oREGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 2018 OR oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to ________________ OR oSHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of event requiring this shell company report |
OR
OR
OR
Commission file number: 001-36582
Sophia Hudson
Title of each class | Name of each exchange on which registered | |
Common Shares, nominal value CHF | The |
37,495,859
Large accelerated filer o | Accelerated filer o | Non-accelerated filer x |
Emerging Growth Company x |
International Financial Reporting Standards as issued by the International Accounting Standards Board x | Other o |
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our dependence on the success of |
• |
the chance that we do not obtain orphan drug exclusivity for |
dependence on governmental authorities and health insurers establishing adequate reimbursement levels and pricing policies; our products may not gain market acceptance, in which case |
Although we believemay not be able to generate product revenues;
iv
A. | Directors and senior management |
B. | Advisers |
C. | Auditors |
A. | Offer statistics |
B. | Method and expected timetable |
A. | Selected Financial Data |
For the years ended December 31, | ||||||||||||||||
2015 | 2014 | 2013 | 2012 | |||||||||||||
(in thousands of CHF except for share and per share data) | ||||||||||||||||
Profit or Loss and Other Comprehensive Loss: | ||||||||||||||||
Research and development | (26,536 | ) | (17,705 | ) | (13,254 | ) | (3,987 | ) | ||||||||
General and administrative | (4,342 | ) | (4,489 | ) | (1,362 | ) | (624 | ) | ||||||||
Operating loss | (30,878 | ) | (22,194 | ) | (14,616 | ) | (4,611 | ) | ||||||||
Interest income | 37 | 52 | 74 | 8 | ||||||||||||
Interest expense | (8 | ) | (56 | ) | (53 | ) | (2 | ) | ||||||||
Foreign currency exchange gains/(losses), net | 1,144 | 4,012 | (104 | ) | 3 | |||||||||||
Loss before tax | (29,705 | ) | (18,186 | ) | (14,699 | ) | (4,602 | ) | ||||||||
Income tax expense | — | — | (306 | ) | — | |||||||||||
Net loss attributable to owners of the Company | (29,705 | ) | (18,186 | ) | (15,005 | ) | (4,602 | ) | ||||||||
Other comprehensive loss: | ||||||||||||||||
Items that will never be reclassified to profit or loss: | ||||||||||||||||
Remeasurements of defined benefits liability | (54 | ) | (1,101 | ) | (58 | ) | (55 | ) | ||||||||
Items that are or may be reclassified to profit or loss: | ||||||||||||||||
Foreign currency translation differences | (13 | ) | (105 | ) | 32 | 22 | ||||||||||
Other comprehensive loss | (67 | ) | (1,206 | ) | (26 | ) | (32 | ) | ||||||||
Total comprehensive loss attributable to owners of the Company | (29,772 | ) | (19,392 | ) | (15,031 | ) | (4,635 | ) | ||||||||
Net loss per share(1) | ||||||||||||||||
Net loss per share, basic and diluted(2) | (0.92 | ) | (0.66 | ) | (1.01 | ) | (0.40 | ) | ||||||||
Weighted-average number of shares used to compute net loss per common share, basic and diluted | 32,299,166 | 27,692,494 | 14,917,064 | 11,581,450 | ||||||||||||
For the years ended December 31, | ||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||
(in thousands of CHF except for share and per share data) | ||||||||||||||
Profit or Loss and Other Comprehensive Loss: | ||||||||||||||
Research and development | (6,690 | ) | (19,211 | ) | (24,777 | ) | (26,536 | ) | (17,705 | ) | ||||
General and administrative | (4,264 | ) | (5,150 | ) | (5,447 | ) | (4,342 | ) | (4,489 | ) | ||||
Operating loss | (10,954 | ) | (24,361 | ) | (30,224 | ) | (30,878 | ) | (22,194 | ) | ||||
Interest income | — | 54 | 68 | 37 | 52 | |||||||||
Interest expense | (1,070 | ) | (1,640 | ) | (829 | ) | (8 | ) | (56 | ) | ||||
Foreign currency exchange gain/(loss), net | (140 | ) | (825 | ) | (100 | ) | 1,144 | 4,012 | ||||||
Revaluation gain from derivative financial instruments | 1,350 | 3,372 | 291 | — | — | |||||||||
Transaction costs | (520 | ) | (1,027 | ) | ||||||||||
Loss before tax | (11,334 | ) | (24,427 | ) | (30,794 | ) | (29,705 | ) | (18,186 | ) | ||||
Income tax gain | (162 | ) | 18 | 131 | — | — | ||||||||
Income tax expense | — | — | — | — | (306 | ) | ||||||||
Net loss attributable to owners of the Company | (11,496 | ) | (24,409 | ) | (30,663 | ) | (29,705 | ) | (18,492 | ) | ||||
Other comprehensive loss: | ||||||||||||||
Items that will never be reclassified to profit or loss: | ||||||||||||||
Remeasurements of defined benefits liability | 1,277 | 272 | (394 | ) | (54 | ) | (1,101 | ) | ||||||
Items that are or may be reclassified to profit or loss: | ||||||||||||||
Foreign currency translation differences | (11 | ) | 50 | (20 | ) | (13 | ) | (105 | ) | |||||
Other comprehensive income/(loss) | 1,266 | 322 | (414 | ) | (67 | ) | (1,206 | ) | ||||||
Total comprehensive loss attributable to owners of the Company | (10,230 | ) | (24,087 | ) | (31,077 | ) | (29,772 | ) | (19,698 | ) | ||||
Net loss per share(1) | ||||||||||||||
Net loss per share, basic and diluted(2) | (0.72 | ) | (5.58 | ) | (8.93 | ) | (9.20 | ) | (6.57 | ) | ||||
Weighted-average number of shares used to compute net loss per common share, basic and diluted | 15,900,865 | 4,374,187 | 3,432,928 | 3,229,917 | 2,769,249 |
(1) | For periods prior to the closing of our initial public offering, net loss per share includes preferred shares, which were converted on a one-for-one basis upon the closing of our initial public offering. |
As of December 31, | ||||||||||||||||
2015 | 2014 | 2013 | 2012 | |||||||||||||
(in thousands of CHF) | ||||||||||||||||
Statement of Financial Position Data: | ||||||||||||||||
Cash and cash equivalents | 50,237 | 56,934 | 23,866 | 64 | ||||||||||||
Total assets | 52,812 | 59,493 | 26,252 | 866 | ||||||||||||
Total liabilities | 8,070 | 6,210 | 17,219 | 1,110 | ||||||||||||
Share capital | 13,722 | 11,604 | 6,487 | 4,633 | ||||||||||||
Total shareholders’ equity attributable to owners of the Company | 44,741 | 53,283 | 9,034 | (244 | ) |
2
As of December 31, | ||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||
(in thousands of CHF) | ||||||||||||||
Statement of Financial Position Data: | ||||||||||||||
Cash and cash equivalents | 5,393 | 14,973 | 32,442 | 50,237 | 56,934 | |||||||||
Total assets | 9,877 | 17,826 | 35,658 | 52,812 | 59,493 | |||||||||
Total liabilities | 6,227 | 19,888 | 21,515 | 8,070 | 6,210 | |||||||||
Share capital | 710 | 19,350 | 13,732 | 13,722 | 11,604 | |||||||||
Total shareholders’ (deficit)/equity attributable to owners of the Company | 3,650 | (2,162 | ) | 14,143 | 44,741 | 53,283 |
Period-end | Average for | Low | High | |||||||||||||
(CHF per U.S. dollar) | ||||||||||||||||
Year Ended December 31: | ||||||||||||||||
2011 | 0.9351 | 0.9036 | 0.7883 | 0.9896 | ||||||||||||
2012 | 0.9154 | 0.9481 | 0.9154 | 0.9845 | ||||||||||||
2013 | 0.8894 | 0.9391 | 0.8894 | 0.9608 | ||||||||||||
2014 | 0.9895 | 0.9150 | 0.8687 | 0.9895 | ||||||||||||
2015 | 1.0014 | 0.9613 | 0.9243 | 1.0292 | ||||||||||||
Month Ended: | ||||||||||||||||
September 30, 2015 | 0.9773 | 0.9725 | 0.9614 | 0.9780 | ||||||||||||
October 31, 2015 | 0.9858 | 0.9687 | 0.9489 | 0.9915 | ||||||||||||
November 30, 2015 | 1.0282 | 1.0098 | 0.9853 | 1.0305 | ||||||||||||
December 31, 2015 | 1.0017 | 0.9951 | 0.9823 | 1.0296 | ||||||||||||
January 31, 2016 | 1.0226 | 1.0082 | 0.9972 | 1.0226 | ||||||||||||
February 28, 2016 | 0.9960 | 0.9920 | 0.9706 | 1.0202 | ||||||||||||
March, 2016 (through March 4, 2016) | 0.9926 | 0.9955 | 0.9920 | 0.9994 |
Period-end | Average for period | Low | High | ||||
(CHF per U.S. dollar) | |||||||
Year Ended December 31: | |||||||
2014 | 0.9934 | 0.9147 | 0.8712 | 0.9934 | |||
2015 | 1.0017 | 0.9628 | 0.8488 | 1.0305 | |||
2016 | 1.0160 | 0.9848 | 0.9536 | 1.0334 | |||
2017 | 0.9738 | 0.9842 | 0.9456 | 1.0266 | |||
2018 | 0.9832 | 0.9784 | 0.9232 | 1.0083 | |||
Month Ended: | |||||||
September 30, 2018 | 0.9758 | 0.9683 | 0.9593 | 0.9776 | |||
October 31, 2018 | 1.0057 | 0.9940 | 0.9840 | 1.0057 | |||
November 30, 2018 | 0.9987 | 1.0011 | 0.9938 | 1.0083 | |||
December 31, 2018 | 0.9832 | 0.9919 | 0.9832 | 0.9975 | |||
January 31, 2019 | 0.9938 | 0.9897 | 0.9767 | 0.9988 | |||
February 28, 2019 | 0.9974 | 1.0014 | 0.9914 | 1.0073 | |||
March 11, 2019 | 1.0074 | 1.0041 | 0.9987 | 1.0106 |
B. | Capitalization and indebtedness |
C. | Reasons for the offer and use of proceeds |
D. | Risk factors |
13.0 million. We have never generated any revenue from product sales and may never be profitable.development stagedevelopment-stage company and have a limited operating history and a history of operating losses. We anticipate that we will continue to incur losses for the foreseeable future.29.711.5 million, CHF 18.224.4 million and CHF 15.030.7 million for the years ended December 31, 2015, 20142018, 2017 and 2013,2016, respectively. As of December 31, 2015,2018, we had an accumulated deficit of CHF 81.7146.3 million. from general and administrative expenses that we have incurred while building our business infrastructure. We expect to continue to incur significant operating losses in the future as we continue our research and development efforts for our product candidates in clinical and pre-clinical development and seek to obtain regulatory approval and commercialization of our product candidates AM-101 and AM-111.development. In our financial year ended December 31, 2015,2018, we incurred CHF 26.66.7 million in research and development costs, and we expect that our total operating expense in 20162019 will be in the range of CHF 33.010.0 to CHF 38.0 million (excluding AM-111 clinical Phase 2 expenses to enroll patients in REACH (as defined below)).shortshort- and long-term loans. On July 19, 2016, we entered into a Loan and Security Agreement with Hercules Technology Growth Capital, Inc., or Hercules. The agreement provided us with a senior secured term loans. loan facility for up to $20 million. As of December 31, 2018, the amount outstanding under the Loan and Security Agreement was CHF 1.4 million. On January 31, 2019, we made the final payment to Hercules under the facility, comprising the last amortization payment as well as an end of term charge. With the final payment, all covenants and collaterals in favor of Hercules have been lifted.We are in the late stages of clinical development for our product candidates, but itIt may be several years, if ever, before we complete pivotal clinical trials and have a product candidate approved for commercialization and begin to generate revenues from product sales.3AM-101Keyzilen®, Sonsuvi®, AM-125 or AM-111.AM-201. Our ability to generate future revenue from product sales depends heavily on our success in many areas, including but not limited to:·• completing research and clinical development of our product candidates, including successfully completing Phase 3 clinical trials of AM-101 or AM-111;
obtaining marketing approvals for our product candidates, including |
4
We expect that we will need substantial additional funding before we can expect to become profitable from sales of our products. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.
We are currently advancing our product candidates AM-101 and AM-111 through clinical development.
5
We do not have a limited operating history and no history of commercializing pharmaceutical products, which may make it difficult to evaluate the prospects for our future viability.
We began our current operations in 2003.
6
Clinical trials must be conducted in accordance with FDA, EMA and comparable foreign regulatory authorities’ legal requirements, regulations or guidelines, and are subject to oversight by these governmental agencies and Institutional Review Boards, or IRBs, at the medical institutions where the clinical trials are conducted. In addition, clinical trials must be conducted with supplies of our product candidates produced under current good manufacturing practices, or cGMP, and other requirements. We depend on medical institutions and clinical research organizations, or CROs, to conduct our clinical trials in compliance with current good clinical practice, or cGCP, standards. To the extent the CROs fail to enroll participants for our clinical trials, fail to conduct the trialtrials to cGCP standards or are delayed for a significant time in the execution of trials, including achieving full enrollment, we may be affected by increased costs, program delays or both, which may harm our business.
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rating frequency.
8
Therefore, we expect to be able to demonstrate a therapeutic effect at the later time points in the Phase 3 trials. However, this expectationpharmacological target for Sonsuvi
Whereas in our Phase 2 trial we had full placebo control for the primary endpoint at Day 7 and an oral corticosteroid could only be administered as a reserve therapyactivated in case of insufficientsevere acute cochlear injury; however, activation of this target cannot be determined in humans, and we have to rely on the measurement of hearing recoveryloss for assessing the severity of injury.
FDA. Orphan drug designation for AM-111 was granted by the FDA and EMA for the treatment of acute sensorineural hearing loss, or ASNHL, an umbrella term that comprises hearing loss from acute acoustic trauma, or AAT, surgery-induced trauma, or ISSNHL. We estimate ISSNHL to be the largest of the three subgroups. The broader, more general designation of ASNHL is based on the common pathophysiologic pathway shared by the three subgroups. Although we expect to obtain regulatory approval for the entire indication of ASNHL based on confirmatory efficacy and safety data that covers only one or two rather than all three of the three subgroups, there can be no assurance that regulatory agencies will concur with this assumption at the time of the marketing approval procedure. In that case, it may not be sufficient to conduct HEALOS and ASSENTtrials in the subgroup of ISSNHL, and REACH in the subgroup of surgery-related trauma, as is currently planned.
planned to gain the indication for ASNHL.
9
If serious adverse, undesirable or unacceptable side effects are identified during the development of our product candidates or following approval, if any, we may need to abandon our development of such product candidates, the commercial profile of any approved label may be limited, or we may be subject to other significant negative consequences following marketing approval, if any.
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commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.
AM-111
11
no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity.
12
13
Whereas various balance tests such as the tandem Romberg or standing on foam tests or other objective measures such as nystagmography or head impulse tests are widely used in the diagnosis and management of vertigo, there is no universally recognized definition of the clinical meaningfulness of outcomes, and regulatory authorities have not issued guidelines for demonstrating efficacy for drug-based treatments such as AM-125. Therefore we cannot be certain that AM-125 will be approved even if it were to show statistically significant improvements in these tests.
Our special protocol assessment agreement with the FDA for our Phase 3 study of AM-101 does not guarantee any particular outcome from regulatory review, including ultimate approval and
We have obtained agreement from the FDA on an SPA for the design of our U.S. Phase 3 trial of AM-101. We also designed our Phase 3 clinical trials for AM-101 based on scientific advice that we received from the EMA. The FDA’s SPA process is designed to facilitate the FDA’s review and approval of drugs by allowing the FDA to evaluate the proposed design and size of Phase 3 clinical trials that are intended to form the primary basis for determining a drug product’s efficacy. Upon specific request by a clinical trial sponsor, the FDA will evaluate the protocol and respond to a sponsor’s questions regarding, among other things, primary efficacy endpoints, trial conduct and data analysis, within 45 days of receipt of the request. The FDA ultimately assesses whether the protocol design and planned analysis of the trial are acceptable to support regulatory approval of the product candidate with respect to the effectiveness of the indication studied. All agreements and disagreements between the FDA and the sponsor regarding an SPA must be clearly documented in an SPA letter or the minutes of a meeting between the sponsor and the FDA. However, a SPA agreement does not guarantee approval of a product candidate, and even if the FDA agrees to the design, execution, and analysis proposed in protocols reviewed under the SPA process, the FDA may revoke or alter its agreement in certain circumstances. In particular, an SPA agreement is not binding on the FDA if public health concerns emerge that were unrecognized at the time of the SPA agreement, other new scientific concerns regarding product safety or efficacy arise, the sponsor company fails to comply with the agreed upon trial protocols, or the relevant data, assumptions or information provided by the sponsor in a request for the SPA change or are foundneed to be false or omit relevant facts. In addition, even after an SPA agreement is finalized, the SPA agreement may be modified, and such modification will be deemed binding on the FDA review division, except under the circumstances described above, if the FDA and the sponsor agreegenerated in writingorder to modify the protocol and such modification is intended to improve the study. The FDA retains significant latitude and discretion in interpreting the terms of the SPA agreement and the data and results from any study that is the subject of the SPA agreement.
We cannot assure you that our Phase 3 clinical trial of AM-101 will succeed, will be deemed binding by the FDA under our SPA, or will result in any FDAobtain marketing approval for AM-101. The TACTT2 Phase 3AM-125.
Regardless of the SPAone for the TACTT2 trial, we expect the FDA to require positive results from our second pivotal clinical, TACTT3, before granting marketing authorization. TACTT3 is congruent with the design of TACTT2 regarding outcome measures and the patient population to be enrolled; it differs in that the
14
improvement in the TFI score is not a co-primary efficacy endpoint, that it has a slightly smaller size (300 instead of 330 patients) and that it also includes a separate stratum of patients suffering from post-acute inner ear tinnitus. TACTT3 was not assessed by the FDA as part of the SPA process, and in spite of the congruence between the trials, we cannot exclude that differences in outcomes may arise between the two pivotal trials that may affect the FDA’s assessment (for example, from cultural differences in patient attitudes or perceptions as TACTT3 is being conducted outside North America).
We do not have control over the actual number of study participants that are willing and eligible for enrollment in the open label follow-on safety studies, AMPACT1 and AMPACT2. Hence, the number of patients with safety data may fail to reach the levels specified and requested by the FDA.
The FDA has requested safety data from chronic intermittent use of AM-101 by a minimum of 300 patients treated for six months and a minimum of 100 patients treated for one year, to support a new drug application filing for AM-101 in the treatment of acute peripheral tinnitus. We are seeking to address this request by offering all participants completing the TACTT2 and TACTT3 studies and continuing to meet certain criteria the option to roll over into an open label follow-on safety study (AMPACT1 and AMPACT2, respectively) and receive up to three treatment cycles with AM-101 over a period of up to nine months. Together with the three month TACTT study duration, this would cover up to 12 months of exposure. Since a higher than expected number of TACTT study participants has been willing and eligible for enrollment into the AMPACT studies so far, we reduced the number of available treatment cycles in AMPACT2 from three to one by way of a protocol amendment in the first quarter 2016 and are still confident of meeting the requested number of patients with chronic intermittent use data. However, we have no control over the actual number and over the number of treatment cycles that the AMPACT participants will choose. Hence the number of patients with safety data over six months and over 12 months may or may not reach the levels specified and requested by the FDA. In case of insufficient numbers, this will become a review issue at the time of the NDA submission. Although we plan to apply for an indication of acute inner ear tinnitus, rather than chronic inner ear tinnitus, we cannot ensure that the FDA will be satisfied with the data supporting our NDA if we are not able to enroll sufficient numbers of patients in AMPACT1 and AMPACT2.
Even if our product candidates obtain regulatory approval, we will be subject to ongoing obligations and continued regulatory review, which may result in significant additional expense. Additionally, our product candidates, if approved, could be subject to labeling and other restrictions and market withdrawal and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our products.
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restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or voluntary or mandatory product recalls;
Moreover, other
Moreover, U.S. President Donald Trump has discussed the need for federal legislation, regulation or Executive Order to regulate the prices of medicines.
16
increase the costs and timelines for our product development efforts. The regulation also provides an obligation for clinical trial sponsors to make summaries of all trial results, accompanied by a summary understandable to laypersons, as well as the clinical trial report publicly available in a new database. Beyond this obligation, the EMA adopted a new “Agency policy on publication of clinical data” (in force since January 1, 2015) based on which the EMA makes available to the public all clinical trials submitted with the EMA as well as raw data results (“individual patient data”). These publication requirements can conflict with legitimate secrecy interests of the sponsors and may lead to valuable clinical trial data falling into the public domain.
17
Law provides that the government may assert that a claim including items or services resulting from a violation of the federal anti-kickback statute constitutes a false or fraudulent claim for purposes of the False Claims Act.
certain types of hearing loss and may compete against Sonsuvi
®.18
Third party
19
candidate that we develop does not achieve an adequate level of acceptance, we may not generate significant product revenues or any profits from operations. The degree of market acceptance of AM-101, AM-111Keyzilen
• |
relative convenience and ease of administration, particularly as |
• |
patient diagnostics and screening infrastructure in each market, particularly as |
20
Risks Related to Our Reliance on Third Parties
21
applications, including the treatment of tinnitus, in order to develop, promote, manufacture, cause to be manufactured, use, sell and distribute any products, processes or services deriving from such patents, including AM-101,Keyzilen
Sonsuvi
®.22
Tablewe may not be able to control the amount and timing of Contents
23
able to secure and/or maintain regulatory approval for their manufacturing facilities. In addition, we have no control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved. Any failure to achieve and maintain compliance with these laws, regulations and standards could subject us to the risk that we may have to suspend the manufacturing of our product candidates or that obtained approvals could be revoked, which would adversely affect our business and reputation. Furthermore, third-party providers may breach agreements they have with us because of factors beyond our control. They may also terminate or refuse to renew their agreements because of their own financial difficulties or business priorities, potentially at a time that is costly or otherwise inconvenient for us. If we were unable to find adequate replacement or another acceptable solution in time, our clinical trials could be delayed or our commercial activities could be harmed.
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identify patentable aspects of our research and development output before it is too late to obtain patent protection. Moreover, in some circumstances, we do not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology that we license from third parties. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business.
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for AM-111Sonsuvi
Janssen, a subsidiary of Johnson & Johnson, has been testing Esketamine in a spray formulation for intranasal treatment of treatment-resistant depression in several clinical trials to date, with a Phase 3 program starting in 2015. In November 2014, the FDA designated Esketamine a ‘breakthrough therapy’ for this indication. In the event that Janssen’s confirmatory trials are successful and the company receives marketing authorization prior to us receiving marketing authorization for AM-101, we would lose the potential benefit of a five year market exclusivity period that we would otherwise expect to obtain.
26
including information that we may consider to be
27
may be for a new or improved version of the original innovator product. Hatch-Waxman also provides for certain periods of regulatory exclusivity, which preclude FDA approval (or in some circumstances, FDA filing and reviewing) of an ANDA, or 505(b)(2) NDA. These include, subject to certain exceptions, the period during which an FDA-approved drug is subject to orphan drug exclusivity. In addition to the benefits of regulatory exclusivity, an innovator NDA holder may have
28
exploitation agreement with INSERM for AM-101,Keyzilen
29
of third-party intellectual property rights is a competitive area, and a number of more established companies are also pursuing strategies to license or acquire third-party intellectual property rights that we may consider attractive. These established companies may have a competitive advantage over us due to their size, cash resources, and greater clinical development and commercialization capabilities.
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poloxamer 407 compositions under certain specifications. While we cannot assure youOn January 26, 2017, the USPTO issued a decision on the interference granting Auris benefit of priority. As a result of the outcomedecision, judgment was entered against Otonomy and all claims in the ‘636 Application were refused. In addition, claims 1-8 of these proceedings, we do not expect the proceedings‘865 Patent were cancelled as the result of the USPTO’s determination that the written description of the specification lacked full scope support for treating middle or inner ear disease with fluoroquinolone. However, claim 9, which is directed to impacta method of treating viral and bacterial infections with intratympanic injection of a fluoroquinolone antibiotic in a poloxamer 407 composition under certain specifications, was affirmed. On March 27, 2017, Otonomy submitted a notice of appeal to the United States Court of Appeals for the Federal Circuit. To preserve its rights, Auris filed a notice of cross-appeal on April 5, 2017. Otonomy subsequently filed its opening brief on July 20, 2017, and Auris filed its principal and response brief on October 27, 2017. On January 5, 2018, Otonomy filed its opposition and reply brief. Auris filed its reply brief on February 2, 2018. On August 1, 2018, the United States Court of Appeals for the Federal Circuit reversed the USPTO Patent Trial and Appeal Board’s determination of priority in our intellectual property portfoliofavor relating to AM-101the July 2015 USPTO declaration of patent interference (No. 106,030) involving our issued ‘865 Patent and AM-111.
Otonomy’s ‘636 Application. We believe that this ruling will not materially impact any of our development programs.
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We may not be able to protect our intellectual property rights throughout the world.
Officer.
32
To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The expansion of our operations may lead to significant costs and may divert our management and business development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.
33
Future sales, or the possibility of future sales, of a substantial number of our common shares could adversely affect the price of our common shares.
We have broad discretion in Following the useRedomestication, we intend to update all of our cash and cash equivalents and may not use them effectively.
Our management has broad discretion inexisting registration statements to the use of our cash and cash equivalents and could spend them in ways that do not improve our results of operations or enhance the value of our common shares. The failure by our managementextent necessary to apply these funds effectively could result in financial losses that could have a material adverse effect on our business, cause the price of our common shares to decline and delay the development of our product candidates. Pendingallow for their use, we may invest our cash and cash equivalents in a manner that does not produce income or that loses value.
continued use.
operations.
We are a Swiss corporation. The rights of our shareholders may be different from the rights of shareholders in companies governed by the laws of U.S. jurisdictions.
We are a Swiss corporation. Our corporate affairs are governed by our articles of association and by the laws governing companies incorporated in Switzerland. The rights of our shareholders and the responsibilities of members of our board of directors may be different from the rights and obligations of shareholders and directors of companies governed by the laws of U.S. jurisdictions. In the performance of its duties, our board of directors is required by Swiss law to consider the interests of our company, our shareholders, our employees and other stakeholders, in all cases with due observation of the principles of reasonableness and fairness. It is possible that some of these parties will have interests that are different from, or in addition to, your interests as a shareholder. Swiss corporate law limits the ability of our shareholders to challenge resolutions made or other actions taken by our board of directors in court. Our shareholders generally are not permitted to file a suit to reverse a decision or an action taken by our board of directors but are instead only permitted to seek damages for breaches of fiduciary duty. As a matter of Swiss law, shareholder claims against a member of our board of directors for breach of fiduciary duty would have to be brought in Zug, Switzerland, or where the relevant member of our board of directors is domiciled. In addition, under Swiss law, any claims by our shareholders against us must be brought exclusively in Zug, Switzerland.
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Our common shares are issued under the laws of Switzerland, which may not protect investors in a similar fashion afforded by incorporation in a U.S. state.
We are organized under the laws of Switzerland. There can be no assurance that Swiss law will not change in the future or that it will serve to protect investors in a similar fashion afforded under corporate law principles in the U.S., which could adversely affect the rights of investors.
U.S. shareholders may not be able to obtain judgments or enforce civil liabilities against us or our executive officers or members of our board of directors.
We are organized under the laws of Switzerland and our jurisdiction of incorporation is Zug, Switzerland. Moreover, a number of our directors and executive officers and a number of directors of each of our subsidiaries are not residents of the United States, and all or a substantial portion of the assets of such persons are located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon us or upon such persons or to enforce against them judgments obtained in U.S. courts, including judgments in actions predicated upon the civil liability provisions of the federal securities laws of the United States. We have been advised by our Swiss counsel that there is doubt as to the enforceability in Switzerland of original actions, or in actions for enforcement of judgments of U.S. courts, of civil liabilities to the extent predicated upon the federal and state securities laws of the United States. Original actions against persons in Switzerland based solely upon the U.S. federal or state securities laws are governed, among other things, by the principles set forth in the Swiss Federal Act on International Private Law. This statute provides that the application of provisions of non-Swiss law by the courts in Switzerland shall be precluded if the result is incompatible with Swiss public policy. Also, mandatory provisions of Swiss law may be applicable regardless of any other law that would otherwise apply.
Switzerland and the United States do not have a treaty providing for reciprocal recognition and enforcement of judgments in civil and commercial matters. The recognition and enforcement of a judgment of the courts of the United States in Switzerland is governed by the principles set forth in the Swiss Federal Act on Private International Law. This statute provides in principle that a judgment rendered by a non-Swiss court may be enforced in Switzerland only if:
Our status as a Swiss corporation means that our shareholders enjoy certain rights that may limit our flexibility to raise capital, issue dividends and otherwise manage ongoing capital needs.
Swiss law reserves for approval by shareholders certain corporate actions over which a board of directors would have authority in some other jurisdictions. For example, the payment of dividends and cancellation of treasury shares must be approved by shareholders. Swiss law also requires that our shareholders themselves resolve to, or authorize our board of directors to, increase our share capital. While our shareholders may authorize share capital that can be issued by our board of directors without additional shareholder approval, Swiss law limits this authorization to 50% of the issued share capital at the time of the authorization. The authorization, furthermore, has a limited duration of up to two years and must be renewed by the shareholders from time to time thereafter in order to be available for raising capital. Additionally, subject to specified exceptions, including exceptions explicitly described in our articles of association, Swiss law grants pre-emptive rights to existing shareholders to subscribe for new issuances of shares. Swiss law also does not provide as much flexibility in the various rights and regulations that can attach to different categories of shares as do the laws of some other jurisdictions. These Swiss law requirements relating to our capital management may limit our flexibility, and situations may arise where greater flexibility would have provided benefits to our shareholders.
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We are a foreign private issuer and, as a result, we are not subject to U.S. proxy rules and are subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company.
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We may lose our foreign private issuer status, which would then require us to comply with the Exchange Act’s domestic reporting regime and cause us to incur significant legal, accounting and other expenses.
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weaknesses in our internal controls could lead to financial statement restatements and require us to incur the expense of remediation.
We believe that we were
We believe that we wereeach year has to prepare a “passive foreign investment company,” or PFIC, for U.S. federal income tax purposes for our 2014 and 2015 taxable years, and we expectwritten compensation report which has to be approved by the shareholders, detailing the compensations paid to each member of the board of directors, the management and the advisory board. In addition, companies that are subject to the OaEC are generally not allowed to make severance payments, advance compensations and to pay commissions for restructuring within the group. Under Bermuda law, directors are subject to election each year at the annual general meeting of the company, but there is no requirement that the chairman of the board of directors be elected by the shareholders. There is also no requirement under Bermuda law for shareholders to elect members of a PFICcompany’s compensation committee, or for shareholders to approve the compensation of the members of the board of directors or the company’s management; the foregoing matters are typically determined by the company’s board of directors. In addition, under Bermuda law there is no requirement to submit a written compensation report for approval to shareholders, and there are no general restrictions on severance payments, advance compensation or the payment of commissions for restructuring within the group. See “Your rights as a shareholder of the Company will change as a result of the Redomestication. The Bye-laws grant certain powers to the board of directors that differs from our current yeararticles of association. Such changes may adversely affect your rights as a shareholder of the Company.” and for“Item 10. Additional Information—B. Memorandum and articles of association—Comparison of Corporate Law,” where we describe material differences between the foreseeable future. In addition, we may, directly or indirectly, hold equity interests in other PFICs, or Lower-tier PFICs. Undercorporate law of Delaware, Switzerland and Bermuda relating to your rights as a shareholder. The form of Memorandum of Continuance and Bye-laws of Auris Medical (Bermuda) are filed as exhibits to this Annual Report.
If we are a PFICour board of directors. These provisions provide for:
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A. | History and development of the Company |
We believe we are currently the clinically most advanced company working on inner ear therapeutics. We believe that AM-101 and AM-111 are the only drug candidates that have demonstrated positive efficacy in randomized placebo-controlled clinical trials in acute inner ear tinnitus and acute inner ear hearing loss. Our products are protected through intellectual property rights and, in addition,been granted orphan drug status by the FDA and the EMA and has been granted to AM-111.
fast track designation by the FDA.
TACTT3.
Our second product candidate, AM-111, is being developed for the treatment of ASNHL. In sensorineural hearing loss, which is also referred to as inner ear hearing loss, there is damage to the sensory cells of the inner ear or the auditory nerve. Hearing loss is a heterogeneous disorder of many forms with a variety of causes. ASNHL may be triggered by a variety of insults, such as exposure to excessively loud sound, infection, inflammation or certain ototoxic drugs. These insults may also result in tinnitus. In the United States, more than 66,000 patients covered by health insurance are treated for sudden deafness annually. There are no currently approved pharmaceutical treatments for this patient population in the United States.
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loss. In our Phase 2 clinical trial, AM-111 showed a favorable safety profile. Furthermore, in patients with severe to profound ASNHL, we observed a clinically relevant improvement in hearing threshold, speech discrimination and a higher rate of complete tinnitus remission compared with placebo. We intend to conduct two pivotalOn November 28, 2017,
total number of outstanding common shares on the purchase date exceeds 12,500,000 and (iii) the Regular Purchase Share Limit shall be increased to 400,000 of our common shares if the closing sale price of our common shares is not below $1.00 on the purchase date and the total number of outstanding common shares on the purchase date exceeds 15,000,000. The Regular Purchase Share Limit is subject to proportionate adjustment in the event of a reorganization, recapitalization, non-cash dividend, stock split or other similar transaction; provided, that if after giving effect to such full proportionate adjustment, the adjusted Regular Purchase Share Limit would preclude us from requiring LPC to subscribe for common shares at an aggregate purchase price equal to or greater than $100,000 in any single Regular Purchase, then the Regular Purchase Share Limit for such Regular Purchase will not be fully adjusted, but rather the Regular Purchase Share Limit for such Regular Purchase shall be adjusted as specified in the LPC Purchase Agreement, such that, after giving effect to such adjustment, the Regular Purchase Share Limit will be equal to (or as close as can be derived from such adjustment without exceeding) $100,000. We may not require LPC to purchase in any single Regular Purchase common shares having an aggregate purchase price greater than $1,000,000. We may not issue any of our common shares as a Regular Purchase on a date in which the closing sale price of our common shares is below $0.25 (subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction). The purchase price for Regular Purchases shall be equal to the lesser of (i) the lowest sale price of our common shares on the applicable purchase date and (ii) the average of the three lowest closing sale prices of our common shares during the 10 business days immediately prior to the applicable purchase date, as reported on The Nasdaq Capital Market.
B. | Business overview |
Strengths
We believe we are a leader in the development of novel therapeutic products for inner ear disorders due to several factors.
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The human ear and its key elements (left). The external ear captures sound waves, amplifies and directs them through the ear canal to the ear drum, also known as the tympanic membrane, which transfers them further via the three small bones of the ossicular chain to the oval window of the inner ear. Here, the sound waves enter the fluid filled cochlea, travel up the turns and down again and are dissipated by the round window membrane. On their way through the cochlea, the sound waves are transduced by inner hair cells into neural activity by excitation of the cochlear nerve.
Principle of intratympanic injection (right). For the administration, the patient is positioned with the ear pointing up to ensure that the round window membrane is at the bottom of the middle ear. Following local anesthesia of the ear drum the drug is injected by the ENT into the middle ear, where it collects in the bottom part, allowing for the active substance to cross the round window membrane.
Because the cochlea is located deep inside the head and because it is separated from the middle ear by a combination of bone and membranes, the interior of the cochlea is a challenging location for drug delivery. We have chosen to deliver certain of our products via intratympanic injection across the ear drum (also known as the tympanic membrane) into the middle ear cavity. By formulating our products with biocompatible gels, we facilitate the diffusion of active substances across the round window membrane into the cochlea at clinically meaningful concentrations.
Additionally, according to a 2016 publication by Hoffman et al. in the journal JAMA Otolaryngology—Head and Neck Surgery, the annual prevalence of speech-frequency hearing loss among adults aged 20 to 69 years was 14.1% (27.7 million) in the 2011-2012 period. Furthermore, according to the NIDCD, more than four out of 10 Americans, at some point in their lives, experience an episode of dizziness significant enough to see a doctor. Approximately 615,000 individuals in the United States are currently diagnosed with Meniere’s disease and 45,500 cases are newly diagnosed each year.
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such different proximal causes as whiplash injury, excessive noise exposure, the flu or even certain dental problems. In some cases, the tinnitus originates inside the cochlea, but then becomes “centralized,” that is, the phantom sound persists even long after the initial source of the sensation has been removed. In case of vertigo, possible triggers include infection, inflammation, surgical trauma, disturbances of inner ear fluid balance or debris inside the inner ear. There has been a dearth of knowledge about the pathophysiology of tinnitus, and hearing loss and vertigo, which has hindered the pharmaceutical industry in pursuing therapeutics in this area.
paradigms.
Tinnitus and Hearing Loss
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A billable procedure, intratympanic injection is routinely reimbursed under a broader reimbursement code. For the injection, patients lie on a stretcher or on a reclined exam chair, treated ear up; the injection is performed under local anesthesia of the eardrum by an ENT specialist using a microscope. Following the procedure, patients rest for 20 to 30 minutes to ensure maximum physical contact of the drug with the RWM. The tympanic membrane heals rapidly, usually within a few days, and the procedure may be performed several times. Often performed in children suffering from ear infections, the reversible opening of the eardrum is one of the most frequent ENT procedures.
(1) | Dates of key milestones are indicative and subject to change. |
AM-101
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the chronic stage, improvement is much more unlikely, and the therapeutic focus shifts from curing to managing the disorder. In some cases, tinnitus originates inside the cochlea, or the periphery of the auditory system, but then becomes “centralized,” that is, the phantom sound persists even long after the initial source of the sensation has been removed.
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of different NMDA antagonists to the inner ear allowed for suppression of salicylate induced tinnitus. Together with INSERM, we developed a much more clinically relevant model of tinnitus induced by acute acoustic trauma, or AAT. Unlike salicylate-induced tinnitus, AAT triggers glutamate excitotoxicity and may lead to irreversible damage to sensory cells. It does not result in tinnitus in all cases, but where it sets in, it may be permanent. In our pre-clinical trials, we demonstrated that AM-101 Keyzilen
AM-101 trial in order to confirm the clinical meaningfulness of a reduction in tinnitus loudness.
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TACTT0
Trial outcomes are described by van de Heyning and colleagues in a 2014 article in Otology & Neurotology.
Efficacy analysis revealed a differentiated picture.
The further efficacy analysis focused on the subgroup of patients with tinnitus caused by AAT or OM (n=118), that is, patients with well-established cochlear origin of tinnitus. It also focused primarily on unilateral tinnitus, patients (n=84) since they alloweddemonstrated superiority of the high dose of Keyzilen
Improvement in tinnitus PROs
AM-101 | ||||||||||||
Placebo | Low Dose | High Dose | ||||||||||
Point improvement in tinnitus loudness (0-100 point scale) | ||||||||||||
LS means (n) | 1.4 (23) | 16.0 (25) | 24.1 (29) | |||||||||
LS mean difference (95% confidence interval) | 14.6 (1.4, 27.7) | 22.7 (10.3, 35.1) | ||||||||||
P-value | 0.0308 | * | 0.0005 | *** | ||||||||
Point improvement in tinnitus annoyance (0-100 point scale) | ||||||||||||
LS means (n) | 10.8 (23) | 21.7 (25) | 27.8 (29) | |||||||||
LS mean difference (95% confidence interval) | 10.9 (1.4, 23.2) | 17.0 (5.4, 28.6) | ||||||||||
P-value | 0.0805 | 0.0047 | ** | |||||||||
Point improvement in difficulties falling asleep (0-100 point scale) | ||||||||||||
LS means (n) | 11.8 (21) | 29.8 (15) | 38.7 (22) | |||||||||
LS mean difference (95% confidence interval) | 18.1 (2.5, 33.6) | 26.9 (13.0, 40.9) | ||||||||||
P-value | 0.0234 | * | 0.0003 | *** | ||||||||
Point improvement in tinnitus impact (0-24 point scale) | ||||||||||||
LS means (n) | 2.5 (22) | 5.5 (25) | 5.9 (27) | |||||||||
LS mean difference (95% confidence interval) | 3.0 (0.1, 5.8) | 3.4 (0.8, 6.0) | ||||||||||
P-value | 0.0400 | * | 0.0124 | * |
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ANCOVA results for changes in PROs from baseline to Day 90 in patients with unilateral tinnitus following AAT or OM. Shown are least square (LS) means for treatment groups, differences for the active groups compared with placebo including 95% confidence interval and the p-value: * significant at 0.05 level; ** significant at 0.01 level; *** significant at 0.001 level. P-value is a conventional statistical method for measuring the statistical significance of clinical results. In clinical trials, the “p-value” is the probability that the result was obtained by chance. By convention, a “p-value” that is less than 0.05 is considered statistically significant. Tinnitus loudness, annoyance and difficulties falling asleep were rated by patients on a scale from 0 to 100 and tinnitus impact by the THI-12 questionnaire (maximum score 24 points).
The improvement in PROs was gradual over the 90 day observation period. At Day 90 the mean improvement in tinnitus loudness was 48% in the AM-101Keyzilen
Improvement in tinnitus loudness over time
Mean improvement of tinnitus loudness from baseline in patients with unilateral tinnitus following AAT or OM (n=84). Shown are changes from baseline D0 (before first injection) to D1 (before second injection), D2 (before third injection) and the follow-up visits at D7, D30 and D90. Whiskers: standard error mean.
64% of patients in the high dose group rated their tinnitus severity at Day 90 compared to baseline as “much improved” or “very much improved”, compared with 34% of patients in the placebo group. The majority of placebo treated patients reported only “somewhat improved” tinnitus severity.
Global patient impression The improvements were dose dependent as the low-dose of change inKeyzilen
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Percentage of patients with unilateral tinnitus following AAT or OM (n=76) reporting at Day 90 “much improved” or “very much improved” tinnitus severity compared with baseline.
Further analysis of efficacy results in the ISSNHL subgroup showedno treatment effects were evident as an unexpectedly high rate of spontaneous remission and substantial heterogeneity in outcomes. When patients with certain pre-specified tinnitus characteristicsoutcomes were excluded, a treatment effect was even observed with a majority of ISSNHL-tinnitus patients.observed. Given the high variability and the uncertainty over the precise trigger of the tinnitus in ISSNHL, we decided to continue clinical development exclusively in tinnitus with established cochlear origin (such as AAT and OM).
bloodstream.
injections.
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Effect size of tinnitus loudness improvement in TACTT0 and TACTT1
Effect size of tinnitus loudness improvement from baseline to 90 days after last treatment administration for three different dose regimens – three doses over three consecutive days, three doses over two weeks, single dose – and pooled together in patients with unilateral tinnitus following AAT or OM (n=118) in the TACTT0 and TACTT1 trials. Effect size is calculated as mean difference in tinnitus loudness improvement between patients treated with AM-101 0.81 mg/mL and patients treated with placebo, standardized by the standard deviation. Whiskers: 95% confidence interval.
As in the TACTT0 trial, psychoacoustic measures such as MML were marked by high variability, confirming their limited suitability and reliability as efficacy outcome measure.
AM-101
With a clear regulatory plan in place based on our SPA with the FDA and scientific advice from the EMA, we
Europe.
The same, well-defined patient population we used in Phase 2 (acute inner ear tinnitus following traumatic injury to the cochlea or OM) is selected in our Phase 3 clinical trials. Furthermore, based on the data we have gathered on the various subjective clinical read outs, we believe we have identified the most reliable and relevant measures for efficacy. Efficacy endpoints include PRO measures of loudness and annoyance, the TFI as well as global patient scores of tinnitus status and change. Based on our discussions with the FDA and EMA, we agreed that psychoacoustic measures were not relevant or reliable enough for the purpose of measuring clinical efficacy of AM-101.
Based on our estimates regarding patient enrollment, we expect to have top-line results from the first Phase 3 trial (TACTT2) for AM-101 in the third quarter of 2016, with results for the second trial (TACTT3) following a few months later.
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AM-111Keyzilen
AM-111
AM-111
sudden sensorineural hearing loss.
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Current Therapies and Unmet Need
respectively, and was granted fast track designation by the FDA in 2017.
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Hearing loss endpoints
The primary efficacy endpoint in our Phase 2 clinical trial was hearing loss recovery from baseline to Day 7 at the three worst affected frequencies. The percentage improvement of the patient’s hearing across an average of three frequencies was measured relative to baseline hearing loss. This percentage improvement and the percentage of patients with complete remission (hearing recovery to within 10 dB of the pre-ASNHL level) at Day 7 were co-primary endpoints. We also monitored change in the speech discrimination score, or SDS, which measures the correct understanding of 20 monosyllabic words presented to patients, as well as subjective tinnitus loudness as secondary outcome variables.
AM-111
FDA. The design of our pivotal Phase 3 clinical trials iswas based on the outcomes from our Phase 2 clinical trial and our discussions with the EMA and FDA. We have decided to make some adjustments to the definition of the target patient population to ensure that the trial enrolls only those subjects who have a clear medical need and in whom a clinically meaningful therapeutic benefit can be shown.
The
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The trial consisted of a baseline assessment and four follow-up visits on Days 3, 7, 30, and 90. The primary efficacy endpoint was hearing loss recovery from baseline to Day 7 at the three worst affected frequencies. The percentage improvementtrial consisted of PTA relative toa baseline hearing lossassessment and the percentage of patients with complete remission (PTA recovering to within 10 dB of the pre-ASNHL level) at Dayfour follow-up visits on Days 3, 7, were co-primary endpoints. We also monitored change in the speech discrimination score, or SDS, measuring the correct understanding of 20 monosyllabic words presented to patients,30, and subjective tinnitus loudness as secondary outcome variables.
AM-11190.
The trial demonstrated a statistically significant and clinically relevant improvement for the primary as well as the co-primary endpoints in patients with severe to profound ASNHL (those patients with hearing loss of at least 60 dB) treated with AM-111 0.4 mg/mL compared with placebo.
Improvement in hearing and speech discrimination
AM-111 | ||||||||||||
Placebo | Low Dose | High Dose | ||||||||||
Absolute hearing improvement, dB | 17.9 (30) | 29.9 (29) | 22.7 (33) | |||||||||
LS means (n) | ||||||||||||
LS mean difference (95% confidence interval) | 12.1 (2.2, 22.0) | 4.9 (-4.8, 14.6) | ||||||||||
P-value | 0.017 | * | 0.319 | |||||||||
Relative hearing improvement, % | ||||||||||||
LS means (n) | 30.9 (30) | 50.4 (29) | 37.6 (33) | |||||||||
LS mean difference (95% confidence interval) | 19.5 (3.0, 35.9) | 6.6 (-9.6, 22.8) | ||||||||||
P-value | 0.021 | * | 0.419 | |||||||||
Frequency complete hearing recovery, % | ||||||||||||
Mean (n) | 13.3 (30) | 31.0 (29) | 24.2 (33) | |||||||||
Odds ratio (95% confidence interval) | 5.5 (1.1, 29.0) | 1.6 (0.4, 6.7) | ||||||||||
P-value | 0.044 | * | 0.530 | |||||||||
Speech discrimination score improvement, % points | ||||||||||||
LS means (n) | 9.1 (29) | 27.4 (29) | 23.2 (33) | |||||||||
LS mean difference (95% confidence interval) | 18.3 (3.1, 33.4) | 14.1 (0.7, 28.9) | ||||||||||
P-value | 0.019 | * | 0.061 | * |
ANCOVA results for changes in hearing (absolute and relative to initial hearing loss) and speech discrimination score from baseline to Day 7 as well as frequency of complete hearing recovery in patients with severe to profound hearing loss. Shown are mean values for treatment groups (least square (LS) means for ANCOVA), differences for the active groups compared with placebo (odds ratio from logistic regression for frequency of complete hearing recovery) including 95% confidence interval and the p-value: * significant at 0.05 level.
A clinically relevant and statistically significant therapeutic effect of AM-111 Low Dose was apparent at Day 3; it continued to Day 30 and leveled off somewhat by Day 90, but still remained clinically relevant.
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Improvement in hearing over time
Treatment effect of AM-111 as difference in hearing recovery over placebo from baseline to follow-up visits in patients with severe to profound hearing loss (n=92). A difference of 10 dB is considered clinically relevant. Whiskers: 95% confidence interval. * Significant at 5% level when compared to placebo.
At Day 90, 42% of patients had achieved complete recovery as compared to 26%(PTA ≥60 dB), it was only about one quarter. Post-hoc analyses in the severe-to-profound hearing loss subgroup demonstrated superiority of Sonsuvi
Improvement in hearing over time – ASNHL onset 24 to 48 hours before
Treatment effect of AM-111 as difference in hearing recovery over placebo from baseline to follow-up visits in patients with severe to profound hearing loss treated 24 to 48 hours post ASNHL onset (n=66). A difference of 10 dB is considered clinically relevant. Whiskers: 95% confidence interval. * Significant at 5% level when compared to placebo.
The superior hearing recovery in the AM-111 0.4 mg/mL group vs. placebo was supported by more frequent complete tinnitus remission. This finding, which was not yet apparent in the previous smaller significant.
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Complete tinnitus remission
Percentage of severe to profound hearing loss patients and tinnitus at baseline whose tinnitus was completely resolved by Day 90 (n=77).
In contrast to the patients with severe to profound hearing loss at baseline, there was no therapeutic benefit observed in patients with mild to moderate hearing loss (i.e. less than 60 dB) due to unexpectedly strong spontaneous recovery. Patients with mild hearing loss recovered essentially all of their initial hearing loss naturally, and those with moderate levels recovered most of it. In hindsight, the inclusion criteria for hearing loss severity had been set too low. Although there is consensus that spontaneous recovery can be substantial in ISSNHL, no reliable data had been available prior to our Phase 2b clinical trial, partly due to the dearth of placebo-controlled trials.
In the present trial, patients in the Low Dose group initially appeared to show greater improvement than those in the High Dose group. The difference, however, was not statistically significant for absolute PTA improvement and was much smaller or absent for the other efficacy outcomes.
Planned Late Stage3 Clinical Program
We have commenced enrollmentPhase 2, recruitment was limited to patients experiencing severe or profound ISSNHL, i.e. patients with more pronounced medical need. Further, the time window for inclusion was extended from up to 48 hours to up to 72 hours from ISSNHL onset as the magnitude of the therapeutic effect in a pivotalPhase 2 did not appear to decrease the later treatment was started. This enlargement also aligned the duration of the time window with the period over which ISSNHL can develop, which is defined, e.g. by the U.S. practice guideline for sudden sensorineural hearing loss, as 72 hours.
In parallel, we are preparing aASSENT, the second pivotal Phase 3 clinical trial calledinvestigating Sonsuvi
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In addition, we plan to conduct a Phase 21b proof-of-concept trial in the treatment of surgery-induced hearing loss (REACH) in the U.S., comparing a single 0.4 mg/mL dose of AM-111 to a placebo. Provided that we obtain funding, REACH could be initiatedwith AM-201 in the first halfquarter of 2017 at2019. The randomized double blind placebo controlled trial will be conducted in a European country and enroll 50 healthy volunteers who will receive either AM-201 or placebo concomitantly with olanzapine over four weeks. Doses will be escalated in five steps. We expect to conclude the earliest.
Competition
We believe that we are the clinically most advanced company in the emerging field of inner ear therapeuticsstudy and that our innovative technology, knowledge, experience and scientific resources provide us with competitive advantages. However, weobtain results during 2019.
A variety of drug products that are licensed or used off-label for the treatment of vestibular disorders and Meniere’s disease exist, including steroids, diuretics, anti-emetics or anti-nausea medications. In many countries outside the United States, oral betahistine is the standard of care and licensed for the treatment of Meniere’s disease and vestibular vertigo.
• |
Otonomy Inc. acquired an early stage NMDA receptor antagonist product candidate (NST-001, gacyclidine) from Neurosystec Inc. in October |
Based on publicly available information, OTO-311 will target a similar group of tinnitus patients. Its competitive strength will ultimately depend on the demonstration of clinical efficacy and safety and its comparison with AM-101. Further, we intend to rely on our patent applications with broad disclosures to pursue claims relating to the use of polymers with NMDA antagonists in controlled-release topical compositions for the
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treatment of tinnitus. Further progressProgress in the development of AM-101Keyzilen® and in particular market approval may attract increased interest in developing treatments for acute inner ear tinnitus and may lead to the arrival of new competitors.
candidates that are currently in clinical development:
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foreign counterparts, pursuant to the terms of our co-ownership and exploitation agreement. In addition, we co-own twoone of our pending applications with Xigen pursuant to the terms of our collaboration and license agreement.
ASNHL.
The patent portfolios for our two (2) leading product candidates as well as other related filings as
AM-111
Additional Patents and Applications
betahistine for Eustachian tube dysfunction that is issued in the United States. In addition, to the AM-101 and AM-111 patent portfolios, we own four (4) U.S. patent applications directed to poloxamer-based compositions with actives including fluoroquinolone antibiotics, steroids, or gacyclidine. Although these applications are not directed to our AM-101 or AM-111 products, they can providepurchased from Otifex a competitive advantage in the relevant market. One of these applications was issued as U.S. Patent No.
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9,066,865 (the “865 Patent”) on June 30, 2015.
On July 20, 2015, the United States Patent and Trademark Office declared Patent Interference No. 106,030 involving our ‘865 Patent and Otonomy’s U.S. patent application No. 13/848,636. The patent interference identifies claims 1-9on the composition and use of intranasal betahistine. Further, we acquired in our ‘865 Patent as interfering with Otonomy’s patent application claims 38, 43, and 46-50. Our 865 Patent relates to methods of treating inner or middle ear diseases with intratympanic injections of poloxamer-based compositions. The claims are directed2018 two U.S. patents relating to the use of fluoroquinolone antibiotics in poloxamer 407 compositions under certain specifications. We do not expectbetahistine for the interferenceprevention and treatment of olanzapine induced weight gain, and we entered into a binding letter of intent to impact our intellectual property portfolioacquire the right to in-license two U.S. patents relating to AM-101the use of betahistine for the treatment of attention deficit/hyperactivity disorder and AM-111. See “Item 3. Key Information—D. Risk factors—Risks Related to Intellectual Property.
atypical depression.
In addition, we have acquired a U.S. orphan drug designation for betahistine for the treatment of obesity associated with Prader-Willi syndrome.
Further, we have obtained several U.S. trademark registrations for betahistine.
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applications have been filed during the term of the agreement. We have also agreed to pay INSERM a low double digit fee on any sums of any nature (except royalties and certain costs) collected by us in respect of the granting of licenses to third parties.
See “Item 4. Information on the Company—B. Business Overview—Collaboration and License Agreements—INSERM.”
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Manufacturing
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requirements or commitments. Failure to promptly conduct any required Phase 4 clinical trials could result in withdrawal of approval.
Special Protocol Assessment
The FDA and an IND sponsor may agree in writing on the design and size of clinical studies intended to form the primary basis of a claim of effectiveness in an NDA. This process is known as a special protocol assessment, or SPA. Upon a specific request for an SPA by an IND sponsor, the FDA will evaluate the protocol. If an SPA agreement is reached, however, it is not a guarantee of product approval by the FDA or approval of any permissible claims about the product. The FDA retains significant latitude and discretion in interpreting the terms of the SPA agreement and the data and results from any study that is the subject of the SPA agreement. In particular, the SPA agreement is not binding on the FDA if previously unrecognized public health concerns later come to light, other new scientific concerns regarding product safety or efficacy arise, the IND sponsor fails to comply with the protocol agreed upon, or the relevant data, assumptions, or information provided by the IND sponsor when requesting an SPA agreement change, are found to be false statements or misstatements, or are found to omit relevant facts. An SPA agreement may not be changed by the sponsor or the FDA after the trial begins except with the written agreement of the sponsor and the FDA, or if the FDA determines that a
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substantial scientific issue essential to determining the safety or effectiveness of the drug was identified after the testing began.
Orphan Drug Designation
DEA Regulation
The Drug Enforcement Administration, or DEA, regulatesprocess for the development and FDA review of drugs that are controlled substances. Controlled substances are those drugs that appear on oneintended for the treatment of the five schedules promulgatedserious or life threatening diseases or conditions and administered by the DEA under the Controlled Substances Act, or CSA, such as Ketamine, which is a Schedule III controlled substance. The CSA governs, among other things, the inventory, distribution, recordkeeping, handling, security and disposal of controlled substances. Any drug that acts on the central nervous system hasdemonstrate the potential to become a controlled substance, and scheduling by the DEAaddress unmet medical needs. The purpose of these programs is a separate process that may delay the commercial launch of a drug even afterto provide important new drugs to patients earlier than under standard FDA approval of the NDA. Companies with a scheduled drug are subject to periodic and ongoing inspections by the DEA and similar state drug enforcement authorities to assess ongoing compliance with the DEA’s regulations. Any failure to comply with these regulations could lead to a variety of sanctions, including the revocationreview procedures.
Post-Approval Requirements
Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulationRPD, designation by the FDA including, among other things, requirements relatingenables priority review voucher, or PRV, eligibility upon U.S. market approval of a designated drug for rare pediatric diseases. The RPD-PRV program is intended to recordkeeping, periodic reporting, product distribution, advertisingencourage development of therapies to prevent and promotion and reporting of adverse experiences with the product. Aftertreat rare pediatric diseases. The voucher, which is awarded upon NDA or Biologics License Application, or BLA, approval most changes to the approved product,sponsor of a designated RPD can be sold or transferred to another entity and used by the holder to receive priority review for a future NDA or BLA submission, which reduces the FDA review time of such future submission from ten to six months.
In addition, drug manufacturers and other entities involved in the manufacture and distributionmore of approved drugs are required to register their establishments with the FDA and state agencies, and are subject to periodic unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance.
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Once an approval is granted,programs, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur afterlater decide that the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things:
The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability.
Foreign Regulation
In order to market any product outside of the United States, we would need to comply with numerous and varying regulatory requirements of other countries and jurisdictions regarding quality, safety and efficacy and governing, among other things, clinical trials, marketing authorization, commercial sales and distribution of our products. Whether or not we obtain FDA approval for a product, we would need to obtain the necessary approvals by the comparable foreign regulatory authorities before we can commence clinical trials or marketing of the product in foreign countries and jurisdictions. Although many of the issues discussed above with respect to the United States apply similarly in the context of the European Union, the approval process varies between countries and jurisdictions and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other countries and jurisdictions might differ from and be longer than that required to obtain FDA approval. Regulatory approval in one country or jurisdiction does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country or jurisdiction may negatively impact the regulatory process in others.
Other Healthcare Laws
In addition to FDA restrictions on marketing of pharmaceutical products, federal and state healthcare laws govern certain business practices in the biopharmaceutical industry. These laws include, but are not limited to, anti-kickback, false claims, data privacy and security, and transparency statutes and regulations.
The federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, to induce, or in return for, purchasing, leasing, ordering or arranging for the purchase, lease or order of any good, facility, item or service reimbursable under Medicare, Medicaid or other federal healthcare programs. The term “remuneration” has been broadly interpreted to include anything of value, including for example, gifts, discounts, the furnishing of supplies or equipment, credit arrangements, payments of cash, waivers of payment, ownership interests and providing anything at less than its fair market value. The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers and formulary managers on the other. Although there are a number of statutory exceptions and regulatory safe harbors protecting certain common activities from prosecution, the exceptions and safe harbors are drawn narrowly, and our practices may not in all cases meet all of the criteria for a statutory exception or safe harbor protection. Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its facts and circumstances. Several courts have interpreted the
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statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the statute has been violated. The Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act, or collectively, the Health Care Reform Law, amended the intent requirement under the Anti-Kickback Statute and criminal healthcare fraud statutes (discussed below) such that a person or entity no longer needs to have actual knowledge ofmeets the statuteconditions for qualification or the specific intent to violate it in order to have committed a violation. In addition, the Health Care Reform Law providesdecide that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claimtime period for purposes of the civil False Claims Act (discussed below). Further, the civil monetary penalties statute imposes penalties against any person or entity who, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.
The federal false claims laws, including the civil False Claims Act, prohibit, among other things, any person or entity from knowingly presenting, or causing to be presented, a false or fraudulent claim for paymentFDA review or approval to the federal government or knowingly making, using or causing towill not be made or used a false record or statement material to a false or fraudulent claim to the federal government. As a result of a modification made by the Fraud Enforcement and Recovery Act of 2009, a claim includes “any request or demand” for money or property presented to the U.S. government. Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws for, among other things, allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. Other companies have been prosecuted for causing false claims to be submitted because of the companies’ marketing of the product for unapproved, and thus non-covered, uses. The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created new federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of, or payment for, healthcare benefits, items or services.
In addition, we may be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their implementing regulations, imposes certain requirements on certain types of individuals and entities relating to the privacy, security and transmission of individually identifiable health information. Among other things, HITECH makes HIPAA’s security standards directly applicable to business associates — independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions. In addition, certain state laws govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
Additionally, the Health Care Reform Law also included the federal Physician Payments Sunshine Act, which requires that certain manufacturers of drugs, devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report information related to certain payments or other transfers of value made or distributed to physicians and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals and to report annually certain ownership and investment interests held by physicians and their immediate family members.
Also, many states have similar healthcare statutes or regulations that apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. Certain states require the posting of information relating to clinical studies, pharmaceutical companies to implement a comprehensive compliance program that includes a limit on expenditures for, or payments to, individual medical or health professionals and track and report gifts and other payments made to physicians and other healthcare providers. If our operations are found to be in violation of any of the health regulatory laws described above or any other laws that apply to us, we may be subject to penalties, including potentially significant criminal, civil and/or administrative penalties, damages, fines, disgorgement, individual imprisonment, exclusion of products from reimbursement under government programs, contractual damages, reputational harm, administrative burdens, diminished profits and future earnings and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
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To the extent that any of our products will be sold in a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws and implementation of corporate compliance programs and reporting of payments or transfers of value to healthcare professionals.
Pharmaceutical Coverage, Pricing and Reimbursement
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In particular, there have been and continue to be a number of initiatives at the U.S. federal and state level that seek to reduce healthcare costs. Initiatives to reduce the federal deficit and to reform healthcare delivery are increasing cost-containment efforts. We anticipate that Congress, state legislatures and the private sector will continue to review and assess alternative benefits, controls on healthcare spending through limitations on the growth of private health insurance premiums and Medicare and Medicaid spending, the creation of large insurance purchasing groups, price controls on pharmaceuticals and other fundamental changes to the healthcare delivery system. Any proposed or actual changes could limit or eliminate our spending on development projects and affect our ultimate profitability.
In March 2010, the Health Care Reform Law was signed into law. The Health Care Reform Law has the potential to substantially change the way healthcare is financed by both governmental and private insurers. The Health Care Reform Law, among other things, established an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents; revised the methodology by which rebates owed by manufacturers for covered outpatient drugs under the Medicaid Drug Rebate Program are calculated; increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program; extended the Medicaid Drug Rebate program to utilization of certain injectable outpatient drugs, as well as prescriptions of individuals enrolled in Medicaid managed care organizations; required manufacturers to offer 50% point-of-sale discounts on negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D; and implemented payment system reforms including a national pilot program on payment bundling to encourage hospitals, physicians and other providers to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models; expanded eligibility criteria for Medicaid programs; and established a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research. There have been judicial and Congressional challenges to certain aspects of the Health Care Reform Law, and we expect there will be additional challenges and amendments to the Health Care Reform Law in the future.
In addition, other legislative changes have been proposed and adopted since the Health Care Reform Law was enacted. These changes included aggregate reductions to Medicare payments to providers of up to 2% per fiscal year effective April 1, 2013 and, due to subsequent legislative amendments to the statute, will stay in effect through 2025 unless additional Congressional action is taken. In January 2013, President Obama also signed into law the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several providers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.
Moreover, the recently enacted
C. | Organizational structure |
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D. | Property, plants and equipment |
A. | Operating results |
2018, we initiated a second randomized placebo-controlled Phase 1 trial in 72 healthy volunteers to further test the safety and tolerability and the pharmacokinetics of AM-125. On October 17, 2018 we announced positive results from the trial as superior bioavailability over a range of four intranasal betahistine doses compared to oral betahistine was observed, with plasma exposure being 6 to 29 times higher (p-value between 0.056 and p<0.0001). Further, it confirmed the good safety profile of intranasal betahistine and showed that the treatment was well tolerated when administered three times daily for three days. In 2019 we plan to initiate a Phase 2 clinical study with AM-125 in the first quarter, which will result in higher research and development expense for the AM-125 program than in 2018. The “TRAVERS” Phase 2 trial will enroll 138 patients suffering from acute vertigo following surgical removal of a vestibular schwannoma, a tumor growing behind the inner ear. It will be conducted in several European countries and potentially, Canada.
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manufactured, use, sell and distribute any products, processes or services deriving from such patents, including AM-101,Keyzilen®, in any country in which these patent applications have been filed during the term of the agreement.
See “Item 4. Information on the Company—B. Business Overview—Collaboration and License Agreements—Xigen.”
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AM-125 for Vertigo. The “TRAVERS”Phase 2 trial will enroll 138 patients suffering from acute vertigo following surgical removal of a vestibular schwannoma, a tumor growing behind the inner ear. It will be conducted in several European countries and potentially, Canada. The TRAVERS trial is expected to start recruitment during the first quarter of 2019 and will have two parts.In Part A, five ascending doses of AM-125 or placebo, administered three times daily over a total of four weeks, will be tested in a total of 50 patients. In addition, oral betahistine 48 mg will
• | Sonsuvi® (AM-111) for Acute Inner Ear Hearing Loss. Following the HEALOS results, we submitted the design of a new pivotal trial with AM-111 |
• | Keyzilen® (AM-101). We conducted a Phase 3 clinical development program with Keyzilen® comprising two |
salaries for |
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We expect that our general and administrative expense will increase in the future as our staff and related expenses, including employee benefits;
research and development activities, professional fees for lawyers not related to the protection and maintenance of our intellectual property and IT expenses;
Hercules. As of March 13, 2018, following the consummation of the Merger, the Hercules warrant was exercisable for up to 15,673 common shares at an exercise price of $39.40 per common share. As of December 31, 2018 the fair value of the warrant amounted to CHF 3,804. The revaluation gain of the derivative for the year ended December, 2018 amounted to CHF 19,546, which is a decrease of CHF 74,236 when comparing to the same period in 2017. Since its initial recognition on July 19, 2016, the fair value decreased by CHF 404,376 resulting in a revaluation gain in the corresponding amount (fair value as of July 19, 2016: CHF 408,180).
We determine the net interest expense or income on the net defined benefit liability or asset for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability or asset, taking into account any changes in the net defined benefit liability or asset during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognized in profit or loss.
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Year Ended December 31, | ||||||||||||
2015 | 2014 | Change | ||||||||||
(in thousands of CHF) | % | |||||||||||
Research and development | (26,536 | ) | (17,705 | ) | 50 | % | ||||||
General and administrative | (4,342 | ) | (4,489 | ) | (3 | %) | ||||||
Operating loss | (30,878 | ) | (22,194 | ) | 39 | % | ||||||
Interest income | 37 | 52 | (30 | %) | ||||||||
Interest expense | (8 | ) | (56 | ) | (86 | %) | ||||||
Foreign currency exchange gains/(losses), net | 1,144 | 4,012 | (71 | %) | ||||||||
Loss before tax | (29,705 | ) | (18,185 | ) | (63 | %) | ||||||
Income tax expense | — | — | — | |||||||||
Net loss attributable to owners of the Company | (29,705 | ) | (18,185 | ) | 63 | % | ||||||
Other comprehensive loss: | ||||||||||||
Items that will never be reclassified to profit or loss | ||||||||||||
Remeasurements of defined benefits liability, net of taxes of CHF 0 | (54 | ) | (1,102 | ) | (95 | %) | ||||||
Items that are or may be reclassified to profit or loss | ||||||||||||
Foreign currency translation differences, net of taxes of CHF 0 | (13 | ) | (105 | ) | (88 | %) | ||||||
Other comprehensive loss | (67 | ) | (1,207 | ) | (94 | %) | ||||||
Total comprehensive loss attributable to owners of the Company | (29,772 | ) | (19,392 | ) | 54 | % |
2017
Year Ended December 31, | ||||||||
2018 | 2017 | Change | ||||||
(in thousands of CHF) | % | |||||||
Research and development | (6,690 | ) | (19,211 | ) | (65 | )% | ||
General and administrative | (4,264 | ) | (5,150 | ) | (17 | )% | ||
Operating loss | (10,954 | ) | (24,361 | ) | (55 | )% | ||
Interest income | — | 54 | (100 | )% | ||||
Interest expense | (1,070 | ) | (1,640 | ) | (35 | )% | ||
Foreign currency exchange gain/(loss), net | (140 | ) | (825 | ) | (83 | )% | ||
Revaluation gain from derivative financial instruments | 1,350 | 3,372 | (60 | )% | ||||
Transaction Costs | (520 | ) | (1,027 | ) | (49 | )% | ||
Loss before tax | (11,334 | ) | (24,427 | ) | (54 | )% | ||
Income tax expense | (162 | ) | 18 | (1,000 | )% | |||
Net loss attributable to owners of the Company | (11,496 | ) | (24,409 | ) | (53 | )% | ||
Other comprehensive loss: | ||||||||
Items that will never be reclassified to profit or loss | ||||||||
Remeasurements of defined benefits liability, net of taxes of CHF 0 | 1,277 | 272 | 369 | % | ||||
Items that are or may be reclassified to profit or loss | ||||||||
Foreign currency translation differences, net of taxes of CHF 0 | (11 | ) | 50 | (122 | )% | |||
Other comprehensive loss | 1,266 | 322 | 293 | % | ||||
Total comprehensive loss attributable to owners of the Company | (10,230 | ) | (24,087 | ) | (58 | )% |
Year Ended December 31, | ||||||||||||
2015 | 2014 | Change | ||||||||||
(in thousands of CHF) | % | |||||||||||
Research and development expense | ||||||||||||
Clinical projects | (20,808 | ) | (12,142 | ) | 71 | % | ||||||
Preclinical projects | (468 | ) | (1,160 | ) | (60 | %) | ||||||
Drug manufacture and substance | (1,866 | ) | (1,384 | ) | 35 | % | ||||||
Employee benefits | (2,140 | ) | (1,718 | ) | 25 | % | ||||||
Other research and development expenses | (1,253 | ) | (1,301 | ) | (4 | %) | ||||||
Total | (29,705 | ) | (17,705 | ) | 50 | % |
Year Ended December 31, | ||||||||
2018 | 2017 | Change | ||||||
(in thousands of CHF) | % | |||||||
Research and development expense | ||||||||
Clinical projects | (846 | ) | (12,366 | ) | (93 | )% | ||
Pre-clinical projects | (873 | ) | (643 | ) | 36 | % | ||
Drug manufacture and substance | (2,185 | ) | (2,027 | ) | 8 | % | ||
Employee benefits | (1,653 | ) | (2,774 | ) | (40 | )% | ||
Other research and development expenses | (1,132 | ) | (1,402 | ) | (19 | )% | ||
Total | (6,689 | ) | (19,211 | ) | (65 | )% |
• | Clinical projects. In |
• |
Drug manufacture and substance. In |
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Year Ended December 31, | ||||||||||||
2015 | 2014 | Change | ||||||||||
(in thousands of CHF) | % | |||||||||||
General and administrative expense | ||||||||||||
Employee benefits | (1,503 | ) | (1,137 | ) | 32 | % | ||||||
Administration costs | (2,387 | ) | (2,014 | ) | 18 | % | ||||||
Initial public offering costs, expensed | — | (822 | ) | (100 | %) | |||||||
Other | (452 | ) | (516 | ) | (12 | %) | ||||||
Total | (4,342 | ) | (4,489 | ) | (3 | %) |
Year Ended December 31, | ||||||||
2018 | 2017 | Change | ||||||
(in thousands of CHF) | % | |||||||
General and administrative expense | ||||||||
Employee benefits | (1,084 | ) | (2,098 | ) | (48 | )% | ||
Business development | (44 | ) | (162 | ) | (73 | )% | ||
Travel expenses | (71 | ) | (199 | ) | (64 | )% | ||
Administration expenses | (2,798 | ) | (2,522 | ) | 11 | % | ||
Lease expenses | (52 | ) | (81 | ) | (36 | )% | ||
Depreciation tangible assets | (187 | ) | (69 | ) | 171 | % | ||
Capital tax (expenses)/income | (29 | ) | (18 | ) | 61 | % | ||
Total | (4,265 | ) | (5,150 | ) | (17 | )% |
We expect that general and administrative expense will increase in the future as our business expands and we continue to increase headcount as well as incur additional costs associated with operating as a public company.
Interest income
Interest income decreased from CHF 0.05 million in 2014 to CHF 0.04 million in 2015 due to the lower interest rates on short-term deposits.
Interest expense
Interest expense decreased substantially in 2015, as convertible loans had been converted in 2014. In 2014 we recognized interest expenses in the amount of CHF 0.05 million on the convertible loans.
Foreign currency exchange gains/(losses), net
Foreign currency exchange gains/(losses), net decreased in 2015 due to lower foreign exchange gains on the Company’s U.S. dollar denominated cashheadcount and cash equivalents.
Remeasurements of defined benefits liability
Remeasurements of the net defined benefits liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), decreased 95% from 2014 to 2015. The decline was due to higher return on plan assetsemployee benefit-related expenses, partly offset by lower actuarial losses on changes in experience adjustments and actuarial gains from changes in economic assumptions.
Foreign currency translation differences
Foreign currency translation differences decreased by 88% from 2014 to 2015. The decrease was primarily related to changes in the opening and closing balance of the group’s currency translation differences.
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Comparison of the years ended December 31, 2014 and 2013
Year Ended December 31, | ||||||||||||
2014 | 2013 | Change | ||||||||||
(in thousands of CHF) | % | |||||||||||
Research and development | (17,705 | ) | (13,254 | ) | 34 | % | ||||||
General and administrative | (4,489 | ) | (1,362 | ) | 230 | % | ||||||
Operating loss | (22,194 | ) | (14,616 | ) | 52 | % | ||||||
Interest income | 52 | 74 | (30 | %) | ||||||||
Interest expense | (56 | ) | (53 | ) | 6 | % | ||||||
Foreign currency exchange gains/(losses), net | 4,012 | (104 | ) | (3,985 | %) | |||||||
Loss before tax | (18,185 | ) | (14,699 | ) | 24 | % | ||||||
Income tax expense | — | (306 | ) | (100 | )% | |||||||
Net loss attributable to owners of the Company | (18,185 | ) | (15,005 | ) | 21 | % | ||||||
Other comprehensive loss: | ||||||||||||
Items that will never be reclassified to profit or loss | ||||||||||||
Remeasurements of defined benefits liability, net of taxes of CHF 0 | (1,102 | ) | (58 | ) | 1,800 | % | ||||||
Items that are or may be reclassified to profit or loss | ||||||||||||
Foreign currency translation differences, net of taxes of CHF 0 | (105 | ) | 32 | (431 | )% | |||||||
Other comprehensive loss | (1,207 | ) | (26 | ) | 4,541 | % | ||||||
Total comprehensive loss attributable to owners of the Company | (19,392 | ) | (15,031 | ) | 29 | % |
Year Ended December 31, | ||||||||||||
2014 | 2013 | Change | ||||||||||
(in thousands of CHF) | % | |||||||||||
Research and development expense | ||||||||||||
Clinical projects | (12,142 | ) | (8,753 | ) | 39 | % | ||||||
Preclinical projects | (1,160 | ) | (2,078 | ) | (44 | )% | ||||||
Drug manufacture and substance | (1,384 | ) | (1,036 | ) | 34 | % | ||||||
Employee benefits | (1,718 | ) | (1,074 | ) | 60 | % | ||||||
Other research and development expenses | (1,301 | ) | (313 | ) | 316 | % | ||||||
Total | (17,705 | ) | (13,254 | ) | 34 | % |
Research and development expense increased 34% from CHF 13.3 million in 2013 to CHF 17.7 million in 2014. The variances in expense between 2013 and 2014 were mainly due to the following factors:
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General and administrative expense
Year Ended December 31, | ||||||||||||
2014 | 2013 | Change | ||||||||||
(in thousands of CHF) | % | |||||||||||
General and administrative expense | ||||||||||||
Employee benefits | (1,137 | ) | (196 | ) | 481 | % | ||||||
Administration costs | (2,014 | ) | (556 | ) | 262 | % | ||||||
Initial public offering costs, expensed | (822 | ) | — | 100 | % | |||||||
Other | (516 | ) | (610 | ) | (15 | )% | ||||||
Total | (4,489 | ) | (1,362 | ) | 230 | % |
General and administrative expense increased 230% from CHF 1.4 million in 2013 to CHF 4.5 million in 2014.
Interest income
Interest income decreased from CHF 0.07 million in 2013 to CHF 0.05 million in 2014. Interest income in both periods consisted primarily of interest income recognized on short-term deposits.
Interest expense
Interest expense increased from CHF 0.05 in 2013 to CHF 0.06 million in 2014. Higher interest expenses were mainly due to higher legal fees related to the Merger.
expense.
Net foreign
shares, each warrant entitling its holder to purchase one common share at an exercise price of $0.50 per common share. As of March 13, 2018, following the consummation of the Merger, the warrants became exercisable for an aggregate of 750,002 of our common shares (assuming we decide to round up fractional common shares to the next whole common share), at an exercise price of $5.00 per common share. Revaluation gain/(loss) show the changes in fair value of the warrant issued in connection with this offering. As of December 31, 2018 the fair value of the warrants amounted CHF 289,651. Since its initial recognition on January 30, 2018, the fair value of the warrants has decreased by CHF 2,194,096, resulting in a gain in the corresponding amount (fair value as of January 30, 2018: CHF 2,483,747).
As we have never generated revenue or other taxable income, there have been no income taxes paid so far. In 2014, we recorded a
assets and liabilities.
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Foreign currency translation differences
Year Ended December 31, | ||||||||
2017 | 2016 | Change | ||||||
(in thousands of CHF) | % | |||||||
Research and development | (19,211 | ) | (24,777 | ) | (22 | )% | ||
General and administrative | (5,150 | ) | (5,447 | ) | (5 | )% | ||
Operating loss | (24,361 | ) | (30,224 | ) | (19 | )% | ||
Interest income | 54 | 68 | (21 | )% | ||||
Interest expense | (1,640 | ) | (829 | ) | 98 | % | ||
Foreign currency exchange gain/(loss), net | (825 | ) | (100 | ) | 725 | % | ||
Revaluation gain/(loss) from derivative financial instruments | 3,372 | 291 | 1,059 | % | ||||
Transaction Costs | (1,027 | ) | — | — | % | |||
Loss before tax | (24,427 | ) | (30,794 | ) | (21 | )% | ||
Income tax gain | 18 | 131 | (86 | )% | ||||
Net loss attributable to owners of the Company | (24,409 | ) | (30,662 | ) | (20 | )% | ||
Other comprehensive loss: | ||||||||
Items that will never be reclassified to profit or loss | ||||||||
Remeasurements of defined benefits liability | 272 | (394 | ) | (169 | )% | |||
Items that are or may be reclassified to profit or loss | ||||||||
Foreign currency translation differences | 50 | (20 | ) | (350 | )% | |||
Other comprehensive income/(loss) | 322 | (414 | ) | (178 | )% | |||
Total comprehensive loss attributable to owners of the Company | (24,087 | ) | (31,076 | ) | (22 | )% |
Year Ended December 31, | ||||||||
2017 | 2016 | Change | ||||||
(in thousands of CHF) | % | |||||||
Research and development expense | ||||||||
Clinical projects | (12,366 | ) | (16,639 | ) | (26 | )% | ||
Pre-clinical projects | (643 | ) | (546 | ) | 18 | % | ||
Drug manufacture and substance | (2,027 | ) | (2,609 | ) | (22 | )% | ||
Employee benefits | (2,774 | ) | (2,855 | ) | (3 | )% | ||
Other research and development expenses | (1,402 | ) | (2,128 | ) | (34 | )% | ||
Total | (19,211 | ) | (24,777 | ) | (22 | )% |
• | Clinical projects. In 2017, we incurred lower service and milestone costs for our Keyzilen ® studies, mainly reflecting the completion of TACTT2, AMPACT1 and AMPACT2 and progression towards completion of TACTT3, which was partly offset by higher AM-111 related expenses due to progression of our HEALOS and ASSENT trials. |
• | Drug manufacture and substance. In 2017 costs related to raw material purchases and expenses decreased by 22% mainly due to lower costs for process validation related to Keyzilen ®, which were partly offset by increases related to AM-111. |
Year Ended December 31, | ||||||||
2017 | 2016 | Change | ||||||
(in thousands of CHF) | % | |||||||
General and administrative expense | ||||||||
Employee benefits | (2,098 | ) | (2,175 | ) | (4 | )% | ||
Business development | (162 | ) | (46 | ) | 255 | % | ||
Travel expenses | (199 | ) | (159 | ) | 26 | % | ||
Administration expenses | (2,522 | ) | (2,970 | ) | (15 | )% | ||
Lease expenses | (81 | ) | (64 | ) | 28 | % | ||
Depreciation tangible assets | (69 | ) | (39 | ) | 75 | % | ||
Capital tax (expenses)/income | (18 | ) | 5 | (440 | )% | |||
Total | (5,150 | ) | (5,447 | ) | (5 | )% |
B. | Liquidity and capital resources |
2017
Year Ended December 31, | ||||||||
2015 | 2014 | |||||||
(in thousands of CHF) | ||||||||
Cash used in operating activities | (28,727 | ) | (19,316 | ) | ||||
Net cash used in investing activities | (43 | ) | (1,186 | ) | ||||
Net cash from financing activities | 20,919 | 49,609 | ||||||
Net effect of currency translation on cash | 1,155 | 3,962 | ||||||
Cash and cash equivalents at the beginning of the period | 56,934 | 23,866 | ||||||
Cash and cash equivalents at the end of the period | 50,237 | 56,934 |
2017:
Year Ended December 31, | |||||
2018 | 2017 | ||||
(in thousands of CHF) | |||||
Net cash used in operating activities | (13,232 | ) | (24,276 | ) | |
Net cash from / (used) in investing activities | (1,823 | ) | (99 | ) | |
Net cash from financing activities | 5,733 | 8,221 | |||
Net effect of currency translation on cash | (258 | ) | (1,315 | ) | |
Cash and cash equivalents at the beginning of the period | 14,973 | 32,442 | |||
Cash and cash equivalents at the end of the period | 5,393 | 14,973 |
related expenses.
regular monthly amortizations and interest payments totaling $ 5.1 million on the Hercules loan.
2016
Year Ended December 31, | ||||||||
2014 | 2013 | |||||||
(in thousands of CHF) | ||||||||
Cash used in operating activities | (19,316 | ) | (14,044 | ) | ||||
Net cash used in investing activities | (1,186 | ) | (35 | ) | ||||
Net cash from financing activities | 49,609 | 37,881 | ||||||
Net effect of currency translation on cash | 3,961 | 0 | ||||||
Cash and cash equivalents at the beginning of the period | 23,866 | 64 | ||||||
Cash and cash equivalents at the end of the period | 56,934 | 23,866 |
2016:
Year Ended December 31, | |||||
2017 | 2016 | ||||
(in thousands of CHF) | |||||
Cash used in operating activities | (24,276 | ) | (29,454 | ) | |
Net cash used in investing activities | (99 | ) | (177 | ) | |
Net cash from financing activities | 8,221 | 11,439 | |||
Net effect of currency translation on cash | (1,315 | ) | 397 | ||
Cash and cash equivalents at the beginning of the period | 32,442 | 50,237 | |||
Cash and cash equivalents at the end of the period | 14,973 | 32,442 |
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Cash used in investing activities reflects, in both 20142017 and 2013,2016, cash used in the purchase of property, plant and equipment (manufacturing equipment, leasehold improvements and office furniture) offset by interest received. In 2014, it
Cash from financial activities, in 2014, was primarily driven by a net inflow of CHF 49.6 million from our initial public offering in August 2014.the financing parties under the Hercules Loan and Security Agreement. In 2013 netaddition, cash from financing activities reflects proceeds fromin 2017 includes the private placementissuance of our Series C preferred shares to new investors providing totalunder the Commitment Purchase Agreement and a Registration Rights Agreement with LPC which resulted in net proceeds of CHF 24.1 million in April 2013 as well as a convertible loan from Series C shareholders providing CHF 13.8 million in December 2013.
2.3 million.
Equity Capital and Preferred Shares | Loans | Total | ||||||||||
(in thousands of CHF) | ||||||||||||
2015 | 21,071 | — | 21,071 | |||||||||
2014 | 50,038 | — | 50,038 | |||||||||
2013 | 24,111 | 13,770 | 37,881 | |||||||||
Total | 95,220 | 13,770 | 108,990 |
2016.
Equity Capital and Preferred Shares | Loans | Total | ||||||
(in thousands of CHF) | ||||||||
2018 | 15,441 | — | 15,441 | |||||
2017 | 11,491 | — | 11,491 | |||||
2016 | — | 11,987 | 11,987 | |||||
Total | 26,932 | 11,987 | 38,919 |
Our sources of financing in 2014 includedCompany and certain Series B warrant holders exercised warrant shares to purchase 2,864,422 common shares.
Our sources of financing in 2013 included the private placement of our Series C preferred shares providing total net proceeds of CHF 24.1 million as well as a convertible loan from Series C shareholders providing CHF 13.8 million. Prior to the closing of the Series C financing round in April 2013, a bridge loan was provided by Altamira Pharma GmbH, a company wholly owned by our CEO; a portion of the net proceeds from our Series C financing were used to repay that loan.
Under the terms of the Series C investmentregistration rights agreement we agreed that up to two additional closings resulting in further capital increase and issuance of new Series C preferred shares may be completedwith LPC (the “Second Closing” and/or, the “Third Closing”, respectively)“Registration Rights Agreement”). Pursuant to the termsPurchase Agreement, LPC agreed to purchase common shares for up to $10,000,000 over the 30-month term of the convertiblePurchase Agreement. As of the date of this Annual Report, we have issued an aggregate of 1,750,000 common shares for aggregate proceeds of $1.0 million to LPC under the LPC Purchase Agreement. The Purchase Agreement replaced the Purchase Agreement that we entered into with LPC on October 10, 2017 (the “2017 Commitment Purchase Agreement"), which was terminated as a result of the Merger. Under the 2017 Commitment Purchase Agreement, LPC agreed to subscribe for up to $13,500,000 of our common shares and prior to its termination, we had issued an aggregate of 2,600,000 common shares for aggregate proceeds of $1.8 million to LPC under the 2017 Commitment Purchase Agreement.
Company’s bank accounts. In connection with the loan facility, we issued Hercules a warrant to purchase up to 241,117 of our common shares at an exercise price of $3.94 per share. As of March 13, 2018, following consummation of the Merger, the warrant was exercisable for 15,673 common shares at an exercise price of $3.94 per common share.
did not offer or sell any common shares under the Controlled Equity Offering Sales Agreement. The Controlled Equity Offering program terminated upon consummation of the Merger on March 13, 2018.
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We may also seek to refinance out outstanding indebtedness.
Expenditures on
Expenditures onuntil the Company’s development programs are generally not capitalized except if development costsCompany obtains regulatory approval (i.e. approval to commercially use the product), as this is considered to be essentially the first point in time where it becomes probable that future revenues can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use or sell the asset.generated. For the development projects of the Company, these criteria are generally only met when regulatory approval for commercialization is obtained. GivenAM-125 program, however, given the current stage of the development projects, noproject, the nature of the development approach and the fact that there is an existing market, direct development expenditures have yet been capitalized. In addition, the Company has capitalized certain milestone payments with regard to license payments.
Intellectual Property and Data rights
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Measurement
Taxable profit differs from “loss before tax” as reported in the consolidated statement of profit or loss and other comprehensive loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible.
81
The Company’s net obligation in respect of defined benefit plans is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.
risk free rate.
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JOBS Act exemptions
C. | Research and development, patents and licenses, etc. |
D. | Trend information |
E. | Off-balance sheet arrangements |
F. | Tabular disclosure of contractual obligations |
Payments Due by Period | ||||||||||||
Less Than 1 Year | Between 1 and 5 Years | Total | ||||||||||
(in thousands of CHF) | ||||||||||||
Operating lease obligations (1) | 101 | 114 | 215 | |||||||||
Total | 101 | 114 | 215 |
Payments Due by Period | ||||||||||||||
Less Than 1 Year | 1-3 Years | 3-5 Years | More than 5 Years | Total | ||||||||||
(in thousands of CHF) | ||||||||||||||
Operating lease obligations (1) | 24 | — | 24 | |||||||||||
Loan and Borrowings (2) | 1,435 | — | — | 1,435 | ||||||||||
Derivative Financial Instruments (3) | 215 | 460 | — | 675 | ||||||||||
Total | 1,459 | 215 | 460 | — | 2,134 |
(1) | Operating lease obligations consist of payments pursuant to |
(2) | Loan obligations consist of amortization payments and |
(3) | Derivative Financial instruments relate to the warrants issued in connection with the Hercules Loan and Security Agreement and the warrants issued in the public offering in February 2017, direct placement in January 2018 and the July 2018 Registered Offering. |
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G. | Safe harbor |
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A. | Directors and senior management |
Name | Position | Age | Initial Year of Appointment |
Executive Officers | |||
Thomas Meyer | Chairman and Chief Executive Officer | 48 | 2003 |
Bettina Stubinski | Chief Medical Officer (1) | 49 | 2013 |
Sven Zimmermann | Chief Financial Officer | 45 | 2014 |
Anne Sabine Zoller | General Counsel | 36 | 2015 |
Non-Executive Directors | |||
Wolfgang Arnold | Director | 74 | 2007 |
James I. Healy | Vice-Chairman and Director | 51 | 2013 |
Oliver Kubli | Director | 43 | 2010 |
Berndt A.E. Modig | Director | 57 | 2015 |
Antoine Papiernik | Director | 49 | 2013 |
Calvin W. Roberts | Director | 63 | 2015 |
Name | Position | Age | Initial Year of Appointment | |||
Executive Officers(1) | ||||||
Thomas Meyer | Chairman, Director and Chief Executive Officer | 51 | 2003 | |||
Hernan Levett | Chief Financial Officer | 43 | 2017 | |||
Non-Executive Directors | ||||||
Armando Anido | Director | 61 | 2016 | |||
Mats Blom | Director | 53 | 2017 | |||
Alain Munoz | Director | 68 | 2018 | |||
Calvin W. Roberts | Director | 66 | 2015 |
(1) |
Bettina Mirella Stubinski, Chief Medical Officer: Dr. Stubinski has served as our Chief Medical Officer since September 2013. She previously spent nine years with Merck Serono, Geneva (Switzerland), her last position there being Head of Global Clinical Development Multiple Sclerosis. Prior to Serono she was employed with Novartis Consumer Health, and previous to that led the Clinical Research department of Berlin Chemie, a division of the Menarini Group, which she joined in 1996. Dr. Stubinski holds an M.D. with specialization in Clinical Neurophysiology from the Medical Faculty of the University of Genova, Italy, and started her career as a practicing Neurologist. In 2014 Dr. Stubinski obtained an M.B.A. at MIT’s Sloan School of Management.
Sven Zimmermann,
Anne Sabine Zoller, General Counsel:Ms. ZollerLevett joined the Company on January 1, 2017 as Senior Legal Counsel in April 2015 and was appointed General Counsel in August 2015.Chief Financial Officer. Prior to joining Auris Medical, Ms Zoller wasMr. Levett served as Head of Group Controlling at Acino Pharma AG. Prior to Acino, he served as Vice President of Finance and Administration Europe at InterMune International AG and spent 10 years at Novartis, most recently as Chief Financial Officer of Novartis Chile SA. Mr. Levett is a Corporate/M&A Counsel with Straumann Group, a dental implant company headquartered in Basel,certified public accountant and holds an attorney in the Corporate/M&A team of Homburger AG, a Zurich based law firm. She obtained a Ph.D. in lawaccounting degree from the University of Zurich and holds an M.B.A. degree.
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Non-Executive Directors
Wolfgang Arnold, Director: Dr. Arnold
James I. Healy, Vice-Chairman: Dr. Healy has been a member of our board of directors since April 2013. Dr. Healy has been a General Partner of Sofinnova Ventures, a venture capital firm, since June 2000. Prior to June 2000, Dr. Healy held various positions at Sanderling Ventures, Bayer Healthcare Pharmaceuticals (as successor to Miles Laboratories) and ISTA Pharmaceuticals, Inc. Dr. Healy is currently on the board of directors of Amarin Corporation, plc., Ascendis Pharma A/S, Coherus Bioscience, Inc., Edge Therapeutics, Inc. and several private companies. Previously, he served as a board member of Hyperion Therapeutics, Inc, CoTherix, Inc., Durata Therapeutics, Inc., InterMune, Inc. Movetis NV and several private companies. Dr. Healy was nominated to our board of directors by Sofinnova Ventures. Dr. Healy holds an M.D. and a Ph.D. in Immunology from the Stanford School of Medicine and holds a B.A. in molecular biology and a B.A. in Scandinavian Studies from the University of California at Berkeley.
Oliver Kubli, Director: Mr. Kubli has been a member of our board of directors since June 2010. He is a Managing Director and Head Portfolio Management Healthcare Funds & Mandates at Bellevue Asset Management AG. Mr. Kubli is the Senior Portfolio Manager for several public health care funds. Prior to joining Bellevue Asset Management, Mr Kubli was Head Portfolio Management Healthcare Funds & Mandates of Adamant Biomedical Investments AG. Before joining Adamant in 2008, he held various management positions at ZKB and was responsible for the global health care sector within the bank’s Asset Management Division. Mr. Kubli started his career as a financial analyst and portfolio manager with UBS and Swiss Re. He is a chartered financial analyst (CFA) and holds a B.A. in Business Administration from the University of Applied Sciences, Zürich/Winterthur, Switzerland.
Berndt A.E. Modig, Director, Chairman of the Audit Committee:Mr. Modig was elected to our board of directors in 2015. Mr. Modig is the Managing Director of Schoodic Management BV and Pharvaris BV. He was the Chief Financial Officer of Prosensa Holding N.V., a company dedicated to the development of treatments of neuromuscular and neurodegenerative disorders such as Duchenne Muscular Dystrophy, from 2010 up to its sale to Biomarin. Prior to that, he was the Chief Financial Officer of Jerini AG, another publicly listed biotechnology company, and held various management positions in industry, finance and private equity groups. He started his professional career in the auditing practice of Price Waterhouse. Berndt Modig is a member of the Board of Directors since April 2016. Mr. Anido has more than 30 years of executive, operational and commercial leadership experience in the Audit Committeebiopharmaceutical industry. He has served as Chairman and Chief Executive Officer of Affimed N.V.Zynerba Pharmaceuticals, Inc., a membersince October 2014. Prior to Zynerba, Mr. Anido served as Chief Executive Officer of the Board of Directors and chairman of the Audit Committee of Axovant Sciences, Ltd.NuPathe, Inc., and Auxilium Pharmaceuticals, Inc. Prior to Auxilium, Mr. Anido held commercial leadership roles at MedImmune, Glaxo Wellcome and Lederle Labs. He is currently a member of the Board of Directors of Onco BioTek. Mr. Modig isSCYNEXIS, Inc. (SCYX), and he was a Certified Public Accountant and has an M.B.A. from INSEAD.
Antoine Papiernik, Director, Chairmanmember of the Compensation Committee:Board of Directors of Aviragen Therapeutics, Inc. until it merged with Vaxart Inc. (VXRT) and Adolor Corporation until it was sold to Cubist Pharmaceuticals. Mr. PapiernikAnido earned a BS in Pharmacy and an MBA from West Virginia University.
Zealand Pharma A/S. (ZEAL.CO).
B. | Compensation |
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TheFor the year ended December 31, 2018, the amount set aside or accrued by us to provide pension, retirement or similar benefits to members of our board of directors or executive officers amounted to a total of CHF 78,72155,278 (2017: CHF 94,839).
We incorporate by reference into this Annual Reportmembers of the informationboard of directors in “Item 1.C—2015 Board Compensation” and “Item 2.C—2015 Executive Compensation” of Exhibit 99.42018 is outlined below:
In CHF | Cash Compensation | Social Contributions | Stock Options(4) | Total | ||||||||
Thomas Meyer, PhD, Chairman(1) | — | — | — | — | ||||||||
Armando Anido, MBA | 46,358 | 2,886 | 21,741 | 70,985 | ||||||||
Mats Blom, MBA | 46,358 | — | 21,741 | 68,099 | ||||||||
Oliver Kubli, CFA(2) | 8,480 | 528 | — | 9,008 | ||||||||
Berndt A.E. Modig, MBA(2) | 9,799 | — | — | 9,799 | ||||||||
Alain Munoz, MD(3) | 35,957 | — | 21,741 | 57,698 | ||||||||
Calvin W. Roberts, MD | 49,383 | 671 | 21,741 | 71,795 | ||||||||
Total | 196,335 | 4,085 | 86,964 | 287,384 |
(1) | Disclosed under “Compensation Awarded to Our Executive Officers” below. The Chief Executive Officer does not receive any additional compensation for the exercise of the office of the Chairman. |
(2) | Mr. Kubli and Mr. Modig did not stand for re-election at the 2018 extraordinary shareholders’ meeting and their terms therefore ended on March 12, 2018. |
(3) | Elected on March 12, 2018. |
(4) | In 2018, 37,130 options were granted to each eligible member of the Board of Directors. The fair value calculation of the options was based on the Black-Scholes option pricing model. Assumptions were made regarding inputs such as volatility and the risk-free rate in order to determine the fair value of the options. |
highest individual compensation to our executive officers in 2018 are outlined below:
in CHF | Fixed Cash Compensation | Variable Compensation(1) | Social contributions and fringe benefits | Stock Options(2) | Total | ||||||||||
Thomas Meyer, PhD Chief Executive Officer(3) | 363,600 | 0 | 60,490 | 201,411 | 625,501 | ||||||||||
Executive Officers Total(4) | 821,885 | 87,482 | 148,648 | 345,265 | 1,403,280 |
(1) | The variable compensation is paid in cash. Dr. Meyer waived his short-term incentive for 2018. |
(2) | 2018 option grants. The fair value calculation of the options was based on the Black-Scholes option pricing model. Assumptions were made regarding inputs such as volatility and the risk-free rate in order to determine the fair value of the options. |
(3) | Highest paid executive. |
(4) | On December 31, 2018, we had two executive officers. Dr. Braun-Scherhag retired from her function as executive officer effective as of September 30, 2018. The compensation to the retired executive officer for her services in 2018 is included in the executive officer total compensation. |
Mr. Levett.
Following our initial public offering, we ceased issuing any new grants under Stock Option Plan C and adopted a new omnibus equity incentive plan under which we have the discretion to grant a broad range of equity-based awards to eligible participants.
The EIP was assumed by Auris NewCo following the Merger.
87
Each of the Prior Plans permits the grant of options, or Options, which are subject to transfer restrictions. As of December 31, 2015,2018, there were 121,25050,000 common shares underlying outstanding Options granted pursuant to Plan A and 173,750121,250 common shares underlying outstanding Options granted pursuant to Plan C. There are no outstanding Options under Plan B, which was abolished in 2015.
Following our initial public offering, we ceased issuing any new grants under Stock Option Plan C and adopted a new omnibus equity incentive plan under which we have the discretion to grant a broad range of equity-based awards to eligible participants. Plan A and Plan C were assumed by Auris NewCo following the Merger.
USD 59.80.
Under Plan C, Options vest four years after grant.
C. | Board practices |
determine otherwise, under the Bye-laws directors hold office until the next annual general meeting or until their successors are elected or appointed or their office is otherwise vacated.
88
The audit committee is governed by a charter that complies with Nasdaq rules. The audit committee is responsible for, among other things:
D. | Employees |
E. | Share ownership |
89
A. | Major shareholders |
Shares Beneficially Owned | ||
Shareholder | Number | Percent |
5% Shareholders | ||
Sofinnova Venture Partners VIII, L.P. (1) | 5,818,175 | 16.95% |
Sofinnova Capital VII FCPR (2) | 5,384,450 | 15.68% |
Wasatch Advisors, Inc. (3) | 2,790,514 | 8.13% |
Entities affiliated with Swisscanto Fondsleitung AG (4) | 2,169,625 | 6.32% |
Entities affiliated with Idinvest Partners (5) | 2,065,233 | 6.02% |
Executive Officers and Directors | ||
Thomas Meyer, Ph.D. (10) | 6,792,500 | 19.79% |
Wolfgang Arnold, M.D. (10) | 38,750 | * |
James I. Healy, M.D., Ph.D. (6) | 5,818,175 | 16.95% |
Oliver Kubli, C.F.A.(7)(10) | 2,194,625 | 6.39% |
Antoine Papiernik, M.B.A.(8) | 5,384,450 | 15.68% |
Berndt A.E. Modig, M.B.A. | — | — |
Calvin W. Roberts, M.D.(9) | 55,242 | * |
Bettina Stubinski, M.D. | 39,942 | * |
Sven Zimmermann, Ph.D. | 40,752 | * |
Anne Sabine Zoller, Dr.iur. | — | — |
Shares Beneficially Owned | ||||||
Shareholder | Number | Percent | ||||
5% Shareholders | ||||||
— | — | — | ||||
Executive Officers and Directors | ||||||
Thomas Meyer, Ph.D. (1) | 8,998,479 | 24.00 | % | |||
Armando Anido, M.B.A (2) | 18,484 | * | ||||
Mats Blom, M.B.A. (3) | 17,734 | * | ||||
Alain Munoz (4) | 15,077 | * | ||||
Calvin W. Roberts, M.D.(5) | 25,009 | * | ||||
Hernan Levett, CPA (6) | 6,406 | * |
* | Indicates beneficial ownership of less than 1% of the total outstanding common shares. |
(1) |
90
managing members disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein, if any. The address for Sofinnova Venture Partners VIII, L.P. and Sofinnova Management VIII, L.L.C. is 2800 Sand Hill Road, Suite 150, Menlo Park, California 94025, USA.
(2) | Consists of |
(3) | Consists of options to purchase common shares under the Company’s EIP. |
(4) | Consists of 1,250 common shares owned by |
(5) | Consists of |
(6) |
91
the ZKB Funds (11.4%) and entities affiliated with Idinvest Partners (9.1%).
B. | Related party transactions |
The following is
Related Person Transaction Policy
Prior to
Indemnification Agreements
We have entered into indemnification agreements with our directors and executive officers. The indemnification agreements and our articles of association require us to indemnify our directors and executive officers to the fullest extent permitted by law.
Employment Agreements
Certain of our executive officers have entered into employment agreementsshares transfer agreement with the Company certainto facilitate the rounding up of which providefractional shares resulting from the exchange ratio used in the Merger. Pursuant to the terms of the share transfer agreement, Mr. Meyer has committed to transfer, at no consideration, a common share to any shareholder entitled to a fraction of a common share as part of the Merger. Pursuant to the share transfer agreement, the Company nor Mr. Meyer did receive any compensation for notice of termination periods and include restrictive covenants. None of our directors have entered into service agreementsthis arrangement. Any expenses incurred by Mr. Meyer in connection with the transfers under such agreement were borne by the Company. See “Item 6. Directors, Senior Management and Employees—B. Compensation—Employment Agreements.”
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C. | Interests of |
A. | Consolidated statements and other financial information |
Statements
On July, 20, 2015, the USPTO Office declared Patent Interference No. 106,030 involving our issued patent No. 9,066,865 (the “865 Patent”) and Otonomy’s patent application No. 13/848,636. The patent interference identifies our claims No. 1-9 in US Patent No. 9,066,865 as interfering with Otonomy’s claims No. 38, 43, and 46-50. Our 865 Patent relates to methods of treating inner or middle ear diseases with intratympanic injections of poloxamer-based compositions. The claims are directed to the use of fluoroquinolone antibiotics in poloxamer 407 compositions under certain specifications. While we cannot assure you of the outcome of these proceedings, we do not expect the proceedings to impact our intellectual property portfolio relating to AM-101 and AM-111.
B. | Significant changes |
A. | Offering and listing details |
Not applicable.
B. | Plan of distribution |
C. | Markets |
High | Low | |||||||
Year Ended December 31, 2015: | ||||||||
First Quarter | 6.38 | 3.51 | ||||||
Second Quarter | 6.05 | 4.33 | ||||||
Third Quarter | 5.56 | 3.50 | ||||||
Fourth Quarter | 5.00 | 3.02 | ||||||
Month Ended: | ||||||||
September 30, 2015 | 4.73 | 3.50 | ||||||
October 31, 2015 | 3.94 | 3.33 | ||||||
November 30, 2015 | 3.88 | 3.02 | ||||||
December 31, 2015 | 5.00 | 3.09 | ||||||
January 31, 2016 | 7.79 | 4.13 | ||||||
February 29, 2016 | 4.75 | 3.91 | ||||||
March, 2016 (through March 11, 2016) | 4.70 | 4.40 |
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D. | Selling shareholders |
E. | Dilution |
F. | Expenses of the issue |
A. | Share capital |
B. | Memorandum and articles of association |
We incorporateour constitutive document. The new constitutive documents under Bermuda law will comprise similar rights for Auris Medical (Bermuda) shareholders and creditors to those they currently have under Swiss law and our current constitutive documents. However, there will be differences between Auris Medical (Bermuda)’s new constitutive documents and Bermuda law, on one hand, and our current constitutive documents and Swiss law, on the other hand, that may affect the rights of shareholders.
a. | a) for the purpose of financing or refinancing the acquisition of enterprises, divisions thereof, or of participations, products, intellectual property rights, licenses, cooperations or of newly planned investments of the Corporation; |
b. | b) if the issue occurs on domestic or international capital markets including private placements; or |
c. | c) for purposes of an underwriting of the Financial Instruments by a banking institution or a consortium of banks with subsequent offering to the public. |
DELAWARE CORPORATE LAW | SWISS CORPORATE LAW | BERMUDA CORPORATE LAW |
Mergers and similar arrangements | ||
Under the Delaware General Corporation Law, with certain exceptions, a merger, consolidation, sale, lease or transfer of all or substantially all of the assets of a corporation must be approved by the board of directors and a majority of the outstanding shares entitled to vote thereon. A shareholder of a Delaware corporation participating in certain major corporate transactions may, under certain circumstances, be entitled to appraisal rights pursuant to which such shareholder may receive cash in the amount of the fair value of the shares held by such shareholder (as determined by a court) in lieu of the consideration such shareholder would otherwise receive in the transaction. The Delaware General Corporation Law also provides that a parent corporation, by resolution of its board of directors, may merge with any subsidiary, of which it owns at least 90.0% of each class of capital stock without a vote by the shareholders of such subsidiary. Upon any such merger, dissenting shareholders of the subsidiary would have appraisal rights. | Under Swiss law, with certain exceptions, a merger or a division of the corporation or a sale of all or substantially all of the assets of a corporation must be approved by two-thirds of the shares represented at the respective general meeting of shareholders as well as the absolute majority of the share capital represented at such shareholders’ meeting. The articles of association may increase the voting threshold. A shareholder of a Swiss corporation participating in a statutory merger or demerger pursuant to the Swiss Merger Act can file an appraisal right lawsuit against the surviving company. As a result, if the consideration is deemed “inadequate,” such shareholder may, in addition to the consideration (be it in shares or in cash) receive an additional amount to ensure that such shareholder receives the fair value of the shares held by such shareholder. Swiss law also provides that a parent corporation, by resolution of its board of directors, may merge with any subsidiary, of which it owns at least 90.0% of the shares without a vote by shareholders of such subsidiary, if the shareholders of the subsidiary are offered the payment of the fair value in cash as an alternative to shares. | The amalgamation or merger of a Bermuda company with another company or corporation (other than certain affiliated companies) requires the amalgamation or merger agreement to be approved by the company's board of directors and by its shareholders. Unless the company's bye-laws provide otherwise, the approval of 75% of the shareholders voting at a general meeting is required to approve the amalgamation or merger agreement, and the quorum for such meeting must be two persons holding or representing more than one-third of the issued shares of the company. The Bye-laws provide that a merger or an amalgamation (other than with a wholly owned subsidiary or as described below) that has been approved by the board must only be approved by a majority of the votes cast at a general meeting of the shareholders at which the quorum shall be two or more persons present in person and representing in person or by proxy issued and outstanding voting shares. The Bye-laws contain provisions regarding “business combinations” with “interested shareholders”. Pursuant to our Bye-laws, in addition to any other approval that may be required by applicable law, any business combination with an interested shareholder within a period of three years after the date of the transaction in which the person became an interested shareholder must be approved by Auris Medical (Bermuda)’s board and authorized at an annual or special general meeting by the affirmative vote of at least 66 and 2/3rds% of Auris Medical (Bermuda)’s issued and outstanding voting shares that are not owned by the interested shareholder, unless: (i) prior to the time that the shareholder becoming an interested shareholder, our board of directors approved either the business combination or the transaction that resulted in the shareholder becoming an interested shareholder; or |
(ii) upon consummation of the transaction that resulted in the shareholder becoming an interested shareholder, the interested shareholder owned at least 85% of our issued and outstanding voting shares at the time the transaction commenced. For purposes of these provisions, “business combinations” include mergers, amalgamations, consolidations and certain sales, leases, exchanges, mortgages, pledges, transfers and other dispositions of assets, issuances and transfers of shares and other transactions resulting in a financial benefit to an interested shareholder. An “interested shareholder” is a person that beneficially owns 15% or more of our issued and outstanding voting shares and any person affiliated or associated with us that owned 15% or more of our issued and outstanding voting shares at any time three years prior to the relevant time. Under Bermuda law, in the event of an amalgamation or merger of a Bermuda company with another company or corporation, a shareholder of the Bermuda company who did not vote in favor of the amalgamation or merger and who is not satisfied that fair value has been offered for such shareholder’s shares may, within one month of notice of the shareholders meeting, apply to the Supreme Court of Bermuda to appraise the fair value of those shares. Note that each share of an amalgamating or merging companies carries the right to vote in respect of an amalgamation or merger whether or not is otherwise carries the right to vote. |
Shareholders’ suits | ||
Class actions and derivative actions generally are available to shareholders of a Delaware corporation for, among other things, breach of fiduciary duty, corporate waste and actions not taken in accordance with applicable law. In such actions, the court has discretion to permit the winning party to recover attorneys’ fees incurred in connection with such action. | Class actions and derivative actions as such are not available under Swiss law. Nevertheless, certain actions may have a similar effect. A shareholder is entitled to bring suit against directors for breach of, among other things, their fiduciary duties and claim the payment of the company’s damages to the corporation. Likewise, an appraisal lawsuit won by a shareholder will indirectly compensate all shareholders. Under Swiss law, the winning party is generally entitled to recover attorneys’ fees incurred in connection with such action, provided, however, that the court has discretion to permit the shareholder whose claim has been dismissed to recover attorneys’ fees incurred to the extent he acted in good faith. | Class actions and derivative actions are generally not available to shareholders under Bermuda law. The Bermuda courts, however, would ordinarily be expected to permit a shareholder to commence an action in the name of a company to remedy a wrong to the company where the act complained of is alleged to be beyond the corporate power of the company or illegal, or would result in the violation of the company’s memorandum of association or bye-laws. Furthermore, consideration would be given by a Bermuda court to acts that are alleged to constitute a fraud against the minority shareholders or, for instance, where an act requires the approval of a greater percentage of the company’s shareholders than that which actually approved it. When the affairs of a company are being conducted in a manner which is oppressive or prejudicial to the interests of some part of the shareholders, one or more shareholders may apply to the Supreme Court of Bermuda, which may make such order as it sees fit, including an order regulating the conduct of the company's affairs in the future or ordering the purchase of the shares of any shareholders by other shareholders or by the company. The Bye-laws contain a provision by virtue of which Auris Medical (Bermuda)’s shareholders waive any claim or right of action that they have, both individually and on Auris Medical (Bermuda)’s behalf, against any director or officer in relation to any action or failure to take action by such director or officer, except in respect of any fraud or dishonesty of such director or officer. |
Shareholder vote on board and management compensation | ||
Under the Delaware General Corporation Law, the board of directors has the authority to fix the compensation of directors, unless otherwise restricted by the certificate of incorporation or bylaws. | Pursuant to the Swiss Ordinance against excessive compensation in listed stock corporations, the general meeting of shareholders has the non-transferable right, amongst others, to vote on the compensation of the board of directors, executive management and advisory boards. | The Bye-laws contains a provision that the board of directors has the power to determine the remuneration, if any, of the directors. |
Annual vote on board renewal | ||
Unless directors are elected by written consent in lieu of an annual meeting, directors are elected in an annual meeting of stockholders on a date and at a time designated by or in the manner provided in the bylaws. Re-election is possible. | The general meeting of shareholders elects annually (i.e. until the following general meeting of shareholders) the members of the board of directors (including the chairman) and the members of the compensation committee individually for a term of office of one year. Re-election is possible. | The Bye-laws provide that the directors shall hold office for such term as the shareholders may determine or, in their absence of such determination, until the next annual general meeting, or until their successors are elected or appointed or their office is otherwise vacated. Re-election is possible. |
Classified boards are permitted. | Provision for staggered boards of directors may be included in a company’s bye-laws. | |
Indemnification of directors and executive management and limitation of liability | ||
The Delaware General Corporation Law provides that a certificate of incorporation may contain a provision eliminating or limiting the personal liability of directors (but not other controlling persons) of the corporation for monetary damages for breach of a fiduciary duty as a director, except no provision in the certificate of incorporation may eliminate or limit the liability of a director for: any breach of a director’s duty of loyalty to the corporation or its shareholders; acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; statutory liability for unlawful payment of dividends or unlawful stock purchase or redemption; or any transaction from which the director derived an improper personal benefit. | Under Swiss corporate law, an indemnification of a director or member of the executive management in relation to potential personal liability is not effective to the extent the director or member of the executive management intentionally or negligently violated his or her corporate duties towards the corporation (certain views advocate that at least a grossly negligent violation is required to exclude the indemnification). Most violations of corporate law are regarded as violations of duties towards the corporation rather than towards the shareholders. In addition, indemnification of other controlling persons is not permitted under Swiss corporate law, including shareholders of the corporation. Nevertheless, a corporation may enter into and pay for directors’ and officers’ liability insurance which typically covers negligent acts as well. | Section 98 of the Companies Act provides generally that a Bermuda company may indemnify its directors, officers and auditors against any liability which by virtue of any rule of law would otherwise be imposed on them in respect of any negligence, default, breach of duty or breach of trust, except in cases where such liability arises from fraud or dishonesty of which such director, officer or auditor may be guilty in relation to the company. Section 98 further provides that a Bermuda company may indemnify its directors, officers and auditors against any liability incurred by them in defending any proceedings, whether civil or criminal, in which judgment is awarded in their favor or in which they are acquitted or granted relief by the Supreme Court of Bermuda pursuant to section 281 of the Companies Act. |
A Delaware corporation may indemnify any person who was or is a party or is threatened to be made a party to any proceeding, other than an action by or on behalf of the corporation, because the person is or was a director or officer, against liability incurred in connection with the proceeding if the director or officer acted in good faith and in a manner reasonably believed to be in, or not opposed to, the best interests of the corporation; and the director or officer, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. | The Bye-laws contain provisions that provide that Auris Medical (Bermuda)’s shall indemnify its officers and directors in respect of their actions and omissions, except in respect of their fraud or dishonesty. Our bye-laws provide that the shareholders waive all claims or rights of action that they might have, individually or in right of the company, against any of the company’s directors or officers for any act or failure to act in the performance of such director’s or officer’s duties, except in respect of any fraud or dishonesty of such director or officer. Section 98A of the Companies Act permits Auris Medical (Bermuda) to purchase and maintain insurance for the benefit of any officer or director in respect of any loss or liability attaching to him in respect of any negligence, default, breach of duty or breach of trust, whether or not we may otherwise indemnify such officer or director. We have purchased and maintain a directors’ and officers’ liability policy for such a purpose. |
Unless ordered by a court, any foregoing indemnification is subject to a determination that the director or officer has met the applicable standard of conduct: by a majority vote of the directors who are not parties to the proceeding, even though less than a quorum; by a committee of directors designated by a majority vote of the eligible directors, even though less than a quorum; by independent legal counsel in a written opinion if there are no eligible directors, or if the eligible directors so direct; or by the shareholders. | ||
Moreover, a Delaware corporation may not indemnify a director or officer in connection with any proceeding in which the director or officer has been adjudged to be liable to the corporation unless and only to the extent that the court determines that, despite the adjudication of liability but in view of all the circumstances of the case, the director or officer is fairly and reasonably entitled to indemnity for those expenses which the court deems proper. | ||
Directors’ fiduciary duties | ||
A director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This duty has two components: the duty of care; and the duty of loyalty. | A director of a Swiss corporation has a fiduciary duty to the corporation only. This duty has two components: the duty of care; and the duty of loyalty. | At common law, members of a board of directors owe a fiduciary duty to the company to act in good faith in their dealings with or on behalf of the company and exercise their powers and fulfill the duties of their office honestly. This duty includes the following elements: (i) a duty to act in good faith in the best interests of the company; (ii) a duty not to make a personal profit from opportunities that arise from the office of director; (iii) a duty to avoid conflicts of interest; and (iv) a duty to exercise powers for the purpose for which such powers were intended. |
The duty of care requires that a director act in good faith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himself of, and disclose to shareholders, all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director act in a manner he reasonably believes to be in the best interests of the corporation. He must not use his corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. In general, actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption may be rebutted by evidence a breach of one of the fiduciary duties. | The duty of care requires that a director act in good faith, with the care that an ordinarily prudent director would exercise under similar circumstances. Under this duty, a director must inform himself of, and disclose, all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director act in a manner he reasonably believes to be in the best interest of the corporation. He must not use his corporate position for personal gain or advantage. This duty prohibits in principle self-dealing by a director and mandates that the best interest of the corporation take precedence over any interest possessed by a director or officer. The burden of proof for a violation of these duties is with the corporation or with the shareholder bringing a suit against the director. Directors also have an obligation to treat shareholders equally proportionate to their share ownership. | The Companies Act also imposes a duty on directors and officers of a Bermuda company to: (i) act honestly and in good faith with a view to the best interests of the company; and (ii) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. In addition, the Companies Act imposes various duties on directors and officers of a company with respect to certain matters of management and administration of the company. |
Should such evidence be presented concerning a transaction by a director, a director must prove the procedural fairness of the transaction, and that the transaction was of fair value to the corporation. | ||
Shareholder action by written consent | ||
A Delaware corporation may, in its certificate of incorporation, eliminate the right of shareholders to act by written consent. | Shareholders of a Swiss corporation may only exercise their voting rights in a general meeting of shareholders (directly or through a proxy) and may not act by written consent. | The Companies Act provides that shareholders may take action by written consent, expect in respect of the removal of an auditor from office before the expiry of his term or in respect of a resolution passed for the purpose of removing a director before the expiration of his term of office. A resolution in writing is passed when it is signed by the members of the company who at the date of the notice of the resolution represent such majority of votes as would be required if the resolution had been voted on at a meeting or when it is signed by all the members of the company or such other majority of members as may be provided by the bye-laws of the company. |
Shareholder proposals | ||
A shareholder of a Delaware corporation has the right to put any proposal before the annual meeting of shareholders, provided it complies with the notice provisions in the governing documents. A special meeting may be called by the board of directors or any other person authorized to do so in the governing documents, but shareholders may be precluded from calling special meetings. | At any general meeting of shareholders any shareholder may put proposals to the meeting if the proposal is part of an agenda item. Unless the articles of association provide for a lower threshold or for additional shareholders’ rights: one or several shareholders representing 10.0% of the share capital may ask that a general meeting of shareholders be called for specific agenda items and specific proposals; and one or several shareholders representing 10.0% of the share capital or CHF 1.0 million of nominal share capital may ask that an agenda item including a specific proposal be put on the agenda for a regularly scheduled general meeting of shareholders, provided such request is made with appropriate notice. | Shareholder(s) may, as set forth below and at their own expense (unless the company otherwise resolves), require the company to: (i) give notice to all shareholders entitled to receive notice of the annual general meeting of any resolution that the shareholder(s) may properly move at the next annual general meeting; and/or (ii) circulate to all shareholders entitled to receive notice of any general meeting a statement in respect of any matter referred to in the proposed resolution or any business to be conducted at such general meeting. The number of shareholders necessary for such a requisition is either: (i) any number of shareholders representing not less than 5% of the total voting rights of all shareholders entitled to vote at the meeting to which the requisition relates; or (ii) not less than 100 shareholders. |
Any shareholder can propose candidates for election as directors without prior written notice. | Pursuant to the Bye-laws, any shareholder or shareholders holding or representing not less than 5% of the total voting rights wishing to propose for election as a director someone who is not an existing director or is not proposed by Auris Medical (Bermuda)’s board must give notice of the intention to propose the person for election in accordance with the Bye-laws. | |
In addition, any shareholder is entitled, at a general meeting of shareholders and without advance notice, to (i) request information from the Board on the affairs of the company (note, however, that the right to obtain such information is limited), (ii) request information from the auditors on the methods and results of their audit, and (iii) request, under certain circumstances and subject to certain conditions, a special audit. | ||
Cumulative voting | ||
Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation’s certificate of incorporation provides for it. | Cumulative voting is not permitted under Swiss corporate law. Pursuant to Swiss law, shareholders can vote for each proposed candidate, but they are not allowed to cumulate their votes for single candidates. An annual individual election of all members of the board of directors (including the chairman) for a term of office of one year (i.e. until the following annual general meeting) is mandatory for listed Swiss corporations. | Under Bermuda law, the voting rights of shareholders are regulated by the company’s bye-laws and, in certain circumstances, by the Companies Act. The Bye-laws provide for a plurality of voting for elections of directors, and cumulative voting for elections of directors is not permitted. |
Removal of directors | ||
A Delaware corporation with a classified board may be removed only for cause with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. | A Swiss corporation may remove, with or without cause, any director at any time with a resolution passed by an absolute majority of the shares represented at a general meeting of shareholders. The articles of association may provide for a qualified majority for the removal of a director. | Under the Bye-laws, a director may be removed, with cause, by the shareholders, provided notice of the shareholders meeting convened to remove the director is given to the director. The notice must contain a statement of the intention to remove the director and must be served on the director not less than fourteen days before the meeting. The director is entitled to attend the meeting and be heard on the motion for his removal. |
Transactions with interested shareholders | ||
The Delaware General Corporation Law generally prohibits a Delaware corporation from engaging in certain business combinations with an “interested shareholder” for three years following the date that such person becomes an interested shareholder. An interested shareholder generally is a person or group who or which owns or owned 15.0% or more of the corporation’s outstanding voting stock within the past three years. | No such rule applies to a Swiss corporation. | There is no similar law in Bermuda. The Bye-laws contain provisions regarding “business combinations” with “interested shareholders” which are described above under “mergers and similar arrangements.” |
Dissolution; Winding up | ||
Unless the board of directors of a Delaware corporation approves the proposal to dissolve, dissolution must be approved by shareholders holding 100.0% of the total voting power of the corporation. Only if the dissolution is initiated by the board of directors may it be approved by a simple majority of the corporation’s outstanding shares. Delaware law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by the board. | A dissolution and winding up of a Swiss corporation requires the approval by two-thirds of the shares represented as well as the absolute majority of the nominal value of the share capital represented at a general meeting of shareholders passing a resolution on such dissolution and winding up. The articles of association may increase the voting thresholds required for such a resolution (but only by way of a resolution with the majority stipulated by law). | A Bermuda company may be wound up by the Bermuda court on application presented by the company itself, its creditors (including contingent or prospective creditors) or its contributories. The Bermuda court has authority to order winding up in a number of specified circumstances including where it is, in the opinion of the Bermuda court, just and equitable to do so. A Bermuda company limited by shares may be wound up voluntarily when the shareholders so resolve in general meeting. In the case of a voluntary winding up, the company shall, from the commencement of the winding up, cease to carry on its business, except so far as may be required for the beneficial winding up thereof. |
Variation of rights of shares | ||
A Delaware corporation may vary the rights of a class of shares with the approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise. | A Swiss corporation may modify the rights of a category of shares with (i) a resolution passed by an absolute majority of the shares represented at the general meeting of shareholders and (ii) a resolution passed by an absolute majority of the shares represented at the special meeting of the affected preferred shareholders. Shares that are granted more voting power are not regarded a special class for these purposes. | Under the Bye-laws, if at any time we have more than one class of shares, the rights attaching to any class, unless otherwise provided for by the terms of issue of the relevant class, may be varied either: (i) with the consent in writing of the holders of 75% of the issued shares of that class; or (ii) with the sanction of a resolution passed by a majority of the votes cast at a general meeting of the relevant class of shareholders at which a quorum consisting of at least two persons holding or representing issued shares of the relevant class is present. The Bye-laws specify that the creation or issue of shares ranking equally with existing shares will not, unless expressly provided by the terms of issue of existing shares, vary the rights attached to existing shares. In addition, the creation or issue of preference shares ranking prior to common shares will not be deemed to vary the rights attached to common shares or, subject to the terms of any other series of preference shares, to vary the rights attached to any other series of preference shares. |
Amendment of governing documents | ||
A Delaware corporation’s governing documents may be amended with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. | By way of a public deed, the articles of association of a Swiss corporation may be amended with a resolution passed by an absolute majority of the shares represented at such meeting, unless otherwise provided in the articles of association. There are a number of resolutions, such as an amendment of the stated purpose of the corporation and the introduction of authorized and conditional capital, that require the approval by two-thirds of the votes and an absolute majority of the nominal value of the shares represented at a shareholders’ meeting. The articles of association may increase the voting thresholds. | A Bermuda company’s memorandum of association and bye-laws may be amended by resolutions of the board of directors and the shareholders, subject to the company’s bye-laws. |
Inspection of Books and Records | ||
Shareholders of a Delaware corporation, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose, and to obtain copies of list(s) of shareholders and other books and records of the corporation and its subsidiaries, if any, to the extent the books and records of such subsidiaries are available to the corporation. | Shareholders of a Swiss corporation may only inspect books and records if the general meeting of shareholders or the board of directors approved such inspection. The inspection right is limited in scope and only extends to information required for the exercise of shareholder rights and does not extend to confidential information. The right to inspect the share register is limited to the right to inspect that shareholder’s own entry in the share register. | Members of the general public have a right to inspect the public documents of a company available at the office of the Registrar of Companies in Bermuda. These documents include the company’s memorandum of association/continuance, including its objects and powers, and certain alterations to the memorandum of association/continuance. The shareholders have the additional right to inspect the bye-laws of the company, minutes of general meetings and the company’s audited financial statements, which must be presented to the annual general meeting. The register of members of a company is also open to inspection by shareholders without charge, and by members of the general public on payment of a fee. The register of members is required to be open for inspection for not less than two hours in any business day (subject to the ability of a company to close the register of members for not more than thirty days in a year). A company is required to maintain its share register in Bermuda but may, subject to the provisions of the Companies Act, establish a branch register outside of Bermuda. A company is required to keep at its registered office a register of directors and officers that is open for inspection for not less than two hours in any business day by members of the public without charge. Bermuda law does not, however, provide a general right for shareholders to inspect or obtain copies of any other corporate records. |
Payment of dividends | ||
The board of directors may approve a dividend without shareholder approval. Subject to any restrictions contained in its certificate of incorporation, the board may declare and pay dividends upon the shares of its capital stock either: out of its surplus, or in case there is no such surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Stockholder approval is required to authorize capital stock in excess of that provided in the charter. Directors may issue authorized shares without stockholder approval. | Dividend payments are subject to the approval of the general meeting of shareholders. The board of directors may propose to shareholders that a dividend shall be paid but cannot itself authorize the distribution. Payments out of the Company’s share capital (in other words, the aggregate nominal value of the Company’s registered share capital) in the form of dividends are not allowed and may be made by way of a capital reduction only. Dividends may be paid only from the profits brought forward from the previous business years or if the Company has distributable reserves, each as will be presented on the Company’s audited annual stand-alone balance sheet. The dividend may be determined only after the allocations to reserves required by the law and the articles of association have been deducted. | Under Bermuda law, the board of directors may declare a dividend without shareholder approval, but a company may not declare or pay dividends if there are reasonable grounds for believing that: (i) the company is, or would after the payment be, unable to pay its liabilities as they become due; or (ii) that the realizable value of its assets would thereby be less than its liabilities. Under the Bye-laws, each common share is entitled to dividends if, as and when dividends are declared by our board of directors, subject to any preferred dividend right of the holders of any preference shares. |
Creation and issuance of new shares | ||
All creation of shares require the board of directors to adopt a resolution or resolutions, pursuant to authority expressly vested in the board of directors by the provisions of the company’s certificate of incorporation. | All creation of shares requires a shareholders’ resolution documented by way of a public deed. Authorized shares can be, once created by shareholders’ resolution, issued by the board of directors (subject to fulfillment of the authorization). Conditional shares are created and issued through the exercise of options and conversion rights related to debt instruments issued by the board of directors or such rights issued to employees. | The authorized share capital of a Bermuda company is determined by the company’s shareholders. |
C. | Material contracts |
D. | Exchange controls |
E. | Taxation |
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the business of buying and selling common shares or other securities. The summary is not intended to be, and should not be interpreted as, legal or tax advice to any particular potential shareholder/s, and no representation with respect to the tax consequences to any particular shareholder/s is made.
Switzerland is currently in the process of reforming certain elements of its corporate tax law (Swiss Corporate Tax Reform III, “CTR III”). The current dispatch of CTR III includes proposed changes which may impact the taxation ofCompany. Assuming TRAF will be implemented as planned, Auris Medical Holding AG (including the abolitionwill lose its holding privilege at cantonal/communal level as of the holding taxation at cantonal level). If passed, the new rules are anticipated to enter into force around 2018 / 2019, likely with a 2 year transition period for the cantons to adopt these new rules.
January 1, 2020.
Besides the bilateral tax treaties, Switzerland has entered into an agreement with the European Community providing for measures equivalent to those laid down in Council Directive 2003/48/EC on taxation of savings income in the form of interest payments and the Council Directive 90/435/EWGUnion on the taxationautomatic exchange of parent companiesinformation in tax matters (the “AEOI Agreement”) which provides for, inter alia, full withholding tax exemption of cross-border dividends, interest and subsidiaries of different Member States. This agreement contains in its Article 15 provisions on
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taxation of dividends which apply with respect toroyalties between related entities from EU member states to Switzerland and provides for an exemption of Withholding Tax for companies under certain circumstances.
On January 1, 2013, treaties on final withholding taxes entered into by Switzerland with the European Community and the individual European states came into force (each a “Contracting State”). The treaties require a Swiss paying agent, as defined in the treaties, to levy a flat-rate final withholding tax at rates specified in the treaties on certain capital gains and income items (including dividends), all as defined in the treaties, deriving from assets, including the common shares held in account or deposits with a Swiss paying agent by (i) an individual resident in a Contracting State, or (ii) if certain requirements are met, by a domiciliary company (Sitzgesellschaft), an insurance company in connection with a so-called insurance wrapper (Lebensversicherungsmantel) or other individualsvice versa if the beneficial owner is an individual resident in a Contracting State. Each contracting state has different tax rates on dividends and capital gains for individuals resident and domiciled in onerespective requirements of the European states. The flat-rate tax withheld substitutes the ordinary capital gains tax and income tax on the relevant capital gains and income items in the Contracting State where the individualsArticle 9 AEOI Agreement are tax resident, unless the individuals elect for the flat-rate tax withheld to be treated as if it were a credit allowable against the income tax or, as the case may be, capital gains tax, due for the relevant tax year in the relevant Contracting State. Alternatively, instead of paying the flat-rate tax, such individuals may opt for a disclosure or the relevant capital gains and income items to the tax authorities of the Contracting State where they are tax residents. If Swiss federal withholding tax of 35% has been withheld on dividends, the Swiss paying agent will – to the extent provided in the applicable bilateral treaty for the avoidance of double taxation between Switzerland and the Contracting State – in its own name and on behalf of the relevant shareholder file with the Swiss tax authorities a request for the partial refund of the Swiss federal withholding tax. The Swiss federal withholding tax which is not refundable according to the bilateral tax treaty (residual tax) is credited against the flat-rate final withholding tax.
met.
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business have an aggregate market value of at least CHF 1 million or represent at least 10% of the share capital of the Company or give entitlement to at least 10% of the profits and reserves of the Company, respectively.
Swiss resident corporate taxpayers
Under certain circumstances, the sales proceeds may be recharacterised into taxable investment income (e.g., professional securities dealer, etc.).
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circumstances where residency requirements are satisfied, if the applicable tax treaty were to allocate the right to tax to Switzerland.
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Treaty. U.S. Holders should consult their tax advisers concerning the U.S. federal, state, local and non-U.S. tax consequences of owning and disposing of common shares in their particular circumstances.
dispositions.
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income previously included as a result of the mark-to-market election). If a U.S. Holder makes the election, the holder’sU.S. Holder’s tax basis in the common shares will be adjusted to reflect the income or loss amounts recognized. Any gain recognized on thea sale or other disposition of common shares in a year whenin which we are a PFIC will be treated as ordinary income and any loss will be treated as an ordinary loss (but only to the extent of the net amount of income previously included as a result of the mark to-market election). Distributions paid on common shares will be treated as discussed below under “
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tax advisers regarding the creditability of foreign taxes in their particular circumstances. In lieu of claiming a foreign tax credit, U.S. Holders may, at their election, deduct foreign taxes, including the Swiss withholding tax, in computing their taxable income, subject to generally applicable limitations under U.S. law. An election to deduct foreign taxes instead of claiming foreign tax credits applies to all foreign taxes paid or accrued in the taxable year.
F. | Dividends and paying agents |
G. | Statement by experts |
H. | Documents on display |
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I. | Subsidiary information |
We
We do not hedge our foreign exchange risk.
A. | Debt securities |
B. | Warrants and rights |
C. | Other securities |
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D. | American Depositary Shares |
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A. | Defaults |
B. | Arrears and delinquencies |
E. | Use of Proceeds |
On August 11, 2014, we completed our initial public offering of common shares pursuant to a Registration Statement on Form F-1, as amended (Registration No. 333-197105) that was declared effective on August 5, 2014. Under the registration statement, we sold an aggregate of 10,113,235 common shares, which included 713,235 common shares sold on August 19, 2014 pursuant to an over-allotment option granted to the underwriters. All of these common shares were sold at a price to the public of US$6.00 per share, yielding gross proceeds of $60.7 million or net proceeds of $56.4 million (CHF 51.3 million) after underwriting discounts and commissions. Jefferies LLC and Leerink Partners LLC were joint book-running managers for the initial public offering. We paid the offering expenses in connection with the initial public offering, which were approximately CHF 2.1 million ($2.3 million), and which included SEC registration fees, FINRA filing fees, NASDAQ listing fees and expenses, legal fees and expenses, printing expenses, transfer agent fees and expenses, accounting fees and expenses as well as other miscellaneous fees and expenses, but excluded the underwriting discounts and commissions.
Between the effective date of the Registration Statement and December 31, 2015, we used approximately CHF 30.0 million of the net proceeds to fund research and development expenses for AM-101 and AM-111 and general administrative expenses. None of the net proceeds were used to make payments (other than compensation paid to our executive officers, directors and an affiliate of one of our directors, each as described in this Annual Report), directly or indirectly, to (i) any of our directors, officers or their associates, (ii) any persons owning 10% or more of our common shares or (iii) any of our affiliates. The intended use of the remaining net proceeds has not changed from the information mentioned in the prospectus relating to the Registration Statement.
A. | Disclosure Controls and Procedures |
B. | Management’s Annual Report on Internal Control over Financial Reporting |
C. | Attestation Report of the Registered Public Accounting Firm |
D. | Changes in Internal Control over Financial Reporting |
104
2015 | 2014 | |||||||
Audit Fees | 743 | 870 | ||||||
Total fees | 743 | 870 |
For the year ended December 31, 2013, KPMG AG was the Company’s auditor for the IFRS and statutory accounts.
2018 | 2017 | ||
Audit fees | 228 | 191 | |
Audit-related fees | 147 | 153 | |
Total fees | 375 | 344 |
2015, April 8, 2016, April 13, 2017 and the extraordinary meeting of shareholders on March 12, 2018. On March 13, 2018 following the consummation of the Merger, the successor company implemented the election of Deloitte AG.
issuance of shares and other statutory required audit reports.
We rely on an exemption in connection with our initial public offering pursuant to Rule 10A-3(b)(1)(iv)(A) of the Securities Exchange Act in connection with James I. Healy’s membership on the audit committee.
The NASDAQ listing rules mandated by Rule 10A-3(b) of the Exchange Act require, among other things, that each member of the audit committee be independent. A company listing in connection with its initial public offering may phase in its compliance with the independent committee requirement pursuant to Rule 10A-3(b)(1)(iv)(A) of the Exchange Act. Accordingly, a company listing in connection with its initial public offering is permitted to phase in its compliance with the independent committee requirements as follows: (1) one independent member at the time of listing; (2) a majority of independent members within 90 days of listing; and (3) all independent members within one year of listing.
Immediately after our initial public offering, our audit committee consisted of Oliver Kubli, Alain Munoz and James I. Healy. Mr. Kubli and Mr. Munoz meet the independence standards of NASDAQ Listing Rule 5605(a)(2) and satisfied the criteria for independence set forth in Section 10A(m)(3) of the Exchange Act.
Since April 22, 2015 our audit committee consists of Mr. Modig, Mr. Kubli and Mr. Roberts. Messrs. Modig, Kubli and Roberts meet the independence standards of NASDAQ Listing Rule 5605(a)(2) and satisfied the criteria for independence set forth in Section 10A(m)(3) of the Exchange Act. Messrs. Modig and Kubli qualify as audit committee financial experts according to Regulation S-K Item 407(d)(5).
105
106
Shareholder approval
(a) | The following documents are filed as part of this registration statement: |
Amended and Restated Articles of Association of the Company (incorporated by reference to exhibit 99.1 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on March 14, 2019) |
Form of Memorandum of Continuance | |
Form of Bye-laws of the Auris Medical (Bermuda) | |
Form of Registration Rights Agreement between Auris Medical Holding AG and the shareholders listed therein (incorporated by reference to exhibit 4.1 of the Auris Medical Holding AG registration statement on Form F-1 (Registration no. 333-197105) filed with the Commission on July 21, 2014) |
Warrant Agreement, dated as of March 13, 2018, between Auris Medical Holding AG and Hercules Capital, Inc. (incorporated by reference to exhibit 2.2 of the Auris Medical Holding AG Annual Report on Form 20-F filed with the Commission on March 22, 2018) | |
Registration Rights Agreement, dated as of October 10, 2017 between Auris Medical Holding AG and Lincoln Park Capital Fund, LLC (incorporated by reference to exhibit 10.3 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on October 11, 2017) | |
Purchase Agreement, dated as of May 2, 2018 between Auris Medical Holding AG and Lincoln Park Capital Fund, LLC (incorporated by reference to exhibit 10.1 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on May 2, 2018) | |
Registration Rights Agreement, dated as of May 2, 2018 between Auris Medical Holding AG and Lincoln Park Capital Fund, LLC (incorporated by reference to exhibit 10.2 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on May 2, 2018) | |
Form of Pre-Funded Warrant (incorporated by reference to exhibit 4.6 of the Auris Medical Holding AG registration statement on Form F-1 (Registration no. 333-225676) filed with the Commission on July 12, 2018) | |
Form of Series A Warrant (incorporated by reference to exhibit 4.7 of the Auris Medical Holding AG registration statement on Form F-1 (Registration no. 333-225676) filed with the Commission on July 12, 2018) | |
Form of Series B Warrant (incorporated by reference to exhibit 4.8 of the Auris Medical Holding AG registration statement on Form F-1 (Registration no. 333-225676) filed with the Commission on July 12, 2018) | |
Collaboration and License Agreement, dated October 21, 2003, between Auris Medical AG and Xigen SA (incorporated by reference to exhibit 10.1 of the Auris Medical Holding AG registration statement on Form F-1 (Registration no. 333-197105) filed with the Commission on June 27, 2014) |
Co-Ownership and Exploitation Agreement, dated September 29, 2003, between Auris Medical AG and INSERM (incorporated by reference to exhibit 10.2 of the Auris Medical Holding AG registration statement on Form F-1 (Registration no. 333-197105) filed with the Commission on June 27, 2014) |
107
Form of Indemnification Agreement (incorporated by reference to exhibit |
Stock Option Plan A (incorporated by reference to exhibit 10.11 of the Auris Medical Holding AG registration statement on Form F-1 (Registration no. 333-197105) filed with the Commission on June 27, 2014) |
Stock Option Plan C (incorporated by reference to exhibit 10.12 of the Auris Medical Holding AG registration statement on Form F-1 (Registration no. 333-197105) filed with the Commission on June 27, 2014) | ||
Equity Incentive Plan, as amended (incorporated by reference to exhibit 99.1 to the Auris Medical Holding AG registration statement on Form S-8 (Registration no. 333-217306) filed with the Commission on April 14, 2017) | ||
English language translation of Lease Agreement between Auris Medical AG and PSP Management AG (incorporated by reference to exhibit 4.8 of the Auris Medical Holding AG Annual Report on Form 20-F filed with the Commission on March 14, 2017) |
Controlled Equity OfferingSM Sales Agreement, dated as of June 1, 2016, between Auris Medical Holding AG and Cantor Fitzgerald & Co. (incorporated by reference to exhibit 1.1 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on June 1, 2016) | |
Share Lending Agreement, dated as of June 1, 2016, between Thomas Meyer and Cantor Fitzgerald & Co. (incorporated by reference to exhibit 10.1 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on June 1, 2016) | |
Loan and Security Agreement, dated as of July 19, 2016, between Auris Medical Holding AG, the several banks and other financial institutions or entities from time to time parties to the agreement and Hercules Capital, Inc. (incorporated by reference to exhibit 10.1 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on July 19, 2016) | |
Consent and Waiver, dated as of March 8, 2018, between Auris Medical Holding AG, the several banks and other financial institutions or entities from time to time parties to the agreement and Hercules Capital, Inc. (incorporated by reference to exhibit 4.12 of the Auris Medical Holding AG Annual Report on Form 20-F filed with the Commission on March 22, 2018) | |
Joinder Agreement dated as of March 13, 2018 to the Loan and Security Agreement, dated as of July 19, 2016, between Auris Medical Holding AG, the several banks and other financial institutions or entities from time to time parties to the agreement and Hercules Capital, Inc. (incorporated by reference to exhibit 4.12 of the Auris Medical Holding AG Annual Report on Form 20-F filed with the Commission on March 22, 2018) | |
Share Pledge Agreement, dated July 19, 2016, between Auris Medical Holding AG and Hercules Capital, Inc. (incorporated by reference to exhibit 10.3 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on July 19, 2016) | |
Claims Security Assignment Agreement, dated July 19, 2016, between Auris Medical Holding AG and Hercules Capital, Inc. (incorporated by reference to exhibit 10.4 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on July 19, 2016) | |
Bank Account Claims Security Assignment Agreement, dated July 19, 2016, between Auris Medical Holding AG and Hercules Capital, Inc. (incorporated by reference to exhibit 10.5 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on July 19, 2016) | |
Purchase Agreement, dated as of October 10, 2017 between Auris Medical Holding AG and Lincoln Park Capital Fund, LLC (incorporated by reference to exhibit 10.1 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on October 11, 2017) | |
Purchase Agreement, dated as of October 10, 2017 between Auris Medical Holding AG and Lincoln Park Capital Fund, LLC (incorporated by reference to exhibit 10.2 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on October 11, 2017) | |
Placement Agency Agreement, dated as of January 28, 2018, between Auris Medical Holding AG and Ladenburg Thalmann & Co. Inc. (incorporated by reference to exhibit 1.1 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on January 30, 2018) | |
Securities Purchase Agreement, dated as of January 26, 2018 by and among Auris Medical Holding AG and the investors named therein (incorporated by reference to exhibit 10.1 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on January 30, 2018) | |
Agreement and Plan of Merger, dated as of February 9, 2018 by and among Auris Medical Holding AG and Auris Medical NewCo Holding AG (incorporated by reference to exhibit 99.3 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on February 9, 2018) | |
Share Transfer Agreement, dated as of February 9, 2018 by and between Thomas Meyer and Auris Medical Holding AG (incorporated by reference to exhibit 4.22 of the Auris Medical Holding AG Annual Report on Form 20-F filed with the Commission on March 22, 2018) | |
Sales Agreement, dated as of November 30, 2018, between Auris Medical Holding AG and A.G.P./Alliance Global Partners (incorporated by reference to exhibit 1.1 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on November 30, 2018) | |
List of subsidiaries (incorporated by reference to exhibit 21.1 of the Auris Medical Holding AG registration statement on Form F-1 (Registration no. 333-197105) filed with the Commission on June 27, 2014) |
Certification of Thomas Meyer pursuant to 17 CFR 240.13a-14(a) |
Certification of |
Certification of Thomas Meyer pursuant to 17 CFR 240.13a-14(b) and 18 U.S.C.1350 |
Certification of |
Consent of Deloitte AG | ||
101.INS* | XBRL Instance Document |
101.SCH* | XBRL Taxonomy Extension Schema Document |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document |
101.LAB* | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document |
* | Filed herewith |
† | Confidential treatment requested as to portions of the exhibit. Confidential materials omitted and filed separately with the Securities and Exchange Commission. |
(b) | Financial Statement Schedules |
108
AURIS MEDICAL HOLDING AG | ||||
By: | /s/ Thomas Meyer | |||
Name: | Thomas Meyer | |||
Title: | Chief Executive Officer |
Report of Independent Registered Public Accounting | |
Consolidated Statement of Profit or Loss and Other Comprehensive | |
Consolidated Statement of Financial Position | |
Consolidated Statement of Changes in Equity | |
Consolidated Statement of Cash Flows | |
Notes to the consolidated financial statements |
F-1
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Auris Medical Holding AG and its subsidiaries as of December 31, 2015 and 2014, and the results of its operations, and cash flows for each of the two years in the period ended December 31, 2015, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
/s/ | /s/ | |
Adrian Kaeppeli | ||
Auditor in Charge | ||
Zurich, Switzerland | ||
March 14, 2019 |
Zurich, Switzerland
March 10, 2016
F-2
Report of Independent Registered Public Accounting Firm
The Board of Directors
Auris Medical AG:
We have audited the accompanying consolidated statements of profit or loss and other comprehensive loss, changes in equity and cash flows of Auris Medical AG and subsidiaries (the “Company”) for the year ended December 31, 2013.These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations and the cash flows of Auris Medical AG and subsidiaries for the year ended December 31, 2013, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
KPMG AG
Zurich, Switzerland
March 18, 2014
F-3
AURIS MEDICAL HOLDING AG (formerly Auris Medical AG)
Income / (Loss)
2016
Note | 2015 | 2014 | 2013 | |||||||||||||
Research and development | 16 | -26,536,176 | -17,704,461 | -13,253,638 | ||||||||||||
General and administrative | 17 | -4,341,570 | -4,489,051 | -1,362,211 | ||||||||||||
Operating loss | -30,877,746 | -22,193,512 | -14,615,849 | |||||||||||||
Interest income | 19 | 36,562 | 52,133 | 74,036 | ||||||||||||
Interest expense | 19 | -7,985 | -55,810 | -52,631 | ||||||||||||
Foreign currency exchange gains/(losses), net | 19 | 1,144,106 | 4,012,174 | -104,299 | ||||||||||||
Loss before tax | -29,705,063 | -18,185,015 | -14,698,743 | |||||||||||||
Income tax expense | 20 | – | – | -305,750 | ||||||||||||
Net loss attributable to owners of the Company | -29,705,063 | -18,185,015 | -15,004,493 | |||||||||||||
Other comprehensive loss: | ||||||||||||||||
Items that will never be reclassified to profit or loss* | ||||||||||||||||
Remeasurements of defined benefit liability, net of taxes of CHF 0 | 18 | -53,916 | -1,101,468 | -57,716 | ||||||||||||
Items that are or may be reclassified to profit or loss | �� | |||||||||||||||
Foreign currency translation differences, net of taxes of CHF 0 | -12,712 | -105,104 | 31,720 | |||||||||||||
Other comprehensive loss, net of taxes of CHF 0* | -66,628 | -1,206,572 | -25,996 | |||||||||||||
Total comprehensive loss attributable to owners of the Company | -29,771,691 | -19,391,587 | -15,030,489 | |||||||||||||
Basic and diluted loss per share | 21 | -0.92 | -0.66 | -1.01 |
2017 2016 2016 On March 13, 2018, the Company ("Auris OldCo") merged (the “Merger”) into Auris Medical NewCo Holding AG (“Auris NewCo”), a newly incorporated, wholly-owned Swiss subsidiary following shareholder approval at an extraordinary general meeting of shareholders held on March 12, 2018. Following the Merger, Auris NewCo, the surviving company, had a share capital of CHF 122,347.76, divided into 6,117,388 common shares with a nominal value of CHF 0.02 each. Pursuant to the Merger, the Company’s shareholders received one common share with a nominal value of CHF 0.02 of Auris NewCo for every 10 of the Company's common shares held prior to the Merger, effectively resulting in a “reverse stock split” at a ratio of 10-for-1. Auris NewCo changed its name to “Auris Medical Holding AG” following consummation of the Merger. On March 14, 2018 the common shares of Auris NewCo began trading on the Nasdaq Capital Market under the trading symbol “EARS.” 13, 2019. Income tax gain reflects the reassessment of deferred tax assets and liabilities booked in the 2018 fiscal year. Foreign operations Average exchange rates for the year for the most significant foreign Property and equipment Note 2018 2017 2016 Research and development 16 (6,689,589 ) (19,210,842 ) (24,776,763 ) General and administrative 17 (4,264,534 ) (5,150,409 ) (5,446,512 ) Operating loss (10,954,123 ) (24,361,251 ) (30,223,275 ) Interest income 19 — 53,570 67,565 Interest expense 19 (1,070,177 ) (1,640,394 ) (828,547 ) Foreign currency exchange loss, net (139,870 ) (824,592 ) (100,097 ) Revaluation gain from derivative financial instruments 19, 24, 25 1,350,071 3,372,186 291,048 Transaction costs (520,125 ) (1,026,766 ) — Loss before tax (11,334,224 ) (24,427,247 ) (30,793,306 ) Income tax gain/(loss) 20 (162,177 ) 17,773 131,055 Net loss attributable to owners of the Company (11,496,401 ) (24,409,474 ) (30,662,251 ) Other comprehensive income/(loss): Items that will never be reclassified to profit or loss Remeasurements of defined benefit liability, net of taxes of CHF 0 18 1,277,192 271,980 (394,102 ) Items that are or may be reclassified to profit or loss Foreign currency translation differences, net of taxes of CHF 0 (10,964 ) 50,497 (19,723 ) Other comprehensive income/(loss), net of taxes of CHF 0 1,266,228 322,477 (413,825 ) Total comprehensive loss attributable to owners of the Company (10,230,173 ) (24,086,997 ) (31,076,076 ) Basic and diluted loss per share 21 (0.72 ) (5.58 ) (8.93 ) F-420152018 and 2014 Note December 31,
2015 December 31,
2014ASSETS Non-current assets Property and equipment 7 222,570 235,427 Intangible assets 8 1,482,520 1,482,520 Deferred tax asset 20 — 32,761 Other non-current receivables 38,066 — Total non-current assets 1,743,156 1,750,708 Current assets Other receivables 9 650,716 542,538 Prepayments 10 181,044 265,170 Cash and cash equivalents 11 50,237,300 56,934,325 Total current assets 51,069,060 57,742,033 Total assets 52,812,216 59,492,741 EQUITY AND LIABILITIES Equity Share capital 12 13,721,556 11,604,156 Share premium 112,662,910 93,861,171 Foreign currency translation reserve -63,821 -51,108 Accumulated deficit -81,578,733 -52,131,426 Total shareholders’ equity attributable to owners of the Company 44,741,912 53,282,793 Non-current liabilities Employee benefits 18 1,575,833 1,410,598 Deferred tax liabilities 20 327,637 360,398 Total non-current liabilities 1,903,470 1,770,996 Current liabilities Trade and other payables 14 1,205,522 3,234,384 Accrued expenses 15 4,961,312 1,204,568 Total current liabilities 6,166,834 4,438,952 Total liabilities 8,070,304 6,209,948 Total equity and liabilities 52,812,216 59,492,741 Note December 31, 2018 December 31, 2017 ASSETS Non-current assets Property and equipment 7 33,895 252,899 Intangible assets 8 3,535,240 1,629,100 Derivative financial instruments 226,865 — Other non-current receivables 16,001 76,710 Total non-current assets 3,812,001 1,958,709 Current assets Other receivables 9 320,374 241,281 Prepayments 10 351,283 652,913 Cash and cash equivalents 11 5,393,207 14,973,369 Total current assets 6,064,864 15,867,563 Total assets 9,876,865 17,826,272 EQUITY AND LIABILITIES Equity Share capital 12 710,336 19,349,556 Share premium 149,286,723 114,648,228 Foreign currency translation reserve (44,011 ) (33,047 ) Accumulated deficit (146,303,398 ) (136,126,946 ) Total shareholders' (deficit)/equity attributable to owners of the Company 3,649,650 (2,162,209 ) Non-current liabilities Loan 24 — 5,584,297 Derivative financial instruments 24, 25 675,328 1,836,763 Employee benefit liability 18 648,287 1,962,970 Deferred tax liabilities 20 340,986 178,809 Total non-current liabilities 1,664,601 9,562,839 Current liabilities Loan 24 1,435,400 4,542,109 Trade and other payables 14 1,836,335 1,200,820 Accrued expenses 15 1,290,879 4,682,713 Total current liabilities 4,562,614 10,425,642 Total liabilities 6,227,215 19,988,481 Total equity and liabilities 9,876,865 17,826,272 F-5For the Years Ended2015, 2014,2018, 2017 and 2013 Attributable to Owners of the Company Note Share Capital Share Premium Foreign Currency Translation Reserve Accumulated Deficit Total Equity As of January 1, 2013 4,632,580 13,341,942 22,275 -18,240,831 -244,034 Total comprehensive loss Net loss – – – -15,004,493 -15,004,493 Other comprehensive income (loss) – – 31,720 -57,716 -25,996 Total comprehensive loss – – 31,720 -15,062,209 -15,030,489 Transactions with owners of the Company Issue of ordinary shares 1,854,550 22,625,510 – – 24,480,060 Share issuance costs – -359,242 – – -359,242 Convertible loans - equity component – – – 99,038 99,038 Convertible loans - deferred tax – – – -21,886 -21,886 Share based payments 110,198 110,198 Balance at December 31, 2013 6,487,130 35,608,210 53,995 -33,115,689 9,033,646 As of January 1, 2014 6,487,130 35,608,210 53,995 -33,115,689 9,033,646 Total comprehensive loss Net loss – – – -18,185,015 -18,185,015 Other comprehensive loss – – -105,104 -1,101,468 -1,206,572 Total comprehensive loss – – -105,104 -19,286,483 -19,391,587 Transactions with owners of the Company Issue of ordinary shares associated with Initial Public Offering (“IPO”) 12 4,045,294 47,261,446 – – 51,306,740 Issuance costs associated with IPO 12 – -1,815,056 – – -1,815,056 Conversion of convertible loan 1,043,180 12,717,655 – – 13,760,835 Share issuance costs – -136,697 – – -136,697 Share based payments 13 – – – 270,747 270,747 Share options exercised 13 28,552 225,613 – – 254,165 Balance at December 31, 2014 11,604,156 93,861,171 -51,109 -52,131,426 53,282,793 As of January 1, 2015 11,604,156 93,861,171 -51,109 -52,131,426 53,282,793 Total comprehensive loss Net loss – – – -29,705,063 -29,705,063 Other comprehensive loss – – -12,712 -53,916 -66,628 Total comprehensive loss – – -12,712 -29,758,979 -29,771,691 Transactions with owners of the Company Capital increase from follow-on offering 12 2,110,000 19,604,877 – – 21,714,877 Transaction costs – -643,796 – – -643,796 Share issuance costs – -211,142 – – -211,142 Share based payments 13 – – – 311,671 311,671 Share options exercised 13 7,400 51,800 – – 59,200 Balance at December 31, 2015 13,721,556 112,662,910 -63,821 -81,578,733 44,741,912 Note As of January 1, 2016 13,721,556 112,662,910 (63,821 ) (81,578,733 ) 44,741,912 Total comprehensive loss Net loss — — — (30,662,251 ) (30,662,251 ) Other comprehensive loss — — (19,723 ) (394,102 ) (413,825 ) Total comprehensive loss — — (19,723 ) (31,056,353 ) (31,076,076 ) Transactions with owners of the Company Issue of bonus shares 13 10,325 177,767 — — 188,092 Share issuance costs 13 — (1,862 ) — — (1,862 ) Share based payments 13 — — — 290,783 290,783 Balance at December 31, 2016 13,731,881 112,838,815 (83,544 ) (112,344,303 ) 14,142,849 As of January 1, 2017 13,731,881 112,838,815 (83,544 ) (112,344,303 ) 14,142,849 Total comprehensive loss Net loss — — — (24,409,474 ) (24,409,474 ) Other comprehensive income — — 50,497 271,980 322,477 Total comprehensive income / (loss) — — 50,497 (24,137,494 ) (24,086,997 ) Transactions with owners of the Company Capital increase from follow-on offering 5,617,675 2,330,928 — — 7,948,603 Transaction costs — (521,515 ) — — (521,515 ) Share based payments 13 — — — 354,851 354,851 Balance at December 31, 2017 19,349,556 114,648,228 (33,047 ) (136,126,946 ) (2,162,209 ) As of January 1, 2018 19,349,556 114,648,228 (33,047 ) (136,126,946 ) (2,162,209 ) Total comprehensive loss Net loss — — — (11,496,401 ) (11,496,401 ) Other comprehensive income / (loss) — — (10,964 ) 1,277,192 1,266,228 Total comprehensive loss — — (10,964 ) (10,219,209 ) (10,230,173 ) Transactions with owners of the Company Reorganization of group structure (24,347,208 ) 24,347,208 — — — Capital increase / Exercise of warrants 5,707,988 11,550,874 — — 17,258,862 Transaction costs — (1,259,587 ) — — (1,259,587 ) Share based payments 13 — — — 42,757 42,757 Balance at December 31, 2018 710,336 149,286,723 (44,011 ) (146,303,398 ) 3,649,650 F-62015, 20142018, 2017, and 2013 Note 2015 2014 2013 Cash flows from operating activities Net loss -29,705,063 -18,185,015 -15,004,493 Adjustments for: Depreciation 16,17 92,777 73,984 37,517 Unrealized foreign currency exchange (gains)/losses, net -1,167,227 -4,066,452 32,076 Net interest income 19 -36,390 -2,498 -23,859 Share option costs 13 311,671 270,747 110,198 Employee benefits 111,321 -19,211 27,980 Income tax expense 20 – – 305,750 -30,392,911 -21,928,445 -14,514,831 Changes in: Other receivables -146,244 -17,634 -288,765 Prepayments 84,126 -82,033 -98,812 Trade and other payables -2,028,862 2,279,626 530,080 Accrued expenses 3,756,744 432,449 328,719 Cash used in operating activities -28,727,147 -19,316,037 -14,043,609 Cash flows from investing activities Purchase of property and equipment 7 -79,920 -113,496 -108,936 Purchase of intangibles – -1,125,000 – Interest received 19 36,562 52,133 74,036 Net cash used in investing activities -43,358 -1,186,363 -34,900 Cash flows from financing activities Proceeds from share capital increase – – 24,120,818 Proceeds from exercise of options 12 59,200 254,165 – Share issuance costs -211,142 -136,697 – Proceeds from issue of convertible loans – – 13,769,976 Proceeds from follow-on offering, net of underwriting fees and follow-on offering costs 12 21,071,081 – – Proceeds from IPO, net of underwriting fees and IPO costs 12 – 50,037,847 – Share issuance costs IPO 12 – -546,163 – Interest paid 19 –172 – -9,915 Net cash from financing activities 20,918,967 49,609,152 37,880,879 Net (decrease)/increase in cash and cash equivalents -7,851,538 29,106,752 23,802,370 Cash and cash equivalents at beginning of the period 56,934,325 23,865,842 63,967 Net effect of currency translation on cash 1,154,513 3,961,731 -495 Cash and cash equivalents at end of the period 50,237,300 56,934,325 23,865,842 Note 2018 2017 2016 Cash flows from operating activities Net loss (11,496,401 ) (24,409,474 ) (30,662,251 ) Adjustments for: Depreciation 16, 17 72,713 122,784 97,600 Unrealized foreign currency exchange loss, net 211,214 776,165 99,091 Net interest expense 19 1,052,787 1,568,781 748,840 Loss on disposal of property and equipment 78,133 — — Share based payments 13 27,730 354,851 290,783 Transaction costs 520,125 1,026,766 — Employee benefits (37,491 ) 142,514 122,501 Revaluation gain derivative financial instruments 24, 25 (1,350,071 ) (3,372,186 ) (291,048 ) Income tax gain 20 162,177 (17,773 ) (131,055 ) (10,759,084 ) (23,807,572 ) (29,725,539 ) Changes in: Other receivables (18,390 ) 93,328 277,483 Prepayments 301,628 299,684 (771,551 ) Trade and other payables 635,516 (637,177 ) 632,474 Accrued expenses (3,391,834 ) (224,028 ) 133,522 Net cash used in operating activities (13,232,164 ) (24,275,765 ) (29,453,611 ) Cash flows from investing activities Purchase of property and equipment 7 — (6,389 ) (244,324 ) Purchase of intangibles 8 (1,891,115 ) (146,580 ) — Proceeds from disposals of property and equipment 68,160 — — Interest received 19 — 53,570 67,553 Net cash from / (used) in investing activities (1,822,955 ) (99,399 ) (176,771 ) Cash flows from financing activities Share issuance costs 12 — — (1,862 ) Proceeds from issue of loan with warrant 24 — — 11,986,671 Proceeds from follow-on offering 12, 25 17,447,499 13,039,066 — Transaction costs 12 (2,006,577 ) (1,548,281 ) — Repayment of loan (9,272,328 ) (2,087,076 ) — Interest paid 19, 24 (435,993 ) (1,182,369 ) (546,170 ) Net cash from financing activities 5,732,601 8,221,340 11,438,639 Net decrease in cash and cash equivalents (9,322,518 ) (16,153,824 ) (18,191,743 ) Cash and cash equivalents at beginning of the period 14,973,369 32,442,222 50,237,300 Net effect of currency translation on cash (257,644 ) (1,315,029 ) 396,665 Cash and cash equivalents at end of the period 5,393,207 14,973,369 32,442,222 F-7Notes to the Consolidated Financial Statementsas of December 31, 2015, and 2014and for the Years Ended December 31, 2015, 2014 and 2013 (in CHF)joint-stock companycorporation (Aktiengesellschaft) organized in accordance with Swiss law and domiciled in Switzerland. The Company’s registered address is Bahnhofstrasse 21, 6300 Zug. These consolidated financial statements comprise the Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”). The Company is the ultimate parent of the following Group entities:·Auris Medical AG, Basel, Switzerland (100%) with a nominal share capital of CHF 2,500,000·Otolanum AG, Zug, Switzerland (100%) with a nominal share capital of CHF 100,000·Auris Medical Inc., Chicago, United States (100%) with a nominal share capital of USD 15,000·Auris Medical Ltd., Dublin, Ireland (100%) with a nominal share capital of EUR 100wethe Company changed ourits name from Auris Medical AG to Auris Medical Holding AG. On May 21, 2014 the domicile of Auris Medical Holding AG was transferred from Basel to Zug.10, 2016.assets.liabilities. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. The principal accounting policies adopted are set out below.F-8TheCHF 305,206, the Group has not recorded any deferred tax assets in relation to these tax losses. The key factors which have influenced management in arriving at this evaluation are the fact that the business is still in a development phase and the Group has not yet a history of making profits. Should management’s assessment of the likelihood of future taxable profits change, a deferred tax asset will be recorded.GenerallyFor AM-101, AM-111 and AM-201 clinical development expenditures are not capitalized until the Group obtains regulatory approval (i.e. approval to commercially use the product), as this is considered to be essentially the first point in time where it becomes probable that future revenues can be generated. For the Group's intranasal betahistine program for the treatment of vertigo (AM-125), however, the development program of intranasal betahistine is primarily focused on the delivery route and formulation and not the drug itself (already an approved generic) and to demonstrate higher bioavailability through intranasal delivery. Given the current stagenature of the Group’s development projects, noapproach and the fact that there is an existing market in which oral betahistine for the treatment of vertigo has been approved, direct development expenditures have yet been capitalized. TheIn addition, the Group has capitalized certain milestone payments with regard to license payments.disorder.and vestibular disorders. Financial information is only available for the Group as a whole. Therefore, management considers there is only one operating segment under the requirements of IFRS 8, Operating Segments.F-9Foreigncurrencies:currencies relative to CHF:Currency Geographical area Reporting
entities December 31,
2015 December 31,
2014 December 31,
2013 Geographical area December 31, 2018 December 31, 2017 December 31, 2016 CHF Swiss Franc Switzerland 3/1* 1.0000 1.0000 1.0000 Swiss Franc Switzerland 3 1.0000 1.0000 1.0000 USD Dollar United States 1 1.0014 0.9895 0.8894 Dollar United States 1 0.9827 0.9725 1.0196 EUR Euro Europe 1 1.0875 1.2027 1.2255 Europe Europe 1 1.1283 1.1713 1.0723 * There were three operating entities in 2015 and 2014 and there was one operating entity in 2013.currencies:Currency Geographical area Reporting
entities 2015 2014 2013 Geographical area 2018 2017 2016 CHF Swiss Franc Switzerland 3/1* 1.0000 1.0000 1.0000 Swiss Franc Switzerland 3 1.0000 1.0000 1.0000 USD Dollar United States 1 0.9613 0.9150 0.9391 Dollar United States 1 0.9768 0.9849 0.9855 EUR Euro Europe 1 1.0659 1.2144 1.2414 Europe Europe 1 1.1573 1.1116 1.0901 * There were three operating entities in 2015 and 2014 and one operating entity in 2013. Production equipment 5 years Office furniture and electronic data processing equipment (“EDP”) 3 years Leasehold improvements 5 years
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.
F-10
Cost and accumulated depreciation related to assets retired or otherwise disposed are removed from the accounts at the time of retirement or disposal and any resulting gain or loss is included in profit or loss in the period of disposition.
intellectual property and data rights
The date of initial application (i.e. the date on which the Company classifies non-derivativehas assessed its existing financial assets and financial liabilities as other liabilities.
in terms of IFRS 9 requirements) is January 1, 2018. Accordingly, the Company has applied the requirements of IFRS 9 to instruments that continue to be recognized at January 1, 2018 whereas for the year ended December 31, 2017 IAS 39 was applied.
F-11
The Group derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred, or it neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control over the transferred asset. Any interest in such derecognized financial assets that is created or retained by the Group is recognized as a separate asset or liability.
receivable
Convertible loans
The component parts of convertible loans issued by the Company are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortized cost basis using the effective interest method until extinguished upon conversion or at the instrument’s maturity date. The equity component is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognized and included in equity, net of income tax effects, and is not subsequently remeasured.
F-12
Available-for-sale
Impairment losses on available-for-sale financial assets are recognized by reclassifyinginstrument (asset) is accounted as the losses accumulatedcost to obtain the rights from a third party to issue shares under the purchase agreement and changes in the fair value reserve toare shown as profit or loss. The fair value calculation of the derivative financial instrument (asset) is adjusted on the utilization of the asset based on total dollar amount reclassifiedof the purchase agreement.
Other Comprehensive Income.
F-13
The Group’s net obligation in respect of defined benefit plans is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.
The fair value of our shares is determined by our Management and our Board of Directors, and takes into account numerous factors to determine a best estimate of the fair value of our common shares as of each grant date.
In our historic financing rounds we have mainly relied on the prior sale of stock method where the Company and new investors negotiate the Company’s valuation at arm’s length. Typical considerations in this method may include the type and amount of equity sold, the estimated volatility, the estimated time to liquidity, the relationship of the parties involved, the timing compared to the common shares valuation date and the financial condition and structure of the Company at the time of the sale.
Company's stock and the risk free rate.
F-14
settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.
Group
Annual Improvements to IFRSs 2010-2012 Cycle (July 2014)
Annual Improvements to IFRSs 2011-2013 Cycle (July 2014)
Amendments to IAS 19 (July 2014) Employee contributions
IFRS 9 | Financial instruments |
IFRS 15 | Revenue from Contracts with Customers and the related clarifications |
IFRS 2 - Amendment | Classification and Measurement of Share-based Payment Transaction |
IFRIC 22 | Foreign Currency Transactions and Advance Consideration |
Standard/Interpretation | Impact | Effective date | Planned application by the Group | |||
New standards, interpretations or amendments | ||||||
IFRS | 1) | January 1, | FY | |||
IFRIC 23 | Uncertainty over Income Tax Positions | 2) | January 1, 2019 | FY 2019 | ||
IFRS | January 1, | FY | ||||
IAS | January 1, | FY | ||||
IAS | January 1, | FY | ||||
Various | Annual Improvements to | |||||
IFRS | 2) | |||||
January 1, 2019 | FY 2019 | |||||
Various | Amendments to References to Conceptual Framework in IFRS Standards. | 2) | January 1, 2020 | FY 2020 | ||
IFRS 17 | Insurance contracts | 2) | January 1, 2021 | FY 2021 |
1) |
2) |
December 31, 2015 | December 31, 2014 | |||||||
Financial assets | ||||||||
Available for sale | ||||||||
Current financial assets | — | — | ||||||
Loans and receivables | ||||||||
Cash and cash equivalents | 50,237,300 | 56,934,325 | ||||||
Other receivables | 592,792 | 451,355 | ||||||
Total financial assets | 50,830,092 | 57,385,680 | ||||||
Financial liabilities | ||||||||
At amortized cost | ||||||||
Trade and other accounts payable | 1,205,522 | 3,234,383 | ||||||
Accrued expenses | 4,917,074 | 1,162,988 | ||||||
Total financial liabilities | 6,122,596 | 4,397,371 | ||||||
F-15
Financial assets | |||||
December 31, 2018 | December 31, 2017 | ||||
Cash and cash equivalents | 5,393,207 | 14,973,369 | |||
Loans and receivables | |||||
Other receivables | 80,040 | 79,840 | |||
Total financial assets | 5,473,247 | 15,053,209 | |||
Financial liabilities | |||||
At amortized cost | |||||
Trade and other payables | 1,836,335 | 1,200,820 | |||
Accrued expenses | 1,290,879 | 4,395,609 | |||
Loan | 1,435,400 | 10,126,406 | |||
At fair value through profit and loss | |||||
Derivative financial instruments | 675,328 | 1,836,763 | |||
Total financial liabilities | 5,237,942 | 17,559,598 | |||
Fair values
In respect of the Company’s loan which has floating rates of interest, the fair value approximates carrying value.
Carrying amount | Less than 3 months | Between 3 months and 2 years | 2 years and later | Total | ||||||||||||||||
December 31, 2015 | ||||||||||||||||||||
Trade and other accounts payable | 1,205,522 | 1,205,522 | — | — | 1,205,522 | |||||||||||||||
Accrued expenses | 4,917,074 | 4,780,737 | 136,337 | — | 4,917,074 | |||||||||||||||
Total | 6,122,596 | 5,986,259 | 136,337 | — | 6,122,596 | |||||||||||||||
Carrying amount | Less than 3 months | Between 3 months and 2 years | 2 years and later | Total | ||||||||||
December 31, 2018 | ||||||||||||||
Trade and other payables | 1,836,335 | 1,836,335 | — | — | 1,836,335 | |||||||||
Accrued expenses | 1,290,879 | 1,290,879 | — | — | 1,290,879 | |||||||||
Loan and borrowings | 1,435,400 | 1,435,400 | — | — | 1,435,400 | |||||||||
Derivative financial instruments | 675,328 | — | 215,572 | 459,756 | 675,328 | |||||||||
Total | 5,237,942 | 4,562,614 | 215,572 | 459,756 | 5,237,942 |
Carrying amount | Less than 3 months | Between 3 months and 2 years | 2 years and later | Total | ||||||||||||||||
December 31, 2014 | ||||||||||||||||||||
Trade and other accounts payable | 3,234,383 | 3,234,383 | — | — | 3,234,383 | |||||||||||||||
Accrued expenses | 1,162,988 | 1,162,988 | — | — | 1,162,988 | |||||||||||||||
Total | 4,397,371 | 4,397,371 | — | — | 4,397,371 |
including interest bearing deposits. Total December 31, 2017 Trade and other payables 1,200,820 1,200,820 — — 1,200,820 Accrued expenses 4,395,609 4,395,609 — — 4,395,609 Loan and borrowings 10,126,406 1,349,531 9,446,716 1,166,225 11,962,472 Derivative financial instruments 1,836,763 — — 1,836,763 1,836,763 Total 17,559,598 6,945,960 9,446,716 3,002,988 19,395,664 Financial
assets / liabilitiesFair values as at Fair value
hierarchyValuation technique(s) and key input(s) December 31,
2018December 31,
2017Derivative financial liabilities Liability
675,328 Liability
1,836,763 Level 2 Black-Scholes option pricing model
The share price is determined by Company's NASDAQ quoted-price. The strike price and maturity are coming from the contract. The volatility assumption is driven by Company's historic quoted share price and the risk free rate is estimated based on observable yield curves at the end of each reporting period.Derivative financial asset Asset
226,865 Asset
- Level 3 Non-cash changes 01.01.2018
Cash
Flows 1) Fair
value
revaluation
changes 2) 31.12.2018 Derivative
financial
instrument1,836,763 188,636 (1,350,071 ) — 675,328 Loans 10,126,406 (9,272,328 ) — 581,322 1,435,400 Total 11,963,169 (9,083,692 ) (1,350,071 ) 581,322 2,110,728 Non-cash changes 01.01.2017
Cash
Flows 1) Fair
value
revaluation
changes 2) 31.12.2017 Derivative
financial
instrument117,132 5,091,817 (3,372,186 ) — 1,836,763 Loans 12,364,204 (2,087,076 ) — (150,722 ) 10,126,406 Total 12,481,336 3,004,741 (3,372,186 ) (150,722 ) 11,963,169
2) IRR-Correction and FX-DifferenceF-16 For banks and financial institutions, only independently rated parties with a minimum rating of “A” are accepted. Other receivables were current as of December 31, 20152018 and December 31, 2014,2017, not impaired and included only well-known counterparties. December 31,
2015 December 31,
2014December 31, 2018 December 31, 2017 Financial assets Cash and cash equivalents 50,237,300 56,934,325 5,393,207 14,973,369 Other receivables 592,792 451,355 80,040 79,840 Total 50,830,092 57,385,680 5,473,247 15,053,209
As of December 31, 20152018 and December 31, 20142017 other receivables consisted of advance payments to suppliers, other non-current receivables from third party and deposits for rent.
2015 | 2014 | |||||||||||||||
in CHF | USD | EUR | USD | EUR | ||||||||||||
Prepayments | 179,674 | — | 183,779 | 11,489 | ||||||||||||
Other receivables | 158,625 | 286,313 | 145,636 | 267,533 | ||||||||||||
Cash and cash equivalents | 44,643,328 | 193,366 | 46,433,371 | 1,949,684 | ||||||||||||
Trade and other accounts payable | -284,620 | -189,393 | -1,686,733 | -1,238,171 | ||||||||||||
Accrued expenses | -2,046,276 | -2,638,638 | -354,397 | -590,001 | ||||||||||||
Net statement of financial position exposure - asset/(liability) | 42,650,731 | -2,348,352 | 44,721,656 | 400,534 | ||||||||||||
2018 | 2017 | ||||||||||
in CHF | USD | EUR | USD | EUR | |||||||
Cash and cash equivalents | 3,618,778 | 208,507 | 13,901,698 | 116,942 | |||||||
Trade and other payables | (1,646,910 | ) | (76,184 | ) | (365,999 | ) | (426,050 | ) | |||
Accrued expenses | (82,847 | ) | (370,145 | ) | (1,750,752 | ) | (1,692,946 | ) | |||
Loan and borrowings | (1,435,400 | ) | — | (10,126,406 | ) | — | |||||
Derivative financial instruments | (675,328 | ) | — | (1,836,763 | ) | — | |||||
Net statement of financial position exposure -asset/(liability) | (221,707 | ) | (237,822 | ) | (178,222 | ) | (2,002,054 | ) | |||
As atof December 31, 2015,2018, a 5% increase or decrease in the USD/CHF exchange rate with all other variables held constant would have resulted in a CHF 2,135,522 (2014:10,886 (2017: CHF 2,212,604)8,662) increase or decrease in the net result. Also, a 5% increase or decrease in the EUR/CHF exchange rate with all other variables held constant would have resulted in a CHF 127,692 (2014:13,413 (2017: CHF 24,086)117,320) increase or decrease in the net result.
In
The only variable interest-bearing financial asset of the Group is cash at banks. As atof December 31, 20152018 an increase or decrease in interest rates on financial obligations by 50 basis points with all other variables held constant would have resulted in a CHF 275,256 (2014: CHF 169,455)3,721 (2017: 62,500) increase or decrease in the net result.
F-17
entity level, on an interim basis as well as annually. From time to time the Company may take appropriate measures or propose capital increases to ensure the necessary capital remains intact.
December 31, 2015 | December 31, 2014 | December 31, 2018 | December 31, 2017 | ||||||||||
Switzerland | 1,743,156 | 1,750,708 | 3,812,001 | 1,958,709 | |||||||||
Total | 1,743,156 | 1,750,708 | 3,812,001 | 1,958,709 | |||||||||
Production equipment | Office furniture and EDP | Leasehold improvements | Total | |||||||||||||
At cost | ||||||||||||||||
As at January 1, 2014 | 166,750 | 132,045 | 17,132 | 315,927 | ||||||||||||
Additions | 63,499 | 49,997 | — | 113,496 | ||||||||||||
As at December 31, 2014 | 230,249 | 182,042 | 17,132 | 429,423 | ||||||||||||
Additions | 53,250 | 26,670 | — | 79,920 | ||||||||||||
As at December 31, 2015 | 283,499 | 208,712 | 17,132 | 509,343 | ||||||||||||
Accumulated depreciation | ||||||||||||||||
As at January 1, 2014 | -31,362 | -86,288 | -2,362 | -120,012 | ||||||||||||
Charge for the year | -42,230 | -28,251 | -3,503 | -73,984 | ||||||||||||
As at December 31, 2014 | -73,592 | -114,539 | -5,865 | -193,996 | ||||||||||||
Charge for the year | -54,037 | -35,334 | -3,406 | -92,777 | ||||||||||||
As at December 31, 2015 | -127,629 | -149,873 | -9,271 | -286,773 | ||||||||||||
Net book value | ||||||||||||||||
As at December 31, 2014 | 156,657 | 67,502 | 11,267 | 235,427 | ||||||||||||
As at December 31, 2015 | 155,870 | 58,839 | 7,861 | 222,570 | ||||||||||||
Production equipment | Office furniture and EDP | Leasehold improvements | Total | ||||||||
At cost | |||||||||||
As of January 1, 2017 | 283,499 | 233,706 | 236,462 | 753,667 | |||||||
Additions | 6,389 | — | — | 6,389 | |||||||
As of December 31, 2017 | 289,888 | 233,706 | 236,462 | 760,056 | |||||||
Additions | — | — | — | — | |||||||
Disposals | — | — | (236,462 | ) | (236,462 | ) | |||||
As of December 31, 2018 | 289,888 | 233,706 | — | 523,594 | |||||||
Accumulated depreciation | |||||||||||
As of January 1, 2017 | (184,329 | ) | (183,710 | ) | (16,334 | ) | (384,373 | ) | |||
Charge for the year | (53,594 | ) | (21,918 | ) | (47,272 | ) | (122,784 | ) | |||
As of December 31, 2017 | (237,923 | ) | (205,628 | ) | (63,606 | ) | (507,157 | ) | |||
Charge for the year | (32,485 | ) | (13,663 | ) | (26,565 | ) | (72,713 | ) | |||
Disposals | — | — | 90,171 | 90,171 | |||||||
As of December 31, 2018 | (270,408 | ) | (219,291 | ) | — | (489,699 | ) | ||||
Net book value | |||||||||||
As of December 31, 2017 | 51,965 | 28,078 | 172,856 | 252,899 | |||||||
As of December 31, 2018 | 19,480 | 14,415 | — | 33,895 |
8. Intangible assets
F-18
Licenses | IP & Data rights | Internally generated | Total | |||||
At cost | ||||||||
As of January 1, 2017 | 1,482,520 | — | — | 1,482,520 | ||||
As of December 31, 2017 | 1,482,520 | 146,580 | — | 1,629,100 | ||||
As of December 31, 2018 | 1,482,520 | 193,989 | 1,858,731 | 3,535,240 | ||||
Accumulated amortization and impairment losses | ||||||||
As of December 31, 2017 | — | — | — | — | ||||
As of December 31, 2018 | — | — | — | — | ||||
Net book value | ||||||||
As of December 31, 2017 | 1,482,520 | 146,580 | — | 1,629,100 | ||||
As of December 31, 2018 | 1,482,520 | 193,989 | 1,858,731 | 3,535,240 |
2017.
December 31, 2015 | December 31, 2014 | ||||||||||||
Advance payments to suppliers | 465,624 | 413,169 | |||||||||||
December 31, 2018 | December 31, 2017 | ||||||||||||
Value added tax receivable | 82,468 | 74,065 | 96,853 | 63,452 | |||||||||
Withholding tax receivable | 13,522 | 17,118 | 18,526 | 18,115 | |||||||||
Deposit for rent | — | 38,066 | |||||||||||
Deposit credit cards | 80,040 | 79,840 | |||||||||||
Other | 89,102 | 120 | 124,955 | 79,874 | |||||||||
Total other receivables | 650,716 | 542,538 | 320,374 | 241,281 | |||||||||
Other receivables were not considered impaired in the years under review.
December 31, 2015 | December 31, 2014 | |||||||
Clinical projects and related activities | — | 85,299 | ||||||
Insurance | 179,674 | 179,871 | ||||||
Other | 1,370 | — | ||||||
Total prepayments | 181,044 | 265,170 | ||||||
December 31, 2018 | December 31, 2017 | ||||
Advance payments to supplier | 212,207 | 442,828 | |||
Insurance | 139,076 | 200,246 | |||
Other | — | 9,839 | |||
Total prepayments | 351,283 | 652,913 | |||
December 31, 2014 | December 31, 2014 | December 31, 2018 | December 31, 2017 | ||||||||||
Cash in bank accounts | 50,235,869 | 56,932,993 | 5,392,599 | 14,972,761 | |||||||||
Petty cash | 1,431 | 1,332 | |||||||||||
Cash on hand | 608 | 608 | |||||||||||
Total cash and cash equivalents | 50,237,300 | 56,934,325 | 5,393,207 | 14,973,369 | |||||||||
December 31, 2015 | December 31, 2014 | |||||||||||||||
Number | CHF | Number | CHF | |||||||||||||
Common shares with a nominal value of CHF 0.40 each | 34,303,891 | 13,721,556 | 29,010,391 | 11,604,156 | ||||||||||||
Total | 34,303,891 | 13,721,556 | 29,010,391 | 11,604,156 | ||||||||||||
F-19
December 31, 2018 | December 31, 2017 | ||||||||||
Number | CHF | Number | CHF | ||||||||
Common shares with a nominal value of CHF 0.40 each | — | — | 48,373,890 | 19,349,556 | |||||||
Common shares with a nominal value of CHF 0.02 each | 35,516,785 | 710,336 | — | — | |||||||
Total | 35,516,785 | 710,336 | 48,373,890 | 19,349,556 | |||||||
Common Shares (Number) | |||||
2018 | 2017 | ||||
As of January 1 | 48,373,890 | 34,329,704 | |||
Common shares issued for the follow-on offering with a | 12,800,000 | 14,044,186 | |||
nominal value of CHF 0.40 each | |||||
Adjustment during the Merger: | |||||
Issuance of Auris NewCo Shares | 6,117,388 | — | |||
Cancellation of Auris OldCo Shares | (61,173,890 | ) | — | ||
Common shares issued for capital increase with a nominal value of CHF 0.02 each | 29,399,397 | — | |||
Total, as of December 31 | 35,516,785 | 48,373,890 | |||
Common Shares (Number) | Preferred Shares (Number) | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
As of January 1 | 29,010,391 | 72,600 | — | 16,145,225 | ||||||||||||
Common shares issued for stock options exercises with a nominal value of CHF 0.40 each | 18,500 | 71,381 | — | — | ||||||||||||
Preferred shares “C” issued for conversion of convertible loans with a nominal value of CHF 0.40 each | — | — | — | 2,607,950 | ||||||||||||
Common shares issued for the IPO with a nominal value of CHF 0.40 each | — | 10,113,235 | — | — | ||||||||||||
Common shares resulting from conversion of Preferred Shares at the time of the IPO with a nominal value of CHF 0.40 each | — | 18,753,175 | — | -18,753,175 | ||||||||||||
Common shares issued for the follow-on offering with a nominal value of CHF 0.40 each | 5,275,000 | — | — | — | ||||||||||||
Total, as at December 31 | 34,303,891 | 29,010,391 | — | — | ||||||||||||
Follow-On Offering on NASDAQ Global Market
IPO on NASDAQ Global Market
In August, 2014, the Company completed its IPO issuing 10,113,235 shares, including the underwriter’s overallotment option, yielding total net proceeds of CHF 51.3 million (USD 56.4 million). Offering costs associated with the IPO were CHF 2,091,259. As of March 31, 2014, management determined that successful completion of the IPO was not deemed to be more likely than not, thus CHF 822,367 was expensed in the first quarter of 2014.
Following the IPO there were 28,954,510 common shares of the Company outstanding. At December 31, 2014 there were 29,010,391 shares outstanding due to the exercise of options.
Pursuant to the agreements related to the preferred shares, all preferred shares outstanding at the time of the IPO converted automatically into common shares at the ratio of 1:1 upon consummation of the IPO.
Issuance of common shares upon exercise of options
In 2015, beneficiaries of Option Plan A exercised their right to acquire common shares of the Company at CHF 3.20 per share. This resulted in an increase in the number of outstanding common shares of 18,500 and an increase in the share capital of CHF 7,400. Total proceeds from the exercise to the Company were CHF 59,200.
In 2014, a total of 50,500 stock options were exercised under Stock Option Plan A at an exercise price of CHF 3.20 per common share with a nominal value of CHF 0.40. This resulted in0.02 each, Series A warrants each entitling its holder to purchase 0.35 of a common share and for an increase in theaggregate of 6,282,051 common shares, and Series B warrants entitling its holder to purchase 0.25 of a common share capitalfor an aggregate of 4,487,178 common shares (the “July 2018 Registered Offering”). The exercise price for both series Warrants is CHF 20,200. Total0.39 per common share. The net proceeds from the exercise to the Company from the July 2018 Registered Offering were approximately CHF 6.2 million, after deducting underwriting discounts and other offering expenses payable by us. The Company had transaction costs amounting to CHF 851,692. The transactions costs were recorded as CHF 742,833 in equity for the issuance of the common shares and CHF 108,809 to finance expense in the statement of profit or loss and comprehensive loss for the issuance of the warrants.
9,998,305 (US$10,000,000). The Company had transaction costs amounting to CHF 903,919. The transactions costs were recorded as CHF 397,685 in equity for the issuance of the common shares and CHF 506,234 to finance expense in the statement of profit or loss and comprehensive loss for the issuance of the warrants.
In 2014, 20,881 restricted common shares with a nominal value188,092 in 2015.
In January 2014, a convertible loan was converted into 2,607,950 preferred shares Series C with a nominal value of CHF 0.40 at a conversion price of CHF 5.28 each.
F-20
Authorized share capital
Prior to the IPO,2018, the Company’s authorized share capital consistedamounted to CHF 22,580.26 and allowed to Board of common sharesDirectors, subject to the terms and preferred shares. Preferred shares (Series A, B, and C) hadconditions set forth in the same voting rights and dividend rights as common shares but enjoyed a liquidation preference.
In August 2014, the shareholders approved an extension and increaseArticles of the authorized capital of the Company. The Board is authorizedAssociation, to increase the share capital at any time until June 30, 2016 by the maximum amount of CHF 3,314,706 by issuing not more than 8,286,765issue up to 1,129,013 fully paid registered shares with a nominal value of CHF 0.400.02 each. The shares will have to be fully paid-in. After the follow-on offering in May 2015 and as of December 31, 2015 the authorized capital amounted to CHF 1,204,706 or 3,011,765 registered shares with a nominal value of CHF 0.40 each.
F-21
In 2014, the Company granted 20,881 shares (2013: 0) to employees under Stock Option Plan B. The options were exercised on the grant date. There were no Stock Option Plan B options outstanding as of December 31, 2014, or December 31, 2013. The exercise price for the 2014 awards was CHF 4.43 per share and resulted in a total payroll charge of CHF 92,565 (2013: 0). These shares vested immediately and have a sale restriction for a period of 3 years. The fair value of the shares was defined in the pre-IPO Phase based on DCF-valuation and historical shares transactions and discounted for the fact the shares cannot be sold during the restriction period of three years.
For the business year 2015, the Company granted 25,813 restricted shares to employees under the Equity Incentive Plan on January 7, 2016. The grant price for these awards was the closing price of our shares on January 7, 2016 (USD 7.08) and resulted in a total payroll charge of CHF 188,092. These shares vest upon grant and have a sale restriction for a period of 3 years.
EIP.
| |||||||
Plan | Number of options | Vesting conditions | Contractual life of options | ||||
Stock option | | 4 years' service from grant date | |||||
6 years | |||||||
Equity Incentive Plan Board | 185,340 | 1 year service from grant date | 8 years | ||||
Equity Incentive Plan Employees / Board | 405,280 | 2 | 8 years | ||||
Equity Incentive Plan Employees / Board | 390,627 | 3 | 8 years | ||||
Measurement of fair values
F-22
Stock Option Plan | ||||
Equity Incentive Plan 2018 | Equity Incentive Plan 2018 | Equity Incentive Plan 2017 | Equity Incentive Plan 2017 | |
Fair value at grant date | USD 0.340 (1 year vesting) 1) USD 0.449 (2 year vesting) 1) USD 0.514 (3 year vesting) 1) | USD 1.074 (1 year vesting) 2) USD 1.299 (2 year vesting) 2) USD 1.390 (3 year vesting) 2) | USD 0.198 (1 year vesting) 1) USD 0.287 (2 year vesting) 1) USD 0.352 (3 year vesting) 1) | USD 0.233 (1 year vesting) 2) USD 0.335 (2 year vesting) 2) USD 0.406 (3 year vesting) 2) |
Share price at grant date | USD 0.64 | USD 1.46 | USD 0.76 | USD 0.72 |
Exercise price | USD 0.66 | USD 1.58 | USD 0.82 | USD 0.82 |
Expected volatility | 137.06% | 93.38% | 72.85% | 93.01% |
Expected life | 1,2 and 3 years | 1,2 and 3 years | 1,2 and 3 years | 1,2 and 3 years |
Expected dividends | — | — | — | — |
Risk-free interest rate | 3.06% | 2.92% | 2.38% | 2.19% |
1) October grants for the respective year | ||||
2) April grants for the respective year |
Stock Option Plan | ||||||||||||||||||
Equity Incentive Plan 2015 | Equity Incentive Plan 2015 | Equity Incentive Plan 2014 | Plan C 2014 (CHF) | Plan C 2013 (CHF) | Plan A 2013 (CHF) | |||||||||||||
Fair value at grant date | USD 1.161 (1 year vesting); USD 1.679 (2 years vesting); USD 2.052 (3 year vesting) | USD 2.289 (2 years vesting); USD 2.773 (3 year vesting) | USD 1.572 (2 years vesting); USD 1.902 (3 year vesting) | 3.03 | 3.03 | 2.43 | ||||||||||||
Share price at grant date | USD 4.33 | USD 5.75 | USD 3.92 | 5.28 | 5.28 | 4.80 | ||||||||||||
Exercise price | USD 4.68 | USD 5.98 | USD 4.05 | 5.28 | 5.28 | 4.80 | ||||||||||||
Expected volatility | 74.2% | 74.2% | 74% | 74 | % | 78 | % | 78 | % | |||||||||
Expected life | 1, 2 and 3 years | 2 and 3 years | 2 and 3 years | 4 years | 4 years | 3 years | ||||||||||||
Expected dividends | — | — | — | — | — | — | ||||||||||||
Risk-free interest rate | 2.28% | 2.06% | 2.22% | 0.96 | % | 1.0 | % | 1.0 | % | |||||||||
The Company has historically been a private company and started trading publicly in August 2014. Therefore, for Plan A, Plan C, the 2014 and March 2015 grants under the 2014 Plan the Company lacks significant Company-specific historical and implied volatility information For the aforementioned grants, the Company estimates expected volatility based on comparable public company data for these grants. For September 2015 award under the 2014 Plan, the Company useduses its own historic volatility to calculate expected volatility. The expected life of all options is assumed to correspond to the vesting period.
354,851, 2016: 290,783).
2015 | 2014 | 2013 | 2018 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||
Number of options | Weighted average exercise price | Weighted average remaining term | Number of options | Weighted average exercise price | Weighted average remaining term | Number of options | Weighted average exercise price | Weighted average remaining term | Number of options | Weighted average exercise price | Weighted average remaining term | Number of options | Weighted average exercise price | Weighted average remaining term | ||||||||||||||||||||||||||||||||||
Outstanding at January 1 | 419,010 | 4.61 | 4.86 | 272,750 | 4.32 | 3.64 | 146,500 | 3.66 | 3.29 | 225,154 | 17.40 | 6.88 | 1,038,140 | 3.36 | 6.14 | |||||||||||||||||||||||||||||||||
Expired during the year | (6,250 | ) | — | — | — | — | — | — | — | — | (5,000 | ) | — | — | (67,500 | ) | — | — | ||||||||||||||||||||||||||||||
Forfeited during the year | (139,360 | ) | — | — | (637,200 | ) | — | — | ||||||||||||||||||||||||||||||||||||||||
Exercised during the year | (18,500 | ) | 3.20 | — | (50,500 | ) | 3.20 | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Granted during the year | 234,750 | 5.31 | 7.61 | 196,760 | 4.64 | 6.71 | 126,250 | 5.09 | 5.24 | 911,983 | 1.04 | 7.73 | 1,918,100 | 0.82 | 7.70 | |||||||||||||||||||||||||||||||||
Outstanding at December 31 | 629,010 | 4.92 | 5.42 | 419,010 | 4.61 | 4.86 | 272,750 | 4.32 | 3.64 | 992,777 | 1.10 | 7.45 | 2,251,540 | 1.74 | 6.88 | |||||||||||||||||||||||||||||||||
Exercisable at December 31 | 71,250 | 4.15 | 1.31 | 146,000 | 4.21 | 2.33 | 69,000 | 3.20 | 1.12 | 63,314 | 26.28 | 5.08 | 326,510 | 4.48 | 4.24 | |||||||||||||||||||||||||||||||||
2017.
December 31, 2015 | December 31, 2014 | |||||||
Trade accounts payable - third parties | 965,472 | 3,141,194 | ||||||
Other | 240,050 | 93,190 | ||||||
Total trade and other payables | 1,205,522 | 3,234,384 | ||||||
F-23
December 31, 2018 | December 31, 2017 | ||||
Trade accounts payable - third parties | 1,810,445 | 1,032,557 | |||
Other | 25,890 | 168,263 | |||
Total trade and other payables | 1,836,335 | 1,200,820 | |||
December 31, 2015 | December 31, 2014 | |||||||
Accrued research and development costs including milestone payments | 4,403,622 | 949,561 | ||||||
Professional fees | 291,629 | 178,000 | ||||||
Accrued vacation & overtime | 44,238 | 41,580 | ||||||
Accrual for share based payment (1) | 188,092 | — | ||||||
Board of Directors fees | — | 32,056 | ||||||
Other | 33,731 | 3,371 | ||||||
Total accrued expenses | 4,961,312 | 1,204,568 |
December 31, 2018 | December 31, 2017 | ||||
Accrued research and development costs including milestone payments | 700,866 | 4,060,048 | |||
Professional fees | 315,657 | 227,363 | |||
Accrued vacation & overtime | 54,557 | 69,455 | |||
Employee benefits incl. share based payments | 146,949 | 217,649 | |||
Other | 72,850 | 108,198 | |||
Total accrued expenses | 1,290,879 | 4,682,713 | |||
2015 | 2014 | 2013 | December 31, 2018 | December 31, 2017 | December 31, 2016 | |||||||||||||||
Pre-clinical projects | 468,326 | 1,160,058 | 2,078,407 | 873,453 | 642,821 | 546,429 | ||||||||||||||
Clinical projects | 20,808,025 | 12,141,571 | 8,753,398 | 846,235 | 12,365,768 | 16,639,304 | ||||||||||||||
Drug manufacturing and substance | 1,866,148 | 1,383,581 | 1,036,152 | 2,185,292 | 2,027,184 | 2,608,814 | ||||||||||||||
Employee benefits | 2,140,664 | 1,718,212 | 1,074,398 | |||||||||||||||||
Employee benefits and expenses | 1,652,791 | 2,773,516 | 2,854,624 | |||||||||||||||||
Lease expenses | 42,953 | 68,082 | 74,065 | 65,921 | 111,680 | 84,344 | ||||||||||||||
Patents and trademarks | 824,201 | 665,023 | 100,702 | 634,986 | 603,892 | 941,836 | ||||||||||||||
Regulatory projects | 331,822 | 519,104 | 106,325 | 398,426 | 632,387 | 1,043,287 | ||||||||||||||
Depreciation tangible assets | 54,037 | 48,830 | 30,191 | 32,485 | 53,594 | 58,125 | ||||||||||||||
Total research and development expense | 26,536,176 | 17,704,461 | 13,253,638 | 6,689,589 | 19,210,842 | 24,776,763 | ||||||||||||||
2015 | 2014 | 2013 | ||||||||||
Employee benefits | 1,502,900 | 1,136,677 | 195,739 | |||||||||
Business development | 72,562 | 237,720 | 479,027 | |||||||||
Travel expenses | 257,454 | 169,602 | 77,616 | |||||||||
Administration costs | 2,386,791 | 2,014,178 | 556,445 | |||||||||
IPO costs, expensed | — | 822,367 | — | |||||||||
Lease expenses | 59,665 | 35,072 | 3,968 | |||||||||
Depreciation tangible assets | 38,740 | 25,153 | 7,326 | |||||||||
Capital tax expenses | 23,458 | 48,281 | �� | 42,090 | ||||||||
Total general and administrative expenses | 4,341,570 | 4,489,051 | 1,362,211 | |||||||||
As of March 31, 2014, management determined that a successful completion of an IPO was not deemed to be more likely than not thus CHF 822,367 were expensed in the first quarter of 2014.
F-24
December 31, 2018 | December 31, 2017 | December 31, 2016 | ||||||
Employee benefits and expenses | 1,084,112 | 2,097,853 | 2,174,543 | |||||
Business development | 43,816 | 161,985 | 45,649 | |||||
Travel expenses | 70,944 | 199,484 | 158,774 | |||||
Administration expenses | 2,797,526 | 2,522,217 | 2,969,796 | |||||
Lease expenses | 52,416 | 81,277 | 63,695 | |||||
Depreciation tangible assets | 186,520 | 69,190 | 39,475 | |||||
Capital tax expenses | 29,200 | 18,403 | (5,420 | ) | ||||
Total general and administrative expenses | 4,264,534 | 5,150,409 | 5,446,512 | |||||
2015 | 2014 | 2013 | December 31, 2018 | December 31, 2017 | December 31, 2016 | |||||||||||||||
Salaries | 2,833,741 | 2,259,112 | 836,686 | 2,542,952 | 3,761,171 | 3,662,180 | ||||||||||||||
Pension costs | 282,517 | 118,755 | 78,917 | 108,978 | 378,588 | 342,805 | ||||||||||||||
Other social benefits | 191,079 | 131,939 | 71,878 | 188,138 | 277,468 | 301,537 | ||||||||||||||
Share based payments costs | 311,671 | 270,748 | 110,198 | 27,730 | 354,851 | 290,783 | ||||||||||||||
Other | 24,557 | 74,334 | 172,458 | |||||||||||||||||
Recruitment costs | — | 125,731 | 391,035 | |||||||||||||||||
Other personnel expenditures | (130,895 | ) | (26,439 | ) | 40,827 | |||||||||||||||
Total employee benefits | 3,643,565 | 2,854,888 | 1,270,137 | 2,736,903 | 4,871,370 | 5,029,167 | ||||||||||||||
Benefit plans
2018.
2015 | 2014 | |||||||
Defined benefit obligation at January 1 | 4,895,667 | 1,626,241 | ||||||
Service cost | 261,778 | 111,513 | ||||||
Plan participants’ contribution | 171,196 | 137,966 | ||||||
Interest cost | 58,943 | 52,097 | ||||||
Actuarial losses | 7,750 | 1,484,222 | ||||||
Benefits paid | -353,925 | -539,920 | ||||||
Transfer-in amounts of new employees | 386,367 | 2,023,548 | ||||||
Defined benefit obligation at December 31 | 5,427,776 | 4,895,667 | ||||||
F-25
2018 | 2017 | ||||
Defined benefit obligation at January 1 | 7,999,617 | 7,122,841 | |||
Service costs | 90,162 | 348,172 | |||
Plan participants' contribution | 144,287 | 236,074 | |||
Interest cost | 50,845 | 50,494 | |||
Actuarial losses | (1,911,382 | ) | 60,781 | ||
Transfer-out amounts | (3,367,834 | ) | (440,950 | ) | |
Transfer-in amounts of new employees | 79,930 | 622,205 | |||
Defined benefit obligation at December 31 | 3,085,625 | 7,999,617 | |||
The defined benefit obligation includes only liabilities for active employees. The weighted average modified duration of the defined benefit obligation at December 31, 20152018 is 22.421.8 years (2014: 22.6(2017: 20.9 years).
2015 | 2014 | 2018 | 2017 | ||||||||||
Fair value of plan assets at January 1 | 3,485,069 | 1,297,899 | 6,036,647 | 5,030,407 | |||||||||
Interest income | 44,070 | 47,909 | 36,304 | 37,500 | |||||||||
Return on plan assets excluding interest income | -46,164 | 382,755 | (634,190 | ) | 332,759 | ||||||||
Employer contributions | 171,196 | 137,966 | 146,245 | 236,074 | |||||||||
Plan participants’ contributions | 171,196 | 137,966 | |||||||||||
Benefits paid | -353,925 | -539,920 | |||||||||||
Plan participants' contributions | 146,245 | 236,074 | |||||||||||
Transfer-out amounts | (3,367,834 | ) | (440,950 | ) | |||||||||
Transfer-in amounts of new employees | 386,367 | 2,023,548 | 79,930 | 622,205 | |||||||||
Administration expense | -5,866 | -3,054 | (6,009 | ) | (17,422 | ) | |||||||
Fair value of plan assets at December 31 | 3,851,943 | 3,485,069 | 2,437,338 | 6,036,647 | |||||||||
Net defined benefit liability recognized in the statement of financial position
December 31, 2015 | December 31, 2014 | December 31, 2018 | December 31, 2017 | ||||||||||
Present value of funded defined benefit obligation | 5,427,776 | 4,895,667 | 3,085,625 | 7,999,617 | |||||||||
Fair value of plan assets | -3,851,943 | -3,485,069 | (2,437,338 | ) | (6,036,647 | ) | |||||||
Net defined benefit liability | 1,575,833 | 1,410,598 | 648,287 | 1,962,970 | |||||||||
Defined Benefit Cost
2015 | 2014 | 2013 | 2018 | 2017 | 2016 | |||||||||||||||
Service cost | 261,778 | 111,513 | 72,803 | 90,162 | 348,172 | 319,173 | ||||||||||||||
Net interest expense | 14,873 | 4,188 | 3,739 | 14,541 | 12,994 | 14,922 | ||||||||||||||
Administration expense | 5,866 | 3,054 | 2,375 | 6,009 | 17,422 | 8,710 | ||||||||||||||
Total defined benefit cost for the year recognized in profit or loss | 282,517 | 118,755 | 78,917 | |||||||||||||||||
Total defined costs for the year recognized in profit or loss | 110,712 | 378,588 | 342,805 | |||||||||||||||||
2015 2014 2013 Actuarial loss (gain) arising from changes in financial assumptions -167,623 699,456 -44,737 Actuarial loss arising from experience adjustments 175,375 784,766 181,670 Return on plan assets excluding interest income 46,164 -382,755 -79,217 Total defined benefit cost for the year recognized in other comprehensive loss 53,916 1,101,467 57,716
In 2016, the Group anticipates to contribute CHF 205,935 to the Plan.
F-26
2018 | 2017 | 2016 | ||||||
Actuarial loss (gain) arising from changes in financial assumptions | (119,117 | ) | (150,552 | ) | 412,396 | |||
Actuarial loss arising from experience adjustments | (1,792,265 | ) | 211,331 | 264,417 | ||||
Actuarial gain arising from demographic assumptions | — | — | (258,876 | ) | ||||
Return on plan assets excluding interest income | 634,190 | (332,759 | ) | (23,835 | ) | |||
Total defined benefit cost for the year recognized in the other comprehensive loss | (1,277,192 | ) | (271,980 | ) | 394,102 | |||
Assumptions
At December 31 | 2015 | 2014 | 2013 | 2018 | 2017 | 2016 | ||||||||||||||
Discount rate | 1.10% | 1.20% | 2.20% | 0.95 | % | 0.80 | % | 0.70 | % | |||||||||||
Future salary increase | 1.10% | 1.50% | 1.50% | 1.10 | % | 1.10 | % | 1.10 | % | |||||||||||
Pension indexation | 0.00% | 0.00% | 0.00% | 0.00 | % | 0.00 | % | 0.00 | % | |||||||||||
Mortality and disability rates | BVG 2010G | BVG 2010G | BVG 2010G | BVG2015G | BVG2015G | BVG 2015G | ||||||||||||||
Sensitivity analysis
December 31, 2015 | |||||||||||||
December 31, | 2018 | 2017 | |||||||||||
Change in assumption | 0.25% increase | 0.25% decrease | 0.25 % increase | 0.25 % increase | |||||||||
Discount rate | -248,110 | 271,492 | (138,606 | ) | (354,477 | ) | |||||||
Salary increase | 39,749 | -38,688 | 13,121 | 49,707 | |||||||||
Pension indexation | 148,095 | N/A | 65,943 | 189,965 | |||||||||
Change in assumption | +1 year | -1 year | + 1 year | + 1 year | |||||||||
Life expectancy | 106,136 | -108,343 | 60,369 | 182,977 | |||||||||
2015 | 2014 | 2013 | 2018 | 2017 | 2016 | |||||||||||||||
Interest income | 36,562 | 52,133 | 74,036 | — | 53,570 | 67,565 | ||||||||||||||
Net foreign exchange gain | 1,806,206 | 4,164,189 | 1,711 | |||||||||||||||||
Net foreign currency exchange gain | 1,103,067 | 1,912,681 | 843,950 | |||||||||||||||||
Revaluation gain from derivative financial instruments | 1,350,071 | 3,372,186 | 291,048 | |||||||||||||||||
Total finance income | 1,842,768 | 4,216,322 | 75,747 | 2,453,138 | 5,338,437 | 1,202,563 | ||||||||||||||
Interest expense related parties | — | 49,635 | 50,177 | |||||||||||||||||
Interest expense (incl. bank charges) | 7,985 | 6,175 | 2,454 | |||||||||||||||||
Net foreign exchange loss | 662,100 | 152,015 | 106,010 | |||||||||||||||||
Interest expense (incl. Bank charges) | 1,070,177 | 1,640,394 | 828,547 | |||||||||||||||||
Net foreign currency exchange loss | 1,242,938 | 2,737,273 | 944,047 | |||||||||||||||||
Total finance expense | 670,085 | 207,825 | 158,641 | 2,313,115 | 4,377,667 | 1,772,594 | ||||||||||||||
Finance income/(expense), net | 1,172,683 | 4,008,497 | -82,894 | 140,023 | 960,770 | (570,031 | ) | |||||||||||||
F-27
2015 | 2014 | 2013 | 2018 | 2017 | 2016 | |||||||||||||||
Deferred income tax expense | -32,761 | -32,761 | -305,750 | (294,056 | ) | (21,415 | ) | — | ||||||||||||
Deferred income tax gain | 32,761 | 32,761 | — | 131,879 | 39,188 | 131,055 | ||||||||||||||
Total income tax expense | — | — | -305,750 | |||||||||||||||||
(162,177 | ) | 17,773 | 131,055 | |||||||||||||||||
The Group’s effective income tax expense differed from the expected theoretical amount computed by applying the Group’s applicable statutoryweighted average tax ratesrate of 21.9% (2014: 23%; 2013: 23.7%21.1% in 2018 (2017: 21.7%, 2016: 21.5%) as summarized in the following table:
Reconciliation | 2015 | 2014 | 2013 | |||||||||
Loss before income tax | -29,705,063 | -18,185,015 | -14,698,743 | |||||||||
Income tax at statutory tax rates applicable to results in the respective countries | 6,493,569 | 4,177,780 | 3,488,916 | |||||||||
Effect of unrecognized temporary differences | -105,395 | -273,073 | 1,343,556 | |||||||||
Effect of unrecognized taxable losses(1) | -6,438,609 | -4,160,118 | -5,160,108 | |||||||||
Effect of unrecognized taxable losses in equity | 50,435 | 99,406 | — | |||||||||
Effect on unrecognized deferred tax due to change in income tax rate | — | 156,005 | — | |||||||||
Deferred tax recognized directly in equity | — | — | 21,886 | |||||||||
Income tax expense | — | — | -305,750 | |||||||||
(1)CHF 457,125 related to the expiry of losses carry forward during 2015 are included in the effect of unrecognized taxable losses.
Reconciliation | 2018 | 2017 | 2016 | ||||||
Loss before income tax | (11,334,224 | ) | (24,427,247 | ) | (30,793,306 | ) | |||
Income tax at statutory tax rates applicable to results in the respective countries | 2,397,177 | 5,311,030 | 6,629,237 | ||||||
Effect of unrecognized temporary differences | 140,371 | 193,598 | (27,072 | ) | |||||
Effect of unrecognized taxable losses | (2,553,594 | ) | (5,429,935 | ) | (6,360,837 | ) | |||
Effect of previously unrecognised deferred tax asset | 114,116 | 39,189 | 131,055 | ||||||
Effect of expenses deductible for tax purposes | — | 9,696 | 2,505 | ||||||
Effect of expenses not considerable for tax purposes | — | — | 23,716 | ||||||
Effect of impact from application of different tax rates | (260,247 | ) | (105,805 | ) | (267,695 | ) | |||
Effect of unrecognized taxable losses in equity | — | — | 146 | ||||||
Income tax gain | (162,177 | ) | 17,773 | 131,055 | |||||
Deferred Tax Liabilities | December 31, 2015 | December 31, 2014 | ||||||
Intangible assets | -327,637 | -327,637 | ||||||
Provisions | — | -32,761 | ||||||
Total | -327,637 | -360,398 | ||||||
Deferred Tax Asset | ||||||||
Net operating loss (NOL) | — | 32,761 | ||||||
Total | — | 32,761 | ||||||
Deferred Tax, net | -327,637 | -327,637 | ||||||
F-28
Deferred Tax Liabilities | December 31, 2018 | December 31, 2017 | ||||
Intangible assets | (627,540 | ) | (349,052 | ) | ||
Hercules Loan Facility | (889 | ) | (47,477 | ) | ||
Derivative financial asset | (17,763 | ) | — | |||
Total | (646,192 | ) | (396,529 | ) | ||
Deferred Tax Asset | December 31, 2018 | December 31, 2017 | ||||
Net operating loss (NOL) | 305,206 | 217,720 | ||||
Total | 305,206 | 217,720 | ||||
Deferred Tax, net | (340,986 | ) | (178,809 | ) |
Deferred Tax 2015 | Opening Balance | Recognized in Profit or Loss | Recognized in Equity | Closing Balance | ||||||||||||
Intangible assets | -327,637 | — | — | -327,637 | ||||||||||||
Provisions | -32,761 | 32,761 | — | — | ||||||||||||
Net operating loss (NOL) | 32,761 | -32,761 | — | — | ||||||||||||
Total | -327,637 | — | — | -327,637 |
Deferred Tax 2014 | Opening Balance | Recognized in Profit or Loss | Recognized in Equity | Closing Balance | ||||||||||||||||||||||||
Deferred Tax 2018 | Opening Balance | Recognized in Profit or Loss | Recognized in Equity | Closing Balance | ||||||||||||||||||||||||
Intangible assets | -327,637 | — | — | -327,637 | (349,052 | ) | (276,293 | ) | (2,195 | ) | (627,540 | ) | ||||||||||||||||
Provisions | — | -32,761 | — | -32,761 | ||||||||||||||||||||||||
Hercules Loan Facility | (47,477 | ) | 46,588 | — | (889 | ) | ||||||||||||||||||||||
Derivative financial asset | — | (17,763 | ) | — | (17,763 | ) | ||||||||||||||||||||||
Net operating loss (NOL) | — | 32,761 | 32,761 | 217,720 | 85,291 | 2,195 | 305,206 | |||||||||||||||||||||
Total | -327,637 | — | — | -327,637 | (178,809 | ) | (162,177 | ) | — | (340,986 | ) | |||||||||||||||||
Deferred Tax 2017 | Opening Balance | Recognized in Profit or Loss | Recognized in Equity | Closing Balance | ||||||||||||||||||||||||
Intangible assets | (327,637 | ) | (21,415 | ) | — | (349,052 | ) | |||||||||||||||||||||
Hercules Loan Facility | (76,390 | ) | 28,913 | — | (47,477 | ) | ||||||||||||||||||||||
Net operating loss (NOL) | 207,445 | 10,275 | — | 217,720 | ||||||||||||||||||||||||
Total | (196,582 | ) | 17,773 | — | (178,809 | ) | ||||||||||||||||||||||
As of December 31, 2015,2018, the Group had total gross tax loss carry forwards amounting to CHF 86.0151.4 million (2014:(2017: CHF 58.6142 million), of which CHF 84.9150.3 million related to Auris Medical AG, Auris Medical Holding AG and Otolanum AG in Switzerland and CHF 1.1 million to Auris Medical Inc. in the United States (2014:(2017: CHF 57.5140.9 million for Auris Medical AG and Otolanum AG and CHF 1.1 million for Auris Medical Inc.).
December 31, 2015 | December 31, 2014 | December 31, 2018 | December 31, 2017 | ||||||||||
Within 1 year | 1,686,986 | 2,068,441 | 8,173,993 | 1,754,398 | |||||||||
Between 1 and 3 years | 3,613,999 | 3,546,587 | 41,980,704 | 31,089,191 | |||||||||
Between 3 and 7 years | 79,651,641 | 51,963,606 | 100,136,349 | 108,055,089 | |||||||||
More than 7 years | 1,073,609 | 1,056,556 | 1,070,993 | 1,072,260 | |||||||||
Total | 86,026,235 | 58,635,190 | 151,362,039 | 141,970,938 | |||||||||
The tax effect of the major unrecognized temporary differences and loss carry-forwards is presented in the table below:
December 31, 2015 | December 31, 2014 | |||||||
Deductible temporary differences | ||||||||
Employee benefit plan | 348,259 | 311,742 | ||||||
Stock option plans | 183,023 | 114,145 | ||||||
Total potential tax assets | 531,282 | 425,887 | ||||||
Taxable unrecognized temporary differences | ||||||||
Property and equipment | — | — | ||||||
Total unrecognized potential tax liabilities | — | — | ||||||
Offsetting potential tax liabilities with potential tax assets | — | — | ||||||
Net potential tax assets from temporary differences not recognized | 531,282 | 425,887 | ||||||
Potential tax assets from loss carry-forwards not recognized | 19,049,472 | 13,067,988 | ||||||
Total potential tax assets from loss carry-forwards and temporary differences not recognized | 19,580,754 | 13,493,874 | ||||||
F-29
December 31, 2018 | December 31, 2017 | ||||
Deductible temporary differences | |||||
Employee benefit plan | 143,271 | 433,816 | |||
Stock option plans | 148,407 | 400,764 | |||
Total potential tax assets | 291,678 | 834,580 | |||
Taxable unrecognized temporary differences | |||||
Property and equipment | — | — | |||
Total unrecognized potential tax liabilities | — | — | |||
Offsetting potential tax liabilities with potential tax assets | — | — | |||
Net potential tax assets from temporary differences not recognized | 291,678 | 834,580 | |||
Potential tax assets from loss carry-forwards not recognized | 31,387,022 | 29,959,963 | |||
Total potential tax assets from loss carry-forwards and temporary differences not recognized | 31,678,700 | 30,794,543 |
December 31, 2015 | December 31, 2014 | December 31, 2018 | December 31, 2017 | December 31, 2016 | ||||||||||||
Loss attributable to owners of the Company | -29,705,063 | -18,185,015 | (11,496,401 | ) | (24,409,474 | ) | (30,662,251 | ) | ||||||||
Weighted average number of shares outstanding | 32,299,166 | 27,692,494 | ||||||||||||||
Weighted average number of shares outstanding * | 15,900,865 | 4,374,187 | 3,432,928 | |||||||||||||
Basic and diluted loss per share | -0.92 | -0.66 | (0.72 | ) | (5.58 | ) | (8.93 | ) | ||||||||
As of December 31, 2018, the Company issued warrants to purchase up to 6,544,791 of its common shares outstanding.
On April
six-month cancellation period.
December 31, 2015 | December 31, 2014 | December 31, 2018 | December 31, 2017 | ||||||||||
Within one year | 100,572 | 103,572 | 24,374 | 161,110 | |||||||||
Between one and five years | 114,465 | 58,893 | — | 446,051 | |||||||||
Total | 215,037 | 162,465 | 24,374 | 607,161 | |||||||||
Office lease expenses of CHF 107,450 were booked in 2015118,337, CHF 192,957 and CHF 99,072148,039 were recorded in 2018, 2017 and CHF 78,033 were booked in 2014 and 2013,2016, respectively, in the consolidated statement of profit or loss and other comprehensive loss.
F-30
Executive Management | Board of Directors | Total | ||||||||||||||||||||||||||||||||||
2015 | 2014 | 2013 | 2015 | 2014 | 2013 | 2015 | 2014 | 2013 | ||||||||||||||||||||||||||||
Short term benefits | 1,363,796 | 1,008,817 | 418,332 | 268,810 | 81,567 | 10,500 | 1,632,606 | 1,090,384 | 428,832 | |||||||||||||||||||||||||||
Post-employee benefits years | 78,721 | 63,386 | 6,836 | — | — | — | 78,721 | 63,386 | 6,836 | |||||||||||||||||||||||||||
Share-based payment charge | 176,691 | 148,474 | 37,964 | 61,017 | 62,080 | 36,181 | 237,708 | 210,554 | 74,145 | |||||||||||||||||||||||||||
Total | 1,619,208 | 1,220,677 | 463,132 | 329,827 | 143,647 | 46,681 | 1,949,035 | 1,364,324 | 509,813 |
Executive Management | Board of Directors | Total | ||||||||||||||||||||||||
2018 | 2017 | 2016 | 2018 | 2017 | 2016 | 2018 | 2017 | 2016 | ||||||||||||||||||
Short term benefits | 1,002,707 | 1,576,864 | 1,554,850 | 200,421 | 280,762 | 325,493 | 1,203,128 | 1,857,626 | 1,880,343 | |||||||||||||||||
Post-employee benefits years | 55,278 | 94,839 | 88,838 | — | — | — | 55,278 | 94,839 | 88,838 | |||||||||||||||||
Share-based payment charge | 204,224 | 190,659 | 217,981 | 60,657 | 72,647 | 103,380 | 264,881 | 263,306 | 321,361 | |||||||||||||||||
Total | 1,262,209 | 1,862,362 | 1,861,669 | 261,078 | 353,409 | 428,873 | 1,523,287 | 2,215,771 | 2,290,542 |
For 2015, the Company granted 25,813 (2014: 20,881; 2013: 0) options to members of Management under the Equity Incentive Plan (2014: Stock Option Plan B) on January 7, 2016. The payroll charge corresponded to CHF 188,092 (2014: CHF 92,565; 2013: 0). These shares vested upon grant and have a sale restriction for a period of 3 years.
The
remaining principal balance of the Secured Obligations and the End of Term Charge. The carrying value of the cash serving as collateral is USD 2,120,257. The Blocked Account will be reduced on a dollar for dollar basis by the amount of such principal payments or end of term charge when such payments are received by Lender. Following the modification of the loan to repay $5 million, a loss of CHF 334,747 was recognized in connection with the modification of the loan and transaction costs. This loss is presented in the line interest expense in the condensed consolidated interim statement of profit or loss and other comprehensive income or loss.
Liabilitiesfair value of the amounted to related parties
2015 | 2014 | |||||||
Interest expense related parties | — | -49,635 | ||||||
Net interest expense—related parties | — | -49,635 | ||||||
In 2014, interest expense to related parties includesCHF 215,572
24.warrants has increased by CHF 77,585, resulting in a loss in the corresponding amount (fair value as of July 17, 2018: CHF 137,987).
No events