personnel 243 219 General and administrative staff 40 39 Average FTE 279 258 * Post-employment benefits ** The Executive Committee consists of key management members and the entities controlled by them.
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8.24. OPERATING LEASES (€’000) Current lease payments
As at 31 December 2013 2012 3,131 3,250
Future lease payments Within one year 3,102 3,247 In the second to the fifth year 9,539 11,318 After five years 0 1,090 The majority of the lease arrangements concerns the leasing of company cars and office facilities.
8.25. FINANCE INCOME AND EXPENSES Year ended 31 December (€’000) 2013 2012 Interest income on financial assets 772 1,411 Other finance income 177 41 Total 949 1,452 Finance expenses Interest charges on financial liabilities 31 74 Other finance expenses 2,715 114 Total 2,746 188 In 2013, the line ‘Other finance expenses’ included unrealised foreign exchange losses of €1,345,151.40, realised exchange losses of €839,784.07 (2012: €96,564.73) and discounting charges of the R&D tax credit of €507,670.47. In 2013, the line ‘Other finance income’ included foreign exchange gains of €163,714.02.
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8.26. INCOME TAX EXPENSE The reconciliation between the expected income tax and the effective income tax reads as follows:
Year ended 31 December (€’000) 2013 2012 Current income taxes 0 0 Total 0 0 Loss of the year (19,470) (28,508) Stock issuance costs 1,366 0 Share-based payments 1,142 1,542 Other permanent differences 4,701 4,686 Expected income tax credit (6,275) (11,625) Impact unrecognised deferred tax asset (6,275) (11,625) Effective income taxes 0 0
8.27. LOSS PER SHARE (€’000) Loss of the year Weighted average number of shares outstanding Basic and diluted loss per share after reverse split (in €)
Year ended 31 December 2013 2012 (19,470) (28,508) 47,859,905 43,708,227 (0.41) (0,65)
Earnings/losses per share are calculated by dividing the net result attributable to shareholders by the weighted average numbers of shares during the year. As the Group is suffering operating losses, warrants have an antidilutive effect. As such, there is no difference between basic and diluted earnings per share.
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8.28. CONTINGENCIES AND ARBITRATIONS At present there are no contingencies and arbitrations.
8.29. COMMITMENTS 8.29.1. COLLABORATIVE RESEARCH AGREEMENTS AND CLINICAL RESEARCH AGREEMENTS 8.29.1.1. BOEHRINGER INGELHEIM (B.I.)
•
B.I. and Ablynx announced a major global strategic alliance to discover, develop and commercialise up to 10 different Nanobody programmes. In return, Ablynx received an up-front payment and will receive research license payments, milestones and royalties. Additionally, Boehringer Ingelheim subscribed for €15 million in the IPO in November 2007. Ablynx will have certain co-promotion rights in Europe.
•
B.I. and Ablynx agreed to collaborate to identify Nanobodies in a specific biological target believed to be relevant in Alzheimer’s disease and B.I. received an exclusive worldwide license to develop and commercialise such Nanobodies. In return, Ablynx received an up-front payment and will receive milestone payments, FTE payments and royalties as Nanobody drug candidates proceed through development and potentially reach the market. Ablynx will also participate in the relevant steering committees. On 21 August 2008, the research funding was extended until 2009. The agreement was extended with two years in March 2012.
8.29.1.2. NOVARTIS AGREEMENT
The agreement with Novartis was signed in December 2005. Under this agreement, Ablynx will seek to discover Nanobodies against a number of targets nominated by Novartis in a 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.
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8.29.1.3. MERCK SERONO AGREEMENTS
ANNUAL REPORT 2013 / ABLYNX
•
Ablynx and Merck Serono announced a co-discovery and codevelopment collaboration on 4 September 2008. They will collaborate to research and develop Nanobody-based therapeutics against two disease targets, one oncology and one immunology exploiting some of the key benefits Nanobodies have over conventional antibodies and other fragments. Under the terms of the agreement, both companies will equally share all research and development costs. Should Ablynx contribute equally to each programme, it will be eligible to receive fifty percent of the resulting profits. In addition, Ablynx will have 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 up-front cash payment to Ablynx of €10 million.
•
On 11 October 2010, Ablynx and Merck Serono announced that they have expanded their relationship and entered into a second agreement to co-discover and co-develop Nanobodies against an inflammatory disease target. Under the terms of the agreement, Ablynx has received an up-front payment of €10 million in 2010 and is responsible for all activities and costs, excluding manufacturing costs, up to the delivery of a pre-clinical package that will form the basis for the filing of an IND or IND-equivalent. Upon acceptance of the package by Merck Serono, Ablynx will be eligible for a €15 million milestone payment. Ablynx has the option to continue with Merck Serono up to a 50:50 co-development basis and share the resulting profits, or to convert this collaboration into an exclusive, worldwide licensing deal with milestone payments and tiered royalties.
•
On 9 November 2011, Ablynx and Merck Serono announced that they have expanded their relationship and entered into a third agreement to co-discover and co-develop Nanobodies against two targets in osteoarthritis. Under the terms of the agreement, Ablynx has received an up-front payment of €12 million in 2011 and €8 million in January 2012 and is responsible for all activities and costs, excluding manufacturing costs, up to the delivery of a pre-clinical package that will form the basis for the filing of an IND or IND-equivalent. Upon acceptance of the package by Merck Serono, Ablynx will be eligible for a €30 million
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milestone payment. Ablynx has the option to continue with Merck Serono up to a 50:50 co-development basis and share the resulting profits, or to convert this collaboration into an exclusive, worldwide licensing deal with milestone payments and tiered royalties. •
On 26 September 2013 a multi-year research alliance that could lead to at least four co-discovery and co-development collaborations was closed. Under the terms of the agreement, Merck Serono will fund a dedicated discovery group at Ablynx. Both partners will jointly select disease targets against which this group will develop Nanobodies, up to in vivo proof-of-principle. The dedicated group will focus on the discovery and development of Nanobodies against a number of targets across multiple disease areas. The collaboration will span all of Merck Serono’s core research and development fields, including oncology, immuno-oncology, immunology and neurology.
8.29.1.4. MERCK & CO AGREEMENTS
•
On 2 October 2012 Ablynx announced a collaboration with Merck & Co, Inc (NYSE: MRK) through a subsidiary, 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. Merck is known as MSD outside the United States and Canada. Under the terms of the agreement, Merck gains exclusive global rights to Nanobodies against the selected target, with an option for similar rights to a second target. Upon signing, Merck will pay Ablynx a €6.5 million upfront payment and a €2 million fee for research funding. In addition, Ablynx will be eligible to receive up to €448 million in research, regulatory and commercial milestone payments associated with the progress of multiple candidates as well as tiered royalties on any products derived from the collaboration. Ablynx will be responsible for the discovery of Nanobody candidates and Merck will be responsible for the research, development, manufacturing and commercialisation of any Nanobody product resulting from the collaboration.
•
On 3 February 2014, Ablynx announced that the Company had entered into a second research collaboration and licensing agreement with a subsidiary of Merck & Co, known outside the US and Canada as MSD. This new exclusive collaboration and licensing agreement is focused on the discovery and development of several predefined Nanobody candidates (including bi- and trispecifics) directed toward so called
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‘immune checkpoint modulators’, proteins believed to provide potential targets for the development of cancer immunotherapies, a rapidly emerging approach to the treatment of a wide range of cancer types. Under the terms of the agreement, Ablynx will receive an upfront payment of €20 million and up to €10.7 million in research funding during the initial three year research term of the collaboration. In addition, Ablynx is eligible to receive development, regulatory and commercial milestone payments on achieved sales thresholds for a number of products with ultimate potential to accrue as much as €1.7 billion plus tiered royalties. Merck will be responsible for the development, manufacturing and commercialisation of any products resulting from the collaboration. 8.29.1.5. ABBVIE AGREEMENT
In September 2013, Ablynx and AbbVie entered into a global license agreement to develop and commercialise the anti-IL-6R Nanobody, ALX-0061, to treat inflammatory diseases. ALX-0061 is Ablynx’s proprietary anti-IL-6R Nanobody that successfully completed a Phase IIa study in February 2013 reporting strong efficacy and safety data in patients with moderately to severely active rheumatoid arthritis (RA) on a stable background of methotrexate. Under the terms of the agreement, Ablynx will be responsible for completing Phase II clinical development in both RA and systemic lupus erythematosus (SLE). Upon the achievement of pre-defined success criteria, AbbVie will exercise its right to in-license ALX-0061 and be responsible for subsequent Phase III clinical development and commercialisation. Ablynx will retain an option for copromotion rights in Belgium, the Netherlands and Luxembourg. Ablynx will receive an upfront payment of US $175 million, which will partly be used to fund the next phases of clinical development of ALX-0061. Upon achievement of certain development, regulatory, commercial and sales-based milestones, Ablynx will be eligible to receive additional milestone payments totalling up to US $665 million as well as double-digit tiered royalties on net sales upon commercialisation. 8.29.1.6. EDDINGPHARM AGREEMENT
On 18 October Ablynx granted an exclusive, royalty-bearing license to Eddingpharm, a leading Chinese specialty pharmaceutical company, to develop and commercialise its anti-RANKL Nanobody, ALX-0141, in the mainland of the People’s Republic of China, the Hong Kong and Macao Special Administrative Regions, and Taiwan, for all indications, including osteoporosis and bone metastases.
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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 will receive a â&#x201A;Ź2 million upfront payment from Eddingpharm and is entitled to receive commercial milestone payments plus tiered, double-digit royalties of up to 20%, based on annual net sales of ALX-0141 generated by Eddingpharm in Greater China. 8.29.1.7. OTHER COLLABORATIVE RESEARCH AGREEMENTS
Ablynx has entered into numerous agreements with universities, medical centers and external researchers for research and development work and for the validation of the Groupâ&#x20AC;&#x2122;s technology and products. These agreements typically have durations of one to three years. Ablynx must pay fixed and variable fees to the collaborators and in exchange receives access and rights to the results of the work.
8.29.2. PRINCIPAL GOVERNMENT GRANTS AND INCENTIVES 8.29.2.1 GRANTS Grant
Assigned
Received at Recognised as Recognised as 31/12/2013 income 2012 income 2013
Still to receive
IWT 7
1,808,138
1,808,138
1,808,138
106,630
0
IWT 9
1,133,636
1,132,755
1,132,755
(881)
0
IWT 11
1,198,325
1,198,325
1,198,325
277,433
0
IWT 12
1,134,496
1,134,496
1,134,496
410,226
0
IWT 13
420,000
375,943
375,943
0
0
IWT 14
600,000
600,000
480,000
240,000
360,000
120,000
IWT 15
157,773
157,773
124,000
38,603
100,177
33,773
IWT 16
747,648
747,648
596,000
596,000
151,648
IWT 17
1,680,765
1,680,765
1,344,000
1,149,009
336,765
IWT 18
885,597
885,597
354,000
540,511
531,597
The IWT, funded by the Flemish Government, awarded Ablynx three additional grants in 2013; the long term S&P rating for the Flemish Government is AA. Altogether, the Group received a fixed percentage of the expenses incurred in the following R&D projects:
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1) WT 7: Development of novel protein half-life extension technologies that result in long half-lives and favourable pharmacokinetic properties for small protein drugs. Grantor: IWT Start date: 1 September 2008 End date: 31 August 2011 Amount approved: €1,808,138 Amount recognised: €1,808,138 Amount received: €1,808,138 2) IWT 9: Accelerating the development of pulmonary and oral delivery technologies for Nanobodies Grantor: IWT Start date: 1 July 2009 End date: 30 June 2011 Amount approved: €1,133,636 Amount recognised: €1,132,755 Amount received: €1,132,755 3) IWT 11: Pre-clinical and clinical development of an anti-IL-6R Nanobody Grantor: IWT Start date: 1 September 2009 End date: 30 June 2012 Amount approved: €1,198,325 Amount recognised: €1,198,325 Amount received: €1,198,325 4) IWT 12: Expansion of the Nanobody platform to pulmonary delivery: preclinical and clinical development of an anti-RSV Nanobody Grantor: IWT Start date: 1 February 2010 End date: 31 July 2012 Amount approved: €1,134,496 Amount recognised: €1,134,496 Amount received: €1,134,496
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5) IWT 13: Grouped feasibility studies application Grantor: IWT Start date: 1 May 2010 End date: 30 April 2011 Amount approved: €420,000 Amount recognised: €375,943 Amount received: €375,943 6) IWT 14: Grouped Feasibility Studies Application Grantor: IWT Start date: 1 December 2011 End date: 30 November 2013 Amount approved: €600,000 Amount recognised: €600,000 Amount received: €480,000 7) IWT 15: Centibody Project Grantor: IWT Start date: 1 May 2012 End date: 30 April 2014 Amount approved: €157,773 Amount recognised: €138,780 Amount received: €124,000 8) 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: €596,000 Amount received: €596,000
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9) 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: €1,149,009 Amount received: €1,344,000 10) 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: €540,511 Amount received: €354,000 8.29.2.2 OTHER INCENTIVES
• The Company received €2.9 million in 2013 as a reduction in withholding taxes for its personnel active in R&D. • The Company has accounted for a tax receivable of €8.0 million following an R&D incentive scheme in Belgium under which the tax can be refunded after five years, if not offset against the taxable basis over the period 8.29.3. PRINCIPAL LEASE AND BORROWINGS CONTRACTS
Ablynx has signed contracts with NV Bio-Versneller, who provides the Company with 8,000 m2 of laboratory facilities within the Technologiepark as from June 2010, with an initial term of eight years which can be extended. Ablynx was granted by KBC Bank a credit commitment of €3.2 million for the guarantee clause, which is mentioned in the NV Bio-Versneller contract and of which end 2010 €1.3 million was withdrawn. For this same amount, a pledge was granted to KBC Bank NV and is constituted as restricted cash. The pledge and the restricted cash of €1.3 million can be increased to a maximum of €3.2 million in relation to the cash position of the Company.
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NV Bio-Versneller was granted a pledge of €1.7 million in the framework of additional investments which NV Bio-Versneller made in the BioVersneller building at the request of Ablynx nv. The pledge is being reduced every year over a period of five years as from January 2012. The amount of the pledge is considered as restricted cash. Ablynx rents 25,322 m2 of land from BVBA Rootom in Belgium. The Company developed facilities on this land for the housing of llamas.
8.30. RELATED PARTY TRANSACTIONS 8.30.1. REMUNERATION KEY MANAGEMENT AND NON-EXECUTIVE DIRECTORS
Key management consists of the members of the Executive Committee and the non-executive Directors and the entities controlled by any of them. Remuneration key management: (€’000) Number of management members
As at 31 December 2013 2012 7 5
Short-term employee benefits (salaries, 1,832 1,390 social security bonuses, lunch vouchers) Post-employment benefits (group insurance) 196 122 Share-based compensation 772 1,033 Other employee costs 112 97 Management fees 355 326 Retribution (111) (26) Total 3,156 2,942 Number of warrants granted (in units) 410,000 500,000 Cumulative outstanding warrants (in units) 2,094,124 3,336,250 Shares owned (in units) 102,035 39,805
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Transactions with non-executive Directors:
As at December 31 (€’000) 2013 2012 Share-based compensation 12 0 Management fees 8 92 Total benefits 20 92 Number of warrants offered (in units)(*) 64,590 12,868 Cumulative outstanding warrants (in units) 14,033 10,713 Non-vested warrants 9,719 Shares owned (in units) 25,000 5,978,845 (*) Offered in 2013 and accepted in 2014
8.31. EVENTS AFTER THE BALANCE SHEET DATE On 13 January, the Company decided to stop recruitment for the trial with the Company’s anti-vWF Nanobody, caplacizumab, to treat acquired thrombotic thrombocytopenic purpura (TTP), a rare blood disorder to allow earlier analysis of the data for potential proof-ofconcept. Phase II data are expected during the first half of 2014 and if the results are promising, a Phase III study is anticipated to commence in 2015. On 17 January 2014, the Company issued 5,583 new shares in exchange for €27,440.04 as the result of the exercise of warrants by some employees and consultants of the Company. In February, the Company announced that the it has entered into a second research collaboration and licensing agreement with a subsidiary of Merck & Co, known outside the US and Canada as MSD. This is focused on the discovery and development of several predefined Nanobody candidates (including bi- and trispecifics) directed toward so called ‘immune checkpoint modulators,’ proteins believed to provide potential targets for the development of cancer immunotherapies, a rapidly emerging approach to the treatment of a wide range of cancer types. Under the terms of the agreement, Ablynx will receive an upfront payment of €20 million and up to €10.7 million in research funding during
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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 â&#x201A;Ź1.7 billion plus tiered royalties. Merck will be responsible for the development, manufacturing and commercialisation of any products resulting from the collaboration. The anti-RSV Nanobody, ALX-0171, demonstrated pre-clinical proof-ofconcept in a neonatal lamb model. This model is a good mimic of the infant with respect to size, breathing characteristics, lung architecture and RSV induced lower respiratory tract infection. RSV infected animals were treated once daily with inhaled ALX-0171, starting at the peak viral load, in a manner which is believed to be representative of the situation which will be investigated in the first-in-infant study. Treatment with ALX-0171 led to a strong reduction in viral titres and inflammation in the lungs. In addition, ALX-0171 was effective in improving various clinical signs and symptoms, such as behavioural activity and general wellbeing. Pre-clinical results with the anti-IgE Nanobody, ALX-0962, for use in the treatment of severe allergic asthma had demonstrated that ALX-0962 has a novel dual mode of action, but upon review of the final pre-clinical data package, it was clear that results were not sufficiently compelling to ensure a significant competitive advantage compared with the benchmark and so the programme has been stopped.
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09. DISCLOSURE AUDIT FEES ANNUAL REPORT 2013 / ABLYNX
€ Auditor’s fees 55,000 Fees for exceptional services or special missions executed in the Group by the auditor Other attestation missions 11,550 Tax consultancy Other missions external to the audit Fees for exceptional services or special missions executed in the Group by people they are linked to Other attestation missions 4,988 Tax consultancy Other missions external to the audit
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The statutory auditor has issued an unqualified report on the statutory financial statements of Ablynx nv. The complete set of the statutory financial statements of Ablynx nv is also available on the Company’s website www.ablynx.com. SUMMARY BALANCE SHEET OF ABLYNX NV (€’000) Assets as at 2013 2012 Fixed assets 118,104 112,300 Intangible fixed assets 115,710 108,851 Tangible fixed assets 2,394 3,449 Current assets 210,805 70,813 Amounts receivable within one year 9,462 7,860 Current investments 189,884 60,496 Cash at bank and in hand 10,482 2,252 Deferred charges and accrued income 977 205 TOTAL ASSETS 328,909 183,113
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OF ABLYNX NV AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2013
The management report, the statutory financial statements of Ablynx nv and the report of the statutory auditor will be filed with the appropriate authorities and are available at the Company’s registered offices.
10. CONDENSED STATUTORY FINANCIAL STATEMENTS
In accordance with Art. 105 of the Belgian Companies’ Code, the condensed statutory financial statements of Ablynx nv are presented. These condensed statements have been drawn up using the same accounting principles for preparing the complete set of statutory financial statements of Ablynx nv at and for the year ending 31 December 2013.
CORPORATE GOVERNANCE & FINANCIAL REVIEW
(€’000) Liabilities as at 2013 2012 Equity 153,217 132,968 Capital 91,564 81,700 Share premium account 150,747 126,466 Accumulated profits (losses) (89,094) (75,198) Amounts payable after more than one year 141 927 Current liabilities 175,551 49,218 Amounts payable within one year 15,421 12,479 Deferred charges and accrued income 160,130 36,739 TOTAL LIABILITIES 328,909 183,113
SUMMARY INCOME STATEMENT OF ABLYNX NV
(€’000) 2013 2012 Operating Income 89,966 83,588 Turnover 32,746 24,566 Own construction capitalised 48,789 50,214 Other operating income 8,431 8,808 Operating charges 98,984 94,002 Services and other goods 35,025 37,038 Remuneration, social security costs and pensions 21,836 22,045 Depreciation of and amounts written off formation 41,909 34,790 expenses, intangible and tangible fixed assets Other operating charges 214 129 Operating Profit (9,018) (10,414) Financial result (3,157) 1,268 Financial income 950 1,451 Financial charges (4,107) (183) Gain (loss) on ordinary activities before taxes (12,175) (9,146) Extraordinary result (1,721) (4,270) Extraordinary cost (1,853) (4,747) Extraordinary income 132 477 Profit (loss) for the year before taxes (13,896) (13,416) Profit (loss) for the period available for appropriation (13,896) (13,416)
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APPROPRIATION ACCOUNT (€’000) Profit (loss) to be appropriated Profit (loss) to be appropriated Profit (loss) to be carried forward Profit (loss) to be carried forward
2013 2012 89,094 75,198 (13,896) (13,416) (75,198) (61,782) (89,094) (75,198)
CAPITAL STATEMENT (position as at 31 December 2013) (€’000) Amounts Number of shares A. Capital 1. Issued capital - At the end of the previous year 81,700 - Changes during the year 9,864 - At the end of this year 91,564 2. Capital representation 48,992,646 2.1. Shares without par value - Bearer and dematerialised 48,992,646 B. Own shares held by 0 C. Commitments to issue shares* 0 D. Autorised capital not issued 90,695 (*) See chapter 11, Additional information, the number of outstanding warrants amounts to 3,312,535.
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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 33.33â&#x20AC;&#x2030;% per year. Other licenses are valued at their acquisition prices and depreciated straight-line over the economic life of the patent to which they relate. The maximum depreciation period for other licenses is five years. Research and Development Research costs have also been capitalised at cost price, insofar as the cost price does not exceed the value in use or the future return of these assets for the Company. They are amortised straight-line over five years. Other intangible fixed assets Other intangible fixed assets are capitalised at their cost price and to their probable useful life for the company. These other intangible fixed assets include contributed technology. The contribution value of this technology is depreciated linearly over five years. Tangible Fixed Assets Tangible fixed assets are capitalised at their acquisition price, including all subsequent direct costs required to make such assets operational.
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The following depreciation percentages are used:
Asset Method Basis Depreciation % L-D-O NR-R Principle costs (Min-Max) Subsequent costs (Min-Max) 1 Formation Cost 2 Intangible Fixed Assets L NR 20-33.3% 3 Installations, machinery and equipment L NR 33.3% 4 Office equipment and furniture L NR 20% 5 Other tangible fixed assets L NR 33.3% 6 Leasehold improvements : the shorter of the useful life or the minimum rent 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 and FTE income Grants and government incentives are recognised in the income statement when all the conditions of the grants and government incentives are fulfilled and costs are incurred. Grants, government incentives 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.
ANNUAL REPORT 2013 / ABLYNX
187.
CORPORATE GOVERNANCE & FINANCIAL REVIEW
In accordance with the CBN recommendation issued in 2010, the reduction in withholding tax has been directly recorded in other operating income. Amounts Payable within One Year Amounts payable are measured at their nominal value. Foreign Currencies Transactions in foreign currencies during the year are booked at the current exchange rate. All outstanding payables and receivables at year end are recorded at the exchange rate on the balance sheet date. Exchange rate gains and losses are recognised in the results under the heading â&#x20AC;&#x2DC;Other Financial Charges and Incomeâ&#x20AC;&#x2122;. Turnover Turnover from research contracts is recognised over the duration of the contract in accordance with the progress of the work and contractual terms.
ANNUAL REPORT 2013 / ABLYNX
188.
CORPORATE GOVERNANCE & FINANCIAL REVIEW
ANNUAL REPORT 2013 / ABLYNX
189.
CORPORATE GOVERNANCE & FINANCIAL REVIEW
Additional information Warrants Warrants
2006
2006
2007
2007
2008
2009
2009
2009
2009
2010
21,500
330,814
10,713
343,119
95,000
116,875
90,994
160,000
274,414
53,334
25,729
36,615
39,134
73,333
157,558
289,785
69,271
80,260
51,860
86,667
116,856
13,000
37,286
25,000
5,730
3,324
10,314
833
At 31 December 2011 Outstanding
1,650,000
Non-vested Exercisable
1,650,000
21,500
330,814
10,713
Granted Forfeited Exercised
30,000
6,461
Expired At 31 December 2012 Outstanding
1,620,000
21,500
307,500
10,713
305,000
70,000
111,145
87,670
160,000
267,953
Non-vested
0
0
0
0
0
1,458
9,844
15,000
33,334
85,233
Exercisable
1,620,000
21,500
307,500
10,713
305,000
68,542
101,301
72,670
126,666
182,720
336
7,813
17,980
Granted Forfeited Exercised
7,142 840,000
3,000
300,000
104,167
70,000
56,831
Expired
7,031 11,803
67,187
At 31 December 2013 Outstanding
780,000
18,500
7,500
3,571
200,833
0
54,314
68,500
85,000
249,973
Non-vested
0
0
0
0
0
0
0
0
0
14,925
Exercisable
780,000
18,500
7,500
3,571
200,833
0
54,314
68,500
85,000
235,048
The weighted average share price at the date of exercise for warrants exercised during 2013 was €3.85 per share and for warrants exercised during 2013 €6.84 per share.
ANNUAL REPORT 2013 / ABLYNX
190.
CORPORATE GOVERNANCE & FINANCIAL REVIEW
2010
2011
85,500
177,100
209,950
64,125
177,100
209,950
21,375
0
0
5,000
2,100
2011
2012
0
2012
0
2012
0
2012
2012
0
0
0
0 0
2013
0 0
Total number
Average Exercise price (in €)
3,565,979
3.67
836,878
7.82
2,729,101
2.40
0
0
0
350,000
398,750
150,000
12,500
911,250
3.21
12,500
134,456
4.86
41,147
1.18
0
-
13,500
0
2013
0
10,555
0
2012
80,500
175,000
199,395
350,000
385,250
150,000
0
0
0
0
0
4,301,626
3.56
39,000
102,083
114,042
350,000
385,250
150,000
0
0
0
0
0
1,285,244
4.77
41,500
72,917
85,353
0
0
0
0
0
0
0
0
3,016,382
3.05
12,868
5,000
391,330
302,778
711,976
6.58
369,922
4.94
1,381,029
1.79
78,990
8.01
35,938
4,565
103,125
4,464
103,125
79,000
6,434
80,500
139,062
194,830
246,875
380,786
46,875
0
6,434
5,000
312,330
302,778
3,183,661
4.73
19,500
33,333
62,500
108,333
207,756
0
0
4,691
3,646
312,330
302,778
1,069,792
5.83
61,000
105,729
132,330
138,542
173,030
46,875
0
1,743
1,354
0
0
2,113,869
4.18
ANNUAL REPORT 2013 / ABLYNX
191.
CORPORATE GOVERNANCE & FINANCIAL REVIEW
Warrants
2006
2006
2007
2007
2008
2009
2009
2009
2009
1,750,000
135,000
425,000
10,713
375,000
135,000
187,500
205,400
170,000
1.00
1.40
1.40
7.00
4.88
4.52
5.79
6.99
8.19
0
0
0
0
0
0
0
0
0
60%
60%
60%
60%
60%
60%
60%
60%
60%
3.95%
3.95%
4.63%
4.22%
4.42%
3.79%
3.20%
3.14%
3.11%
Expected duration
7.00
7.00
7.00
4.78
7.00
5.00
7.00
7.00
7.00
Fair value (in €) at grant date
0.63
0.88
0.90
3.78
3.11
2.06
3.51
5.25
5.07
Incremental Fair Value (in €) at extension
0.26
0.31
0.30
1.13
0.84
0
0
0
0
0
60%
60%
60%
60%
60%
Risk-free interest rate
3.41%
3.46%
3.50%
3.33%
4.08%
Expected duration at extension
9.29
9.75
10.21
8.54
11.17
Number of warrants granted Number of warrants not vested at 31/12/2013 Exercise price (in €)* Expected dividend yield Expected stock price volatility Risk-free interest rate
Expected dividend yield Expected stock price volatility
* Equals the fair market value of the underlying shares on the grant date.
ANNUAL REPORT 2013 / ABLYNX
192.
CORPORATE GOVERNANCE & FINANCIAL REVIEW
2010
2010
2011
2011
2012
2012
2012
2012
2012
2012
2013
2013
287,700
85,500
175,000
212,050
350,000
398,750
150,000
12,500
12,868
5,000
391,330
302,778
14,925
19,500
33,333
62,500
108.333
207,756
0
0
4,691
3,646
312,330
302,778
7.59
8.24
8.68
8.68
3.21
3.21
3.23
3.23
5.44
5.44
6.46
6.79
0
0
0
0
0
0
0
0
0
0
0
0
50%
50%
50%
50%
55%
55%
55%
55%
49%
56%
53.4% - 54.0%
52.7%-53.8%
2.75%
3.46%
3.65%
3.89%
2.35%
2.84%
3.65%
2.83%
1.09%
1.78%
1.54% - 1.88%
1.56%-2.08%
5.00
7.00
5.00
7.00
5.00
7.00
5.00
7.00
5.00
7.00
6.60-7.00
6.70-7.00
3.23
4.49
3.78
4.48
1.38
1.64
1.47
1.74
2.15
2.89
3.18-4.04
3.86-4.07
ANNUAL REPORT 2013 / ABLYNX
193.
CORPORATE GOVERNANCE & FINANCIAL REVIEW
Grant
Assigned
Received at 31/12/2013
Recognised as income 2012
Recognised as income 2013
Still to receive
IWT 7
1,808,138
1,808,138
1,808,138
106,630
0
IWT 9
1,133,636
1,132,755
1,132,755
(881)
0
IWT 11
1,198,325
1,198,325
1,198,325
277,433
0
IWT 12
1,134,496
1,134,496
1,134,496
410,226
0
IWT 13
420,000
375,943
375,943
0
IWT 14
600,000
600,000
480,000
240,000
360,000
120,000
IWT 15
157,773
157,773
124,000
38,603
100,177
33,773
IWT 16
747,648
747,648
596,000
596,000
151,648
IWT 17
1,680,765
1,680,765
1,344,000
1,149,009
336,765
IWT 18
885,597
885,597
354,000
540,511
531,597
ANNUAL REPORT 2013 / ABLYNX
194.
0
CORPORATE GOVERNANCE & FINANCIAL REVIEW
ADRESSES
Ablynx’s registered office and headquarters ABLYNX nv
Technologiepark 21 9052 Zwijnaarde Belgium T. +32 (0)9 262 00 00 F. +32 (0)9 262 00 01 info@ablynx.com investors@ablynx.com dealing_code@ablynx.com www.ablynx.com Independent registered public accounting firm DELOITTE BEDRIJFSREVISOREN | REVISEURS D’ENTREPRISES
Berkenlaan 8b 1831 Diegem Belgium T. +32 2 800 20 00 F. +32 2 800 20 01 www. Deloitte.com
ANNUAL REPORT 2013 / ABLYNX
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CORPORATE GOVERNANCE & FINANCIAL REVIEW
GLOSSARY
GLOSSARY
BIPARATOPIC CONSTRUCT
interleukine-17 (IL-17) are Nanobody construct which bind to associated with the pathology two different epitopes on the same of many human inflammatory target. and autoimmune disorders like psoriasis, rheumatoid arthritis and multiple sclerosis and have proved BISPECIFIC CONSTRUCT Nanobody construct which bind to to play an important role in animal models mimicking these and other two different targets. auto-immune disorders. Although IL-17A is the most BIVALENT CONSTRUCT characterised family member, its Nanobody construct comprising closest relative IL-17F has similar two Nanobodies. biological activity and possibly even a non-redundant role in vivo. FREE FLOAT Free float is defined as the outstanding capital less IL-6R shareholdings exceeding 5%, Receptor of interleukin-6 - a except where such interests are cytokine involved in a wide range held by (a) collective investment of biological activities. schemes/mutual funds or (b) pension funds. In addition, certain NANOBODY insider holdings (e.g. shares held Protein that is composed of one by directors, employees, founders or more binding domains with and family), government holdings the structural and functional and holdings of the Company itself characteristics of naturally (including subsidiaries) are not occurring heavy chain variable considered free float, irrespective domains (VHHâ&#x20AC;&#x2122;s) from Camelidae. of the size. NanobodyÂŽ is a registered trademark of Ablynx.
GPCR
G protein-coupled receptor, also known as seven-transmembrane domain receptors - cell membrane proteins of high medical and pharmacological importance.
NEBULISER
IL-17A/F
Drug treating a rare disease - the grant of orphan drug status by
T Helper 17 (Th17) cells and
ANNUAL REPORT 2013 / ABLYNX
198.
A device used to administer medication in the form of a mist inhaled into the lungs.
ORPHAN DRUG
BUSINESSGLOSSARY SECTION
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.
PHASE I
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.
First stage of testing in human subjects. Normally, a small (20100) group of healthy volunteers will be selected. This phase includes trials designed to assess the safety (pharmacovigilance), tolerability, pharmacokinetics, and pharmacodynamics of a drug.
PBD
PHASE II
PRE-CLINICAL
Once the initial safety of the study drug has been confirmed in Phase I trials, Phase II trials are performed on larger patient groups (20-300) and are designed to assess how well the drug works, as well as to continue Phase I safety assessments in a larger group of patients.
PHASE III
Phase III studies are randomised controlled multi-centre trials on large patient groups (300-3,000 or more depending upon the disease/ medical condition studied) and are aimed at being the definitive assessment of how effective the drug is in comparison with
ANNUAL REPORT 2013 / ABLYNX
pyrrolobenzodiazepine, a toxin
PK
Pharmacokinetics - the study of the absorption, distribution, metabolism, and excretion of drugs in the body. Involves in vitro (test tube or cell culture) and in vivo (animal) experiments using wide-ranging doses of the study drug to obtain preliminary efficacy, toxicity and pharmacokinetic information.
PROOF-OF-CONCEPT STUDY
Clinical trial to demonstrate the product is effective in patients.
RA
Rheumatoid arthritis autoimmune disease that causes chronic inflammation of the joints, the tissue around the joints, as well as other organs in the body .
199.
RANKL
Receptor Activator of Nuclear factor Kappa-B Ligand - a key regulator in bone remodelling.
RSV
Respiratory syncytial virus – virus that infects the respiratory tract, including the lungs.
SLE
Systemic lupus erythematosus - complex, multi-organ, autoimmune disorder characterised by the production of pathogenic autoantibodies and tissue deposition of immune complexes, which result in widespread tissue damage.
TNFα
Protein named Tumour Necrosis Factor-alpha - a cytokine involved in systemic inflammation.
TTP
Thrombotic thrombocytopenic purpura - a rare thrombotic disorder.
UL-vWF
Ultra-large vWF multimers
vWF
von Willebrand factor - a blood glycoprotein involved in haemostasis.
BUSINESSGLOSSARY SECTION