AC Immune
Annual Report 2017

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 20-F (Mark One) ☐REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934OR ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 2017OR ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ________________ to ________________OR ☐SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Date of event requiring this shell company report Commission file number: 001-37891 AC IMMUNE SA(Exact name of Registrant as specified in its charter) Switzerland(Jurisdiction of incorporation) EPFL INNOVATION PARKBuilding B1015 LausanneSwitzerland(Address of principal executive offices) Andrea PfeiferTel: +41 21 345 91 21EPFL INNOVATION PARKBuilding B1015 LausanneSwitzerland(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person) Copies to: Richard D. Truesdell, Jr.Derek J. DostalDavis Polk & Wardwell LLP450 Lexington AvenueNew York, NY 10017(212) 450-4000Securities registered or to be registered pursuant to Section 12(b) of the Act: Title of each className of each exchange on which registeredCommon Shares, nominal value CHF 0.02 per shareThe NASDAQ Global Market Securities registered or to be registered pursuant to Section 12(g) of the Act: None Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None  Indicate the number of outstanding shares of each of the issuer’s classes of capital stock or common stock as of the close of the period covered by the annualreport. Common shares: 57,355,188 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934. ☐ Yes ☒ No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. ☒ Yes ☐ No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required tobe submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required tosubmit and post such files). ☐ Yes ☒ No (Not Required) Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. Seedefinition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐Accelerated filer ☒Non-accelerated filer ☐ Emerging growth company ☒ Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: US GAAP ☐International Financial Reporting Standards asissued by the International Accounting StandardsBoard ☒Other ☐ If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow. ☐ Item 17 ☐ Item 18 If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No  AC IMMUNE SA TABLE OF CONTENTS FORWARD-LOOKING STATEMENTS1PART I3ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS3A. Directors and senior management3B. Advisers3C. Auditors3ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE3A. Offer statistics3B. Method and expected timetable3ITEM 3. KEY INFORMATION3A. Selected Financial Data3B. Capitalization and indebtedness5C. Reasons for the offer and use of proceeds5D. Risk factors5ITEM 4. INFORMATION ON THE COMPANY43A. History and Development of the Company43B. Business overview44C. Organizational structure89D. Property, plant and equipment89ITEM 4A. UNRESOLVED STAFF COMMENTS89ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS90A. Operating results90B. Liquidity and capital resources104C. Research and development, patents and licenses, etc.106D. Trend information106E. Off-balance sheet arrangements107F. Tabular disclosure of contractual obligations107G. Safe harbor107H. Non-IFRS Financial Measures107ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES108A. Directors and senior management108B. Compensation111C. Board practices113D. Employees115E. Share ownership115ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS115A. Major shareholders115B. Related party transactions117C. Interests of Experts and Counsel118ITEM 8. FINANCIAL INFORMATION118A. Consolidated statements and other financial information118B. Significant changes119ITEM 9. THE OFFER AND LISTING119A. Offering and listing details119B. Plan of distribution119C. Markets119D. Selling shareholders119E. Dilution120F. Expenses of the issue120ITEM 10. ADDITIONAL INFORMATION120A. Share capital120B. Memorandum and articles of association120C. Material contracts120 Table of Contents D. Exchange controls120E. Taxation120F. Dividends and paying agents125G. Statement by experts125H. Documents on display125I. Subsidiary information126ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK126ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES127A. Debt securities127B. Warrants and rights127C. Other securities127D. American Depositary Shares127PART II127ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES127A. Defaults127B. Arrears and delinquencies127ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS127E. Use of Proceeds127ITEM 15. CONTROLS AND PROCEDURES128A. Disclosure Controls and Procedures128B. Management’s Annual Report on Internal Control over Financial Reporting128C. Attestation Report of the Registered Public Accounting Firm128D. Changes in Internal Control over Financial Reporting128ITEM 16. [RESERVED]129ITEM 16A. Audit committee financial experts129ITEM 16B. Code of ethics129ITEM 16C. Principal accountant fees and services (in CHF and thousands)129ITEM 16D. Exemptions from the listing standards for audit committees129ITEM 16E. Purchases of equity securities by the issuer and affiliated purchasers129ITEM 16F. Change in registrant’s certifying accountant130ITEM 16G. Corporate governance130ITEM 16H. Mine safety disclosure130PART III131ITEM 17. Financial statements131ITEM 18. Financial statements131ITEM 19. Exhibits131Financial StatementsF-1Report of Independent Registered Public Accounting Firm F-2Balance SheetsF-3Statements of Income / (Loss) and Statement of Comprehensive Income/(Loss)F-4Statements of Changes in EquityF-5Statements of Cash FlowsF-6Notes to the Financial StatementsF-7 Table of Contents PRESENTATION OF FINANCIAL AND OTHER INFORMATION Unless otherwise indicated or the context otherwise requires, all references in this annual report on Form 20-F (the “Annual Report”) to “AC Immune” orthe “Company,” “we,” “our,” “ours,” “us” or similar terms refer to AC Immune SA. The Company owns various trademark registrations and applications, andunregistered trademarks, including Morphomer™, SupraAntigen™ and its corporate logo. All other trademarks, trade names and service marks of othercompanies appearing in this Annual Report are the property of their respective owners. Solely for convenience, the trademarks and trade names in this AnnualReport may be referred to without the © and ™ symbols, but such references should not be construed as any indicator that their respective owners will notassert, to the fullest extent under applicable law, their rights thereto. The Company does not intend to use or display other companies’ trademarks and tradenames to imply a relationship with, or endorsement or sponsorship of the Company by, any other companies. Financial Statements Our financial statements are presented in Swiss Francs and in accordance with International Financial Reporting Standards, or IFRS, as issued by theInternational Accounting Standards Board, or IASB. None of the financial statements were prepared in accordance with generally accepted accountingprinciples in the United States. The terms “dollar,” “USD” or “$” refer to U.S. dollars and the term “Swiss Franc” and “CHF” refer to the legal currency ofSwitzerland, unless otherwise indicated. Unless otherwise indicated, certain Swiss Franc amounts and certain U.S. dollar amounts have been translated intoU.S. dollars and Swiss Francs, respectively, at a rate of USD 0.9738 to CHF 1.00, the official exchange rate quoted as of December 29, 2017 by the U.S.Federal Reserve Bank. Such Swiss Franc and U.S. dollar amounts are not necessarily indicative of the amounts of U.S. dollars and Swiss Francs, respectively,that could actually have been purchased upon exchange of the other currency at the dates indicated or any other date, and such translated amounts have beenprovided solely for the convenience of the reader. We have made rounding adjustments to some of the figures included in this Annual Report. Accordingly,any numerical discrepancies in any table between totals and sums of the amounts listed are due to rounding. FORWARD-LOOKING STATEMENTS This Annual Report contains statements that constitute forward-looking statements. All statements other than statements of historical facts contained inthis Annual Report, including statements regarding our future results of operations and financial position, business strategy, product candidates, productpipeline, ongoing and planned clinical studies, including those of our collaboration partners, regulatory approvals, research and development costs, timingand likelihood of success, as well as plans and objectives of management for future operations are forward-looking statements. Many of the forward-lookingstatements contained in this Annual Report can be identified by the use of forward-looking words such as “anticipate,” “believe,” “could,” “expect,”“should,” “plan,” “intend,” “estimate,” “will” and “potential,” among others. Forward-looking statements appear in a number of places in this Annual Report and include, but are not limited to, statements regarding our intent, beliefor current expectations. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to ourmanagement. Such statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including, but not limited to, those identified under “Item 3. Key Information – D. Risk Factors” in this AnnualReport. These risks and uncertainties include factors relating to: ·The success of our and our collaboration partners’ clinical studies, and our and their ability to obtain regulatory approval and to commercializecrenezumab, our anti-Tau antibody candidate, ACI-24, ACI-35, and our Tau-PET Imaging tracer candidate; ·The ability of our competitors to discover, develop or commercialize competing products before or more successfully than we do; ·Our Morphomer proprietary technology platform and its success in building additional product candidates for our pipeline; ·The identification of serious adverse, undesirable or unacceptable side effects related to our product candidates; 1 Table of Contents ·Our ability to maintain our current strategic relationships with our collaboration partners; ·Failure to protect our, and not infringe on third parties’, intellectual property rights throughout the world; ·Our ability to raise capital when needed in order to continue our product development programs or commercialization efforts; ·The Food and Drug Administration’s and applicable foreign regulatory authorities’ acceptance of data from studies we conduct outside the UnitedStates in the future; ·Our foreign private issuer status, the loss of which would require us to comply with the Exchange Act’s domestic reporting regime and cause us toincur significant legal, accounting and other expenses; ·Our incorporation in Switzerland, the laws of which govern our corporate affairs and may differ from those applicable to companies incorporated inthe United States; and ·The other risk factors discussed under “Item 3. Key Information – D. Risk Factors.” These forward-looking statements speak only as of the date of this Annual Report and are subject to a number of risks, uncertainties and assumptionsdescribed under the sections in this Annual Report entitled “Item 3. Key Information—D. Risk Factors” and “Item 5. Operating and Financial Review andProspects” and elsewhere in this Annual Report. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannotbe predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events.The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from thoseprojected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time totime, and it is not possible for management to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publiclyupdate or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances orotherwise. ENFORCEMENT OF JUDGMENTS We are organized under the laws of Switzerland and our registered office and domicile is located in Ecublens, Switzerland. Moreover, a number of ourdirectors and executive officers are not residents of the United States, and all or a substantial portion of the assets of such persons are located outside theUnited 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 enforceagainst them judgments obtained in U.S. courts, including judgments in actions predicated upon the civil liability provisions of the federal securities laws ofthe 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 forenforcement of judgments of U.S. courts, of civil liabilities to the extent solely 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 principlesset forth in the Swiss Federal Act on Private International Law. This statute provides that the application of provisions of non-Swiss law by the courts inSwitzerland shall be precluded if the result would be incompatible with Swiss public policy. Also, mandatory provisions of Swiss law may be applicableregardless of any other law that would otherwise apply. Switzerland and the United States do not have a treaty providing for reciprocal recognition of andenforcement of judgments in civil and commercial matters. The recognition and enforcement of a judgment of the courts of the United States in Switzerland isgoverned by the principles set forth in the Swiss Federal Act on Private International Law. This statute provides in principle that a judgment rendered by anon-Swiss court may be enforced in Switzerland only if: ·the non-Swiss court had jurisdiction pursuant to the Swiss Federal Act on Private International Law; ·the judgment of such non-Swiss court has become final and non-appealable; ·the judgment does not contravene Swiss public policy; ·the court procedures and the service of documents leading to the judgment were in accordance with the due process of law; and ·no proceeding involving the same parties and the same subject matter was first brought in Switzerland, or adjudicated in Switzerland, or was earlieradjudicated in a third state and this decision is recognizable in Switzerland. 2 Table of Contents PART I ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS A. Directors and senior management Not applicable. B. Advisers Not applicable. C. Auditors Not applicable. ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE A. Offer statistics Not applicable. B. Method and expected timetable Not applicable. ITEM 3. KEY INFORMATION A. Selected Financial Data The following tables summarize our financial data as of the dates and for the periods indicated. The financial data for the years ended December 31,2017, 2016 and 2015 have been derived from our audited financial statements, which have been prepared in accordance with International FinancialReporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB, and audited in accordance with the standards of the U.S.Public Company Accounting Oversight Board, and included elsewhere in this Annual Report. The financial data for the year ended December 31, 2014 havebeen derived from our audited financial statements, which have been prepared in accordance with IFRS, as issued by the IASB, and audited in accordancewith the standards of the U.S. Public Company Accounting Oversight Board, and have not been included in this Annual Report. Our historical results are not necessarily indicative of the results that may be expected in the future. The following summary financial data should be readin conjunction with “Item 5. Operating and Financial Review and Prospects” and our financial statements included elsewhere in this Annual Report. We maintain our books and records and our audited financial statements in Swiss Francs (CHF). 3 Table of Contents For the Years Ended December 31,(in CHF ‘000 except for share and per share data) 2017 2016 2015Income Statement Data: Contract revenue 20,255 23,214 39,090 Research and development expenses (32,663) (25,774) (17,049)General and administrative expenses (10,131) (7,896) (3,417)Operating income/(loss) (22,539) (10,456) 18,624 Finance result—net (3,872) 3,360 1,646 Net income/(loss) before tax (26,411) (7,096) 20,270 Income taxes — — — Net income/(loss) for the period (26,411) (7,096) 20,270 For the Years Ended December 31,(in CHF ‘000 except for share and per share data) 2017 2016 2015Earnings per share in CHF (basic)(1)(2) (0.46) (0.14) 0.47 Earnings per share in CHF (fully diluted)(2) (0.46) (0.14) 0.44 Weighted-average number of shares used to compute earnings per share basic 57,084,295 50,096,859 43,412,250 Weighted-average number of shares used to compute earnings per share fully diluted 57,084,295 50,096,859 46,043,198 (1)For the periods prior to the closing of our initial public offering on September 23, 2016, earnings per share includes preferred shares outstanding. Thesepreferred shares were converted on a one-for-one basis upon closing of our initial public offering on September 23, 2016. Amounts for fiscal year 2015have also been adjusted for the 250-for-1 stock split effective October 23, 2015. (2)Earnings per share calculations do not give effect to the Series E Private Placement Extension or the CS AG Share Issuance effected in 2016. As of December 31, 2017 2016 2015 (in CHF ‘000) Cash and cash equivalents 124,377 152,210 76,522 Total assets 132,013 156,100 79,931 Accumulated losses (72,607) (46,921) (40,381)Total shareholder’s equity 116,839 142,380 71,043 Total shareholder’s equity and liabilities 132,013 156,100 79,931 Share capital 1,147 1,135 928 Exchange Rate Information The following table sets forth, for the periods indicated, the high, low, average and period-end exchange rates for the purchase of U.S. dollars expressedin CHF per U.S. dollar. The average rate is calculated by using the average of the U.S. Federal Reserve Bank’s reported exchange rates on each day during amonthly period and on the last day of each month during an annual period. On March 16, 2018, the exchange rate as reported by the U.S. Federal ReserveBank was CHF 0.9532 to $1.00. In this Annual Report, translations from CHF to U.S. dollars were made at the rate of CHF 0.9738 to $1.00, the officialexchange rate quoted as of December 29, 2017 by the U.S. Federal Reserve Bank. Period-end Average forPeriod Low High(CHF per U.S. dollar) Years Ended December 31: 2013 0.8904 0.9269 0.8856 0.9814 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 Months Ended: September 30, 2017 0.9688 0.9625 0.9456 0.9745 October 31, 2017 0.9968 0.9821 0.9732 0.9990 November 30, 2017 0.9838 0.9915 0.9788 1.0014 December 31, 2017 0.9738 0.9870 0.9738 0.9928 January 31, 2018 0.9321 0.9604 0.9321 0.9832 February 28, 2018 0.9430 0.9355 0.9232 0.9438 March 2018 (through March 16, 2018) 0.9532 0.9455 0.9378 0.9532 4 Table of Contents B. Capitalization and indebtedness Not applicable. C. Reasons for the offer and use of proceeds Not applicable. D. Risk factors You should carefully consider the risks and uncertainties described below and the other information in this Annual Report before making an investmentin our common shares. Our business, financial condition or results of operations could be materially and adversely affected if any of these risks occurs, andas a result, the market price of our common shares could decline and you could lose all or part of your investment. This Annual Reports also containsforward-looking statements that involve risks and uncertainties. See “Forward-Looking Statements.” Our actual results could differ materially andadversely from those anticipated in these forward-looking statements as a result of certain factors. Risks Related to Our Business We depend heavily on the success of crenezumab, and, to a lesser extent, our anti-Tau antibody candidate, ACI-24 for Alzheimer’s disease, or AD, ACI-35 and our Tau-PET Imaging tracer candidate, all of which are in clinical development. If our clinical studies are unsuccessful, we or our collaborationpartner do not obtain regulatory approval or we are unable to commercialize crenezumab, our anti-Tau antibody candidate, ACI-24, ACI-35 and ourTau-PET Imaging tracer candidate, or we experience significant delays in doing so, our business, financial condition and results of operations will bematerially adversely affected. We currently have no products approved for sale and have invested a significant portion of our efforts and financial resources in the development ofcrenezumab, our anti-Tau antibody candidate, ACI-24, ACI-35 and our Tau-PET Imaging tracer candidate, all of which are in clinical development. Ourability to generate product revenues, which we do not expect will occur for at least the next several years, if ever, will depend heavily on successful clinicaldevelopment, obtaining regulatory approval and eventual commercialization of these product candidates. We currently generate no revenues from sales ofany drugs or diagnostics, and we may never be able to develop or commercialize a marketable drug or diagnostic. The success of our current and futureproduct candidates will depend on several factors, including the following: ·completing clinical studies that demonstrate the efficacy, safety and clinical utility of our product candidates; ·receiving marketing approvals from applicable regulatory authorities; ·establishing commercial manufacturing capabilities; ·launching commercial sales, marketing and distribution operations; ·acceptance of our product candidates by patients, the medical community and third-party payors; ·a continued acceptable safety profile following approval; 5 Table of Contents ·competing effectively with other therapies or diagnostic approaches; and ·qualifying for, obtaining, maintaining, enforcing and defending our intellectual property rights and claims and not infringing on third parties’intellectual property rights. If we or our collaboration partners do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or aninability to successfully commercialize our current or future product candidates, which would materially adversely affect our business, financial conditionand results of operations. Results of early clinical studies may not be predictive of future study results. Positive or timely results from preclinical or early stage studies do not ensure positive or timely results in late stage clinical studies or product approvalby the U.S. Food and Drug Administration, or the FDA, the European Medicines Agency, or the EMA, or comparable foreign regulatory authorities. Productsthat show positive preclinical or early clinical results may not show sufficient safety or efficacy in later stage clinical studies and therefore may fail to obtainregulatory approvals. For example, our collaboration partner Genentech may fail to achieve success in Phase 3 clinical studies of crenezumab. In addition,preclinical and clinical data are often susceptible to varying interpretations and analyses. Many companies that believed their product candidates performedsatisfactorily in preclinical and clinical studies have nonetheless failed to obtain marketing approval for the product candidates. The FDA, the EMA andcomparable foreign regulatory authorities have substantial discretion in the approval process and in determining when or whether regulatory approval will beobtained for any of our product candidates. Even if we believe the data collected from clinical studies of our product candidates are promising, such data maynot be sufficient to support approval by the FDA, the EMA or any other regulatory authority. In some instances, there can be significant variability in safety and/or efficacy results between different studies of the same product candidate due tonumerous factors, including changes in study procedures set forth in protocols, differences in the size and type of the patient populations, adherence to thedosing regimen and other study protocols and the rate of dropout among clinical study participants. In the case of our late stage clinical product candidates,results may differ in general on the basis of the larger number of clinical study sites and additional countries and languages involved in Phase 3 clinicalstudies. Clinical studies are, or will be, based on patient reported outcomes, some of which are or will be captured daily by study participants with electronicdiaries. We have no assurance and cannot rely on past experience that the high frequency of questioning is not influencing the measured outcome. Inaddition, low compliance with daily reporting requirements may impact the studies’ validity or statistical power. We cannot assure you that any Phase 2,Phase 3 or other clinical studies that either we or our collaboration partners may conduct will demonstrate consistent or adequate efficacy and safety to obtainregulatory approval to market our product candidates. If we or our collaboration partners are required to conduct additional clinical studies or other testing of any of our current or future product candidatesthat we or our collaboration partners develop beyond the studies and testing that we or our collaboration partners contemplate, if we or our collaborationpartners are unable to successfully complete clinical studies of our product candidates or other testing, if the results of these studies or tests are unfavorable orare only modestly favorable or if there are safety concerns associated with our current or future product candidates, we may: ·be delayed in obtaining marketing approval for our product candidates; ·not obtain marketing approval; ·obtain approval for indications or patient populations that are not as broad as intended or desired; ·obtain approval with labeling that includes significant use or distribution restrictions or significant safety warnings, including boxed warnings; ·be subject to additional post-marketing testing or other requirements; or ·remove the product from the market after obtaining marketing approval. 6 Table of Contents Our product development costs will also increase if we experience delays in testing or marketing approvals and we may be required to obtain additionalfunds to complete clinical studies. We cannot assure you that our clinical studies will begin as planned or be completed on schedule, if at all, or that we willnot need to restructure our studies after they have begun. Significant clinical study delays also could shorten any periods during which we may have theexclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do or shorten any periods duringwhich we have the exclusive right to commercialize our product candidates, which may harm our business and results of operations. In addition, some of thefactors that cause, or lead to, clinical study delays may ultimately lead to the denial of regulatory approval of our product candidates. Additional competitors could enter the market with generic versions of our products, which may result in a material decline in sales of affected products. Under the Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Act, a pharmaceutical manufacturer may file anabbreviated new drug application, or ANDA, seeking approval of a generic copy of an approved innovator product. Under the Hatch-Waxman Act, amanufacturer may also submit a new drug application, or NDA, under section 505(b)(2) that references the FDA’s prior approval of the innovator product. A505(b)(2) NDA product may be for a new or improved version of the original innovator product. Hatch-Waxman also provides for certain periods ofregulatory 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 regulatoryexclusivity, an innovator NDA holder may have patents claiming the active ingredient, product formulation or an approved use of the drug, which would belisted with the product in the FDA publication, “Approved Drug Products with Therapeutic Equivalence Evaluations,” known as the “Orange Book.” If thereare patents listed in the Orange Book, a generic or 505(b)(2) applicant that seeks to market its product before expiration of the patents must include in theANDA what is known as a “Paragraph IV certification,” challenging the validity or enforceability of, or claiming non-infringement of, the listed patent orpatents. Notice of the certification must be given to the innovator, too, and if within 45 days of receiving notice the innovator sues to protect its patents,approval of the ANDA is stayed for 30 months, or as lengthened or shortened by the court. Accordingly, if crenezumab, our anti-Tau antibody candidate, ACI-24, ACI-35 or our Tau-PET Imaging tracer candidate are approved, competitors couldfile ANDAs for generic versions of crenezumab, our anti-Tau antibody candidate ACI-24 and ACI-35, or 505(b) (2) NDAs that reference crenezumab, our anti-Tau antibody candidate, ACI-24, ACI-35 or our anti-Tau antibody candidate, respectively. If there are patents listed for crenezumab, our anti-Tau antibodycandidate, ACI-24 and ACI-35 in the Orange Book, those ANDAs and 505(b) (2) NDAs would be required to include a certification as to each listed patentindicating whether the ANDA applicant does or does not intend to challenge the patent. We cannot predict whether any patents issuing from our pendingpatent applications will be eligible for listing in the Orange Book, how any generic competitor would address such patents, whether we would sue on anysuch patents, or the outcome of any such suit. We may not be successful in securing or maintaining proprietary patent protection for products and technologies we develop or license. Moreover, if anypatents that are granted and listed in the Orange Book are successfully challenged by way of a Paragraph IV certification and subsequent litigation, theaffected product could immediately face generic competition and its sales would likely decline rapidly and materially. Should sales decline, we may have towrite off a portion or all of the intangible assets associated with the affected product and our results of operations and cash flows could be materially andadversely affected. One of our collaboration partners is evaluating a product candidate in the same indication as our lead product candidate crenezumab. Our collaboration partner Genentech is a subsidiary of Roche, which is evaluating gantenerumab, a product candidate for the same indication as our leadproduct candidate crenezumab, and Roche’s collaboration partner MorphoSys AG announced in March 2017 that Roche plans to initiate multiple phase 3programs for gantenerumab in patients with prodromal to mild AD. Our collaboration agreement with Genentech for crenezumab provides Genentech withcontrol over, and responsibility for, the clinical development process, including obtaining regulatory and marketing approvals, manufacturing costs and salesand marketing costs. In addition, the collaboration agreement provides that Genentech may terminate the agreement at any time by providing three months’notice to us. As a result, Roche may choose to devote more time and resources to advancing gantenerumab instead of crenezumab, which could rendercrenezumab non-competitive and limit or make it more difficult for us to achieve or maintain profitability with crenezumab. Should this occur, our business,financial condition and results of operations could be materially impacted. 7 Table of Contents The successful commercialization of our product candidates will depend in part on the extent to which governmental authorities and health insurersestablish adequate coverage and reimbursement levels and pricing policies. The successful commercialization of our product candidates will depend, in part, on the extent to which coverage and reimbursement for our productswill be available from government and health administration authorities, private health insurers and other third-party payors. To manage healthcare costs,many governments and third-party payors increasingly scrutinize the pricing of new technologies and require greater levels of evidence of favorable clinicaloutcomes and cost-effectiveness before extending coverage. In light of such challenges to prices and increasing levels of evidence of the benefits and clinicaloutcomes of new technologies, we cannot be sure that coverage will be available for any of our current or future product candidates that we commercializeand, if available, that the reimbursement rates will be adequate. If we are unable to obtain adequate levels of coverage and reimbursement for our productcandidates, their marketability will be negatively and materially impacted. Third party payors may deny coverage and reimbursement status altogether of a given drug product, or cover the product but may also establish prices atlevels that are too low to enable us to realize an appropriate return on our investment in product development. Because the rules and regulations regardingcoverage and reimbursement change frequently, in some cases at short notice, even when there is favorable coverage and reimbursement, future changes mayoccur that adversely impact the favorable status. Further, the net reimbursement for drug products may be subject to additional reductions if there are changesto laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. The unavailability or inadequacy of third-party coverage and reimbursement could have a material adverse effect on the market acceptance of ourproduct candidates and the future revenues we may expect to receive from those products. In addition, we are unable to predict what additional legislation orregulation relating to the healthcare industry or third-party coverage and reimbursement may be enacted in the future, or what effect such legislation orregulation would have on our business. Our products may not gain market acceptance, in which case we may not be able to generate product revenues, which will materially adversely affect ourbusiness, financial condition and results of operations. Even if the FDA, the EMA or other regulatory authority approves the marketing of any product candidates that we develop, physicians, healthcareproviders, patients or the medical community may not accept or use them. Efforts to educate the medical community and third-party payors on the benefits ofour product candidates may require significant resources and may not be successful. If any of our current or future product candidates does not achieve anadequate level of acceptance, we may not generate significant product revenues or any profits from operations. The degree of market acceptance of ourproduct candidates that are approved for commercial sale will depend on a variety of factors, including: ·how clinicians and potential patients perceive our novel products; ·the timing of market introduction; ·the number and clinical profile of competing products; ·our ability to provide acceptable evidence of safety and efficacy or clinical utility; ·the prevalence and severity of any side effects; ·relative convenience and ease of administration; ·cost-effectiveness; ·patient diagnostics and screening infrastructure in each market; ·marketing and distribution support; ·availability of coverage, reimbursement and adequate payment from health maintenance organizations 8 Table of Contents and other third-party payors, both public and private; and ·other potential advantages over alternative treatment methods. If our product candidates fail to gain market acceptance, this will have a material adverse impact on our ability to generate revenues to provide asatisfactory, or any, return on our investments. Even if some products achieve market acceptance, the market may prove not to be large enough to allow us togenerate significant revenues. In addition, the potential market opportunity of our product candidates is difficult to precisely estimate. Our estimates of the potential marketopportunity are predicated on several key assumptions such as industry knowledge and publications, third-party research reports and other surveys. Theseassumptions involve the exercise of significant judgment on the part of our management, are inherently uncertain and the reasonableness of theseassumptions could not have been assessed by an independent source in every detail. If any of the assumptions proves to be inaccurate, then the actual marketfor our product candidates could be smaller than our estimates of the potential market opportunity. If the actual market for our product candidates is smallerthan we expect, or if any approved products fail to achieve an adequate level of acceptance by physicians, health care payors and patients, our productrevenue may be limited and it may be more difficult for us to achieve or maintain profitability. We depend on enrollment of patients in our clinical studies for our product candidates. If we are unable to enroll patients in our clinical studies, ourresearch and development efforts could be materially adversely affected. Successful and timely completion of clinical studies will require that we enroll a sufficient number of patient candidates. Studies may be subject todelays as a result of patient enrollment taking longer than anticipated or patient withdrawal. Patient enrollment depends on many factors, including the sizeand nature of the patient population, eligibility criteria for the study, the proximity of patients to clinical sites, the design of the clinical protocol, theavailability of competing clinical studies, the availability of new drugs approved for the indication the clinical study is investigating, and clinicians’ andpatients’ perceptions as to the potential advantages of the drug being studied in relation to other available therapies. In the Phase 3 clinical studies ofcrenezumab, our collaboration partner Genentech seeks the enrollment of patients in the early stages of AD and it may be unable to successfully identify anadequate number of eligible patients. The specific target population of patients and therapeutic time windows may make it difficult for us to enroll enough patients to complete our clinicalstudies in a timely and cost-effective manner. Delays in the completion of any clinical study of our product candidates will increase our costs, slow down ourproduct candidate development and approval process and delay or potentially jeopardize our ability to commence product sales and generate revenue. Inaddition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical studies may also ultimately lead to the denial ofregulatory approval of our product candidates. If serious adverse, undesirable or unacceptable side effects are identified during the development of our product candidates or following approval, ifany, we may need to abandon our development of such product candidates, the commercial profile of any approved label may be limited, or we may besubject to other significant negative consequences following marketing approval, if any. If our product candidates are associated with serious adverse, undesirable or unacceptable side effects, we may need to abandon their development orlimit development to certain uses or sub-populations in which such side effects are less prevalent, less severe or more acceptable from a risk-benefitperspective. Many compounds that initially showed promise in preclinical or early stage testing have later been found to cause side effects that restrictedtheir use and prevented further development of the compound for larger indications. Genentech has not disclosed detailed information about serious adverse events associated with crenezumab either publicly or to us. However, at the 2014Alzheimer’s Association International Conference, it was reported that in the combined Phase 2 study populations, serious adverse events occurred at similarrates in patients treated with crenezumab (16.5%) and in patients given a placebo (11.9%). In addition, adverse events identified in the clinical studies ofcrenezumab initiated to date have included inflammation of the throat and nasal passages, urinary tract infections and upper respiratory infections. At the2016 Clinical Trials on Alzheimer’s Disease (CTAD) AAIC meeting it was reported that in a Phase 1 clinical trial no dose-limiting toxicities were observed atdoses of crenezumab of up to 120mg/kg. At the 2017 AAIC meeting it was reported that in a Phase 1b study to evaluate higher doses of crenezumab, no dose-limiting toxicities occurred. Twelve non drug related 9 Table of Contents serious adverse events were observed in nine AD patients during the randomized and active extension phases including malignant melanoma; an accidentaloverdose; pneumonia; fall; subdural hematoma; contusion; nephrolithiasis; non-cardiac chest pain; pulmonary emboli; urinary bladder hemorrhage;subdural hematoma and atypical chest pain. As reported in 2017, five serious adverse events were observed in three patients during clinical studies of ACI-35, although we believe that these seriousadverse events were not related to the treatment. Acute pyelonephritis, or kidney infection, and dizziness were observed in one patient and sick sinussyndrome was reported for a second patient, and these were labeled as possibly related due to the close timing proximity with the last administration of ACI-35. In the third patient, urosepsis, or blood poisoning, and pyelonephritis were described and classified as unlikely related to the drug. A relationshipbetween these serious adverse effects and ACI-35 cannot be ruled out, however. Thirteen non-drug related serious adverse effects were observed during clinical studies of ACI-24 in mild to moderate AD patients. They were onemalignant colon polyp, one wound infection associated with a planned hip replacement, one radius fracture, one intra-abdominal cancer of unknown originfollowed by the death of the patient, one fall complicated by vertebral compression fracture, one acute chest pain, one death due to Alzheimer’s disease, onedeath considered to be due to complications from coronary artery disease, one case of pneumonia, one case of breast cancer and three successive episodes ofpancreatitis in addition to gallstones in one patient. Occurrence of serious procedure- or treatment-related side effects could impede clinical study enrollment and receipt of marketing approval from theFDA, the EMA and comparable foreign regulatory authorities. Adverse events could also adversely affect physician or patient acceptance of our productcandidates. Additionally if one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by suchproducts, a number of potentially significant negative consequences could result, including: ·regulatory authorities may withdraw approvals of such product and require us to take any approved products off the market; ·regulatory authorities may require the addition of labeling statements, specific warnings, a contraindication or field alerts to physicians andpharmacies; ·we may be required to create a medication guide outlining the risks of such side effects for distribution to patients; ·we may be required to change the way the product is administered, conduct additional studies or change the labeling of the product; ·we may be subject to limitations in how we promote the product; ·sales of the product may decrease significantly; ·we could be sued and held liable for harm caused to patients; and ·our reputation and physician or patient acceptance of our products may suffer. Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and couldsignificantly harm our business, results of operations and prospects. We operate in highly competitive and rapidly changing industries, which may result in others discovering, developing or commercializing competingproducts before or more successfully than we do. The biopharmaceutical and pharmaceutical industries are highly competitive and subject to significant and rapid technological change. Our success ishighly dependent on our ability to discover, develop and obtain marketing approval for new and innovative products on a cost-effective basis and to marketthem successfully. In doing so, we face and will continue to face intense competition from a variety of businesses, including large, fully integratedpharmaceutical companies, specialty pharmaceutical companies and biopharmaceutical companies, academic institutions, government agencies and otherprivate and public research institutions in 10 Table of Contents Europe, the United States and other jurisdictions. Many of our potential competitors, alone or with their strategic partners, have substantially greaterfinancial, technical and human resources than we do and significantly greater experience in the discovery and development of product candidates, obtainingFDA and other regulatory approvals of treatments and the commercialization of those treatments. Mergers and acquisitions in the biotechnology andpharmaceutical industries may result in even more resources being concentrated among a smaller number of our competitors. Our commercial opportunitycould be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, aremore convenient or are less expensive than any products that we may develop. Our competitors also may obtain FDA or other regulatory approval for theirproducts more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able toenter the market. We believe that our key competitor product candidates are (i) aducanumab (Biogen) and gantenerumab (Roche) for crenezumab; (ii) CAD-106(Novartis), UB-311 (United Neuroscience) and ABvac 40 (Araclon Biotech) for ACI-24; (iii) AADVAC1 (Axon Neurosciences) for ACI-35; BIIB092 (Biogen)and ABBV-8E12 (Abbvie) for Tau antibody and (vi) Flortaucipir (Eli Lilly) for Tau-PET imaging tracer, as described under “Item 4. Information on theCompany – B. Business Overview – Competition” The highly competitive nature of and rapid technological changes in the biotechnology and pharmaceutical industries could render our productcandidates or our technology obsolete or non-competitive. Our competitors may, among other things: ·develop and commercialize products that are safer, more effective, less expensive, or more convenient or easier to administer; ·obtain quicker regulatory approval; ·establish superior intellectual property and proprietary positions; ·have access to more manufacturing capacity; ·implement more effective approaches to sales and marketing; or ·form more advantageous strategic alliances. Should any of these occur, our business, financial condition and results of operations could be materially adversely affected. We may not be successful in our efforts to use and expand our Morphomer proprietary technology platform to build additional product candidates forour pipeline. A key element of our strategy is to use and expand our Morphomer proprietary technology platform to create unique drug therapies for conformationaldiseases, such as AD, and progress these product candidates through clinical development. Although our research and development efforts to date haveresulted in a pipeline of product candidates, we may not be able to develop product candidates that are safe and effective. Even if we are successful incontinuing to build our pipelines, the potential product candidates that we identify may not be suitable for clinical development, including as a result ofbeing shown to have harmful side effects or other characteristics that indicate that they are unlikely to be products that will receive marketing approval andachieve market acceptance. If we do not continue to successfully develop and begin to commercialize product candidates, we will face difficulty in obtainingproduct revenues in future periods, which could result in significant harm to our financial position and adversely affect the price of our common shares. Our business is subject to economic, political, regulatory and other risks associated with international operations. Our business is subject to risks associated with conducting business internationally. We and a number of our suppliers and collaborative and clinicalstudy relationships are located outside the United States. Accordingly, our future results could be harmed by a variety of factors, including: ·economic weakness, including inflation, or political instability in particular non-U.S. economies and markets; 11 Table of Contents ·differing regulatory requirements for drug approvals in non-U.S. countries; ·potentially reduced protection for intellectual property rights; ·difficulties in compliance with non-U.S. laws and regulations; ·changes in non-U.S. regulations and customs, tariffs and trade barriers; ·changes in non-U.S. currency exchange rates and currency controls; ·changes in a specific country’s or region’s political or economic environment; ·trade protection measures, import or export licensing requirements or other restrictive actions by U.S. or non-U.S. governments; ·negative consequences from changes in tax laws; ·compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; ·workforce uncertainty in countries where labor unrest is more common than in the United States; ·difficulties associated with staffing and managing international operations, including differing labor relations; ·production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and ·business interruptions resulting from geo-political actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floodsand fires. We have no history of commercializing pharmaceutical products, which may make it difficult to evaluate the prospects for our future viability. We began our operations in 2003. Our operations to date have been limited to financing and staffing our company, developing our technology anddeveloping crenezumab and our other product candidates. We have not yet demonstrated an ability to successfully complete a large-scale, pivotal clinicalstudy, obtain marketing approval, manufacture a commercial scale product or conduct sales and marketing activities necessary for successful productcommercialization. Consequently, predictions about our future success or viability may not be as accurate as they could be if we had a history of successfullydeveloping and commercializing pharmaceutical products. Our future growth and ability to compete depends on retaining our key personnel and recruiting additional qualified personnel. Our success depends upon the continued contributions of our key management, scientific and technical personnel, many of whom have substantialexperience with or been instrumental for us and our projects. Members of our key management include Dr. Andrea Pfeifer, our Chief Executive Officer;Dr. Andreas Muhs, our Chief Scientific Officer; Dr. Olivier Sol, our Head of Clinical Team; Joerg Hornstein, our Chief Financial Officer; and Jean-FabienMonin, our Chief Administrative Officer. The loss of our key managers and senior scientists could delay our research and development activities. Laws and regulations on executivecompensation, including legislation in our home country, Switzerland, may restrict our ability to attract, motivate and retain the required level of qualifiedpersonnel. In Switzerland, new legislation affecting public companies has been passed that, among other things, (i) imposes an annual binding shareholders’“say on pay” vote with respect to the compensation of executive management, including executive officers and the board of directors; (ii) prohibitsseverance, advances, transaction premiums and similar payments to executive officers and directors; and (iii) requires companies to specify variouscompensation-related matters in their articles of association, thus requiring them to be approved by a shareholders’ vote. In addition, the competition forqualified personnel in the biopharmaceutical and pharmaceutical field is intense, 12 Table of Contents and our future success depends upon our ability to attract, retain and motivate highly-skilled scientific, technical and managerial employees. We facecompetition for personnel from other companies, universities, public and private research institutions and other organizations. If our recruitment andretention efforts are unsuccessful in the future, it may be difficult for us to implement business strategy, which could have a material adverse effect on ourbusiness. We expect to expand our development, and regulatory capabilities, and as a result, we may encounter difficulties in managing our growth, which coulddisrupt our operations. We expect to experience growth in the number of our employees and the scope of our operations. To manage our anticipated future growth, we mustcontinue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additionalqualified personnel. Due to our limited financial resources, we may not be able to effectively manage the expansion of our operations or recruit and trainadditional qualified personnel. The expansion of our operations may lead to significant costs and may divert our management and business developmentresources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations. We may become exposed to costly and damaging liability claims, either when testing our product candidates in the clinic or at the commercial stage;and our product liability insurance may not cover all damages from such claims. We are exposed to potential product liability and professional indemnity risks that are inherent in the research, development, manufacturing, marketingand use of pharmaceutical products. Currently we have no products that have been approved for commercial sale; however, our current and future use ofproduct candidates in clinical studies, and the sale of any approved products in the future, may expose us to liability claims. These claims might be made bypatients that use the product, healthcare providers, pharmaceutical companies or others selling such products. Any claims against us, regardless of their merit,could be difficult and costly to defend and could materially adversely affect the market for our product candidates or any prospects for commercialization ofour product candidates. Although the clinical study process is designed to identify and assess potential side effects, it is always possible that a drug, even after regulatoryapproval, may exhibit unforeseen side effects. If any of our product candidates were to cause adverse side effects during clinical studies or after approval ofthe product candidate, we may be exposed to substantial liabilities. Physicians and patients may not comply with any warnings that identify known potentialadverse effects and patients who should not use our product candidates. We purchase liability insurance in connection with the clinical studies that we undertake in amounts that we consider to be consistent with industrynorms. It is possible that our liabilities could exceed our insurance coverage. We intend to expand our insurance coverage to include the sale of commercialproducts if we obtain marketing approval for any of our product candidates. However, we may not be able to maintain insurance coverage at a reasonable costor obtain insurance coverage that will be adequate to satisfy any liability that may arise. If a successful product liability claim or series of claims is broughtagainst us for uninsured liabilities or in excess of insured liabilities, our assets may not be sufficient to cover such claims and our business operations couldbe impaired. Should any of the events described above occur, this could have a material adverse effect on our business, financial condition and results of operations. We may seek to obtain orphan drug designation for certain of our product candidates. Orphan drug designation may not ensure that we will enjoymarket exclusivity in a particular market, and if we fail to obtain or maintain orphan drug exclusivity for such product candidates, we may be subject toearlier competition and our potential revenue will be reduced. Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is intended to treat a rare disease or condition, defined as a patientpopulation of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States where there is no reasonableexpectation that the cost of developing the drug will be recovered from sales in the United States. In the European Union, the EMA’s Committee for OrphanMedicinal Products, or COMP, grants orphan drug designation to promote the development of products which meet the following criteria: a) they areintended for the diagnosis, prevention, or treatment of a life-threatening or chronically debilitating condition affecting not more than five in 10,000 personsin the European Union or for products that are intended for the diagnosis, prevention, or treatment of a life-threatening, seriously debilitating or serious andchronic condition when, without incentives, it is unlikely 13 Table of Contents that sales of the drug in the European Union would be sufficient to justify the necessary investment in developing the drug or biological product; and b)there is no satisfactory method of diagnosis, prevention, or treatment, or, if such a method exists, the medicine must be of significant benefit to those affectedby the condition. In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical study costs,tax advantages and user-fee waivers. In addition, if a product receives the first FDA approval for the indication for which it has orphan designation, theproduct is entitled to orphan drug exclusivity, which means the FDA may not approve any other application to market the same drug for the same indicationfor a period of seven years, except in limited circumstances, such as a showing of clinical superiority over the product with orphan exclusivity or where themanufacturer is unable to assure sufficient product quantity. In the European Union, orphan drug designation entitles a party to financial incentives such asreduction of fees or fee waivers and ten years of market exclusivity for the orphan indication following drug or biological product approval, provided that thecriteria for orphan designation are still applicable at the time of the granting of the marketing authorization. This period may be reduced to six years if at theend of the fifth year, the orphan drug designation criteria are no longer met, including where it is shown that the product is sufficiently profitable not tojustify maintenance of market exclusivity. We may not be able to obtain orphan drug designation for any of our product candidates, and even if we do, we may not be the first to obtain marketingapproval for any particular orphan indication due to the uncertainties associated with developing pharmaceutical products. Further, even if we obtain orphandrug designation for a product, that exclusivity may not effectively protect the product from competition because different drugs with different activemoieties can be approved for the same condition. Orphan drug designation neither shortens the development time or regulatory review time of a drug norgives the drug any advantage in the regulatory review or approval process. Due to our limited resources and access to capital, we must prioritize development of certain product candidates. Because we have limited resources and access to capital to fund our operations, we must decide which product candidates to pursue and the amount ofresources to allocate to each. Our decisions concerning the allocation of research, collaboration, management and financial resources toward particularcompounds, product candidates or therapeutic areas may not lead to the development of viable commercial products and may divert resources away frombetter opportunities. Similarly, our potential decisions to delay, terminate or collaborate with third parties in respect of certain product developmentprograms may also prove not to be optimal and could cause us to miss valuable opportunities. If we make incorrect determinations regarding the marketpotential of our product candidates or misread trends in the biopharmaceutical industry, in particular for neurological disorders, our business, financialcondition and results of operations could be materially adversely affected. Our research and development activities could be affected or delayed as a result of possible restrictions on animal testing. Certain laws and regulations require us to test our product candidates on animals before initiating clinical studies in humans. Animal testing activitieshave been the subject of controversy and adverse publicity. Animal rights groups and other organizations and individuals have attempted to stop animaltesting activities by pressing for legislation and regulation in these areas and by disrupting these activities through protests and other means. To the extentthe activities of these groups are successful, our research and development activities may be interrupted, delayed or become more expensive. Our internal computer systems, or those used by our third-party research institution collaborators, CROs or other contractors or consultants, may failor suffer security breaches. Despite the implementation of security measures, our internal computer systems and those of our future CROs and other contractors and consultants maybe vulnerable to damage from computer viruses and unauthorized access. Although to our knowledge we have not experienced any such material systemfailure or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of ourdevelopment programs and our business operations. For example, the loss of clinical trial data from completed, ongoing or future clinical trials could result indelays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Likewise, we rely on our third-party researchinstitution collaborators for research and development of our product candidates and other third parties for the manufacture of our product candidates and toconduct clinical trials, and similar events relating to their 14 Table of Contents computer systems could also have a material adverse effect on our business. To the extent that any disruption or security breach were to result in a loss of, ordamage to, our data or systems, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further developmentand commercialization of our product candidates could be delayed. Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses. Our operations, and those of our third-party research institution collaborators, CROs, CMOs, suppliers, and other contractors and consultants, could besubject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions,medical epidemics, and other natural or man-made disasters or business interruptions, for which we are partly uninsured. In addition, we rely on our third-party research institution collaborators for conducting research and development of our product candidates, and they may be affected by governmentshutdowns or withdrawn funding. The occurrence of any of these business disruptions could seriously harm our operations and financial condition andincrease our costs and expenses. We rely on third party manufacturers to produce and process our product candidates. Our ability to obtain clinical suppliesof our product candidates could be disrupted if the operations of these suppliers are affected by a man-made or natural disaster or other business interruption. All of our operations including our corporate headquarters are located in a single facility in Lausanne, Switzerland. Damage or extended periods ofinterruption to our corporate, development or research facilities due to fire, natural disaster, power loss, communications failure, unauthorized entry or otherevents could cause us to cease or delay development of some or all of our product candidates. Although we maintain property damage and businessinterruption insurance coverage on these facilities, our insurance might not cover all losses under such circumstances and our business may be seriouslyharmed by such delays and interruption. We have never commercialized a product candidate before and may lack the necessary expertise, personnel and resources to successfully commercializeour products on our own or together with suitable partners. We have never commercialized a product candidate, and we currently have no sales force, marketing or distribution capabilities. To achieve commercialsuccess for our product candidates, we will have to develop our own sales, marketing and supply organization or outsource these activities to a third party. Factors that may affect our ability to commercialize our product candidates on our own include recruiting and retaining adequate numbers of effectivesales and marketing personnel, obtaining access to or persuading adequate numbers of physicians to prescribe our drug candidates and other unforeseen costsassociated with creating an independent sales and marketing organization. Developing a sales and marketing organization requires significant investment, istime-consuming and could delay the launch of our product candidates. We may not be able to build an effective sales and marketing organization. If we areunable to build our own distribution and marketing capabilities or to find suitable partners for the commercialization of our product candidates, we may notgenerate revenues from them or be able to reach or sustain profitability. Risks Related to Our Relationships with Third Parties If we fail to maintain our current strategic relationships with Genentech, Janssen, Piramal and other of our current or future strategic partners, ourbusiness, commercialization prospects and financial condition may be materially adversely affected. We have two partnerships with Genentech. In 2006, we granted Genentech an exclusive, worldwide license for crenezumab. In 2012, we entered into asecond partnership to commercialize our anti-Tau antibodies for use as immunotherapies. We partner with Janssen Pharmaceuticals, Inc. (Janssen) to developand commercialize therapeutic anti-Tau vaccines for the treatment of AD and potentially other Tauopathies. We also have a diagnostic partnership withPiramal Imaging for a compound from our Morphomer chemical library that binds pathogenic Tau for use as a positron emission tomography, or PET, tracer.Genentech has the right to terminate its agreements with us at any time and for any reason upon providing us with a certain notice period. After a specifiedamount of time, Janssen and Piramal will also each have the right to terminate their agreements with us for any reason upon providing us with a certain noticeperiod. If Genentech, Janssen, Piramal or other of our current or future strategic partners terminates its agreement with us at any time, it could delay or preventdevelopment of our product candidates and materially harm our business, financial condition, commercialization prospects and results of operations. 15 Table of Contents Good relationships with Genentech, Janssen, Piramal and other of our current or future strategic partners are important for our business prospects. If ourrelationships with Genentech, Janssen, Piramal or other of our current or future strategic partners were to deteriorate substantially or Genentech, Janssen,Piramal or other of our current or future strategic partners were to challenge our use of their intellectual property or our calculations of the payments we oweunder our agreements, our business, financial condition, commercialization prospects and results of operations could be materially adversely affected. Lastly, our collaboration agreement with Genentech for crenezumab provides Genentech with control over, and responsibility for, the clinicaldevelopment process, including obtaining regulatory and marketing approvals, manufacturing costs and sales and marketing costs. Our other existingcollaboration agreements provide our collaboration partners with similar control over the clinical development process and future collaboration agreementsmay also relinquish development control to our partners. Genentech or our other current or future collaboration partners may separately pursue competingproducts, therapeutic approaches or technologies to develop treatments for the diseases targeted by us or our collaborative efforts. Even if our partnerscontinue their contributions to the collaborative agreements to which we are a party, they may nevertheless determine not to actively pursue the developmentor commercialization of any resulting products. Our partners may also fail to perform their obligations under the collaboration agreements or may be slow inperforming their obligations. Any of these circumstances could result in a material adverse impact on our business, financial condition, commercializationprospectus or results of operations. We may seek to form additional strategic alliances in the future with respect to our product candidates, and if we do not realize the benefits of suchalliances, our business, financial condition, commercialization prospects and results of operations may be materially adversely affected. Our product development programs and the potential commercialization of our product candidates will require substantial additional cash to fundexpenses and may require expertise, such as sales and marketing expertise, which we do not currently possess. Therefore, in addition to our relationships withGenentech, Janssen and Piramal, we may decide to enter into strategic alliances, or create joint ventures or collaborations with pharmaceutical orbiopharmaceutical companies for the further development and potential commercialization of those and other of our product candidates. We face significant competition in seeking appropriate collaborators. Collaborations are complex and time-consuming to negotiate and document. Anydelays in entering into new strategic partnership agreements related to our product candidates could delay the development and commercialization of ourproduct candidates and reduce their competitiveness even if they reach the market. We may also be restricted under existing and future collaborationagreements from entering into strategic partnerships or collaboration agreements on certain terms with other potential collaborators. We may not be able tonegotiate collaborations on acceptable terms, or at all, for any of our existing or future product candidates and programs because the potential partner mayconsider that our research and development pipeline is insufficiently developed to justify a collaborative effort, or that our product candidates and programsdo not have the requisite potential to demonstrate safety and efficacy in the target population. If we are unsuccessful in establishing and maintaining acollaboration with respect to a particular product candidate, we may have to curtail the development of that product candidate, reduce the scope of or delayits development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of our sales ormarketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense for which we have notbudgeted. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital,which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we will not be able to bring our product candidates tomarket and generate product revenue. Even if we are successful in establishing a new strategic partnership or entering into a collaboration agreement, wecannot be certain that, following such a strategic transaction or license, we will be able to progress the development and commercialization of the applicableproduct candidates as envisaged, or that we will achieve the revenues that would justify such transaction, and we could be subject to the following risks, eachof which may materially harm our business, commercialization prospects and financial condition: ·we may not be able to control the amount and timing of resources that the collaboration partner devotes to the product development program; ·the collaboration partner may experience financial difficulties; ·we may be required to grant or otherwise relinquish important rights such as marketing, distribution and intellectual property rights; 16 Table of Contents ·a collaboration partner could move forward with a competing product developed either independently or in collaboration with third parties,including our competitors; or ·business combinations or significant changes in a collaboration partner’s business strategy may adversely affect our willingness to complete ourobligations under any arrangement. We rely on third parties to conduct our nonclinical and clinical studies and perform other tasks for us. If these third parties do not successfully carry outtheir contractual duties, meet expected deadlines, or comply with regulatory requirements, we may not be able to obtain regulatory approval for orcommercialize our product candidates and our business could be substantially harmed. We have relied upon and plan to continue to rely upon third-party clinical research organizations, or CROs, to monitor and manage data for our ongoingnonclinical and clinical programs, including the clinical studies of our product candidates. We rely on these parties for execution of our nonclinical andclinical studies and control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted inaccordance with the applicable protocol, legal, regulatory and scientific standards and our reliance on the CROs does not relieve us of our regulatoryresponsibilities. We and our CROs and other vendors are required to comply with current good manufacturing practices, or cGMP, current good clinicalpractice, or cGCP, and Good Laboratory Practice, or GLP, which are regulations and guidelines enforced by the FDA, the Competent Authorities of theMember States of the European Union and comparable foreign regulatory authorities for all of our product candidates in nonclinical and clinicaldevelopment. Regulatory authorities enforce these regulations through periodic inspections of study sponsors, principal investigators, study sites and othercontractors. If we or any of our CROs or vendors fail to comply with applicable regulations, the data generated in our nonclinical and clinical studies may bedeemed unreliable and the EMA, FDA, other regulatory authorities may require us to perform additional nonclinical and clinical studies before approving ourmarketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that all of ourclinical studies comply with cGCP regulations. In addition, our clinical studies must be conducted with products produced under cGMP regulations. Ourfailure to comply with these regulations may require us to repeat clinical studies, which would delay the regulatory approval process. If any of our relationships with these third-party CROs terminates, we may not be able to enter into arrangements with alternative CROs or do so oncommercially reasonable terms. In addition, our CROs are not our employees, and except for remedies available to us under our agreements with such CROs,we cannot control whether or not they devote sufficient time and resources to our on-going nonclinical and clinical programs. If CROs do not successfullycarry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the data they obtain iscompromised due to the failure to adhere to our protocols, regulatory requirements, or for other reasons, our clinical studies may be extended, delayed, orterminated and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. CROs may also generate highercosts than anticipated. As a result, our results of operations and the commercial prospects for our product candidates would be harmed, our costs couldincrease, and our ability to generate revenue could be delayed. Switching or adding additional CROs involves additional cost and requires management time and focus. In addition, there is a natural transition periodwhen a new CRO commences work. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines.Though we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter similar challenges or delays in the futureor that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects. We currently rely on third-party suppliers and other third parties for production of our product candidates and our dependence on these third partiesmay impair the advancement of our research and development programs and the development of our product candidates. We currently rely on and expect to continue to rely on third parties, for the manufacturing and supply of chemical compounds for the clinical studies ofour current and future product candidates. For the foreseeable future, we expect to continue to rely on such third parties for the manufacture of any of ourproduct candidates on a clinical or commercial scale, if any of our product candidates receives regulatory approval. Reliance on third-party providers mayexpose us to different risks than if we were to manufacture product candidates ourselves. The facilities used by our contract manufacturers to manufacture ourproduct candidates must be approved by the FDA or other regulatory authorities pursuant to inspections that will be conducted after we submit our NDA orcomparable marketing application to the FDA or other regulatory authority. We do not have control over a supplier’s or manufacturer’s compliance withthese laws, regulations and applicable cGMP 17 Table of Contents standards and other laws and regulations, such as those related to environmental health and safety matters. If our contract manufacturers cannot successfullymanufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or others, they will not be able to secure and/ormaintain regulatory approval for their manufacturing facilities. In addition, we have no control over the ability of our contract manufacturers to maintainadequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority does not approve these facilitiesfor 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 achieveand maintain compliance with these laws, regulations and standards could subject us to the risk that we may have to suspend the manufacturing of ourproduct candidates or that obtained approvals could be revoked, which would adversely affect our business and reputation. Third-party providers may breach agreements they have with us because of factors beyond our control. Contract manufacturers often encounterdifficulties involving production yields, quality control and quality assurance, as well as shortages of qualified personnel. They may also terminate or refuseto 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 studies could be delayed or our commercial activitiescould be harmed. In addition, the fact that we are dependent on our suppliers and other third parties for the manufacture, storage and distribution of our product candidatesmeans that we are subject to the risk that our product candidates and, if approved, commercial products may have manufacturing defects that we have limitedability to prevent or control. The sale of products containing such defects could result in recalls or regulatory enforcement action that could adversely affectour business, financial condition and results of operations. Growth in the costs and expenses of components or raw materials may also adversely influence our business, financial condition and results ofoperations. Supply sources could be interrupted from time to time and, if interrupted, we cannot be certain that supplies could be resumed (whether in part orin whole) within a reasonable timeframe and at an acceptable cost or at all. Our current and anticipated future dependence upon others for the manufacturingof our current and future product candidates may adversely affect our future profit margins and our ability to commercialize any products that receivemarketing approval on a timely and competitive basis. Our collaboration arrangements with our strategic partners may make us an attractive target for potential acquisitions under certain circumstances. Under certain circumstances, due to the structure of our collaboration arrangements with our strategic partners, our strategic partners may prefer toacquire us rather than paying the milestone payments or royalties under the collaboration arrangements, which may bring additional uncertainties to ourbusiness development and prospects. For example, under our collaboration arrangements with Genentech and Janssen, we may become entitled to substantialmilestone payments and royalties. As a result, rather than paying the milestone payments or royalties, Genentech or Janssen, or one of their affiliatesincluding Roche or Johnson & Johnson, may choose to acquire us. Risks Related to Intellectual Property We may not have sufficient patent terms to effectively protect our products and business. Patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed. Although various extensionsor adjustments may be available, such as adjustments based on certain delays caused by the United States Patent and Trademark Office, or the USPTO, the lifeof a patent, and the protection it affords, is limited. Given the amount of time required for the development, testing and regulatory review of new productcandidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned, co-owned andlicensed patent portfolios may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours or otherwiseprovide us with a competitive advantage. Even if patents covering our product candidates are obtained and unchallenged, once the patent life has expired fora product, we may be open to competition from generic medications. While patent term extensions under the Hatch-Waxman Act, in the United States and under supplementary protection certificates in Europe may beavailable to extend the patent exclusivity term for our products, we 18 Table of Contents cannot provide any assurances that any such patent term extension will be obtained and, if so, for how long. The Hatch-Waxman Act permits a patentextension term of up to five years as compensation for patent term lost during the FDA regulatory review process. A patent term extension cannot extend theremaining term of a patent beyond a total of 14 years from the date of product approval, only one patent may be extended and only those claims covering theapproved drug, a method for using it or a method for manufacturing it may be extended. However, we may not be granted any extension because of, forexample, failing to exercise due diligence during the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to applyprior to expiration of relevant patents or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patentprotection afforded could be less than we request. If we are unable to obtain patent term extension or the term of any such extension is less than we request,such result could have a material adverse effect on our business. We or our licensing or collaboration partners may become subject to intellectual property-related litigation or other proceedings to protect or enforceour patents or the patents of our licensors or collaborators, any of which could be expensive, time consuming, and unsuccessful, and may ultimatelyresult in our loss of ownership of intellectual property. Competitors may infringe our patents or the patents of our licensors or collaborators. To counter such infringement, we may be required to file claimsagainst those competitors, which can be expensive and time-consuming. If we or one of our licensing or collaboration partners were to initiate legalproceedings against a third party to enforce a patent covering one of our product candidates, the defendant could counterclaim that the patent covering ourproduct candidate is invalid or unenforceable, or that we infringe the defendant’s patents. In patent litigation in the United States, defendant counterclaimsalleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutoryrequirements, including lack of novelty, obviousness, obviousness-type double patenting, lack of written description, or non-enablement. Grounds for anunenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO, ormade a misleading statement, during prosecution. In addition, third parties may raise similar claims before administrative bodies in the United States orabroad, even outside the context of litigation. Such mechanisms include re-examination, post grant review, inter partes review, interference and derivationproceedings as well as equivalent proceedings in foreign jurisdictions. The outcome following legal assertions of invalidity and unenforceability isunpredictable. Such proceedings or patent litigations could result in the revocation or cancellation of or amendment to our patents in such a way that they nolonger cover our product candidates or otherwise provide any competitive advantage. With respect to the validity question, for example, we cannot be certainthat there is no invalidating prior art, of which the patent examiner and we or our licensing or collaboration partners were unaware during prosecution. Acourt may also refuse to stop a third party from using the technology in question on the grounds that our patents do not cover that technology. An adverseresult in any proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly, which could have a material adverse effecton our business and financial condition. Interference proceedings provoked by third parties or brought by us or declared by the USPTO may be necessary to determine the priority of inventionswith respect to our patents or patent applications or those of our licensors or collaborators. An unfavorable outcome could require us or our licensing orcollaboration partners to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be materiallyharmed if the prevailing party does not offer us or our licensing or collaboration partners a license on commercially reasonable terms or at all. If we or ourlicensing or collaboration partners are unsuccessful in any interference proceedings, we may lose our ownership of intellectual property or our patents may benarrowed or invalidated. There can be no assurance as to the outcome of the interference and opposition proceedings, and any of the foregoing could result ina material adverse effect on our business, financial condition, results of operations or prospects. Our defense of litigation, interference proceedings or other intellectual property-related proceedings may fail and, even if successful, may result insubstantial costs and distract our management and other employees from their normal responsibilities. Such litigation or proceedings could substantiallyincrease our operating losses and could substantially reduce the funds necessary to continue our clinical studies, continue our research programs, licensenecessary technology from third parties, or enter into development partnerships that would help us bring our product candidates to market. We may not beable to prevent, alone or with our licensing or collaboration partners, misappropriation of our intellectual property rights, particularly in countries where thelaws may not protect those rights as fully as in the United States. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of ourconfidential information could be compromised by disclosure 19 Table of Contents during this type of litigation. There could also be public announcements of the results of hearings, motions, decisions or other interim proceedings ordevelopments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our commonshares. If we or our licensing or collaboration partners are unable to obtain and maintain effective patent rights for our technologies, product candidates or anyfuture product candidates, or if the scope of the patent rights obtained is not sufficiently broad, our competitors could develop and commercializeproducts and technology similar or identical to ours, and our ability to successfully commercialize our products and technology may be adverselyaffected. We rely upon a combination of patents, trade secret protection, and confidentiality agreements to protect the intellectual property related to ourtechnologies and product candidates. Our success depends in large part on our and our licensing or collaboration partners’ ability to obtain and maintainpatent and other intellectual property protection in the United States and in other countries with respect to our proprietary technologies and productcandidates. In particular, Genentech or our other licensing or collaboration partners may be dependent on a license with a third party for the development andcommercialization of crenezumab or our other product candidates. If such license is terminated, Genentech or such other licensing or collaboration partnersmay be required to cease development and commercialization of crenezumab or our other product candidates, any of which could have a material adverseeffect on our business, financial condition, results of operations or prospects. We have sought to protect our proprietary position by filing patent applications in the United States and abroad related to any of our novel technologiesand products that are important to our business. This process is expensive, time consuming, and complex, and we may not be able to file and prosecute allnecessary or desirable patent applications at a reasonable cost, in a timely manner or in all jurisdictions. It is also possible that we will fail to identifypatentable aspects of our or our licensing or collaboration partners’ 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 thepatents, covering technology that we license to or from third parties. Therefore, these patents and applications may not be prosecuted and enforced in amanner consistent with the best interests of our business. The patent position of biotechnology and pharmaceutical companies generally is highly uncertain and involves complex legal and factual questions forwhich legal principles remain unsolved. As a result, the inventorship, issuance, scope, validity, enforceability and commercial value of our patent rights arehighly uncertain. The pending or future patent applications that we own, co-own or in-license may fail to issue, fail to result in issued patents with claims thatcover our product candidates in the United States or in other foreign countries, or fail to effectively prevent others from commercializing competitivetechnologies and product candidates. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries maydiminish the value of our patents or narrow the scope of our patent protection. We may not be aware of all third-party intellectual property rights potentially relating to our technologies or product candidates. Publications ofdiscoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions remainconfidential for a period of time after filing, and some remain so until issued. Therefore, we cannot be certain that we were the first to file any patentapplication related to our product candidates or technologies, or whether we were the first to make the inventions claimed in our owned or co-owned patentsor pending patent applications, nor can we know whether those from whom we license patents were the first to make the inventions claimed or were the firstto file. There is no assurance that all potentially relevant prior art relating to our patents and patent applications has been found, which can invalidate a patentor prevent a patent from issuing from a pending patent application. Even if patents do successfully issue, and even if such patents cover our productcandidates, third parties may challenge their validity, enforceability, or scope, which may result in such patents being narrowed, found unenforceable orinvalidated, which could allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result inour inability to manufacture or commercialize products without infringing third party patent rights. Furthermore, even if they are unchallenged, our patentsand patent applications may not adequately protect our intellectual property, provide exclusivity for our product candidates, prevent others from designingaround our claims or provide us with a competitive advantage. Any of these outcomes could impair our ability to prevent competition from third parties,which may have a material adverse effect on our business. 20 Table of Contents We may be subject to claims challenging the inventorship of our patents and other intellectual property. We may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as aninventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved indeveloping our product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship or our ownership of ourpatents or other intellectual property. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectualproperty rights, such as exclusive ownership of, or the right to use, valuable intellectual property. Such an outcome could have a material adverse effect onour business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management andother employees. Patent policy and rule changes could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement ordefense of our issued patents, thereby impairing our ability to protect our technologies and products. Changes in either the patent laws or interpretation of the patent laws in the United States could increase the uncertainties and costs surrounding theprosecution of patent applications and the enforcement or defense of issued patents. Assuming the other requirements for patentability are met, in the UnitedStates prior to March 15, 2013, the first to make the claimed invention is entitled to the patent, while outside the United States, the first to file a patentapplication is entitled to the patent. After March 15, 2013, under the Leahy-Smith America Invents Act, or the Leahy-Smith Act, enacted on September 16,2011, the United States has moved to a first-to-file system. Under a first-to-file system, assuming the other requirements for patentability are met, the firstinventor to file a patent application generally will be entitled to the patent on an invention regardless of whether a third party was the first to invent theinvention. The Leahy-Smith Act also includes a number of significant changes that affect the way patent applications will be prosecuted and may also affectpatent litigation. These include allowing third-party submission of prior art to the USPTO during patent prosecution and additional procedures to attack thevalidity of a patent by the USPTO administered post grant proceedings, including reexamination proceedings, inter partes review, post-grant review andderivation proceedings. The effects of these changes on the operation of our business are currently unclear as, among other reasons, the USPTO must stillimplement various regulations and courts must interpret these changes. However, the Leahy-Smith Act and its implementation could increase theuncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have amaterial adverse effect on our business, financial condition, results of operations and prospects. In addition, the patent positions of companies in the development and commercialization of biologics and pharmaceuticals are particularly uncertain.Recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent ownersin certain situations. This combination of events has created uncertainty with respect to the validity and enforceability of patents, once obtained. Dependingon future actions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable waysthat could have a material adverse effect on our existing patent portfolio and our ability to protect and enforce our intellectual property in the future. If we are unable to maintain effective proprietary rights for our technologies, product candidates or any future product candidates, we may not be ableto compete effectively in our markets. In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how thatis not patentable or that we elect not to patent, processes for which patents are difficult to enforce and any other elements of our product candidate discoveryand development processes that involve proprietary know-how, information or technology that is not covered by patents. However, trade secrets can bedifficult to protect and some courts inside and outside the United States are less willing or unwilling to protect trade secrets. Because we rely on our advisors,employees and third-party contractors and consultants to research and develop and to manufacture our product candidates, we must, at times, share ourintellectual property with them. We seek to protect our intellectual property and other proprietary technology in part by entering into confidentialityagreements and, if applicable, material transfer agreements, consulting agreements or other similar agreements with our advisors, employees, contractors,consultants, licensing and collaboration partners, and other third parties. These agreements typically limit the rights of these third parties to use or discloseour confidential information, including our intellectual property and trade secrets. These agreements also typically restrict the ability of third parties topublish data potentially relating to our intellectual property, although our agreements may contain certain limited publication rights. For example, anyacademic institution that we may collaborate with in the future may expect to be granted rights to publish data arising out of such collaboration, providedthat we may have the right to be notified in advance and given the opportunity to delay publication for a limited time period in order for us to secure patentprotection of 21 Table of Contents intellectual property rights arising from the collaboration, in addition to the opportunity to remove confidential or trade secret information from any suchpublication. In the future, we may also conduct joint research and development programs that may require us to share intellectual property under the terms ofour research and development or similar agreements. However, we cannot guarantee that we have entered into such agreements with each party that may haveor have had access to our trade secrets or other confidential information or proprietary technology and processes or that such agreements will not be breachedor that our trade secrets or other confidential information will not otherwise be disclosed. Despite the contractual provisions employed when working withthese advisors, employees and third party contractors and consultants, the need to share intellectual property and other confidential information increases therisk that such confidential information becomes known by our competitors, is inadvertently incorporated into the product development of others or isdisclosed or used in violation of these agreements. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical andelectronic security of our information technology systems. Despite our efforts to protect our intellectual property, our competitors may discover our tradesecrets through breach of our agreements with third parties, where we may not have adequate remedies for any breach, independent development orpublication of information by any of our licensing or collaboration partners. Additionally, if the steps taken to maintain our trade secrets are deemedinadequate, we may have insufficient recourse against third parties for misappropriating such trade secrets. Misappropriation or unauthorized disclosure ofour trade secrets could impair our competitive position and may have a material adverse effect on our business. Moreover, if any of our trade secrets were tobe lawfully obtained or independently developed by a competitor or other third party, we would have no right to prevent such competitor or other third partyfrom using that technology or information to compete with us. A competitor’s or other third party’s discovery of our intellectual property would impair ourcompetitive position and have a material adverse effect on our business. Further, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. As aresult, we may encounter significant problems in protecting and defending our intellectual property both in the United States and abroad. If we are unable toprevent material disclosure of the intellectual property related to our technologies to third parties, we will not be able to establish or maintain a competitiveadvantage in our market, which could materially adversely affect our business, financial condition and results of operations. Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and otherrequirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with theserequirements. Periodic maintenance fees, renewal fees, annuity fees and various other government fees on a patent and patent application are due to be paid to theUSPTO and foreign patent agencies in several stages over the lifetime of the patent and patent application. The USPTO and various foreign governmentalpatent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent applicationprocess. We employ reputable law firms and other professionals to help us comply with these requirements and we are also dependent on our licensors orcollaboration partners to take the necessary action to comply with these requirements with respect to certain of our intellectual property. While aninadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in whichnoncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevantjurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure torespond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. In such an event,our competitors might be able to enter the market, which would have a material adverse effect on our business. The patent protection and patent prosecution for some of our product candidates is dependent on third parties. While we normally seek to obtain the right to control prosecution, maintenance and enforcement of the patents relating to our product candidates, theremay be times when the filing and prosecution activities for patents relating to our product candidates are controlled by our licensors or collaborationpartners. If any of our current or future licensing or collaboration partners fail to prosecute, maintain and enforce such patents and patent applications in amanner consistent with the best interests of our business, including by payment of all applicable fees for patents covering our product candidates, we couldlose our rights to the intellectual property or our exclusivity with respect to those rights, our ability to develop and commercialize those product candidatesmay be adversely affected and we may not be able to prevent competitors from making, using, and selling 22 Table of Contents competing products. In addition, even where we have the right to control patent prosecution of patents and patent applications we have licensed to and fromthird parties, we may still be adversely affected or prejudiced by actions or inactions of our licensees, our licensors and their counsel that took place prior tothe date upon which we assumed control over patent prosecution. If we fail to comply with the obligations in our intellectual property agreements, including those under which we license intellectual property and otherrights to or from third parties, or otherwise experience disruptions to our business relationships with our licensees, our licensors and partners, we couldlose intellectual property rights that are important to our business. We are a party to a number of intellectual property license and co-ownership agreements that are important to our business and expect to enter intoadditional such agreements in the future. Under certain circumstances, the royalties payable to us under these agreements are subject to certain reductions,which may have a materially adverse effect on our business, financial condition, results of operations and prospects. In addition, our existing agreementsimpose, and we expect that future agreements will impose, various diligence, commercialization, milestone payment, royalty and other obligations on us. Ifwe fail to comply with our obligations under these agreements, or we are subject to a bankruptcy, we may be required to make certain payments to thelicensor, we may lose the exclusivity of our license, or the licensor may have the right to terminate the license, in which event we would not be able todevelop or market products covered by the license. Licensing of intellectual property is of critical importance to our business and involves complex legal, business, and scientific issues. Disputes may ariseregarding intellectual property subject to a licensing or co-ownership agreement, including: ·the scope of rights granted under the agreement and other interpretation-related issues; ·the extent to which our technology and processes infringe or otherwise violate intellectual property of the licensor, the licensee or partner that is notsubject to the agreement; ·the sublicensing of patent and other rights; ·the diligence, development and commercialization obligations under the agreement and what activities satisfy those obligations; ·the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors or collaboration partnersand us; and ·the priority of invention of patented technology. If disputes over intellectual property and other rights that we have licensed or co-own prevent or impair our ability to maintain our current licensing orexclusivity arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates. In addition, certain provisions in the agreements under which we currently license intellectual property or technology to and from third parties may besusceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be thescope of our rights to the relevant intellectual property or technology, increase what we believe to be our financial or other obligations under the relevantagreement, or decrease the third party’s financial or other obligations under the relevant agreement, any of which could have a material adverse effect on ourbusiness, financial condition, results of operations and prospects. We may not be successful in obtaining or maintaining necessary rights to our product candidates through acquisitions and in-licenses. Our programs may in the future require the use of proprietary rights held by third parties, the growth of our business will likely depend in part on ourability to acquire, in-license, maintain or use these proprietary rights. In addition, our product candidates may require specific formulations to workeffectively and efficiently and the rights to these formulations may be held by others. We may be unable to acquire or in-license any compositions, methodsof use, processes, or other third-party intellectual property rights from third parties that we identify as necessary for our product candidates. The licensing andacquisition of third-party intellectual property rights is a competitive area, and a number of more established companies may pursue strategies to license oracquire third- 23 Table of Contents party intellectual property rights that we may consider attractive or necessary. These established companies may have a competitive advantage over us due totheir size, cash resources, and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitormay be unwilling to assign or license rights to us. We also may be unable to license or acquire third-party intellectual property rights on terms that wouldallow us to make an appropriate return on our investment. For example, we sometimes collaborate with U.S. and foreign academic institutions to accelerate our preclinical research or development under writtenagreements with these institutions. Typically, these institutions provide us with an option to negotiate a license to any of the institution’s rights intechnology resulting from the collaboration. Regardless of such option, we may be unable to negotiate a license within the specified timeframe or underterms that are acceptable to us. If we are unable to do so, the institution may offer the intellectual property rights to other parties, potentially blocking ourability to pursue our applicable product candidate or program. If we are unable to successfully obtain a license to third-party intellectual property rights necessary for the development of a product candidate orprogram, we may have to abandon development of that product candidate or program and our business and financial condition could suffer. Third-party claims of intellectual property infringement may expose us to substantial liability or prevent or delay our development andcommercialization efforts. Our commercial success depends on our ability and the ability of our licensees or collaborators to develop, manufacture, market and sell our productcandidates and use our proprietary technology without infringing, misappropriating, or otherwise violating the proprietary rights and intellectual property ofthird parties. The biotechnology and pharmaceutical industries are characterized by extensive and complex litigation regarding patents and other intellectualproperty rights. We may in the future become party to, or be threatened with, adversarial proceedings or litigation regarding intellectual property rights withrespect to our product candidates and technology, including patent infringement lawsuits, interferences, oppositions, reexamination proceedings, inter partesreview, derivation proceedings and post grant review before the USPTO and corresponding foreign patent offices Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we aredeveloping product candidates. For example, we are aware of third party patents that may be construed to cover one or more of our product candidates. Ifthese patents are asserted against us or our licensing or collaboration partners and either we or our licensing or collaboration partners are found to infringeany of these patents, and are unsuccessful in demonstrating that such patents are invalid or unenforceable, then we and our licensing or collaboration partnerscould be required to pay substantial monetary damages or cease further development or commercialization of one or more of our product candidates. Theremay also be other third-party patents or patent applications with claims to materials, formulations, methods of manufacture, or methods of treatment related tothe use or manufacture of our product candidates and technology. Although we generally conduct a freedom to operate search and review with respect to ourproduct candidates, we cannot guarantee that our search and review is complete and thorough, nor can we be sure that we have identified each and everypatent and pending application in the United States and abroad that is relevant or necessary to the commercialization of our product candidates or use of ourtechnology. Because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issuedpatents that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringesupon these patents. Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future, regardless of merit. Even ifwe believe such claims are without merit, a court of competent jurisdiction could hold that these third party patents are valid, enforceable and infringed,which could materially and adversely affect our ability to commercialize our product candidates or technologies covered by the asserted third party patents.If we are found to infringe a third party’s valid and enforceable intellectual property rights, we could be required to obtain a license from such third party tocontinue developing, manufacturing and marketing our product candidates and technology. However, we may not be able to obtain any required license oncommercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors and other thirdparties access to the same technologies licensed to us and it could require us to make substantial payments to the licensor. Parties making claims against us may also obtain injunctive or other equitable relief, which could effectively block our ability to further develop andcommercialize one or more of our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense andwould be a 24 Table of Contents substantial diversion of management and employee resources from our business. In the event of a successful claim of infringement against us, we may have topay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain oneor more licenses from third parties, which may be impossible or require substantial time and monetary expenditure. Any of the foregoing could have amaterial and adverse effect on our business, financial conditions, results of operations and prospects. In addition, claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on ourbusiness, financial condition, results of operations and prospects. There could also be public announcements of the results of hearings, motions, decisions, orother interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect onthe price of our common shares. Some of our competitors may have substantially greater resources and more mature and developed intellectual property portfolios than we do and may beable to sustain the costs of complex intellectual property litigation to a greater degree and for longer periods of time than we could. In addition, patentholding companies that focus solely on extracting royalties and settlements by enforcing patent rights may target us. As the biotechnology andpharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement of thepatent rights of third parties. The uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a materialadverse effect on our ability to compete in the marketplace. We may be subject to claims that our employees, consultants, or independent contractors have wrongfully used or disclosed confidential information ofthird parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers. We employ and utilize the services of individuals who were previously employed or provided services to universities or other biotechnology orpharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants, and independentcontractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees,consultants, or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietaryinformation, of any of our employee’s, consultant’s or independent contractor’s former employer or other third parties. Litigation may be necessary to defendagainst these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights orpersonnel, which could adversely impact our business. Even if we are successful in defending against such claims, litigation could result in substantial costsand be a distraction to management and other employees. In addition, while it is our policy to require our employees, consultants and independent contractors who may be involved in the conception ordevelopment of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such anagreement with each party who, in fact, conceives or develops intellectual property that we regard as our own. The assignment of intellectual property rightsmay not be self-executing or the assignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims thatthey may bring against us, to determine the ownership of what we regard as our intellectual property. We may not be able to protect our intellectual property rights throughout the world. Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and ourintellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of someforeign countries do not protect intellectual property rights to the same extent as the laws in the United States. Consequently, we may not be able to preventthird parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in andinto the United States or other jurisdictions. In the ordinary course of prosecution and maintenance activities, we determine whether to seek patent protectionoutside the U.S. and in which countries. This also applies to patents we have acquired or in-licensed from third parties. In some cases, we, or our predecessorsin interest or licensors of patents within our portfolio, have sought patent protection in a limited number of countries for patents covering our productcandidates. Competitors may use our technologies in jurisdictions where we have not obtained or are unable to adequately enforce patent protection todevelop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not asstrong as that in the United States. These products may compete with our products and our patents or other intellectual property rights may not be 25 Table of Contents effective or sufficient to prevent them from competing, which would have a material adverse effect on our business and financial positions. Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legalsystems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual propertyprotection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement, misappropriation or otherviolations of our intellectual property and proprietary rights. Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful,could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated orinterpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in anylawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce ourintellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we developor license. Risks Related to Our Financial Condition and Capital Requirements We are a clinical-stage company and have a history of operating losses. We anticipate that we will continue to incur losses for the foreseeable future. We are a clinical-stage biopharmaceutical company. Since 2003, while we have received upfront and milestone payments from our collaboration partnersand certain other revenue, we have also incurred significant operating losses. For example, we incurred net losses (defined as net loss attributable to owners ofthe company) of CHF 26.4 million for the year ended December 31, 2017. In addition, we had accumulated losses of CHF 72.6 million as of December 31,2017. Our losses have resulted principally from research and development expenses and from general business and administrative expenses. We expect tocontinue to incur significant operating losses in the future as we continue our research and development efforts for our current and future product candidatesand seek to obtain regulatory approval and commercialization of such product candidates. To date, we have financed our cash requirements primarily from the proceeds from our initial public offering (“IPO”) in September 2016, share issuancesand revenues from collaboration agreements. We have no products approved for commercialization and have never generated any revenues from productsales. Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk. It may be several years, if ever,before we or our collaboration partners complete pivotal clinical studies and have a product candidate approved for commercialization and we begin togenerate revenue or royalties from product sales. While we have generated revenues from upfront and milestone payments related to our collaboration agreements, we have never generated any revenuefrom product sales and may never be profitable. While we have generated revenue from upfront and milestone payments related to our collaboration agreements, we have no products approved forcommercialization and have never generated any revenue from product sales. Our ability to generate revenue and achieve profitability depends on our abilityto successfully complete the development of, and obtain the marketing approvals necessary to commercialize, one or more of our product candidates. We donot anticipate generating revenue from product sales unless and until we or our collaboration partners obtain regulatory approval for, and commercialize, ourproduct candidates. 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 us or our collaboration partners, as the case may be, successfullycompleting a Phase 3 clinical studies of crenezumab, a Phase 2 clinical study of our anti-Tau antibody candidate, a Phase 1/2 clinical study of ACI-24 for AD, a Phase 1b clinical study of ACI-24 in Down syndrome, a Phase 1b clinical study of ACI-35 and a Phase 1 for our Tau-PET Imaging tracercandidate; ·obtaining marketing approvals for our product candidates, including crenezumab, ACI-24 for AD or ACI-35 or our anti-Tau antibody candidate, forwhich we complete clinical studies; ·developing a sustainable and scalable manufacturing process for any approved product candidates and 26 Table of Contents maintaining supply and manufacturing relationships with third parties that can conduct the process and provide adequate (in amount and quality)products to support clinical development and the market demand for our product candidates, if approved; ·launching and commercializing product candidates for which we obtain marketing approval, either directly or with a collaborator or distributor; ·obtaining market acceptance of our product candidates as viable treatment options; ·addressing any competing technological and market developments; ·identifying, assessing, acquiring and/or developing new product candidates; ·negotiating favorable terms in any collaboration, licensing, or other similar arrangements into which we may enter; ·maintaining, protecting, and expanding our portfolio of intellectual property rights, including patents, trade secrets and know-how; and ·attracting, hiring and retaining qualified personnel. Even if one or more of the product candidates that we develop is approved for commercial sale, we anticipate incurring significant costs associated withcommercializing any approved product candidate. Because of the numerous risks and uncertainties with pharmaceutical product development, we are unableto accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. Our expenses could increase beyondexpectations if we are required by the FDA, the EMA, or other regulatory agencies, domestic or foreign, to change our manufacturing processes, or to performclinical, nonclinical, or other types of studies in addition to those that we currently anticipate. In cases where we are successful in obtaining regulatoryapprovals to market one or more of our product candidates, our revenue will be dependent, in part, upon the size of the markets in the territories for which wegain regulatory approval, the accepted price for the product, the ability to obtain coverage and reimbursement at any price, and whether we own thecommercial rights for that territory. If the number of our addressable patients is not as significant as we estimate, the indication approved by regulatoryauthorities is narrower than we expect, or the treatment population is narrowed by competition, physician choice or treatment guidelines, we may notgenerate significant revenue from sales of such products, even if approved. Accordingly, we may not be profitable in the future from the sale of any approvedproducts. We may be unable to develop and commercialize any of our current or future product candidates and, even if we do, may not achieve profitability in thefuture. Even if we do achieve profitability in the future, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to beprofitable in the future would decrease the value of our company and could impair our ability to raise capital, expand our business or continue ouroperations. A decline in the value of our company could cause you to lose all or part of your investment. 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 toraise 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 through clinical development, either together with a collaboration partner (crenezumab, ACI-35 andour anti-Tau antibody candidate, Tau-PET imaging tracer candidate) or independently (ACI-24 for AD and Down syndrome). We expect our research anddevelopment expenses to continue to increase in connection with our ongoing activities, particularly as we and/or our collaboration partners continue ourongoing studies and initiate new studies of crenezumab, ACI-24 for AD, ACI-35, our Tau-PET imaging tracer candidate and our anti-Tau antibody candidateand initiate preclinical and clinical development of our other product candidates. As of December 31, 2017, we had cash and cash equivalents of CHF124.4 million. We currently believe that our existing capital resources, not including potential milestone payments, will be sufficient to meet our projectedoperating requirements for at least through the second quarter of fiscal year 2019. We have based this estimate on assumptions that may prove to be wrong,and we could exhaust our capital resources sooner than we currently expect. Our future funding requirements will depend on many factors, including but notlimited to: 27 Table of Contents ·the scope, rate of progress, results and cost of our pre-clinical and clinical studies and other related activities; ·the cost of manufacturing clinical supplies and establishing commercial supplies of our existing product candidates and any other products we maydevelop; ·the cost, timing, and outcomes of regulatory approvals; ·the cost and timing of establishing sales, marketing and distribution capabilities; ·the terms and timing of any collaborative, licensing, and other arrangements that currently exist or that we may establish in the future, including anyrequired milestone and royalty payments thereunder; ·the emergence of competing technologies or other adverse market developments; and ·the potential cost and timing of managing and protecting our portfolio of intellectual property. We expect that we will require additional capital to commercialize our product candidates. If we receive regulatory approval for our current and futureproduct candidates, and if we have not already licensed such product candidate to a collaboration partner and choose to commercialize such productcandidate independently, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution,depending on where we choose to commercialize. Our costs have also increased as a result of our being a publicly traded company. Additional funds may notbe available on a timely basis, on favorable terms, or at all, and such funds, if raised, may not be sufficient to enable us to continue to implement our long-term business strategy. If we are not able to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs orcommercialization efforts. Raising additional capital may cause dilution to our shareholders, restrict our operations or require us to relinquish rights to our intellectual propertyor future revenue streams. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings,debt financings, grants and license and development agreements in connection with collaborations. We do not have any committed external source of funds.In the event we need to seek additional funds, we may raise additional capital through the sale of equity, convertible debt or other securities. In such anevent, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rightsas a holder of our common shares. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to takespecific actions, such as incurring additional debt, making capital expenditures or proposing dividends to our shareholders. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we mayhave to grant or otherwise relinquish valuable rights to our intellectual property or future revenue streams. If we are unable to raise additional funds whenneeded, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop andmarket product candidates that we would otherwise prefer to develop and market ourselves. Our ability to use tax loss carryforwards in Switzerland may be limited. As of December 31, 2017, we reported tax loss carryforwards from financial years 2011 until 2017 for purposes of Swiss corporate income tax in theaggregate amount of CHF 62.6 million that could be available to offset future taxable income. If not used, these tax losses will expire seven years after theyear in which they were incurred. Due to our limited income, there is a high risk that the tax loss carryforwards will expire partly or entirely and cannot beused to offset future taxable income thereafter for Swiss corporate income tax purposes. Exchange rate fluctuations or abandonment of the Euro currency may materially affect our results of operations and financial condition. Under our existing agreements, we receive and make a significant amount of payments in USD, Swiss Francs and Euro. As a result, changes andfluctuations in currency exchange rates between the Swiss Franc and other currencies, especially the USD and Euro could have a materially adverse effect onour operating results. Since our reporting currency is the Swiss Franc, financial line items are converted into Swiss Francs at the 28 Table of Contents applicable exchange rates. We also expect that in the future, a significant portion of our revenues and expenses will be denominated in Swiss Franc, USD andEuro. Therefore, unfavorable developments in the value of the Swiss Franc as compared to the Euro or any other currency could have a material adverse effecton our business, financial condition and results of operations. Risks Related to the Regulatory Environment We cannot give any assurance that any of our product candidates will receive regulatory approval, which is necessary before they can becommercialized. Our future success is dependent on our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize one or moreproduct candidates. We currently have one product candidate that has completed Phase 2 clinical studies. Enrollment in Phase 3 clinical studies ofcrenezumab initiated by our collaboration partner Genentech started in the first quarter of 2016 and first quarter 2017, respectively. We are not permitted tomarket or promote any of our product candidates before we receive regulatory approval from the FDA, EMA or comparable foreign regulatory authorities, andwe may never receive such regulatory approval for any of our product candidates. We cannot be certain that any of our product candidates will be successful in clinical studies or receive regulatory approval. Applications for our productcandidates could fail to receive regulatory approval for many reasons, including but not limited to the following: ·the FDA, EMA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical studies; ·the population studied in the clinical program may not be sufficiently broad or representative to assure safety in the full population for which weseek approval; ·the FDA, EMA or comparable foreign regulatory authorities may disagree with our interpretation of data from nonclinical or clinical studies; ·the data collected from clinical studies of our product candidates may not be sufficient to support the submission of an NDA or other submission orto obtain regulatory approval in the United States or elsewhere; ·we may be unable to demonstrate to the FDA, EMA or comparable foreign regulatory authorities that a product candidate’s risk-benefit ratio for itsproposed indication is acceptable; ·the FDA, EMA or other regulatory authorities may fail to approve the manufacturing processes, test procedures and specifications, or facilities ofthird-party manufacturers with which we contract for clinical and commercial supplies; and ·the approval policies or regulations of the FDA, EMA or comparable foreign regulatory authorities may significantly change in a manner renderingour clinical data insufficient for approval. We generally plan to seek regulatory approval to commercialize our product candidates in the United States, the European Union and in additionalforeign countries where we have commercial rights. To obtain regulatory approval in other countries, we must comply with numerous and varying regulatoryrequirements of such other countries regarding safety, efficacy, chemistry, manufacturing and controls, clinical studies, commercial sales, pricing, anddistribution of our product candidates. Even if we are successful in obtaining approval in one jurisdiction, we cannot ensure that we will obtain approval inany other jurisdictions. Failure to obtain marketing authorization for our product candidates will result in our being unable to market and sell such products,which would materially adversely affect our business, financial conditional and results of operation. If we fail to obtain approval in any jurisdiction, thegeographic market for our product candidates could be limited. Similarly, regulatory agencies may not approve the labeling claims that are necessary ordesirable for the successful commercialization of our product candidates. 29 Table of Contents Clinical drug development involves a lengthy and expensive process with uncertain timelines and uncertain outcomes. If clinical studies of our productcandidates are prolonged or delayed, we may be unable to obtain required regulatory approvals, and therefore be unable to commercialize our productcandidates on a timely basis or at all. To obtain the requisite regulatory approvals to market and sell any of our product candidates, we must demonstrate through extensive preclinical andclinical studies that our products are safe and effective in humans. Clinical testing is expensive and can take many years to complete, and its outcome isinherently uncertain. Failure can occur at any time during the clinical study process. The results of preclinical and early clinical studies of our productcandidates may not be predictive of the results of later-stage clinical studies. For example, the positive results generated to date in clinical studies for ourproduct candidates do not ensure that later clinical studies will demonstrate similar results. Product candidates in later stages of clinical studies may fail toshow the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical studies. A number of companies in thebiopharmaceutical industry have suffered significant setbacks in advanced clinical studies due to lack of efficacy or adverse safety profiles, notwithstandingpromising results in earlier studies. Our future clinical study results may not be successful. Clinical studies must be conducted in accordance with FDA, EMA and comparable foreign regulatory authorities’ legal requirements, regulations orguidelines, and are subject to oversight by these governmental agencies and Institutional Review Boards, or IRBs, at the medical institutions where theclinical studies are conducted. In addition, clinical studies must be conducted with supplies of our product candidates produced under cGMP and otherrequirements. We depend on medical institutions and CROs, to conduct our clinical studies in compliance with cGCP standards. To the extent the CROs failto enroll participants for our clinical studies, fail to conduct the study to cGCP standards or are delayed for a significant time in the execution of studies,including achieving full enrollment, we may be affected by increased costs, program delays or both, which may harm our business. To date, neither we nor our collaboration partners have completed all clinical studies required for the approval of any of our product candidates.Crenezumab has completed Phase 2 clinical testing and is currently in two Phase 3 clinical studies, ACI-24 for AD is in a combined Phase 1/2a clinical study,ACI-24 for Down syndrome is in a Phase 1b clinical study, ACI-35 completed a Phase 1b clinical study, our anti-Tau antibody candidate is in a Phase 2clinical study and our Tau-PET imaging tracer candidate is in a Phase 1 clinical study. The development of our other product candidates is less advanced andstudies have not yet started. The completion of clinical studies for our clinical product candidates may be delayed, suspended or terminated as a result of many factors, including butnot limited to: ·the delay or refusal of regulators or IRBs to authorize us to commence a clinical study at a prospective study site or changes in regulatoryrequirements, policies and guidelines; ·delays or failure to reach agreement on acceptable terms with prospective CROs and clinical study sites, the terms of which can be subject toextensive negotiation and may vary significantly among different CROs and study sites; ·delays in patient enrollment and variability in the number and types of patients available for clinical studies; ·the inability to enroll a sufficient number of patients in studies to ensure adequate statistical power to detect statistically significant treatmenteffects; ·negative or inconclusive results, which may require us to conduct additional preclinical or clinical studies or to abandon projects that weexpected to be promising; ·safety or tolerability concerns, which could cause us to suspend or terminate a study if we find that the participants are being exposed tounacceptable health risks; ·regulators or IRBs requiring that we or our investigators suspend or terminate clinical research for various reasons, including noncompliancewith regulatory requirements or safety concerns, among others; ·lower than anticipated retention rates of patients and volunteers in clinical studies; 30 Table of Contents ·our CROs or clinical study sites failing to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, orat all, deviating from the protocol or dropping out of a study; ·delays relating to adding new clinical study sites; ·difficulty in maintaining contact with patients after treatment, resulting in incomplete data; ·delays in establishing the appropriate dosage levels; ·the quality or stability of the product candidate falling below acceptable standards; ·the inability to produce or obtain sufficient quantities of the product candidate to complete clinical studies; and ·exceeding budgeted costs due to difficulty in accurately predicting costs associated with clinical studies. Any delays in completing our clinical studies will increase our costs, slow our product candidate development and approval process and jeopardize ourability to commence product sales and generate revenues. Any of these occurrences may harm our business, financial condition and prospects significantly.In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical studies may also ultimately lead to the denial ofregulatory approval of our product candidates. Even if we obtain and maintain approval for our drug candidates from one jurisdiction, we may never obtain approval for our drug candidates in otherjurisdictions, which would limit our market opportunities and adversely affect our business. Sales of our approved drugs will be subject to U.S. and non-U.S. regulatory requirements governing clinical studies and regulatory approval, and we planto seek regulatory approval to commercialize our drug candidates in the United States, the European Economic Area, and other countries. Clinical studiesconducted in one country may not be accepted by regulatory authorities in other countries and regulatory approval in one country does not ensure approvalin any other country, while a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory approval processin others. For example, approval in the United States by the FDA does not ensure approval by the regulatory authorities in other countries or jurisdictions,and similarly approval by a non-U.S. regulatory authority, such as the EMA, does not ensure approval by regulatory authorities in other countries, includingby the FDA. However, the failure to obtain approval in one jurisdiction may have a negative impact on our ability to obtain approval elsewhere. Approvalprocesses and regulatory requirements vary among countries and can involve additional drug testing and validation and additional administrative reviewperiods. Even if a drug is approved, the FDA or EMA, as the case may be, may limit the indications for which the drug may be marketed, require extensivewarnings on the drug labeling or require expensive and time-consuming clinical studies or reporting as conditions of approval. In many countries outside theUnited States, a drug candidate must be approved for reimbursement before it can be approved for sale in that country. In some cases, the price that we intendto charge for a drug is also subject to approval. Regulatory authorities in other countries also have their own requirements for approval of drug candidateswith which we must comply prior to marketing in those countries. Obtaining non-U.S. regulatory approvals and compliance with such non-U.S. regulatoryrequirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our current and any future drugs, incertain countries. If we fail to comply with regulatory requirements in international markets or to obtain and maintain required approvals, or if regulatoryapprovals in international markets are delayed, our target market will be reduced and our ability to realize the full market potential of our drug candidateswill be unrealized. Even if our product candidates obtain regulatory approval, we will be subject to ongoing obligations and continued regulatory review, which mayresult in significant additional expense. Additionally, our product candidates, if approved, could be subject to labeling and other restrictions and marketwithdrawal and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our products. If marketing authorization is obtained for any of our product candidates, the product will remain subject to continual regulatory review and thereforeauthorization could be subsequently withdrawn or restricted. Any 31 Table of Contents regulatory approvals that we receive for our product candidates may also be subject to limitations on the approved indicated uses for which the product maybe marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical studies andsurveillance to monitor the safety and efficacy of the product candidate. In addition, if the FDA or a comparable foreign regulatory authority approves any ofour product candidates, we will be subject to ongoing regulatory obligations and oversight by regulatory authorities, including with respect to themanufacturing processes, labeling, packing, distribution, adverse event reporting, storage, advertising and marketing restrictions, and recordkeeping and,potentially, other post-marketing obligations, all of which may result in significant expense and limit our ability to commercialize such products. Theserequirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with cGMPs andcGCPs for any clinical studies that we conduct post-approval. Later discovery of previously unknown problems with a product, including adverse events ofunanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, mayresult in, among other things: ·restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or voluntary or mandatory productrecalls; ·fines, warning letters or holds on clinical studies; ·refusal by the FDA to approve pending applications or supplements to approved applications filed by us, or suspension or revocation of productlicense approvals; ·product seizure or detention, or refusal to permit the import or export of products; and ·injunctions or the imposition of civil or criminal penalties. If any of these events occurs, our ability to sell such product may be impaired, and we may incur substantial additional expense to comply withregulatory requirements, which could materially adversely affect our business, financial condition and results of operations. The FDA’s policies may changeand additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. If we are slow orunable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance,we may lose any marketing approval that we may have obtained, which would adversely affect our business, prospects and ability to achieve or sustainprofitability. We have conducted and may in the future conduct clinical studies for our drug candidates outside the United States, and the FDA and applicable foreignregulatory authorities may not accept data from such studies. We have conducted and may in the future choose to conduct one or more of our clinical studies outside the United States, including in Germany, Austria,Denmark, Sweden, Finland, the UK and Poland. The acceptance of study data from clinical studies conducted outside the United States or anotherjurisdiction by the FDA or applicable foreign regulatory authority may be subject to certain conditions. In cases where data from foreign clinical studies areintended to serve as the basis for marketing approval in the United States, the FDA will not approve the application on the basis of foreign data alone unlessthe following are true: the data are applicable to the United States population and United States medical practice; the studies were performed by clinicalinvestigators of recognized competence; and the data are considered valid without the need for an on-site inspection by the FDA or, if the FDA considerssuch an inspection to be necessary, the FDA is able to validate the data through an on- site inspection or other appropriate means. Additionally, the FDA’sclinical study requirements, including sufficient size of patient populations and statistical powering, must be met. Many foreign regulatory bodies havesimilar requirements. In addition, such foreign studies would be subject to the applicable local laws of the foreign jurisdictions where the studies areconducted. There can be no assurance that the FDA or any applicable foreign regulatory authority will accept data from studies conducted outside of theUnited States or the applicable jurisdiction. If the FDA or any applicable foreign regulatory authority does not accept such data, it would result in the needfor additional studies, which would be costly and time-consuming and delay aspects of our business plan, and which may result in our drugs or drugcandidates not receiving approval or clearance for commercialization in the applicable jurisdiction. 32 Table of Contents Enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidatesand may affect the prices we may set. In the United States and the European Union, there have been a number of legislative and regulatory changes and proposed changes regarding thehealthcare system. These changes could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affectour ability to profitably sell any products for which we obtain marketing approval. In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or the Medicare Modernization Act, changed theway Medicare covers and pays for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly and introduced anew reimbursement methodology based on average sale prices for physician-administered drugs. In addition, this legislation provided authority for limitingthe number of drugs that will be covered in any therapeutic class. Cost-reduction initiatives and other provisions of this legislation could decrease thecoverage and price that we receive for any approved products. While the Medicare Modernization Act applies only to drug benefits for Medicarebeneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates. Therefore, anyreduction in reimbursement that results from the Medicare Modernization Act may result in a similar reduction in payments from private payors. In March 2010, former President Obama signed into law the Patient Protection and Affordable Care Act, as amended by the Health Care and EducationReconciliation Act, or collectively, the Health Care Reform Law, a sweeping law intended to broaden access to health insurance, reduce or constrain thegrowth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for health care and health insurance industries,impose new taxes and fees on the health industry and impose additional health policy reforms. The Health Care Reform Law, among other things, increasedrebates a manufacturer must pay to the Medicaid program, addressed a new methodology by which rebates owed by manufacturers under the Medicaid DrugRebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected, established a new Medicare Part D coverage gap discountprogram, in which manufacturers must provide 50% point-of-sale discounts on products covered under Part D and implemented payment system reformsincluding a national pilot program on payment bundling to encourage hospitals, physicians and other providers to improve the coordination, quality andefficiency of certain healthcare services through bundled payment models. Further, the new law imposed a significant annual fee on companies thatmanufacture or import branded prescription drug products. Substantial new provisions affecting compliance were enacted, which may affect our businesspractices with health care practitioners. In 2018, we continue to face uncertainties because of continued U.S. federal legislative and administrative efforts to repeal, substantially modify orinvalidate some or all of the provisions of the Health Care Reform Law. In January 2017, Congress voted to adopt a budget resolution for fiscal year 2017, orthe Budget Resolution, that authorized the implementation of legislation that would repeal portions of the Health Care Reform Law. Further, on January 20,2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under Health Care Reform Law to waive,defer, grant exemptions from, or delay the implementation of any provision of Health Care Reform Law that would impose a fiscal or regulatory burden onstates, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. The practical implications of that order areunclear, and the future of the Health Care Reform Law is uncertain. Congress also could consider subsequent legislation to replace elements of the HealthCare Reform Law that are repealed. There is no assurance that the Health Care Reform Law, as currently enacted or as amended in the future, will notadversely affect our business and financial results, and we cannot predict how future federal or state legislative or administrative changes relating tohealthcare reform will affect our business. Moreover, other legislative changes have also been proposed and adopted in the United States since the Health Care Reform Law was enacted. OnAugust 2, 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee onDeficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reachrequired goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions to Medicarepayments to providers of 2% per fiscal year, which went into effect on April 1, 2013. On January 2, 2013, former President Obama signed into law theAmerican Taxpayer Relief Act of 2012, or the ATRA, which, among other things, further reduced Medicare payments to several providers, includinghospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments toproviders from three to five years. These new laws may result in additional reductions in Medicare and other health care funding, which could have a materialadverse effect on our customers and accordingly, our financial operations. 33 Table of Contents In the European Union, new clinical trial regulations are scheduled to come into force in 2019. This new legislation will enforce the centralization ofclinical trial applications and approvals, which will eliminate redundancy, but in some cases this may extend timelines for clinical study approvals due topotentially longer wait times. The new General Data Protection Regulation (GDPR) will become effective in 2018 in all EU Member States. Although it isexpected that the GDPR will provide consistency across the territory of the EU, it imposes more onerous requirements concerning consent and the obligationsof Data Controllers, among other measures, which may increase the costs and extend timelines of our product development efforts. Austerity measures incertain European nations may also affect the prices we are able to seek if our products are approved, as discussed below. Furthermore, the decision of theUnited Kingdom (UK) to withdraw from the European Union (EU) will result in the relocation of the EMA in 2019. While the EMA has developed andinitiated a business continuity plan to deal with the uncertainty and workload implications linked to the Agency’s relocation, it is likely that many of theAgency’s operations will be disrupted for a certain period of time, resulting in reduced opportunities for scientific discussions on our product developmentplans and possible delays for product approvals. Both in the United States and in the European Union, legislative and regulatory proposals have been made to expand post-approval requirements andrestrict sales and promotional activities for pharmaceutical products. We do not know whether additional legislative changes will be enacted, or whether theregulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates, if any,may be. We could be subject to liabilities under environmental, health and safety laws or regulations, or fines, penalties or other sanctions, if we fail to complywith such laws or regulations or otherwise incur costs that could have a material adverse effect on the success of our business. We are subject to numerous environmental, health and safety laws, regulations, and permitting requirements, including those governing laboratoryprocedures, decontamination activities and the handling, transportation, use, remediation, storage, treatment and disposal of hazardous materials and wastes.Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials and produce hazardous waste products.We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from thesematerials or wastes either at our sites or at third party disposal sites. In the event of such contamination or injury, we could be held liable for any resultingdamages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties. Althoughwe maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use ofhazardous materials or other work-related injuries, this insurance may not provide adequate coverage against potential liabilities. In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws, regulations or permittingrequirements. Such laws, regulations and requirements are becoming increasingly more stringent and may impair our research, development or productionefforts. Failure to comply with these laws, regulations and permitting requirements also may result in substantial fines, penalties or other sanctions. Our relationships with customers and payors will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations,which, if violated, could expose us to criminal sanctions, civil penalties, exclusion from government healthcare programs, contractual damages,reputational harm and diminished profits and future earnings. Healthcare providers, physicians and others play a primary role in the recommendation and prescription of any products for which we obtain marketingapproval. Our future arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws andregulations, primarily in the United States, that may constrain the business or financial arrangements and relationships through which we market, sell anddistribute our products for which we obtain marketing approval. Restrictions under applicable healthcare laws and regulations, include the following: ·the U.S. healthcare anti-kickback statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving orproviding remuneration, directly or indirectly, in cash or in kind,to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment maybe made under U.S. government healthcare programs such as Medicare and Medicaid; 34 Table of Contents ·the U.S. False Claims Act imposes criminal and civil penalties, including civil whistleblower or qui tam actions, against individuals or entities forknowingly presenting, or causing to be presented, to the U.S. government, claims for payment that are false or fraudulent or making a false statementto avoid, decrease or conceal an obligation to pay money to the federal government; ·the U.S. Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for executing a scheme todefraud any healthcare benefit program or making false statements relating to healthcare matters; ·HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, imposes obligations, including mandatorycontractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; ·the transparency requirements under the Health Care Reform Law require manufacturers of drugs, devices, biologics and medical supplies to reportto the U.S. Department of Health and Human Services information related to payments and other transfers of value made by such manufacturers tophysicians and teaching hospitals, and ownership and investment interests held by physicians or their immediate family members; and ·analogous laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claimsinvolving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, and some state laws requirepharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidancepromulgated by the federal government in addition to requiring manufacturers to report information related to payments to physicians and otherhealth care providers or marketing expenditures. Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available under the U.S. federal Anti-KickbackStatute, it is possible that some of our future business activities could be subject to challenge under one or more of such laws. In addition, recent health carereform legislation has strengthened these laws. For example, the Health Care Reform Law, among other things, amends the intent requirement of the federalanti-kickback and criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge of this statute or specific intent to violateit. Moreover, the Health Care Reform Law provides that the government may assert that a claim including items or services resulting from a violation of thefederal anti-kickback statute constitutes a false or fraudulent claim for purposes of the False Claims Act. Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantialcosts. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or caselaw involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or anyother governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusionfrom U.S. government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If any of thephysicians or other providers or entities with whom we expect to do business with is found to be not in compliance with applicable laws, they may be subjectto criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs. Risks from the improper conduct of employees, agents, contractors, or collaborators could adversely affect our reputation and our business, prospects,operating results, and financial condition. We cannot ensure that our compliance controls, policies, and procedures will in every instance protect us from acts committed by our employees, agents,contractors, or collaborators that would violate the laws or regulations of the jurisdictions in which we operate, including, without limitation, healthcare,employment, foreign corrupt practices, environmental, competition, and patient privacy and other privacy laws and regulations. Such improper actions couldsubject us to civil or criminal investigations, and monetary and injunctive penalties, and could adversely impact our operating results, ability to conductbusiness, and reputation. We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDA orEMA regulations, to provide accurate information to the FDA or the EMA or intentional failures to report financial information or data accurately or todisclose unauthorized 35 Table of Contents activities to us. Employee misconduct could also involve the improper use of information obtained in the course of clinical studies, which could result inregulatory sanctions and serious harm to our reputation. In October 2015, we adopted a code of conduct, but it is not always possible to identify and deteremployee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks orlosses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. Ifany such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significantimpact on our business, including the imposition of significant fines or other sanctions. Our business activities may be subject to the Foreign Corrupt Practices Act, or FCPA, and similar anti-bribery and anti-corruption laws. Our business activities may be subject to the FCPA and similar anti-bribery or anti-corruption laws, regulations or rules of other countries in which weoperate, including the U.K. Bribery Act. The FCPA generally prohibits offering, promising, giving, or authorizing others to give anything of value, eitherdirectly or indirectly, to a non-U.S. government official in order to influence official action, or otherwise obtain or retain business. The FCPA also requirespublic companies to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain anadequate system of internal accounting controls. Our business is heavily regulated and therefore involves significant interaction with public officials,including officials of non-U.S. governments. Additionally, in many other countries, the health care providers who prescribe pharmaceuticals are employed bytheir government, and the purchasers of pharmaceuticals are government entities; therefore, our dealings with these prescribers and purchasers are subject toregulation under the FCPA. Recently the Securities and Exchange Commission, or SEC, and Department of Justice have increased their FCPA enforcementactivities with respect to pharmaceutical companies. There is no certainty that all of our employees, agents, contractors, or collaborators, or those of ouraffiliates, will comply with all applicable laws and regulations, particularly given the high level of complexity of these laws. Violations of these laws andregulations could result in fines, criminal sanctions against us, our officers, or our employees, the closing down of our facilities, requirements to obtain exportlicenses, cessation of business activities in sanctioned countries, implementation of compliance programs, and prohibitions on the conduct of our business.Any such violations could include prohibitions on our ability to offer our products in one or more countries and could materially damage our reputation, ourbrand, our international expansion efforts, our ability to attract and retain employees, and our business, prospects, operating results, and financial condition. Risks Related to Our Common Shares The price of our common shares may be volatile and may fluctuate due to factors beyond our control. The share prices of publicly traded emerging biopharmaceutical and drug discovery and development companies have been highly volatile and arelikely to remain highly volatile in the future. The market price of our common shares may fluctuate significantly due to a variety of factors, including: ·positive or negative results of testing and clinical studies by us, strategic partners, or competitors; ·delays in entering into strategic relationships with respect to development and/or commercialization of our product candidates or entry into strategicrelationships on terms that are not deemed to be favorable to us; ·technological innovations or commercial product introductions by us or competitors; ·changes in government regulations; ·developments concerning proprietary rights, including patents and litigation matters; ·public concern relating to the commercial value or safety of any of our product candidates; ·financing or other corporate transactions; ·publication of research reports or comments by securities or industry analysts; ·general market conditions in the pharmaceutical industry or in the economy as a whole; or 36 Table of Contents ·other events and factors beyond our control. Broad market and industry factors may materially affect the market price of companies’ stock, including ours, regardless of actual operating performance.Furthermore, issuers such as ourselves whose securities have historically had limited trading volumes and/or have been susceptible to relatively highvolatility levels can be particularly vulnerable to short seller attacks and trading in our common shares by non-fundamental investors such as hedge fundsand others who may enter and exit positions in our common shares frequently and suddenly, causing increased volatility of our share price. Short selling isthe practice of selling securities that the seller does not own but rather has borrowed or intends to borrow from a third party with the intention of buyingidentical securities at a later date to return to the lender, and profit from a decline in the value of the securities in the process. The publication of anycommentary by short sellers with the intent of creating negative market momentum may bring about a temporary, or possibly long term, decline in the marketprice of our common stock. Certain of our existing shareholders exercise significant control over us, and your interests may conflict with the interests of our existing shareholders. Certain principal shareholders as well as our executive officers and directors together beneficially own approximately 60.5% of our common shares.Depending on the level of attendance at our general meetings of shareholders, these shareholders may be in a position to determine the outcome of decisionstaken at any such general meeting. To the extent that the interests of these shareholders may differ from the interests of the company’s other shareholders, thelatter may be disadvantaged by any action that these shareholders may seek to pursue. Among other consequences, this concentration of ownership may havethe effect of delaying or preventing a change in control and might therefore negatively affect the market price of our common shares. 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. Future sales of a substantial number of our common shares, or the perception that such sales will occur, could cause a decline in the market price of ourcommon shares. If certain of our shareholders sell substantial amounts of common shares in the public market, or the market perceives that such sales mayoccur, the market price of our common shares and our ability to raise capital through an issue of equity securities in the future could be adversely affected.We also entered into a registration rights agreement in connection with the Series E Private Placement with certain investors in the Series E Private Placementpursuant to which we agreed under certain circumstances to file a registration statement to register the resale of the common shares held by certain of ourexisting shareholders, as well as to cooperate in certain public offerings of such common shares. In addition, we have adopted a new omnibus equityincentive plan under which we have the discretion to grant a broad range of equity-based awards to eligible participants. These shares were registeredpursuant to the registration statement on Form S-8 that we filed with SEC and, therefore, can be freely sold in the public market upon issuance, subject tovolume limitations applicable to affiliates. If a large number of our common shares or securities convertible into our common shares are sold in the publicmarket after they become eligible for sale, the sales could reduce the trading price of our common shares and impede our ability to raise future capital. We have broad discretion in the use of our cash and cash equivalents and may not use them effectively. Our management will have broad discretion in the application of our cash and cash equivalents. Our decisions concerning the allocation of research,development, collaboration, management and financial resources toward particular product candidates or therapeutic areas may not lead to the developmentof any viable commercial product and may divert resources away from better opportunities. If we make incorrect determinations regarding the viability ormarket potential of any of our programs or product candidates or misread trends in the biopharmaceutical industry, in particular for neurodegenerativediseases, our business, financial condition and results of operations could be materially adversely affected. As a result, we may fail to capitalize on viablecommercial products or profitable market opportunities, be required to forego or delay pursuit of opportunities with other product candidates or otherdiseases and disease pathways that may later prove to have greater commercial potential than those we choose to pursue, or relinquish valuable rights to suchproduct candidates through collaboration, licensing or other royalty arrangements in cases in which it would have been advantageous for us to investadditional resources to retain sole development and commercialization rights. We regularly review the designation of each program as core or seed, andterminate those programs which do not meet our development criteria. 37 Table of Contents We do not expect to pay dividends in the foreseeable future. We have not paid any dividends since our incorporation. Even if future operations lead to significant levels of distributable profits, we currently intendthat any earnings will be reinvested in our business and that dividends will not be paid until we have an established revenue stream to support continuingdividends. The proposal to pay future dividends to shareholders will in addition effectively be at the discretion of our board of directors after taking intoaccount various factors including our business prospects, cash requirements, financial performance and new product development. In addition, payment offuture dividends is subject to certain limitation pursuant to Swiss law or by our articles of association. Accordingly, investors cannot rely on dividend incomefrom our common shares and any returns on an investment in our common shares will likely depend entirely upon any future appreciation in the price of ourcommon shares. 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, including listedcompanies, incorporated in Switzerland. The rights of our shareholders and the responsibilities of members of our board of directors may be different from therights and obligations of shareholders and directors of companies governed by the laws of U.S. jurisdictions. In the performance of its duties, our board ofdirectors is required by Swiss law to consider the interests of our Company, our shareholders, our employees and other stakeholders, in all cases with dueobservation of the principles of reasonableness and fairness. It is possible that some of these parties will have interests that are different from, or in additionto, your interests as a shareholder. Swiss corporate law limits the ability of our shareholders to challenge resolutions made or other actions taken by our boardof 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 insteadonly 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 forbreach of fiduciary duty would have to be brought in Lausanne, 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 Lausanne, Switzerland. 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 protectinvestors in a similar fashion afforded under corporate law principles in the U.S., which could adversely affect the rights of investors. Our status as a Swiss corporation may limit our flexibility with respect to certain aspects of capital management and may cause us to be unable to makedistributions without subjecting our shareholders to Swiss withholding tax. Swiss law allows our shareholders to authorize share capital that can be issued by the board of directors without additional shareholder approval. Thisauthorization is limited to 50% of the existing registered share capital and must be renewed by the shareholders every two years. Additionally, subject tospecified exceptions, Swiss law grants pre-emptive subscription rights to existing shareholders to subscribe to any new issuance of shares. Swiss law also doesnot provide as much flexibility in the various terms that can attach to different classes of shares as the laws of some other jurisdictions. Swiss law also reservesfor approval by shareholders certain corporate actions over which a board of directors would have authority in some other jurisdictions. For example,dividends must be approved by shareholders. These Swiss law requirements relating to our capital management may limit our flexibility, and situations mayarise where greater flexibility would have provided substantial benefits to our shareholders. Under Swiss law, a Swiss corporation may pay dividends only if the corporation has sufficient distributable profits from previous fiscal years, or if thecorporation has distributable reserves, each as evidenced by its audited statutory balance sheet. Freely distributable reserves are generally booked either as“free reserves” or as “capital contributions” (apports de capital, contributions received from shareholders) in the “reserve from capital contributions.”Distributions may be made out of issued share capital—the aggregate nominal value of a company’s issued shares—only by way of a capital reduction. As ofDecember 31, 2017, the Company has CHF 179.4 million of qualifying capital contributions and CHF 1,146,983.80 of issued and outstanding share capital(consisting of 57,349,190 common shares each with a nominal value of CHF 0.02 and no preferred shares) on its audited statutory balance sheet. 38 Table of Contents We expect the aggregate of these amounts (less the lowest legally possible issued share capital and legal reserve of together CHF 150,000) to representthe amount available for future dividends or capital reductions on a Swiss withholding tax-free basis. We will not be able to pay dividends or make otherdistributions to shareholders on a Swiss withholding tax-free basis in excess of that amount unless the Company increases its share capital or its reserves fromcapital contributions. We would also be able to pay dividends out of distributable profits or freely distributable reserves but such dividends would be subjectto Swiss withholding taxes. There can be no assurance that we will have sufficient distributable profits, free reserves, reserves from capital contributions orregistered share capital to pay a dividend or effect a capital reduction, that our shareholders will approve dividends or capital reductions proposed by us, orthat we will be able to meet the other legal requirements for dividend payments or distributions as a result of capital reductions. Generally, Swiss withholding tax of 35% is due on dividends and similar distributions to our shareholders, regardless of the place of residency of theshareholder, unless the distribution is made to shareholders out of (i) a reduction of nominal value or (ii) assuming certain conditions are met, qualifyingcapital contributions accumulated on or after January 1, 1997. A U.S. holder that qualifies for benefits under the Convention between the United States ofAmerica and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income, which we refer to as the “U.S.-Swiss Treaty,”may apply for a refund of the tax withheld in excess of the 15% treaty rate (or in excess of the 5% reduced treaty rate for qualifying corporate shareholderswith at least 10% participation in our voting stock, or for a full refund in the case of qualified pension funds). There can be no assurance that we will havesufficient qualifying capital contributions to pay dividends free from Swiss withholding tax, or that Swiss withholding rules will not be changed in the future.In addition, we cannot provide assurance that the current Swiss law with respect to distributions out of qualifying capital contributions will not be changed orthat a change in Swiss law will not adversely affect us or our shareholders, in particular as a result of distributions out of qualifying capital contributionsbecoming subject to additional corporate law or other restrictions. In addition, over the long term, the amount of par value available to us for nominal valuereductions or qualifying capital contributions available to us to pay out as distributions is limited. If we are unable to make a distribution through a reductionin nominal value or out of qualifying capital contributions, we may not be able to make distributions without subjecting our shareholders to Swisswithholding taxes. Under present Swiss tax laws, repurchases of shares for the purposes of cancellation are treated as a partial liquidation subject to 35% Swiss withholdingtax on the difference between the repurchase price and the nominal value except, since January 1, 2011, to the extent attributable to qualifying capitalcontributions (apports de capital) if any, and to the extent that, the repurchase of shares is out of retained earnings or other taxable reserves. No partialliquidation treatment applies and no withholding tax is triggered if the shares are not repurchased for cancellation but held by the Company as treasuryshares. However, should Company not resell such treasury shares within six years, the withholding tax becomes due at the end of the six year period. 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 ofdirectors. We are organized under the laws of Switzerland and our registered office and domicile is located in Ecublens, near Lausanne, Switzerland. Moreover, anumber 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 asubstantial 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 ofprocess within the United States upon us or upon such persons or to enforce against them judgments obtained in U.S. courts, including judgments in actionspredicated upon the civil liability provisions of the federal securities laws of the United States. We have been advised by our Swiss counsel that there isdoubt 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 extentsolely 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 Private International Law. This statuteprovides that the application of provisions of non-Swiss law by the courts in Switzerland shall be precluded if the result is incompatible with Swiss publicpolicy. Also, certain 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 commercialmatters. 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 SwissFederal Act on Private International Law. This statute provides in principle that a judgment rendered by a non-Swiss court may be enforced in Switzerlandonly if: 39 Table of Contents ·the non-Swiss court had jurisdiction pursuant to the Swiss Federal Act on Private International Law; ·the judgment of such non-Swiss court has become final and non-appealable; ·the judgment does not contravene Swiss public policy; ·the court procedures and the service of documents leading to the judgment were in accordance with the due process of law; and ·no proceeding involving the same parties and the same subject matter was first brought in Switzerland, or adjudicated in Switzerland, or was earlieradjudicated in a third state and this decision is recognizable in Switzerland. Our status as a Swiss corporation means that our shareholders enjoy certain rights that may limit our flexibility to raise capital, issue dividends andotherwise 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 otherjurisdictions. For example, the payment of dividends and cancellation of treasury shares must be approved by shareholders. Swiss law also requires that ourshareholders themselves resolve to, or authorize our board of directors to, increase our share capital. While our shareholders may authorize share capital thatcan be issued by our board of directors without additional shareholder approval, Swiss law limits this authorization to 50% of the issued share capital at thetime 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 timethereafter in order to be available for raising capital. Additionally, subject to specified exceptions, including exceptions explicitly described in our articles ofassociation, Swiss law grants pre-emptive subscription rights to existing shareholders to subscribe for new issuances of shares. Swiss law also does notprovide 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 haveprovided benefits to our shareholders. Swiss law restricts our ability to pay dividends. The proposal to pay future dividends to shareholders will effectively be at the discretion of our board of directors and subject to approval by, in theirdiscretion, our shareholders after taking into account various factors including our business prospects, cash requirements, financial performance and newproduct development. In addition, payment of future dividends is subject to certain limitation pursuant to Swiss law or by our articles of association.Accordingly, investors cannot rely on dividend income from our common shares and any returns on an investment in our common shares will likely dependentirely upon any future appreciation in the price of our common shares. Dividends paid on our common shares are subject to Swiss Federal withholding tax,except if paid out of reserves from capital contributions (apports de capital). See “Item 10. Additional Information- E. Taxation—Swiss Tax Considerations”for a summary of certain Swiss tax consequences regarding dividends distributed to holders of our common shares. We are a foreign private issuer and, as a result, we are not be subject to U.S. proxy rules and are subject to Exchange Act reporting obligations that, tosome extent, are more lenient and less frequent than those of a U.S. domestic public company. We are reporting under the Exchange Act as a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer underthe Exchange Act and although we are subject to Swiss laws and regulations with regard to such matters and intend to furnish quarterly financial informationto the SEC, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (i) the sections of theExchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; (ii) the sections ofthe Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades madein a short period of time; and (iii) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unauditedfinancial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events. In addition, foreign privateissuers are not required to file their annual report on Form 20-F until four months after the end of each financial year, while U.S. domestic issuers that areaccelerated filers are required to file their annual report 40 Table of Contents on Form 10-K within 75 days after the end of each fiscal year. Foreign private issuers are also exempt from the Regulation Fair Disclosure, aimed atpreventing issuers from making selective disclosures of material information. As a result of the above, you may not have the same protections afforded toshareholders of companies that are not foreign private issuers. As a foreign private issuer and as permitted by the listing requirements of NASDAQ, we rely on certain home country governance practices rather thanthe corporate governance requirements of NASDAQ. We are a foreign private issuer. As a result, in accordance with NASDAQ Listing Rule 5615(a)(3), we comply with home country governancerequirements and certain exemptions thereunder rather than complying with certain of the corporate governance requirements of NASDAQ. Swiss law doesnot require that a majority of our board of directors consist of independent directors. Our board of directors therefore may include fewer independent directorsthan would be required if we were subject to NASDAQ Listing Rule 5605(b)(1). In addition, we are not subject to NASDAQ Listing Rule 5605(b)(2), whichrequires that independent directors regularly have scheduled meetings at which only independent directors are present. Although Swiss law also requires that we adopt a compensation committee, we follow home country requirements with respect to such committee and ourcompensation, nomination and governance committee is tasked with certain director nomination and governance responsibilities as described under “Item 6.Directors, Senior Management and Employees.” As a result, our practice varies from the requirements of NASDAQ Listing Rule 5605(d), which sets forthcertain requirements as to the responsibilities, composition and independence of compensation committees, and from the independent director oversight ofdirector nominations requirements of NASDAQ Listing Rule 5605(e). Furthermore, in accordance with Swiss law and generally accepted business practices, our articles of association do not provide quorum requirementsgenerally applicable to general meetings of shareholders. Our practice thus varies from the requirement of NASDAQ Listing Rule 5620(c), which requires anissuer to provide in its bylaws for a generally applicable quorum, and that such quorum may not be less than one-third of the outstanding voting stock. Ourarticles of association provide for an independent proxy holder elected by our shareholders, who may represent our shareholders at a general meeting ofshareholders, and we must provide shareholders with an agenda and other relevant documents for the general meeting of shareholders. However, Swiss lawdoes not have a regulatory regime for the solicitation of proxies and company solicitation of proxies is prohibited for public companies in Switzerland, thusour practice varies from the requirement of NASDAQ Listing Rule 5620(b), which sets forth certain requirements regarding the solicitation of proxies. Inaddition, we have opted out of shareholder approval requirements for the issuance of securities in connection with certain events such as the acquisition ofstock or assets of another company, the establishment of or amendments to equity-based compensation plans for employees, a change of control of us andcertain private placements. To this extent, our practice varies from the requirements of NASDAQ Listing Rule 5635, which generally requires an issuer toobtain shareholder approval for the issuance of securities in connection with such events. For an overview of our corporate governance principles, see “Item 16G. Corporate governance”. As a result of the above, you may not have the sameprotections afforded to shareholders of companies that are not foreign private issuers. 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 toincur significant legal, accounting and other expenses. We are a foreign private issuer and therefore we are not required to comply with all of the periodic disclosure and current reporting requirements of theExchange Act applicable to U.S. domestic issuers. We may no longer be a foreign private issuer as of June 30, 2018 (or the end of our second fiscal quarter inany subsequent fiscal year), which would require us to comply with all of the periodic disclosure and current reporting requirements of the Exchange Actapplicable to U.S. domestic issuers as of January 1, 2019 (or the first day of the fiscal year immediately succeeding the end of such second quarter). In order tomaintain our current status as a foreign private issuer, either (a) a majority of our common shares must be either directly or indirectly owned of record by non-residents of the United States or (b)(i) a majority of our executive officers or directors may not be United States citizens or residents, (ii) more than 50 percentof our assets cannot be located in the United States and (iii) our business must be administered principally outside the United States. If we lost this status, wewould be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed andextensive than the requirements for foreign private issuers. We may also be required to make changes in our corporate governance practices in accordancewith various SEC and stock exchange rules. The regulatory and compliance costs to us under U.S. securities laws if we are required to comply with thereporting requirements applicable to a U.S. domestic issuer may be 41 Table of Contents significantly higher than the cost we would incur as a foreign private issuer. As a result, we expect that a loss of foreign private issuer status would increaseour legal and financial compliance costs and would make some activities highly time consuming and costly. We also expect that if we were required tocomply with the rules and regulations applicable to U.S. domestic issuers, it would make it more difficult and expensive for us to obtain director and officerliability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These rules and regulationscould also make it more difficult for us to attract and retain qualified members of our board of directors. We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to “emerging growth companies”will make our common shares less attractive to investors. We are an “emerging growth company,” as defined in the Jumpstart our Business Startups Act of 2012, or the JOBS Act. For as long as we continue to bean “emerging growth company,” we may take advantage of exemptions from various reporting requirements that are applicable to other public companiesthat are not “emerging growth companies,” including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of anygolden parachute payments not previously approved. We could be an “emerging growth company” until the end of our fiscal year 2021, althoughcircumstances could cause us to lose that status earlier, including if the market value of our common shares held by non-affiliates exceeds $700 million as ofany June 30 (the end of our second fiscal quarter) before the end of our fiscal year 2021, in which case we would no longer be an “emerging growth company”as of the following December 31 (our fiscal year end). We cannot predict if investors will find our common shares less attractive because we may rely on theseexemptions. If some investors find our common shares less attractive as a result, there may be a less active trading market for our common shares and the priceof our common shares may be more volatile. As a result of being a public company we incur additional costs and we may not manage to comply with our internal control procedures and corporategovernance structures. As a public company, we incur additional legal, insurance, accounting and other expenses that we did not incur as a private company. For example, as apublic company, we needed to adopt additional internal controls and disclosure controls and procedures and bear all of the internal and external costs ofpreparing and distributing periodic public reports in compliance with our obligation under the securities laws. However, if our efforts to comply withevolving laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice,regulatory authorities may initiate legal proceedings against us. This could have a material adverse impact on our business, financial condition and results ofoperations. If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results orprevent fraud. As a result, shareholders could lose confidence in our financial and other public reporting, which would harm our business and thetrading price of our common shares. Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosurecontrols and procedures, are designed to prevent fraud among other objectives. Any failure to implement required new or improved controls, or difficultiesencountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection withSection 404 of the Sarbanes-Oxley Act of 2002, or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies inour internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financialstatements or identify other areas for further attention or improvement. Inferior internal controls could also subject us to regulatory scrutiny and sanctions,impair our ability to raise revenue and cause investors to lose confidence in our reported financial information, which could have a negative effect on thetrading price of our common shares. We are required to disclose changes made in our internal controls and procedures and our management is required to assess the effectiveness of thesecontrols annually. However, for as long as we are an “emerging growth company” under the JOBS Act, our independent registered public accounting firm willnot be required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404. We could be an “emerging growthcompany” until the end of our fiscal year 2021. An independent assessment of the effectiveness of our internal controls could detect problems that ourmanagement’s assessment might not. 42 Table of Contents Undetected material weaknesses in our internal controls could lead to financial statement restatements and require us to incur the expense of remediation. If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, the price of our commonshares and our trading volume could decline. The trading market for our common shares will depend in part on the research and reports that securities or industry analysts publish about us or ourbusiness. If no or too few securities or industry analysts cover our company, the trading price for our common shares would likely be negatively affected. Inaddition, if one or more of the analysts who cover us downgrade our common shares or publish inaccurate or unfavorable research about our business, theprice of our common shares would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly,demand for our common shares could decrease, which might cause the price of our common shares and trading volume to decline. An increase in our tax rate could occur, which could adversely affect our financial results. The Swiss Federal government has recently proposed changes to align Swiss corporate taxation with international recommendations but voters inSwitzerland voted against such proposals in a national referendum on February 12, 2017. As a result, uncertainty will continue about the future level of Swisscorporate income taxes that may apply to us until revised proposals are put forward and gain acceptance. For further discussion, see “Item 10. Additional Information—E. Taxation.” Although we believe that we were not a “passive foreign investment company,” or PFIC, for U.S. federal income tax purposes in 2017, and we do notexpect to be a PFIC in the immediately foreseeable future, if we were a PFIC U.S. shareholders may be subject to adverse U.S. federal income taxconsequences. Under the Internal Revenue Code of 1986, as amended, or the Code, we will be a PFIC for any taxable year in which, after the application of certain look-through rules with respect to subsidiaries, either (i) 75% or more of our gross income consists of passive income or (ii) 50% or more of the average quarterlyvalue of our assets consists of assets that produce, or are held for the production of, passive income. Passive income generally includes dividends, interest,certain non-active rents and royalties, and capital gains. Based on our business plan and certain estimates and projections, including as to the relative valuesof our assets, we do not believe that we were a PFIC for our 2017 taxable year and do not expect to be a PFIC in the immediately foreseeable future. However,there can be no assurance that the IRS will agree with our conclusion. In addition, whether we will be a PFIC in 2018 or any future years is uncertain because,among other things, (i) we currently own, a substantial amount of passive assets, including cash, and (ii) the valuation of our assets that generate non-passiveincome for PFIC purposes, including our intangible assets, is uncertain and may vary substantially over time. Accordingly, there can be no assurance that wewill not be a PFIC for any taxable year. If we are a PFIC for any taxable year during which a U.S. investor holds common shares, we generally would continue to be treated as a PFIC with respectto that U.S. investor for all succeeding years during which the U.S. investor holds common shares, even if we ceased to meet the threshold requirements forPFIC status. Such a U.S. investor may be subject to adverse U.S. federal income tax consequences, including (i) the treatment of all or a portion of any gain ondisposition as ordinary income, (ii) the application of a deferred interest charge on such gain and the receipt of certain dividends and (iii) compliance withcertain reporting requirements. We do not intend to provide the information that would enable investors to take a qualified electing fund election that couldmitigate the adverse U.S. federal income tax consequences should we be classified as a PFIC. For further discussion, see “Item 10. Additional Information—Section E. Taxation.” ITEM 4. INFORMATION ON THE COMPANY A. History and Development of the Company We are a Swiss stock corporation (société anonyme) organized under the laws of Switzerland. We were formed as a Swiss limited liability company(société à responsabilité limitée) on February 13, 2003 with our registered office and domicile in Basel, Switzerland. We converted to a Swiss stockcorporation (société anonyme) under the laws of Switzerland on August 25, 2003. Our domicile and registered office is in Ecublens, 43 Table of Contents near Lausanne, Canton of Vaud, Switzerland. Our ordinary shares were admitted to trading on NASDAQ Global Market on September 23, 2016. Our shares aretraded under the symbol ACIU. Our registered and principal executive offices are located at EPFL Innovation Park, Building B, 1015 Lausanne, Switzerland, our general telephonenumber is (41) 21 345 91 21 and our internet address is www.acimmune.com. Our website and the information contained on or accessible through our websiteare not part of this document. B. Business overview We are a clinical stage biopharmaceutical company focused on neurodegenerative diseases with five product candidates in clinical trials. We leverageour two proprietary technology platforms to discover, design and develop novel, proprietary small molecules, antibodies and vaccines for prevention,diagnosis and treatment of neurodegenerative diseases associated with protein misfolding. Misfolded proteins are generally recognized as the leading causeof neurodegenerative diseases, such as Alzheimer’s disease, or AD, and Parkinson’s disease, or PD, with common mechanisms and drug targets, such as Abeta,Tau, alpha-synuclein and Tar Binding Protein (TDP-43). We believe that our large and diverse pipeline of nine therapeutic candidates and three diagnosticcandidates has the potential to drive a paradigm shift in the treatment of a broad spectrum of neurodegenerative and other diseases related to proteinmisfolding. A summary of the business highlights in 2017 is provided in the graph below: 44 Table of Contents The diagram below summarizes the status of our research and development programs. Neurodegenerative diseases and other diseases associated with protein misfolding are prevalent, but there is currently an absence of reliable, early-stagediagnosis and disease-modifying treatments for these diseases. The growth in the number of people with neurodegenerative diseases has been significant asevidenced by the prevalence of people affected by AD and PD, two of the most common neurodegenerative diseases. ·AD is the most common form of dementia, which affects an estimated worldwide patient population of 47 million in 2015, and is expected togrow to 75 million by 2030 and 132 million by 2050, according to the World Alzheimer Report 2015. The estimated aggregate cost ofprevention and treatments in the United States was $172 billion in 2010 and is estimated by Alzheimer’s Disease International, or ADI, to growto $408 billion in 2030 and $1,078 billion in 2050. ADI estimated that the cost of prevention and treatment in the United States could bereduced from over a trillion dollars to $631 billion in 2050 if the onset of AD could be delayed by five years in the patient population. Inaddition, at autopsy, AD has been reported in 80% of people with Down syndrome over age 40 and 100% over age 60. Down syndrome affectsapproximately one in 1,000 live births worldwide; ·AD is typically diagnosed by neurologists and psychiatrists through a series of cognitive and functioning tests once symptoms are clinicallypresent, resulting in diagnosis at later stages of the disease after irreversible loss of neurons has already occurred. Currently approved ADtreatments include medications that only treat the symptoms of the disease. The clinical benefit derived from these symptomatic treatments istypically incomplete. Only between 40 and 70 percent of patients with AD benefit from taking symptomatic treatments and the symptomsimprove for 6 to 12 months in most cases; ·Therapeutic development for AD is increasingly focused on treating early stages of the disease to delay or prevent progression and to preservethe maximum amount of cognitive function before irreversible neuronal damage occurs. Most clinical studies now target mild stages of thedisease, increasing the need for accurate diagnosis that is independent of potentially subjective and otherwise sub-optimal cognitive metrics.Diagnostics therefore have a crucial role in selecting more uniform and stage-specific clinical study subjects, tracking patient progress andresults, 45 Table of Contents managing patients receiving treatment and ultimately diagnosing the disease at its earliest stage for immediate treatment; and ·PD, the second most common neurodegenerative disease worldwide, affects an estimated 7 to 10 million people. In PD, the use of symptomatictreatments, such as levodopa, is associated with the loss of control of motor functions in approximately 50% of patients who have taken thedrug for 5 years or longer. There remains a significant unmet medical need for reliable and accurate diagnostics to enable early diagnosis and disease-modifying treatments thatslow the progress of neurodegenerative diseases. We have assembled an outstanding management team with relevant scientific, clinical and regulatory expertise. Our scientific founders, Dr. Jean-MarieLehn, Dr. Claude Nicolau, Dr. Roscoe Brady and Dr. Fred van Leuven, are regarded as pioneers in their respective scientific domains, including in the studyof AD. Our co-founder and Chief Executive Officer, Dr. Andrea Pfeifer, a pharmacologist with a Ph.D. in cancer research and former National Institute ofHealth researcher, has a 30 year track record in product innovation and implementation and was formerly head of Nestlé Global Research and the co-founderof Nestlé Venture Fund. Our Chief Scientific Officer, Dr. Andreas Muhs, has more than 20 years of experience in various aspects of discovery research anddrug development, including working on multiple drug development programs. Our Strategy Our goal is to become a global leader in precision medicine for the treatment of neurodegenerative diseases. To that aim we are executing a clearbusiness strategy around three pillars: (i) Alzheimer’s disease, (ii) other significant neurodegenerative diseases and neuro-orphan indications, and (iii)diagnostics. The first pillar is Alzheimer’s disease, where we are developing best-in-class late stage assets, preventive or therapeutic vaccines in partnership or as fullyowned assets and where we are working to establish a pipeline of disease modifying small molecules. The second pillar is other non-AD neurodegenerative diseases and neuro-orphan indications, where we aim to discover therapeutic treatments forParkinson’s disease and leverage our AD therapeutics in Down syndrome, progressive supranuclear palsy (PSP) and other neuro-orphan diseases. The third pillar is represented by diagnostics, where we accelerate the diagnostic pipeline to late stage development and use the diagnostics to improveclinical trials and to establish external partnerships. 46 Table of Contents Key elements of our strategy continue to include: Advancing our product candidates, in partnership or alone, from clinical development to regulatory approval and potential commercialization. Ourproducts include: ·Crenezumab. Our collaboration partner, Genentech, will advance crenezumab through Phase 3 clinical studies and seek regulatory approval. Webelieve that crenezumab’s efficacy, coupled with its safety profile, has the potential to become a best-in-class disease-modifying treatment forAD. ·ACI-24. We will continue to advance ACI-24, to complete an ongoing Phase 1/2a clinical study to evaluate the safety, tolerability,immunogenicity and biomarker endpoints in people with mild to moderate AD, and through a Phase 2 clinical study in people with AD. OurPhase 1b clinical study of ACI-24 in people with Down syndrome is intended to assess safety and started in December 2015. We own the globalrights to ACI-24 and we intend to continue to develop ACI-24 in-house as a therapeutic candidate. ·ACI-35. The Phase 1b clinical study delivered encouraging interim results. Janssen Pharmaceuticals and AC Immune will move the anti-Tauvaccine program forward through the next phase of development; this is supported by scientific advice from regulatory authorities. ·Our Anti-Tau antibody candidate. Our collaboration partner, Genentech, is advancing an anti-Tau antibody candidate through a Phase 2clinical study, which started in the fourth quarter of 2017. ·Diagnostic candidates. In addition to the above product candidates, we will continue to develop our complementary diagnostic productcandidates for Tau, alpha-synuclein and TDP-43 to advance these through clinical development, either independently or with collaborationpartners. Expanding into other neurodegenerative and neuro-orphan diseases We will continue to leverage our proprietary technology platforms to develop product candidates that share the same disease targets like misfoldedAbeta, Tau, alpha-synuclein and TDP-43 proteins, which are the key features of many neurodegenerative diseases. We pursue selected neuro-orphanindications, such as progressive supranuclear palsy (PSP) and Huntington’s disease, as well as Tau-related orphan diseases, such as frontotemporal dementiaand corticobasal degeneration. Pursuing neuro-orphan indications may enable us to obtain a streamlined regulatory approval pathway and favorablereimbursement treatment of any approved products. Accelerating the advancement of our diagnostic portfolio We are also developing a complementary diagnostics portfolio. We currently have three diagnostics candidates in our pipeline that we developed usingour Morphomer platform that targets Tau, alpha-synuclein and TDP-43. Our Tau-PET imaging agent is currently undergoing Phase 1 studies and we areworking with our partner, Piramal Imaging, to advance this product candidate through the clinical development process. We are also developing PETimaging diagnostics for diseases resulting from the misfolding of alpha-synuclein and TDP-43 proteins. We are leveraging the duality of our therapeutic and diagnostic approaches to seek to become the leader in precision treatment of neurodegenerativediseases. The goal of precision medicine is to deliver optimally targeted and timed interventions tailored to an individual's molecular drivers of disease. Thebiggest limitation in neurodegenerative disease management is the lack of appropriate biomarkers and reliable diagnostics for early disease detection and theabsence of approved disease-modifying therapies. We believe that the future treatment paradigm for neurodegenerative diseases will likely involve earlydisease diagnosis and combination therapy, leveraging both symptomatic and disease-modifying treatments, with different disease-modifying treatmentsused at various points in the progression of the disease. We believe that our multi-pronged approach to neurodegenerative disease diagnosis and treatmentmay result in the generation of individualized treatment options for patients and improve clinical outcomes. Strategically collaborating or selectively partnering for the development and commercialization of product candidates Historically, we have relied on collaboration agreements with leading pharmaceutical companies to leverage their scientific, development,manufacturing and commercialization expertise and other resources in order to accelerate the development of our product candidates. To date, we haveentered into collaboration agreements with leading global pharmaceutical companies, including two collaborations with Genentech and one with Janssen, aJohnson & Johnson company. We believe that these partnerships validate our core strategy 47 Table of Contents of discovering safe and efficacious therapies using our proprietary platforms and advancing them through the various stages of regulatory approval. In thefuture, for any approved products targeting large markets, we may selectively partner with leading companies that we believe can contribute manufacturingand marketing expertise, geographic reach and other resources and know-how that can enhance the value of these approved products. Our Approach to Treating Diseases Related to Protein Misfolding Protein folding and unfolding are important ways of regulating the protein’s biological activity and cellular location. Misfolding of proteins occurs dueto a breakdown of cellular quality control systems, and is a common feature of many neurodegenerative diseases. Research has shown that misfolded proteinsare not only unable to carry out their normal functions, but also aggregate to form deposits in the brain that eventually lead to neuronal damage and celldeath. The progression of neurodegenerative diseases, such as AD and PD, is linked to the misfolded conformations of proteins, such as Abeta, Tau, alpha-synuclein and TDP-43. The diagram above shows how, in today’s understanding, misfolded proteins play a key role in the pathology of neurodegenerative diseases. Typically,protein misfolding occurs during cellular stress, which can be triggered by many different causes, including oxidation and a lack of growth factors. A cascadeof molecular events begins with the misfolding of single proteins within a cell that then continue to aggregate to ultimately form plaques and tangles. Thesemisfolded proteins are then exported and spread to healthy cells nearby, causing normal proteins to misfold in a process known as seeding. This processeventually leads to cell death in various areas of the brain and is linked to a decline in cognitive function. Challenges in targeting misfolded proteins The central challenge in targeting misfolded proteins for therapeutic effect is a product’s ability to differentiate, or conformationally select, between amisfolded protein and a normally-folded protein. This ability to conformationally select for the misfolded protein prevents the therapeutic candidate frominterfering with the function of the normally-folded protein, thereby reducing the risk of side effects. Benefits of our approach The key aspect of both our SupraAntigen and Morphomer technology platforms is conformational specificity, which we believe is central to thedevelopment of effective therapeutics for neurodegenerative diseases. Our SupraAntigen platform targets misfolded proteins through antigens displayed onthe surface of liposomes which mimic the targeted pathological form of the protein. In a complementary approach, our Morphomer platform uses smallmolecular weight compounds to target the aggregation and seeding process, which prevents the misfolded proteins from aggregating inside the cell and theformation of new misfolded proteins in healthy neighboring cells through a seeding mechanism. Small molecules derived from our Morphomer platform,which we refer to as Morphomers, also promote disaggregation of already formed pathological protein aggregates. 48 Table of Contents The diagram above shows how we believe our therapies aim to intervene in the key pathology steps involved in neurodegenerative diseases: (1) preventmisfolding; (2) promote disaggregation; (3) inhibit spreading; and (4) prevent seeding in healthy cells. Current Treatment Paradigm for Neurodegenerative Disease Current diagnostic and treatment paradigms for neurodegenerative diseases are suboptimal. Diagnosis typically takes the form of observation ofcognitive, functional and behavioral impairment and other symptoms of the diseases, which are generally only apparent after irreversible neuronal damagehas already occurred. These symptoms are treated with medicines capable of providing cognitive benefit and functional improvement but fail to affect theprogression of the disease. For AD, there are currently four approved therapies, all of which only provide modest efficacy in treating the symptoms of AD,while having significant side effect risks, and fail to address the progression of the disease. Despite these shortcomings, marketed therapies, such as Eisai andPfizer’s Aricept, have achieved peak annual global sales of approximately $4 billion prior to loss of exclusivity. Similarly, in the treatment of PD, the currentstandard of care is intended only to alleviate physical symptoms. In both AD and PD, there are no approved disease-modifying treatments that slow or stopthe course of disease progression. Modifying the progression of the disease requires targeting the underlying biological processes that drive disease progression. Unfortunately, theseprocesses evolve over the course of many years prior to manifestation of symptoms and a high percentage of neurons may be lost prior to clinicalmanifestation. Many of the failed clinical studies for disease-modifying treatments targeted patients with moderate stages of the disease, when irreversibleneuronal damage and death had already occurred. This had led to the conclusion that early intervention is necessary to slow the disease progression and thatdisease-modifying therapies should be studied in patients with milder stages of the disease. As a result of this, in recent years, there has been a movementtowards early intervention in clinical development. Early intervention, however, requires accurate disease detection prior to physical manifestation ofsymptoms, using new and sophisticated technologies that are superior to the subjective rating scales currently used to assess patients. Thus, new diagnostictechnologies are critical to the clinical development process of disease-modifying therapies and ultimately better disease management of patients withneurodegenerative diseases. Opportunity for AC Immune in Neurodegenerative Diseases We intend to change the way that neurodegenerative diseases are treated and to differentiate our business by combining reliable diagnostic tools thatfacilitate intervention at earlier stages of the disease with therapies that treat the underlying disease, caused by misfolded protein targets. As shown in thediagram below, AC Immune’s pipeline, comprised of antibodies, vaccines and small molecules, is well situated to address the present and future treatmentparadigms of neurodegenerative diseases involving different disease-modifying treatments at various points in the progression of the disease, includingcombinations thereof. 49 Table of Contents We believe that our lead product candidate, crenezumab, is ideally positioned to be at the forefront of disease-modifying and preventative medicine dueto its demonstrated efficacy in milder AD subjects and favorable safety profile. Unlike the current standard of care, crenezumab and our other therapeuticproduct candidates seek to modify the course of AD by intervening at an earlier stage of the disease progression prior to irreversible neuronal damage.Beyond AD, we believe that we can leverage our proprietary platforms to generate additional molecules that treat the causes of other neurodegenerative andneuro-orphan diseases, such as Parkinson’s disease, multiple system atrophy, PSP, frontotemporal dementia, Pick’s disease, Corticobasal degeneration andHuntington’s disease. We believe that the future treatment paradigm for neurodegenerative diseases will involve different disease-modifying treatments usedat various points in the progression of the disease. One such combination may be passive immunization targeting Abeta, such as crenezumab together withanti-Tau antibodies or immunotherapies and small molecules targeting Abeta or Tau. We believe that we are a leader in discovering new PET imaging agents to improve the timing and accuracy of diagnoses in neurodegenerative diseases.We have three diagnostic candidates in our pipeline that were developed through our Morphomer platform and that target Tau, alpha-synuclein and TDP-43.We believe our Tau-PET imaging program has received external validation through our partnership with Piramal Imaging, a leader in imaging agents. We arealso developing an alpha-synuclein and TDP-43 PET imaging agent for PD and other neurodegenerative diseases. We believe that our diagnostic productcandidate pipeline will complement our disease-modifying treatment product candidate pipeline, with the ultimate goal of reshaping the clinical course andtreatment of neurodegenerative diseases. Our Proprietary Technology Platforms Our two unique proprietary and versatile technology platforms are engines to drive the growth of our development: our SupraAntigen platform, which isour biological and immunological platform, and our Morphomer platform, which is our small molecule, chemical platform. These platforms are designed togenerate vaccines, antibodies and small molecules, respectively, which selectively interact with misfolded proteins that are common in a broad range ofneurodegenerative diseases. Our SupraAntigen platform generates humanized monoclonal antibodies and vaccines for use as passive and active immunotherapies that are highlyspecific for pathological, or misfolded, forms of proteins typically found in neurodegenerative diseases. The key advantages of the SupraAntigen platform include: ·Highly selective conformation-specific immunotherapy; ·Generation of antibodies and vaccines; ·Generation of a rapid antibody response; and ·Favorable safety (T-cell independence). 50 Table of Contents Product candidates generated utilizing the SupraAntigen platform include crenezumab in Phase 3 in AD, ACI-24 in Phase 1/2a in AD and Phase 1b inDS, ACI-35 in Phase 1b in AD, an anti-Tau antibody in Phase 2 in AD and the pre-clinical antibodies for alpha-synuclein/TDP-43 in PD and neuro-orphanindications. Our Morphomer platform represents a highly promising technology that enables us to generate conformation specific small molecules through rationaldesign. As of December 31, 2017, our Morphomer library consisted of more than 3,500 compounds. This proprietary platform enables us to generate smallmolecules that bind to their target and break up neurotoxic protein aggregates or act as propagation inhibitors. Therapeutic product candidates generated by the Morphomer platform include the pre-clinical therapeutic programs Morphomer Abeta in Glaucoma,Morphomer Tau in AD, Morphomer alpha-synuclein in PD and the diagnostic programs Tau-PET imaging agent in Phase 1 in AD and PSP and alpha-synuclein-PET and TDP-43 PET imaging agents in a pre-clinical stage. Our AD Programs Crenezumab Crenezumab is a humanized, conformation-specific monoclonal antibody that targets misfolded Abeta and has a broad binding profile. Crenezumab wasdeveloped using our proprietary SupraAntigen platform. In 2006, we licensed crenezumab to Genentech, a company with a long history of developing andcommercializing innovative biologics. We believe crenezumab may have the following important competitive advantages relative to other drugs targeting Abeta in development: Mechanism of Action: ·Crenezumab recognizes and binds to multiple forms of Abeta, including monomeric, oligomeric and fibrillar Abeta that are found in amyloidplaques. In contrast, certain other antibodies in development such as solanezumab and aducanumab have only been shown in studies torecognize a subset of Abeta forms; ·Due to its capacity to bind to multiple forms of Abeta, with 10-old higher specificity to oligomers, which are thought to be the most toxicspecies, crenezumab also protects against oligomer-induced neurotoxicity; ·Linked to its unique epitope, crenezumab has been shown to promote disaggregation of existing Abeta aggregates and to disrupt their assemblyto prevent amyloid plaque formation. The crystal structure reveals binding interactions that are consistent with this flexible binding profile andprovides further explanation for crenezumab’s ability to block aggregation and to promote disaggregation; and 51 Table of Contents ·Crenezumab has been designed with an IgG4 backbone to reduce effector function on microglia and to clear Abeta from the brain while limitinginflammation. Crenezumab’s lack of binding to vascular amyloid and the dense core of Abeta plaques results in a reduced risk of ARIA-E andneuroinflammation and allows for higher dosing. Signal of activity in milder AD patients (MMSE 22-26) in Phase 2 clinical trials: ·In the proof-of-concept Phase 2 studies of crenezumab, a positive trend in cognition was observed with a greater effect on cognition in patientswith a milder stage of AD (MMSE 22-26); ·In the ABBY cognition study there was a statistically significant 35% reduction in the rate of cognitive decline in the non-pre-specified milderAD patient population (MMSE 22-26) for the high-dose arm; and ·In the BLAZE biomarker study, the high-dose arm showed a consistent trend of reduced Abeta accumulation in the brain over time, as shown intwo independent exploratory analyses of florbetapir-PET data. In addition, results have shown that crenezumab has the ability to enhance theremoval of these proteins from the brain as evidenced by a significant increase in CSF Abeta, confirming target engagement by crenezumab. Favorable safety profile allowing for potentially higher dosing: ·Phase 2 data from ABBY and BLAZE studies suggested that there were no imbalances in overall rate of Adverse Events, or AEs, and AEs werenot dose-related, with only one case of asymptomatic ARIA-E (0.4% in ABBY, 0.3% on active pooled) in crenezumab patients. AEs alsoincluded inflammation of the throat and nasal passages, urinary tract infections and upper respiratory infections. However, no patients in thestudies experienced serious adverse events that we believe were related to the administration of crenezumab; ·Crenezumab is a member of the IgG4 isotype subclass of antibodies. This isotype was selected because IgG4 antibodies are associated with agreatly reduced ability to cause inflammation. By contrast, all other antibody products currently in development that target Abeta are of theIgG1 isotype subclass, which is associated with a higher incidence of inflammation-related ARIA-E. Dose limiting toxicities are a major risk forfailure of competing antibody products. Potential safety at high doses is a key product feature of crenezumab. In exploratory research studies,crenezumab demonstrated a tendency to preferentially bind to oligomeric Abeta and consequently there was no detectable binding to the coreof plaques known to lack oligomers. Furthermore, crenezumab did not bind to vascular amyloid plaques potentially further explaining itspreferentially safety profile regarding ARIA-E formation; ·A Phase 1 study with higher doses of crenezumab up to 120mg/kg showed investigator assessed drug-related serious adverse events and noevents of ARIA-E supporting the dose of 60mg/kg in Phase 3 clinical trials CREAD; and ·Crenezumab is currently evaluated in two Phase 3 clinical trials in prodromal to mild AD patients which started in the first quarter 2017(CREAD 2) and 2016 (CREAD 1), respectively. Additionally a Phase 2 clinical prevention trial is ongoing in 300 cognitively healthyindividuals of whom 200 are genetically predisposed to develop early AD. 52 Table of Contents Ref: (1) Lin et al, CTAD 2017; (2) Budd-Heaberlein, JPAD 2017; (3) Andelkovic, CTAD 2017; (4) Siemers et al, Alzheimers et al, Alz (5) Logovinsky etal, Alzheimer's Research & Therapy 2016; (6) Salloway et al, New England Journal of Medicine 2014 The figure above sets forth crenezumab’s multiple neuroprotective mechanisms of action, in particular direct binding and inhibition of toxic Abetaoligomers which may demonstrate crenezumab's clinical benefit. Results from pre-clinical studies Abeta is produced by the breakdown of a larger protein called amyloid precursor protein, or APP. The Abeta fragment containing 42 amino acids, orAbeta 1–42, is believed to be associated with the highest toxicity of the Abeta fragments. Misfolded Abeta subunits combine to form oligomers and fibrilsthat are found in amyloid plaques. Data resulting from preclinical and clinical studies show that crenezumab binds with high affinity to amino acids 12–24 ofAbeta 1–42, as well as multiple forms of Abeta, including monomers, oligomers, and fibrils, which reduces Abeta 1–42 induced cytotoxicity. Furthermore,these data indicate that crenezumab enhances the uptake of neurotoxic Abeta oligomers by microglial cells, the resident immune cells of the brain, whichnormally respond to neuronal damage and remove the damaged cells for subsequent disposal and clearance from the brain. A challenge with agents acting to remove Abeta is the potential to induce inflammation leading to vasogenic edema, which is accumulation of fluid inthe brain that can lead to headaches, loss of coordination and disorientation. The fluid can be seen clearly on MRI scans and is referred to as Amyloid RelatedImaging Abnormality-Edema, or ARIA-E. Crenezumab is engineered on an IgG4 backbone, which was selected because IgG4 antibodies are associated with agreatly reduced risk of causing inflammation. As a result, crenezumab’s IgG4 structure activates microglial cells to clear Abeta without producinginflammation and associated vasogenic edema, as demonstrated in the Phase 2 clinical studies. In contrast, ARIA-E and other inflammation-related sideeffects have been observed in other antibodies with an IgG1 backbone. 53 Table of Contents The figure above shows that crenezumab promotes Abeta oligomer engulfment by microglia without inflammatory activation. At the 2017 Clinical Trials on Alzheimer’s Disease (CTAD) meeting the results from in vivo studies in PS2APP transgenic mice demonstrated thatcrenezumab localizes to brain areas with putative high concentrations of Abeta oligomers (i.e. the periphery of amyloid plaques and hippocampal mossyfibers) and that crenezumab does not bind to the dense core of plaques or vascular amyloid in AD transgenic mice. The figure above shows that crenezumab binding is present along the periphery (halo) of the plaques and the binding is weak at the plaque core. 54 Table of Contents The figure above shows the selective dose-dependent binding of crenezumab to hippocampal mossy fiber tract in PS2APP mice. The binding is not seenwith control IgG. The binding to those regions may reflect binding to soluble oligomeric Abeta. Ref to the three figures above: Atwal et al, CTAD 2017 The figure above shows the absence of binding to vascular amyloid in PS2APP mice. Phase 2 Studies Phase 2 Study Design Overview Crenezumab has been studied in two Phase 2 clinical studies, the ABBY proof-of-concept study and the BLAZE biomarker study. These two studiesenrolled a total of 522 patients. The purpose of these studies was to investigate whether crenezumab could delay cognitive and functional decline and reducethe accumulation of brain amyloid in patients with mild to moderate AD. The sample size of the studies was not expected to have adequate power to detect amodest but clinically significant difference between active medication and placebo at the 5% significance level (as is commonly the case in Phase 2 studiesin AD). Instead, consistent trends across different endpoints and dose dependency are considered indicators of a response in this learning phase ofdevelopment, with confirmation then sought in Phase 3. Both studies had two active arms: a low dose arm receiving 300mg subcutaneous injection, which isan injection administered beneath the skin, every two weeks and a higher dose arm receiving 15mg/kg intravenously every four weeks. The primary analysiswas conducted at 73 weeks, after 68 weeks of treatment. Safety and tolerability measures included repeated MRI scans to assess for the development ofAmyloid Related Imaging Abnormalities, both vasogenic edema and hemorrhages. ABBY Study Results In the ABBY study, a positive trend in cognition was observed with a greater effect on cognition in patients with a milder stage of AD (MMSE 22-26),although the study did not meet its co-primary endpoints in mild-to-moderate AD (MMSE 18-26) patients. There was no significant change in cognition inpatients who received low-dose subcutaneous crenezumab. Results of an exploratory analysis of the high-dose intravenous arm demonstrated that patientswith the mildest cognitive impairment at screening (MMSE 22-26) showed a statistically significant 35% slowing of the rate of cognitive decline over 73weeks. The effect became greater over time, as shown by the increasing separation of the crenezumab (solid line) and placebo (dashed line) curves in thediagram below. The milder group was not pre-specified, meaning the group of milder AD patients was not identified before commencing the Phase 2 clinicalstudies. 55 Table of Contents ABBY High Dose Arm: Change in ADAS-Cog 12 An exploratory subanalysis in a non-pre-specified subgroup of patients with milder symptoms (MMSE 22-26) showed a 35.4% reduction in cognitivedecline. The sample size of the study was not expected to have adequate power to detect a modest but clinically significant difference between activemedication and placebo at the 5% significance level (as is commonly the case in Phase 2 studies in AD). Instead, consistent trends across different endpointsand dose dependency are considered indicators of a response in this learning phase of development, with confirmation then sought in Phase 3. In the pre-specified subgroup analysis in patients with mild AD (MMSE 20-26), treatment with high-dose intravenous crenezumab led to a 23.8% reduction incognitive decline. In patients with mild-to-moderate AD (MMSE 18-26) treated with high-dose intravenous crenezumab, there was a 16.8% reduction incognitive decline. Effect sizes and p-values for exploratory analyses were not adjusted for multiplicity. In the ABBY study, patients in the high-dose crenezumab arm showed less decline on the measure of global function, CDR-Sum of boxes, as compared toplacebo. In mild-to-moderate AD (MMSE 18-26), a non-significant 3.1% reduction in global functional decline was observed. In the pre-specified subgroupanalysis in patients with mild AD (MMSE 20-26), treatment with high-dose intravenous crenezumab did not show reduction in global functional decline(1.0% reduction; p=0.96). An exploratory analysis in two cohorts of patients with milder symptoms showed a 19.6% (MMSE 22-26) and 45% (MMSE 24-26)reduction in global functional decline. 56 Table of Contents Greater relative reductions were observed in the crenezumab arm compared with placebo in the CDR subdomains Memory, Orientation, Judgment &Problem Solving and Home & Hobbies in progressively milder patients. Treatment effects were less consistent in progressively milder patients for the CDRsubdomains Community Affairs and Personal Care. 57 Table of Contents Ref: Mackey et al, AAIC 2016 CDR subdomains=difference in change from baseline to Week 73 in CDR subdomain scores between treatment and control groups. Diamonds representLS mean change from baseline at Week 73, error bars 95% present CI. Positive values indicate less decline in crenezumab group. Although the overall results were not statistically significant, it should be noted that the sample size of the study was not expected to have adequatepower to detect a modest but clinically significant difference between active medication and placebo at the 5% significance level (as is commonly the case inPhase 2 studies in AD). Instead, consistent trends across different endpoints and timepoints and dose dependency are considered indicators of a response inthis learning phase of development, with confirmation then sought in Phase 3. Trends favoring crenezumab were not observed in the activities of daily livingscale (ADCS-ADL) although the study was significantly underpowered for this type of assessment. 58 Table of Contents BLAZE Study Design The BLAZE study was a randomized, double-blind, parallel-group, placebo-controlled study to evaluate the effects of crenezumab on brain amyloidburden as assessed by amyloid PET imaging and other biomarker endpoints in patients with mild to moderate AD. The primary endpoint was to measure thechange in brain amyloid load using florbetapir-PET. The terms brain amyloid burden and brain amyloid load refer to the total amount of amyloid depositedin the brain. Each of these typically increases over time in an AD patient. Other endpoints included changes from baseline in other biomarkers (CSF,volumetric MRI), cognition (ADAS-cog12), global function (CDR-Sum of boxes), and activities of daily living (ADCS-ADL). Enrollment requiredflorbetapir-PET positive scans, or patients who were amyloid positive. Ninety-one patients were included in the study. BLAZE Study Results The primary end point of change in brain amyloid load by florbetapir-PET was not met, but the study was not powered to detect statistically significantresults. When assessing the amyloid load, the amount of amyloid in a region of the brain is determined by comparing the amount of an amyloid tracer to thatfound in a region with little or no amyloid, such as the cerebellum or the white matter, usually in the cortex. Recent studies have shown that the variabilityfrom scan to scan in the same patient over time is much higher when using the cerebellum than with the white matter, making the white matter a morepowerful point of comparison for use in longitudinal studies. The higher variability of the cerebellum may be due to difficulties in exact positioning betweenscans and higher background levels. Taking this into account, the exploratory analyses of the BLAZE amyloid PET results using white matter referenceregion were conducted independently by two laboratories, the Banner Alzheimer’s Institute and MNI Laboratories. The analyses produced analogous resultswhere a trend in the reduction of Abeta accumulation was observed in the high-dose arm. The BLAZE biomarker study high-dose intravenous cohort showed a consistent trend of reduced Abeta accumulation in the brain over time shown bytwo independent exploratory analyses of florbetapir-PET data. Using white matter rather than cerebellum as the key reference region in the brain is generallyconsidered a more robust method of showing treatment effects of AD therapies. In the BLAZE study, patients also showed a statistically significant increase in CSF Abeta1–42, which we believe confirms target engagement bycrenezumab. Similar results were observed in the ABBY study where CSF was assessed in 49 patients. These results suggest that Abeta is being eliminatedfrom the brain when treated with crenezumab. 59 Table of Contents BLAZE High Dose Arm: Crenezumab Increases CSF Total Abeta Relative to Placebo BLAZE Study Results: Effects on Cognition and Global Function A similar and consistent pattern of response was observed in the BLAZE study with slowing of loss of cognition compared to placebo observed at thehigh-dose intravenous crenezumab arm, and having the most effect in patients with more mild MMSE scores. There was no significant cognitive change inpatients who received low-dose subcutaneous crenezumab. Importantly, the sample size of the study was not expected to have adequate power to detect amodest but clinically significant difference between active medication and placebo at the 5% significance level (as is commonly the case in Phase 2 studiesin AD). BLAZE study results suggest that Abeta is being eliminated from the brain as patients showed a statistically significant increase in CSF Abeta 1–42,which confirms target engagement by crenezumab. BLAZE High Dose Arm: Change in ADAS-Cog 12 The BLAZE high-dose arm showed increasing separation over time of the curves of decline on ADAS-Cog 12 for placebo (dashed line) and intravenouscrenezumab (solid line) in the mild subgroup of patients (MMSE 20-26). In a post-hoc analysis of a group of patients with mild AD (MMSE 20-26) treatedwith high-dose intravenous crenezumab, there was a 52.0% reduction in cognitive decline (p=0.29). In patients with mild-to-moderate AD (MMSE 18-26)treated with high-dose intravenous crenezumab, there was a 10.3% reduction in cognitive decline (p=0.84). Importantly, the sample size of the study was notexpected to have adequate power to detect a modest but clinically significant difference between active medication and placebo at the 5% 60 Table of Contents significance level (as is commonly the case in Phase 2 studies in AD). Effect sizes and p-values were not adjusted for multiplicity. In the BLAZE study, patients in the high-dose crenezumab arm showed less cognitive decline on the measure of global function, CDR-Sum of boxes, ascompared to placebo. In mild-to-moderate AD (MMSE 18-26), a 7.4% reduction in global functional decline (p=0.84) was observed. In a post-hoc analysis inpatients with mild AD (MMSE 20-26), treatment with high-dose intravenous crenezumab resulted in a 41.5% reduction in global functional decline (p=0.44).Although the results were not statistically significant, the sample size of the study was not expected to have adequate power to detect a modest but clinicallysignificant difference between active medication and placebo at the 5% significance level (as is commonly the case in Phase 2 studies in AD). Safety Data from ABBY and BLAZE Studies Crenezumab demonstrated favorable safety and tolerability in Phase 2 clinical studies even at high doses. Crenezumab’s safety profile is especiallyreflected in a low incidence of ARIA-E (0.3%) in Phase 2 clinical studies. ARIA-E was observed in only one patient who received high-dose intravenouscrenezumab in the ABBY study. No case of ARIA-E was reported in the placebo arm or the BLAZE study. Favorable pharmacokinetic properties coupled witha favorable safety and tolerability profile enables crenezumab to penetrate the brain more readily at therapeutically relevant doses. Since dose limitingtoxicities are a potential reason for the failure of other antibodies to demonstrate efficacy, crenezumab’s potential safety at high doses is a key distinguishingproduct feature. There was no imbalance in the overall rate of AEs. AEs were observed in 91.3% of patients treated with crenezumab versus 90.3% of patients whoreceived placebo. AEs were generally mild-to-moderate and transient. AEs did not appear to be related to crenezumab exposure. Five deaths occurred duringABBY and BLAZE, all in patients who received crenezumab during the randomized placebo-controlled period (1.4% of the crenezumab-treated population).The overall rate of deaths is consistent with the background rate of death in the elderly AD population. There was no consistent pattern for the cause of deathand none were considered by the investigators to be related to crenezumab. It was reported that 3.2% of crenezumab-treated patients developed pneumoniaversus 0.6% in placebo-treated patients in ABBY and BLAZE, but the rate of pneumonia cases in crenezumab-treated patients is consistent with the expectedrate in the elderly population (2.5%–4.4%) and no drug-related mechanism for pneumonia was identified. Genentech has not disclosed detailed information about serious adverse events associated with crenezumab either publicly or to us. However, at the 2014Alzheimer’s Association International Conference, it was reported that in the combined Phase 2 study populations, serious adverse events occurred at similarrates in patients treated with crenezumab (16.5%) and in patients given a placebo (11.9%). Phase 1b Study to explore higher doses To explore safety at higher doses, crenezumab was tested in a Phase 1b dose escalation clinical study (NCT02353598) conducted in the United States.This randomized, placebo-controlled, double-blind, four parallel-arm study evaluated the safety and tolerability of at least four doses of intravenouscrenezumab in 77 patients with mild to moderate AD (MMSE 18-28) between the ages of 50 to 90. An optional open-label extension stage was offered topatients after completion of the double-blind stage of the study. At the 2017 AAIC meeting, Genentech presented the results of the four cohorts with mild-to-moderate Alzheimer’s disease. No dose-limiting toxicities were observed at 30, 45, 60 and 120 mg/kg doses of crenezumab. No events of Amyloid RelatedImaging Abnormality-Edema (ARIA-E) were observed in the Phase 1b study and only few patients (6 of 75) showed asymptomatic Amyloid Related ImagingAbnormality-Hemsiderin (ARIA-H).The pharmacokinetic profile of crenezumab is dose proportional up to the 60 mg/kg dose and is consistent with historicaldata. The serum concentrations at this dose are four times higher than in the 15mg/kg dose used in the Phase 2 trials. These safety and pharmacokinetic dataof the Phase 1b dose escalation study support the continued treatment of patients with crenezumab at the higher dose of 60 mg/kg. Phase 2 AD Prevention Study In 2012, crenezumab was independently selected from among twenty five product candidates for use in the first-ever AD prevention study. The study, a$100 million collaboration between the NIH, Banner Alzheimer’s Institute and Genentech, is the cornerstone of the global Alzheimer’s Prevention Initiative.Crenezumab is being administered pre-symptomatically to 300 members of an extended Colombian family, of which 200 members carry a mutation thatcauses early-onset AD. Family members usually develop symptoms before the age of 45. 61 Table of Contents The five-year study has cognitive endpoints. An interim analysis is possible according to the protocol, but the data and results of that analysis may not bemade public due to patient sensitivity. Ongoing Phase 3 Studies (CREAD 1 and 2) Genentech entered Phase 3 clinical development of crenezumab in the first quarter of 2016 with CREAD 1, which was fully recruited in the fourth quarterof 2017. The second Phase 3 clinical trial started in the first quarter of 2017. Both studies are ongoing and follow the same study protocol given below. Therandomized, double-blind, placebo-controlled, parallel group Phase 3 study will enroll about 750 participants with prodromal or mild AD at the age of 50-85years. A high dose of crenezumab (60mg/kg) is administered intravenously once every 4 weeks for 100 weeks. Primary outcome measure is change frombaseline to week 105 in Clinical Dementia Rating - Sum of Boxes (CDR-SB) score. An exposure-response model to evaluate the best dose of crenezumab forthe treatment of Alzheimer’s disease was established and predicts an improved outcome of the CREAD Phase 3 study by using the higher dose of 60mg/kgrelative to the Phase 2 trials. The CREAD 1 final data collection date for primary outcome measures is expected by August 2020, with study completion byJuly 2021. CREAD 2 final data collection date for primary outcome measures is expected by October 2021, with study completion expected by October2022. Exposure-response model results: correlation between crenezumab exposure (AUC at steady state) and treatment effect reaching asymptote at projectedexposure of 60mg/kg 62 Table of Contents Exposure-response model results: clinical trial simulations of Phase 3 study design predict 41% relative reduction on ADAS-Coq12 and 44% on CDR-SB in the milder AD population (MMSE 22-26) ACI-24 ACI-24 is a vaccine candidate that is in a combined Phase 1/2a clinical study for AD. ACI-24 was developed utilizing our SupraAntigen platform, and isdesigned to stimulate a patient’s immune system to produce antibodies that specifically target the misfolded Abeta conformer to prevent plaqueaccumulation and to enhance plaque clearance. Pre-clinical data demonstrated significant activity in plaque reduction and memory restoration. ACI-24 has afavorable safety profile, characterized by a lack of observed local inflammation and a mechanism of action independent of inflammatory T-cells. ACI-24 isfully owned by AC Immune and has been developed in-house. Phase 1/2a Study Phase 1/2a Study Design To be considered a Phase 1/2a study, a study or part of it must include as a primary goal the assessment of efficacy in a patient population, assessed usingeither clinical endpoints or biomarkers. This is in contrast to a Phase 1 study where the primary goal typically includes safety and pharmacokinetic orpharmacodynamic measures. The ACI-24 study was planned as an adaptive design study where, after completion of a first step assessment of safety and immunogenicity at differentdoses, the study may be expanded to assess the efficacy at the best dose in a Phase 2a-type design. The Phase 1 part of the combined Phase 1/2a study is currently ongoing with the last patients of cohort 4 being enrolled in the one-year safety follow upperiod. Originally, each dose cohort was planned to be followed by a two-year treatment-free safety period. The efficacy, tolerability and immunogenicity ofACI-24 were tested in mild to moderate AD patients with four different doses in a randomized, placebo controlled, double blind 63 Table of Contents study. The different doses were tested via an ascending dose design in four consecutive cohorts with 12 patients each (9 on active, 3 on placebo treatment).ACI-24 was administered by subcutaneous injection with multiple injections per cohort. Phase 1 Study Data Safety and tolerability Due to the observed favorable safety profile, the treatment free safety follow-up period of the Phase 1 part of the study was shortened to one year and iscurrently ongoing. In the current safety analysis thirteen serious adverse events were observed. All events were considered to be unrelated to study treatmentand included one malignant colon polyp; one wound infection associated with a planned hip replacement; one radius fracture; an intra-abdominal cancer ofunknown origin followed by death of the patient; one fall complicated by vertebral compression fracture; acute chest pain; one death due to AD; one deathconsidered to be due to complications from coronary artery disease; one case of pneumonia; one case of breast cancer; and three successive episodes ofpancreatitis in addition to gallstones in one patient. Until now, the ACI-24 vaccine is considered as very safe and well tolerated. Antibody response Antibody responses were only observed in the two higher dose groups of cohort 3 and 4 indicating a dose dependent effect of the vaccine. No antibodyresponse was observed in placebo treated patients of those cohorts. PET Imaging and cognitive measures While the study was not powered to examine efficacy, a dose-dependent trend of reduction in accumulation in brain amyloid measured by PET imagingwas observed in cohort 3 and 4. A similar pattern of reduction of clinical decline assessed by the CDR-SB was observed in cohort 3 compared to placebo atweek 52 although this did not reach statistical significance. Next steps Due to the very promising safety profile and potential dose dependent reduction of amyloid plaques as measured by PET imaging, we plan to move thisprogram forward into a Phase 2 clinical trial. The main readout will be to analyze ACI-24’s effect on amyloid plaque reduction in a larger cohort size. Weexpect to start this study by the second half of 2018. ACI-24 in Down Syndrome Individuals with Down syndrome have an extra copy of chromosome 21 where the gene for APP resides. These individuals have a rate of AD that is threeto five times that of the general population and develop the disease at a much younger age. At autopsy, AD has been reported in 80% of people with Downsyndrome over age 40 and 100% over age 60. Alzheimer’s-like characteristics develop in more than 98% of people with DS over the age of 40 with up to80% developing associated dementia over the age of 60. It is estimated that there are 6 million people with DS worldwide, with 250,000 in the United States.Pre-clinical results published by AC Immune in collaboration with Dr. Mobley of the University of California, San Diego in March 2016, shows in a Downsyndrome mouse model (Ts65Dn) a 20% significant improvement of the memory and a 27% reduction of Abeta in the brain following vaccination with ACI-DS-01, the mouse equivalent of ACI-24. A Phase 1b clinical trial (called 3 Star study) is ongoing and evaluates the safety and tolerability of ACI-24, its effect on induction of antibodies againstAbeta and biomarkers for Abeta brain and CSF load in the adult participants with Down syndrome. The study is being funded through a grant from the USNational Institute on Ageing, a part of the US National Institutes of Health (NIH) with an additional grant from the LuMind Research Down SyndromeFoundation. The dose escalation study includes 24 participants across all cohorts, aged 25 to 45 and treated for 12 months, with a 12-month safety follow up.The recruitment of the Phase 1b study of the first, low-dose cohort of adults with Down syndrome has been completed in the third quarter of 2017. No seriousadverse event and no early discontinuation have been reported in the study as of December 20, 2017. The Data Safety Monitoring Board (DSMB)unanimously approved the plan to proceed with cohort 2 as specified in the protocol. 64 Table of Contents ACI-35 ACI-35 is a vaccine candidate directed against another key component of the pathology of AD: phosphorylated Tau proteins, or p-Tau, found in Tautangles. ACI-35 was developed using our SupraAntigen technology and is designed to stimulate a patient’s immune system to produce antibodies against themisfolded and phosphorylated pathogenic conformers of Tau protein that aggregate to create the neurofibrillary tangles that characterize AD. In pre-clinicaltesting, the vaccine candidate induced an antibody response that was highly specific to misfolded and phosphorylated Tau. This antibody response resultedin a significant reduction of phosphorylated Tau and an improvement in clinical parameters. ACI-35 is the first vaccine candidate against phosphorylatedpathological Tau in a clinical study involving patients with mild to moderate AD. The Phase 1b treatment is finished and final data analysis is ongoing. Thenext phase of clinical development is currently in preparation. In 2014, we entered into a partnership with Janssen Pharmaceuticals, a subsidiary ofJohnson & Johnson, for the research, clinical development, manufacture and commercialization of ACI-35. Phase 1b Study Phase 1b Study Design Safety, tolerability and immunogenicity of ACI-35 were tested in a Phase 1b study in mild to moderate AD patients. It was a randomized, placebocontrolled double blind study, where ACI-35 was administered via subcutaneous injection. Different doses and dosing schedules were being investigated inan ascending dose design. Multiple injections of ACI-35 were administered per cohort for active or placebo treatment in a three-to-one ratio. Phase 1b Study Results Safety The safety and tolerability in the study was considered acceptable. As reported in 2017, five serious adverse events were observed in three patientsduring the clinical study of ACI-35. Acute pyelonephritis, or kidney infection, and dizziness were observed in one patient and sick sinus syndrome wasreported for a second patient, and these were labeled as possibly related to the study drug due to the close timing proximity with the last administration ofACI-35. In the third patient, urosepsis, or blood poisoning, and pyelonephritis were described and classified as unlikely to be related to the study drug. Nofurther serious adverse events were reported. The only adverse events consistently reported were injection site reactions which were in all cases mild tomoderate in severity, transient and self-limiting. In conclusion the vaccine ACI-35 is considered to be safe and well tolerated. Antibody response An interim analysis, reported in 2017, had shown a dose dependent and target specific antibody response. Further analysis of the antibody response ofthe Phase 1b study demonstrated that ACI-35 elicited an initial response after the first immunization, indicating a T-cell independent antibody responsewhich, however, lacked the boosting response desired for an optimal long-term and potentially preventive application. Therefore in a collaborative effortboth research teams of AC Immune and Janssen Pharmaceutical successfully developed new formulations of the anti-Tau vaccine. In non-human primates, thenew formulation of the anti-Tau vaccine demonstrated a high and long-term boostable antibody response while preserving the high specificity to misfoldedand phosphorylated Tau. Due to the encouraging data, AC Immune and Janssen jointly decided to advance different formulations of the anti-Tau vaccine program to the nextstage of development. In a scientific advisory meeting, the regulatory authorities were highly supportive of a shortened pre-clinical development of thosenew formulations. Both parties are currently focusing on manufacturing efforts and additional safety studies to advance these promising formulations into thenext stage of development. Our Anti-Tau Antibody Candidate Our anti-Tau monoclonal antibody program generated humanized monoclonal antibodies for use as passive immunotherapies that are highly specific forpathological forms of Tau found in AD brains and other Tauopathies. Results from studies conducted in pre-clinical development demonstrated a significantreduction in pathological Tau with reduced effector function, meaning decreased ability to affect the function of Tau, as well as improvement of long-termspatial memory. The anti-Tau antibody program was out-licensed to Genentech in 2012. The anti-Tau monoclonal antibody known as RO7105705 wasdiscovered and humanized as part of AC Immune’s collaboration with Genentech. It is an IgG4 humanized anti-Tau monoclonal antibody in clinical 65 Table of Contents development for the treatment of AD and other neurodegenerative diseases. It shows a high specificity for pathological Tau and is designed to intercept thecell-to-cell spread of pathological Tau in the extracellular space of the brain. A Phase 1 clinical trial that involved 75 subjects and evaluated the safety, tolerability, pharmacokinetics and preliminary activity of RO7105705 inpeople with mild-to-moderate AD and in healthy volunteers was completed in the second quarter of 2017. RO7105705 was administered at single doses of upto 16,800 mg in healthy volunteers and multiple doses of 8,400 mg in healthy volunteers and patients with AD. The results of the Phase 1 clinical trial werepresented at multiple conferences, including the AD/PD in Vienna (March 29-April 2, 2017), the AAIC in London (July 15-20, 2017) and the CTAD inBoston (November 1-4, 2017). No dose-limiting toxicities and no serious adverse events were observed up to high dose levels. No participant withdrawals,modifications or interruptions due to an adverse event were reported. RO7105705 exhibited a dose proportional pharmacokinetic profile, indicated CNS exposure and showed a median half-life of 32.3 days. Plasma totalTau concentration increased with increasing drug doses and was 2 times greater in participants with AD than in healthy volunteers, suggesting apharmacodynamic signal as shown in the figure below. Ref: Kerchner et al, CTAD 2017 Following the completion of the Phase 1 clinical trial, a Phase 2 clinical trial was commenced in the fourth quarter of 2017, the dosing of the first patienttriggered a milestone payment of CHF 14 million from Genentech to AC Immune. The trial is being conducted by Genentech and will enroll 360 patients toassess the safety, tolerability and efficacy of the anti-Tau monoclonal antibody RO7105705 in people with prodromal-to-mild AD. Participants will receiveone of three active doses or placebo for 72 weeks, followed by a 96-week optional open label extension. Primary endpoints include safety measures and thecomposite functional and cognitive endpoint CDR (Clinical Dementia Rating scale) sum-of-boxes score. Change from baseline in Tau pathological burden isan important exploratory endpoint. The design of the Phase 2 study is shown in the graph below. Ref: Kerchner et al, CTAD 2017 66 Table of Contents Pre-clinical and Discovery Stage Therapeutic Programs Using our SupraAntigen and Morphomer platforms, we have generated additional discovery and pre-clinical stage molecules targetingneurodegenerative diseases, and diagnostics targeting Tau, alpha-synuclein and TDP-43. We currently have five therapeutic product candidates and twodiagnostic product candidates in various stages of pre-clinical development. A number of our therapeutic product candidates in pre-clinical development arefocused on indications outside of AD and evidence our expansion strategy. Based on the data we have received to date, we believe that our technologyplatforms can be applied to misfolded proteins across a broad range of indications. The table below lists five pre-clinical product candidates and the leadindication being pursued: Product CandidateTargetLead IndicationPartnerPlatformMorphomer TauTauADN/AMorphomerMorphomer AbetaAbetaGlaucomaN/AMorphomerMorphomer alpha-synuclein alpha-synucleinPDN/AMorphomerAnti-alpha-synuclein antibody alpha-synuclein N/A N/A SupraAntigen Anti-TDP-43 antibody TDP-43 N/A N/A SupraAntigen Anti-Tau Morphomers: Anti-Tau Morphomers are small molecule compounds designed to inhibit Tau aggregation with the aim of interacting with thebeta sheet conformation present in misfolded aggregated Tau protein. Our anti-Tau Morphomers show a significant inhibition of full length Tau aggregation,size-reduction and solubilization of full length Tau aggregates and intracellular target engagement by reduction of cellular, aggregated and phosphorylatedTau. Importantly, research data show that our compounds reduce cytotoxicity induced by Tau. These data were further confirmed by the reduction ofmisfolded Tau in the brain and memory improvement in a Tau disease mouse model. Morphomer Abeta: Our Morphomer Abeta product candidate is a small molecule that inhibits and disrupts Abeta propagation and aggregation, and iscurrently being evaluated for the treatment of glaucoma, where its anti-Abeta properties represent a novel mechanism of action for that disease. In pre-clinicaltesting, Morphomer abeta demonstrated a strong ability to protect the eyes of rats exposed to increased ocular pressure and chronic ocular hypertensionwhich are clinical features of glaucoma. Morphomer alpha-synuclein: Our Morphomer alpha-synuclein product candidate is a small molecule that reduces the cytotoxicity of alpha-synucleinaggregates by a decrease in their beta sheet content. In pre-clinical studies, Morphomer alpha-synuclein significantly reduced in vivo the formation of alpha-synuclein pathological structures accompanied by improvement of a neuronal marker relevant to PD. Ongoing activities are focused on increasing potencyand pharmacokinetic properties and preparing compounds for pre-clinical development activities. In a mouse model of Tauopathies, our lead compoundsshow improvement of learning and memory deficit and reduce brain atrophy. Anti-alpha-synuclein antibody and TDP-43 antibody: The two antibody programs targeting alpha-synuclein and TDP-43 were discovered using theSupraAntigen technology platform. Both antibody programs have unique binding properties allowing them to bind to only the pathological forms of alpha-synuclein and TDP-43, respectively. Alpha-synuclein is an established target for Parkinson’s disease and other Lewy body diseases, while TDP-43 is arecently identified target of growing interest for neuro-orphan indications such as Frontotemporal Lobar Degeneration. Interestingly, both targets also play animportant role in other significant neurodegenerative indications such as Alzheimer’s disease, beyond the established hallmarks of Abeta and Tau. Diagnostics Scientists believe that early detection of neurodegenerative diseases is critical to enhancing the effectiveness of both symptomatic and disease-modifying therapies. As a result, therapeutic development for AD increasingly focuses on treating early stage disease to delay or prevent progression and topreserve the maximum amount of cognitive function before it is irreversibly lost. Most clinical studies now target mild or even pre-clinical stages of thedisease increasing the need for accurate diagnosis that is independent of potentially subjective cognitive metrics. At least one study estimates that as many asone-third of patients in 67 Table of Contents previous AD studies did not in fact have AD. Accurate and early diagnosis of AD is thus a substantial unmet market need, and diagnostic products will have akey role in generating a new treatment paradigm, including by selecting more uniform and stage-specific clinical study subjects, tracking patient progressand results, managing patients receiving treatment, and ultimately diagnosing disease at its earliest stage for immediate treatment. We are developing two diagnostic product candidates using our Morphomer technology platform. These product candidates are PET ligands that aretracers that can be used to target Tau, alpha-synuclein and TDP-43 aggregates. In May 2014, we established a license and collaboration agreement for ourTau-PET imaging program with Piramal Imaging. Piramal Imaging commenced a Phase 1 clinical study of the program in the fourth quarter of fiscal year2016. Our Tau-PET tracers are designed to bind specifically to the pathological forms of human Tau in AD and other Tauopathies. They have demonstrated anexcellent PET tracer profile with their ability to cross the blood-brain barrier and a high selectivity to pathological Tau even in early stage disease. The severity of cognitive impairment in AD patients is correlated with the presence of Tau protein tangles, leading us to believe that an imaging agentfor Tau is equally important. Our Tau-PET tracers are more selective for Tau than Abeta when compared to current published Tau-PET agents in developmentand can be readily radiolabeled. While PET imaging has improved the diagnosis of AD by targeting Abeta, Tau imaging will further enhance the diagnosis ofearly AD. To date, there are no approved Tau tracers. The diagrams above show that our lead Tau-PET imaging compound (PI-2620) has high selectivity with absence of off-target binding in a pre-clinicalsetting. The interim data of the ongoing Phase 1 clinical study in healthy volunteers and patients with AD and PSP revealed a fast kinetic with a robust brainuptake, fast wash-out in non-target regions and low off-target uptake. As the right diagram shows the lead PET imaging tracer exhibits a distinct, specific Taudistribution pattern in AD and PSP. The reproducibility of the PET-scans was confirmed by a Test Re-test study. Data from the Tau-PET imaging program were presented at multiple conferences in 2017 including, the AD/PD conference in Vienna (March 29 – April2, 2017), the AAIC conference in London (July 15-20, 2017) and the CTAD conference in Boston (November 1-4, 2017). AD diagnostics are a major market opportunity that will be driven by the growth in the aging population and the testing and availability of disease-modifying drugs. We believe a best-in-class Tau tracer has the potential to achieve a substantial market share in this large and growing market. Alongside our AD diagnostics activities, we have a program targeting PET imaging agents for alpha-synuclein, an important protein involved in PD, andwhich progressively accumulates in structures in the PD brain. Scientists believe that the misfolding of alpha-synuclein is central to the neurodegenerativeprocess of PD, as well as a number of other disorders, collectively called synucleinopathies, such as Lewy Body Dementia and Multiple System Atrophy,making it a priority target for development of therapeutics and diagnostics. We have identified molecules from our Morphomer library that stain selectivelyalpha-synuclein pathological structures in human PD brain sections. Those molecules also have suitable properties for the development of PET ligands.Ongoing work to optimize the potency, selectivity and pharmacokinetics of these tracers is being funded by the Michael J. Fox Foundation for Parkinson’sResearch and Biogen under the non-exclusive research and development agreement signed in April 2016. In September 2017 we were awarded acontinuation of a February 2015 research grant from the Michael J. Fox Foundation for Parkinson's Research. 68 Table of Contents Currently there are no imaging products in the market that target alpha-synuclein. This provides us with a unique opportunity to become the marketleader in alpha-synuclein PET imaging. We believe the ability to image alpha-synuclein deposits in the brain will enable: ·The diagnosis of PD at much earlier premotor stages than is now possible, thereby enabling early therapeutic intervention and correspondingbetter patient outcomes; ·The use of alpha-synuclein as a surrogate marker in clinical studies of novel therapeutic regimens designed to slow or halt progression of PD;and ·The diagnosis of sub-populations of PD and other synucleinopathies. These applications of alpha-synuclein PET imaging agents have the potential to fundamentally change the approach of treating PD and other similardiseases. The PD market size is estimated to grow from $3.6 billion in 2012 to approximately $5.3 billion in 2022. To complement our pipeline of PET imaging tracers, we selected Tar Binding Protein (TDP-43) as a third target. TDP-43 in its physiological function is aprotein participating in nucleic acid transport. As Abeta, Tau and alpha-synuclein, TDP-43 misfolds into insoluble, beta-sheet rich aggregates in thecytoplasm of neurons leading to TDP-43 proteinopathies. TDP-43 pathology often appears as a part of mixed pathologies in neurodegenerative diseases. Theprecise diagnosis and differentiation of early stages of such diseases is of critical importance. There are no imaging products in the market today targeting TDP-43. This provides us with a unique opportunity to become the first company providingTDP-43-PET imaging to the market. We believe the ability to image TDP-43 deposits in the brain will enable: ·The diagnosis of primary TDP-43 proteinopathies such as FTD-TDP-43, AD and ALS and separation from other proteinopathies for targeted,early therapeutic intervention; ·The use of TDP-43 quantification as a biomarker in TDP-43 proteinopathies in clinical studies of novel therapeutic regimens designed to slowor halt disease progression; and ·The direct diagnosis of TDP-43 co-pathologies in other neurodegenerative diseases for patient segmentation. The application of TDP-43 imaging agents has the potential to fundamentally change the approach of treating primary and secondary TDP-43 basedproteinopathies to provide the best outcome for patients. License Agreements and Collaborations Our SupraAntigen and Morphomer platforms have generated large numbers of clinical assets that address diseases related to protein misfolding, such asAD, PD and Down syndrome. Select key assets in the product pipeline have been licensed for upfront payments, milestones and royalties to help offset thecost of our research and internal product development. Discussions with other companies are ongoing. We have signed a number of licensing agreementswith leading pharmaceutical companies to assist and accelerate the development of our product pipeline, including: ·A worldwide licensing agreement with Genentech signed in November 2006 (and amended in May 2015) for crenezumab for AD, under whichwe may become eligible to receive payments totaling up to approximately $340 million, excluding royalties. ·A worldwide licensing agreement with Genentech signed in June 2012 for anti-Tau antibodies for AD, under which we may become eligible toreceive payments potentially greater than $400 million, excluding royalties. ·A worldwide licensing agreement with Janssen signed in December 2014 (and amended in April 2016 and July 2017) for therapeutic anti-Tauvaccines for AD, and potentially other Tauopathies, under which we may become eligible to receive payments totaling up to CHF 500 million,excluding royalties. 69 Table of Contents ·A worldwide licensing and collaboration agreement (“LCA”) with Piramal Imaging signed in May 2014 for small molecule Tau ligands for useas PET tracers under which we may become eligible to receive payments totaling up to EUR 157 million, excluding royalties. ·A non-exclusive research and development agreement with Biogen signed in April 2016 to collaborate in the research and early clinicaldevelopment of our alpha-synuclein PET Tracer program for Parkinson’s disease and other synucleinopathies, and a second program for theidentification, research and development of novel PET ligands against TDP-43, a protein recently linked to neurodegeneration in diseases suchas amyotrophic lateral sclerosis. ·AC Immune entered into a research collaboration agreement with Essex Bio-Technology Limited signed in May 2017 to collaborate in theresearch and early clinical development of a new therapeutic agent targeting basic Fibroblast Growth Factor for the treatment ofneurodegenerative and neuroinflammatory diseases. Further information concerning details of AC Immune’s agreements and collaborations can be found under Item 5: Operating and Financial Review andProspects. Competition The biopharmaceuticals industry is highly competitive across all therapeutic fields. In the field of neurodegenerative diseases, there are many public andprivate companies or institutions that are actively engaged in the discovery and development of therapeutic and diagnostic products. Some of these productsmay have a similar target to our product candidates or address similar markets. The industry is still in its infancy in terms of defining the pathology ofneurodegenerative diseases. As disease understanding progresses, the number of novel product candidates may well increase and broaden the therapeutic anddiagnostic options in our product markets. Currently, there are no approved disease-modifying products for AD or any other neurodegenerative disease. Current approved therapies seek to treat thesymptoms of AD, such as cognitive decline, but do not slow or stop the progression of the disease. In addition, commonly, there is off-label prescription ofantidepressant and antipsychotic agents for more advanced AD patients who may suffer from agitation, aggressive behaviors, psychosis and depression. Nonew drugs have been approved for the treatment of AD since 2003. We expect there to be several classes of disease-modifying agents that will enter the AD market. One such class is monoclonal antibodies that targetAbeta plaques, the same target as for our candidate product crenezumab. Another target for monoclonal antibodies is pathological Tau protein. Therapeuticvaccines are a second class of disease-modifying therapies, and include our candidate products ACI-24, that targets Abeta plaque, and ACI-35, that targetsaggregated Tau protein. The availability of novel diagnostic agents to visualize the disease development in AD patients is critical for successful clinical development of disease-modifying products in AD. At the forefront of this new diagnostic effort are PET agents for in-life imaging of disease, and in particular, Tau-targeting PETagents which we believe will allow precise assessment of disease AD patients. Crenezumab: If crenezumab is approved, it would compete with other monoclonal antibody products that target Abeta plaques and act as disease-modifying agents. Currently, no product has been approved that is a disease-modifying agent targeting Abeta plaques. However, including crenezumab, threesuch product candidates are in Phase 3 clinical development. Biogen’s Aducanumab is being evaluated in two Phase 3 studies in subjects with earlyAlzheimer’s disease and, similar to crenezumab in 2008, received Fast Track designation from the FDA in 2016. Gantenerumab is being evaluated by Roche,who in March 2017 announced a continuation of dose finding and the start of late stage studies in Alzheimer’s disease at the end 2017. Several othercompanies have Abeta-targeting assets in earlier clinical stages of development, including Biogen, with BAN2401, currently in a Phase 2 clinical study. ACI-24 in AD: ACI-24, if approved, would compete with other approved anti-Abeta-targeting therapeutic vaccines. Several potential competing productcandidates have not continued through the regulatory approval process, including ACC-001 (Janssen / Pfizer) and AN-1792 (Elan / Janssen), both of whichwere discontinued after completing Phase 2 studies. Other potential competing product candidates for ACI-24 include ABvac 40 70 Table of Contents (Araclon Bioscience) which has completed a Phase 1 study and CAD-106 (Novartis International AG), which has completed a Phase 2 study and is currentlyevaluating AF20513 in a Phase 1 clinical trial. United Therapeutics is developing UB311, which is in a Phase 2 study. ACI-24 in Down syndrome: ACI-24 is the first disease-modifying vaccine candidate addressing AD in Down syndrome, with a potential preventive andtherapeutic application. While there are symptomatic treatments of Down syndrome in clinical development, to our knowledge there are no other disease-modifying treatments for AD in Down syndrome. ACI-35: ACI-35, if approved, would compete with other approved Tau-targeting therapeutic vaccines. This includes AADvac1, being advanced by AxonNeuroscience. It is an anti-Tau vaccine product candidate and is currently in a Phase 2 clinical trial to examine safety and efficacy in patients with mild AD. Anti-Tau Antibodies: The anti-Tau antibody, designated RO 7105705 by Genentech, is one of several monoclonal antibodies in development targetingTau to potentially act as disease-modifying agents. Biogen is evaluating BIIB092 (licensed from Bristol-Myers Squibb) in a Phase 2 clinical trial in PSP andAD. alpha-synuclein and TDP-43 antibodies: Several alpha-synuclein antibodies are currently in development; Biogen entered Phase 2 with BIIB054 inMay 2017; Roche/Prothena entered Phase 2 with PRX002 in June 2017; and Astra Zeneca/Takeda is set to enter Phase 1 shortly with MEDI1341. To ourknowledge, there are no TDP-43 antibodies in the clinic. Diagnostics: Currently, there are no approved Tau PET imaging products. However, should our Tau PET imaging agent be approved, it would competewith other approved Tau-PET agents. These include (i) Flortaucipir (previously known as F-AV-1451 or T807), which is being advanced by Eli Lilly and iscurrently in Phase 3 clinical studies, (ii) THK-5351, is being advanced by GE Healthcare under license from the Tohoku University School of Medicine andis currently in Phase 1 studies, (iii) PBB3, a product candidate in Phase 1 studies and being advanced by the National Institute of Radiological Services,(iv) Roche is evaluating internal Tau PET imaging ligands in Phase 1 clinical studies in AD patients, (v) Genentech is developing F-GTP1 in Phase 1 studiesand (vi) Merck is evaluating F-MK-6240 in Phase 1 clinical trials. Many of our competitors have significantly greater financial, technical and human resources than we have available. Mergers and acquisitions in thepharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Ourcommercial opportunity and our success will be based in part on our ability to identify, develop and manage a portfolio of product candidates that are saferand more effective than competing products. However, this opportunity could be eroded or even eliminated if our competitors develop and/or marketproducts that are novel and have superior safety and efficacy profiles, that may be brought to the market more rapidly due to greater available resources, orthat are less costly than our current or future product candidates. Commercialization Strategy Our strategy to date has been to focus on identifying partnerships for our early stage product candidates as both a way to secure non-dilutive capital tofund our other research and development programs but also as a way to accelerate the development of these partnered products by leveraging our partners’extensive knowledge in clinical studies, drug development, manufacturing and commercialization. With greater financial resources at our disposal but also given the significant knowledge acquired by our scientists and scientific leadership, we intend toretain selected promising product candidates in-house for a longer period of time and fund their development from our own resources. This will allow us togenerate greater value from these product candidates, allowing us to demand more significant terms from a prospective partner. For example, our current planis to retain full control of our two Abeta vaccine programs focused on AD and Down syndrome, meaning that we would fund the planned Phase 2 and Phase2/3 studies, respectively, from our financial resources. In the field of diagnostics, the parallel development of therapeutic compounds and companiondiagnostics is of growing importance to the pharmaceutical industry. The development timeframe of a PET diagnostic agent is significantly shorter than for atherapeutic product providing the prospect for potential diagnostic product revenues to be realized quicker than potential therapeutic product revenues. OurMorphomer platform is particularly well suited to generate molecules for use in the development of companion diagnostics. Given our current stage of product development, we currently do not have a commercialization infrastructure. If any of our diagnostic product candidatesis granted marketing approval, we intend to focus our initial commercial efforts in the United States and select European markets, which we believe representthe 71 Table of Contents largest market opportunities for us. In those markets, we expect our commercial operations to include our own specialty sales force that will targetneurologists and gerontologists, both in hospitals and in private practice. In other markets, we expect to seek partnerships that would maximize our products’commercial potential. Intellectual Property We strive to protect the proprietary technology that we believe is important to our business, including seeking and maintaining U.S. and foreign patentsintended to cover our products and compositions, their methods of use and processes for their manufacture, as well as our proprietary technology platforms,diagnostic candidates, and any other inventions that are commercially important to the development of our business. We also rely on trade secrets and know-how to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection. Our success will significantly depend on our ability to obtain and maintain patent and other proprietary protection for commercially importanttechnology, inventions and know-how related to our business, defend and enforce patents, preserve the confidentiality of our trade secrets and operate ourbusiness without infringing any patents and other intellectual property or proprietary rights of third parties. See the section titled “Risk Factors— RisksRelated to Intellectual Property” for additional information. As of December 31, 2017 we owned or co-owned approximately 28 issued U.S. patents and 232 issued patents in other jurisdictions, as well as 14pending U.S. patent applications and 283 pending foreign patent applications. As of December 31, 2017 we licensed approximately 16 issued U.S. patentsand 10 pending U.S. patent applications, as well as 159 issued patents in other jurisdictions and 230 pending foreign patent applications. The patent portfolios for our three most advanced product candidates as of December 31, 2017 are summarized below: Crenezumab Our patent portfolio relating to crenezumab includes patents and patent applications with claims directed to composition of matter (including claimsdirected to the crenezumab antibody or a fragment thereof, a polynucleotide encoding the crenezumab antibody or a fragment thereof, a cell line used toproduce the crenezumab antibody as well as pharmaceutical compositions comprising the crenezumab antibody), claims directed to treating certainindications using the crenezumab antibody including AD, claims directed to a method of manufacturing the crenezumab antibody, and claims directed todiagnostic and prognostic uses of the crenezumab antibody. Our patent portfolio relating to crenezumab includes patents and patent applications that we own or co-own in four different patent families. As ofDecember 31, 2017, we owned or co-owned approximately 29 patents (not including the patents in the individual countries where the issued European patentwas validated) and 41 patent applications in 34 countries in our main patent family directed to the crenezumab antibody and methods of using thecrenezumab antibody to treat certain indications, including AD. This patent portfolio includes three issued U.S. patents and three pending U.S. patentapplications, which, if the appropriate maintenance or other governmental fees are paid, are expected to expire in 2027, excluding any additional term forpatent term adjustments or patent term extensions. This patent portfolio also includes a PCT patent application which was filed on July 13, 2007. If theappropriate maintenance, renewal, annuity, or other governmental fees are paid, national stage applications issuing from this PCT patent application areexpected to expire in 2027, excluding any additional term for patent term adjustments or patent term extensions, as applicable. ACI-24 Our patent portfolio for ACI-24 includes composition of matter claims (including claims directed to the ACI-24 antigenic construct) claims directed totreating certain indications using ACI-24 including AD, and claims directed to using ACI-24 to induce an immune response. Our patent portfolio for ACI-24 consists of approximately 24 issued patents and 10 pending patent applications in 30 countries. With respect to the U.S.,we own two issued U.S. patents. The patents in this patent portfolio claim the benefit of a PCT application with a filing date of December 8, 2006. The issued patents in this patentportfolio, if the appropriate maintenance, renewal, annuity or other 72 Table of Contents governmental fees are paid, are expected to expire in 2026, excluding any additional term for patent term adjustments or patent term extensions. ACI-35 Our patent portfolio for ACI-35 includes composition of matter claims (including claims directed to the ACI-35 antigenic peptide and a pharmaceuticalcomposition comprising such an antigenic peptide), claims directed to treating certain indications using ACI-35 including AD, and claims directed to usingACI-35 to induce an immune response. Our patent portfolio for ACI-35 consists of approximately 18 issued patents and 13 pending patent applications in 27 countries. With respect to the U.S.,we own one issued U.S. patent. The patents in this patent portfolio claim the benefit of a PCT application with a filing date of April 1, 2010. The issued patents in this patent portfolio, ifthe appropriate maintenance, renewal, annuity or other governmental fees are paid, are expected to expire in 2030, excluding any additional term for patentterm adjustments or patent term extensions. Manufacturing and Supply Background The manufacturing and supply of the clinical study materials are currently done in collaboration with our collaboration partners ( e.g. , Genentech in thecase of crenezumab and anti-Tau antibodies and Piramal Imaging in the case of Tau PET imaging) or contract manufacturing organizations ( e.g. , for ACI-35and ACI-24) for the supply of raw materials, drug substances and drug products. We have an established standard operating procedure to properly select the contract manufacturing organization to which the manufacturing tasks willbe assigned. In the assessment, we consider the availability of the technical skills necessary to support the project, the business and commercial aspectsrelated to the collaboration and the compliance of our providers with local and international regulations. Collaboration Partners and Contract Manufacturing Organizations Genentech, a leading biotech company with extensive experience in developing, producing and distributing products worldwide from pre-clinical tocommercial stages of development, manufactures and supplies clinical study materials for crenezumab and anti-Tau antibodies. Tau-PET imagingcompounds are produced in collaboration with Piramal, which is a subsidiary of Piramal Enterprises Limited, a well-established Indian company with a strongchemical background and diverse businesses. ACI-24 and ACI-35 APIs (active pharmaceutical ingredients) are produced by Bachem AG, which is an experienced company specialized inmanufacturing synthetic peptides and based in Bubendorf, Switzerland. Drug products for the advancement of ACI-24 are manufactured by Polymun GmbH,a company based in Kosterneuburg, Austria with significant experience in developing and producing Liposomal formulations, while drug products for theadvancement of ACI-35 are produced by Evonik Canada Inc., a company based in Vancouver, Canada with a strong and long experience in the field ofliposomal formulation and production. Compliance with Governing Rules and Quality Requirements The facilities used by our collaboration partners and contract manufacturing organizations to manufacture our product candidates are systematicallyaudited by local authorities and occasionally inspected by competent authorities where the clinical studies are ongoing. The facilities where the commercialproductions are performed must be approved by the FDA or other relevant regulatory authorities pursuant to inspections that are conducted after we submitour NDA or comparable marketing applications. We perform periodic quality audits of the manufacturing facilities and contract manufacturing organizationsto monitor their compliance with the regional laws, regulations and applicable cGMP standards and other laws and regulations, such as those related toenvironmental health and safety matters. The scope of our audits also involves monitoring the ability of our providers to maintain adequate quality controlsand quality assurance systems including personnel qualification. After manufacturing, our products are submitted to extensive characterization and quality control testing plans performed by using properly developedanalytical methods that are qualified or validated; this ensures the accuracy of the results generated and provides evidence of the quality of our products. Inaddition, our products 73 Table of Contents are submitted to detailed and standardized stability programs aimed at demonstrating the stability during the storage period; this, while it guarantees thesafety of the products, supports the definition of a suitable supply chain that may encompass the distribution of the products in different continents. Contractual framework We have established, with each contract manufacturing organization supplying drug substances or drug products, quality agreements and master serviceagreements. Quality agreements define the quality standards required to develop, produce and supply the product. Quality agreements also define theresponsibilities related to the collaboration with regards to the quality related aspects. Master service agreements define the framework under which thequality agreements operate. Any failure to achieve and maintain compliance with the laws, regulations and standards, suspension of the manufacturing of ourproduct candidates or revoke of cGMP permissions which would adversely affect our business and reputation are defined in the master service agreementsand quality agreements. The risk that any third-party providers may breach the agreements they have with us because of factors beyond our control and thepossibility they may also terminate or refuse to renew their agreements because of their own financial difficulties or business priorities, potentially at a timethat is costly or otherwise inconvenient for us is managed by us with constant investments toward maintaining reserve stocks and in-depth process know-how. The latter is supported by continuous in-house process development and production activities of small-scale/research grade materials that may offer thechance to rapidly identify alternative contract manufacturers to which the manufacturing process could be transferred providing continuity for the clinicalstudy. Interaction with collaboration partners and contract manufacturing organizations Finally, our partnership with contract manufacturing organizations is managed through an efficient project management platform in which teams areformed with the representatives of each key function from both parties. Meetings occur either by telephone conferences aimed at updating short term actionsor face-to-face when mid-long term development plans are discussed. Government Regulation and Our Regulatory Department Our regulatory department has a strong culture of regulatory compliance, operating under three guiding principles, to: ·Provide constructive regulatory input for development products; ·Ensure smooth regulatory approvals by anticipating hurdles; and ·Build confidence with regulators by continuous communication The quality assurance group is included within the regulatory department with the mission to: ·Create and maintain a corporate quality management system; and ·Ensure GCP, GMP, GLP and GDP compliance A science driven approach is the cornerstone of our interactions and this has helped us to build and maintain a high level of trust with regulators. Besidesinformal conversations with the authorities, our regulatory department has conducted several pre-IND meetings with the FDA (ACI-24 for AD and Downsyndrome, and Tau-PET Imaging) and Scientific Advice meetings, which are the European equivalent of pre-IND meetings (with German PEI, SwedishMedical Products Agency; Medicine & Healthcare Products Regulatory Agency (UK), Finnish Medicines Agency, and the European Medicines Agency).Since 2008, our regulatory department has filed a total of six clinical trial applications (CTAs) in the EU (Germany, Austria, Denmark, Sweden, UK and two inFinland) and one IND in the US. Given the seriousness of AD and public pressure for new therapeutics, we consider regulatory agencies to be importantstakeholders in our product development strategies. We are committed to working closely with global regulatory authorities to adhere to and achieve thehighest levels of safety and quality of our product candidates in the most timely and efficient manner. The transparency we have achieved and our goal of aclose working relationship with the regulatory agencies, in particular the FDA, are intended to facilitate expeditious execution through the regulatoryapproval process. 74 Table of Contents Our regulatory department contains a quality assurance (QA) group. As every quality issue ultimately requires regulatory involvement and input, thisapproach is intended to lead to rapid resolution of issues and ensure full compliance to satisfy both the reviewers and the inspectors at the government healthauthorities. Our regulatory department is charged with keeping our entire organization directly or indirectly involved in the clinical study applicationprocess in a state of “inspection readiness.” To that end, we ensure that the Trial Master Files are complete and regularly updated. Our regulatory departmentis also tasked with generating our annual quality plan. The personnel tasked with QA have issued a set of approximately 30 standard operating proceduresand continuously train the relevant staff. Our QA personnel conduct regular audits, including in-person audits of the contract manufacturers, contract researchorganizations and laboratories conducting primary end-point analysis. In addition, we have recently added a corporate documentation specialist to ensuregood documentation practice. Product Approval Process The clinical studies, manufacturing, labeling, storage, distribution, record keeping, advertising, promotion, import, export and marketing, among otherthings, of our product candidates are subject to extensive regulation by governmental authorities in the United States and other countries. The U.S. Food andDrug Administration, or FDA, under the Federal Food, Drug, and Cosmetic Act, or FDCA, regulates pharmaceutical products in the United States. The stepsrequired before a drug may be approved for marketing in the United States generally include: ·the completion of pre-clinical laboratory tests and animal tests conducted under Good Laboratory Practice, or GLP, regulations; ·the submission to the FDA of an Investigational New Drug, or IND, application for human clinical testing, which must become effective beforehuman clinical studies commence; ·obtaining a positive opinion from the Ethics Committee (Europe) / Institutional Review Board (United States) to commence study on humansubjects; ·the performance of adequate and well-controlled human clinical studies to establish the safety and efficacy of the product candidate for eachproposed indication and conducted in accordance with current Good Clinical Practice, or cGCP, requirements; ·pre-New Drug Application (NDA) submission meeting with FDA (highly recommended); ·the submission to the FDA of a NDA; ·the FDA’s acceptance of the NDA; ·satisfactory completion of an FDA Pre-Approval Inspection (PAI) of the manufacturing facilities at which the product is made to assesscompliance with current Good Manufacturing Practice, or cGMP, requirements; ·the FDA’s review and approval of an NDA prior to any commercial marketing or sale of the drug in the United States; and ·having a parallel scientific advice from the European Medicines Agency or Health-Technology-Assessment body where the payors are involvedat the outset (Phase 2), which is intended to facilitate the design of clinical studies to primarily target populations with a high chance ofobtaining reimbursement and accelerate the process of time-to-reimbursement. The FDA has various programs, including fast track, priority review, accelerated approval, and breakthrough therapy designation, that are intended toincrease agency interactions, expedite or facilitate the process for reviewing drug candidates, and/or provide for initial approval on the basis of surrogateendpoints. We believe that one or more of our product candidates may qualify for some of these expedited development and review programs. Even if a drugcandidate qualifies for one or more of these programs, the FDA may later decide that the drug candidate no longer meets the conditions for qualification. The Fast Track program is intended to expedite or facilitate the process for reviewing new drugs that meet certain criteria. Specifically, new drugs areeligible for Fast Track designation if they are designed to treat a 75 Table of Contents serious or life-threatening condition and demonstrate the potential to address unmet medical needs for the condition. Fast Track designation applies to thecombination of the product and the specific indication for which it is being studied. The sponsor of a new drug may request the FDA to designate the drug asa Fast Track product at any time during the clinical development of the product. AD, for example, meets both pre-requisites—it is life-threatening andconstitutes an unmet medical need. Unique to a Fast Track product, the FDA may consider for review sections of the marketing application on a rolling basisbefore the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the application, the FDA agrees toaccept sections of the application and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the firstsection of the application. Any product submitted to the FDA for marketing, including under a Fast Track program, may be eligible for other types of FDA programs intended toexpedite development and review, such as priority review and accelerated approval. Any product is eligible for priority review if it has the potential toprovide safe and effective therapy where no satisfactory alternative therapy exists or a significant improvement in the treatment, diagnosis or prevention of adisease compared to marketed products. The FDA will attempt to direct additional resources to the evaluation of an application for a new drug designated forpriority review in an effort to facilitate the review. Additionally, a product may be eligible for accelerated approval. Drug candidates studied for their safetyand effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may receiveaccelerated approval, which means that they may be approved on the basis of adequate and well-controlled clinical studies establishing that the product hasan effect on a surrogate endpoint that is reasonably likely to predict a clinical benefit, or on the basis of an effect on a clinical endpoint other than survival orirreversible morbidity. As a condition of approval, the FDA may require that a sponsor of a drug receiving accelerated approval perform adequate and well-controlled post-marketing clinical studies. Failure to conduct required post-approval trials, or the inability to confirm a clinical benefit during post-marketing trials, may allow the FDA to withdraw the drug from the market on an expedited basis. In addition, the FDA currently requires as a condition foraccelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product. Fast Trackdesignation, priority review and accelerated approval do not change the standards for approval but may expedite the development or approval process. The Food and Drug Administration Safety and Innovation Act of 2012 also amended the FDCA to require FDA to expedite the development and reviewof a breakthrough therapy. A drug can be designated as a breakthrough therapy if it is intended to treat a serious or life-threatening disease or condition andpreliminary clinical evidence indicates that it may demonstrate substantial improvement over existing therapies on one or more clinically significantendpoints. A sponsor may request that a drug be designated as a breakthrough therapy at any time during the clinical development of the product. If sodesignated, FDA shall act to expedite the development and review of the product’s marketing application, including by meeting with the sponsor throughoutthe product’s development, providing timely advice to the sponsor to ensure that the development program to gather nonclinical and clinical data is asefficient as practicable, involving senior managers and experienced review staff in a cross-disciplinary review, assigning a cross-disciplinary project lead forthe FDA review team to facilitate an efficient review of the development program and to serve as a scientific liaison between the review team and the sponsor,and taking steps to ensure that the design of the clinical trials is as efficient as practicable. The testing and approval process requires substantial time, effort and financial resources, and the receipt and timing of any approval is uncertain. Giventhis paradigm, AD has been given a Life Threatening Disease status by the FDA and therefore AD therapies are eligible for the expanded access program forinvestigational drugs and other pathways like Breakthrough Therapy, Accelerated Approval and Priority Review. Also, a single well-designed, well-conducted pivotal clinical study could be sufficient to trigger market approval pending a successful PAI. Pre-clinical studies include laboratory evaluations of the product candidate, as well as animal studies to assess the potential safety and efficacy of theproduct candidate. The results of the pre-clinical studies, together with manufacturing information and analytical data, are submitted to the FDA as part of theIND, which must become effective before clinical studies may be commenced. The IND will become effective automatically 30 days after receipt by the FDA,unless the FDA raises concerns or questions about the conduct of the studies as outlined in the IND prior to that time. In this case, the IND sponsor and theFDA must resolve any outstanding concerns before clinical studies can proceed. Clinical studies involve the administration of the product candidates to healthy volunteers or patients with the disease to be treated under thesupervision of a qualified principal investigator. Clinical studies are conducted under protocols detailing, among other things, the objectives of the study,the parameters to be used 76 Table of Contents in monitoring safety, and the efficacy criteria to be evaluated. A protocol for each clinical study and any subsequent protocol amendments must be submittedto the FDA as part of the IND. Further, each clinical study must be reviewed and approved by an independent institutional review board, or IRB, eithercentrally or individually at each institution at which the clinical study will be conducted. The IRB will consider, among other things, ethical factors, thesafety of human subjects and the possible liability of the institution. There are also requirements governing the reporting of ongoing clinical studies andclinical study results to public registries. The FDA, the IRB or the clinical study sponsor may suspend or terminate clinical studies at any time on variousgrounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk. Additionally, some clinical studies are overseenby an independent group of qualified experts organized by the clinical study sponsor, known as a data safety monitoring board or committee. This groupprovides authorization for whether or not a study may move forward at designated check points based on access to certain data from the study. We may alsosuspend or terminate a clinical study based on evolving business objectives and/or competitive climate. Clinical studies are typically conducted in three sequential phases prior to approval, but the phases may overlap. These phases generally include thefollowing: Phase 1. Phase 1 clinical studies represent the initial introduction of a product candidate into human subjects, frequently healthy volunteers. In Phase 1,the product candidate is usually tested for safety, including adverse effects, dosage tolerance, absorption, distribution, metabolism, excretion andpharmacodynamics. Phase 2. Phase 2 clinical studies usually involve studies in a limited patient population to (1) evaluate the efficacy of the product candidate for specificindications, (2) determine dosage tolerance and optimal dosage and (3) identify possible adverse effects and safety risks. Phase 3. If a product candidate is found to be potentially effective and to have an acceptable safety profile in Phase 2 studies, the clinical study programwill be expanded to Phase 3 clinical studies to further demonstrate clinical efficacy, optimal dosage and safety within an expanded patient population atgeographically dispersed clinical study sites. Phase 4 clinical studies are conducted after approval to gain additional experience from the treatment of patients in the intended therapeutic indicationand to document a clinical benefit in the case of drugs approved under accelerated approval regulations, or when otherwise requested by the FDA in the formof post-market requirements or commitments. Failure to promptly conduct any required Phase 4 clinical studies could result in withdrawal of approval. The results of pre-clinical studies and clinical studies, including negative or ambiguous results as well as positive findings, together with detailedinformation on the manufacture, composition and quality of the product, are submitted to the FDA in the form of an NDA requesting approval to market theproduct. The NDA must be accompanied by a significant user fee payment. The FDA has substantial discretion in the approval process and may refuse toaccept any application or decide that the data is insufficient for approval and require additional pre-clinical, clinical or other studies. We estimate that it generally takes 10 to 15 years, or possibly longer, to discover, develop and bring to market a new pharmaceutical product in theUnited States. Several years may be needed to complete each phase, including discovery, preclinical, Phase 1, 2 or 3, or marketing authorization. In addition, under the Pediatric Research Equity Act, or PREA, an NDA or supplement to an NDA must contain data to assess the safety and effectivenessof the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation forwhich the product is safe and effective. Recently, the Food and Drug Administration Safety and Innovation Act, or FDASIA, which was signed into law onJuly 9, 2012, amended the FDCA. FDASIA requires that a sponsor who is planning to submit a marketing application for a drug or biological product thatincludes a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration submit an initial Pediatric Study Plan,within sixty days of an end-of-phase 2 meeting or as may be agreed between the sponsor and FDA. The initial Pediatric Study Plan must include an outline ofthe pediatric study or studies that the sponsor plans to conduct, including study objectives and design, age groups, relevant endpoints and statisticalapproach, or a justification for not including such detailed information, and any request for a deferral of pediatric assessments or a full or partial waiver of therequirement to provide data from pediatric studies along with supporting information. FDA and the sponsor must reach agreement on the Pediatric StudyPlan. A sponsor can submit amendments to an agreed-upon initial Pediatric Study Plan at any time if changes to the 77 Table of Contents pediatric plan need to be considered based on data collected from nonclinical studies, early phase clinical trials, and/or other clinical development programs. The cost of preparing and submitting an NDA is substantial. Under federal law, NDAs are subject to substantial application user fees and the sponsor ofan approved NDA is also subject to annual product and establishment user fees. Under the Prescription Drug User Fee Act, or PDUFA, as amended, each NDAmust be accompanied by a user fee. The FDA adjusts the PDUFA user fees on an annual basis. According to the FDA’s fee schedule, effective throughSeptember 30, 2017, the user fee for each NDA application requiring clinical data is $2,038,100. PDUFA also imposes an annual product fee for drugs($97,750), and an annual establishment fee ($512,200) on facilities used to manufacture prescription drugs. Fee waivers or reductions are available in certaincircumstances, including a waiver of the application fee for the first application filed by a small business. Additionally, no user fees are assessed on NDAs forproducts designated as orphan drugs, unless the product also includes a non-orphan indication. Once the NDA submission has been submitted, the FDA has 60 days after submission of the NDA to conduct an initial review to determine whether it issufficient to accept for filing. Under the Prescription Drug User Fee Act, or PDUFA, the FDA sets a goal date by which it plans to complete its review. This istypically 12 months from the date of submission of the NDA application. The review process is often extended by FDA requests for additional information orclarification. Before approving an NDA, the FDA will inspect the facilities at which the product is manufactured and will not approve the product unless themanufacturing facility complies with cGMPs and may also inspect clinical study sites for integrity of data supporting safety and efficacy. The FDA may alsoconvene an advisory committee of external experts to provide input on certain review issues relating to risk, benefit and interpretation of clinical study data.The FDA is not bound by the recommendations of an advisory committee, but generally follows such recommendations in making its decisions. The FDAmay delay approval of an NDA if applicable regulatory criteria are not satisfied and/or the FDA requires additional testing or information. The FDA mayrequire post-marketing testing and surveillance to monitor safety or efficacy of a product. After the FDA evaluates the NDA and conducts inspections of manufacturing facilities where the drug product and/or its API will be produced, it mayissue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the drug with specific prescribing informationfor specific indications. A Complete Response Letter indicates that the review cycle of the application is complete and the application is not ready forapproval. A Complete Response Letter may require additional clinical data and/or an additional pivotal Phase 3 clinical study(ies), and/or other significant,expensive and time-consuming requirements related to clinical studies, pre-clinical studies or manufacturing. Even if such additional information issubmitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. The FDA could also approve the NDA with a RiskEvaluation and Mitigation Strategy, or REMS, plan to mitigate risks, which could include medication guides, physician communication plans, or elements toassure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA also may condition approval on, amongother things, changes to proposed labeling, development of adequate controls and specifications, or a commitment to conduct one or more post-marketstudies or clinical studies. Such post-market testing may include Phase 4 clinical studies and surveillance to further assess and monitor the product’s safetyand effectiveness after commercialization. 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 effectivenessin an NDA. This process is known as a special protocol assessment, or SPA. Upon a specific request for a SPA by an IND sponsor, the FDA will evaluate theprotocol. If a SPA agreement is reached, however, it is not a guarantee of product approval by the FDA or approval of any permissible claims about theproduct. 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 thesubject of the SPA agreement. In particular, the SPA agreement is not binding on the FDA if previously unrecognized public health concerns later come tolight, other new scientific concerns regarding product safety or efficacy arise, the IND sponsor fails to comply with the protocol agreed upon, or the relevantdata, assumptions, or information provided by the IND sponsor when requesting a SPA agreement change, are found to be false statements or misstatements,or are found to omit relevant facts. A SPA agreement may not be changed by the sponsor or the FDA after the study begins except with the written agreementof the sponsor and the FDA, or if the FDA determines that a substantial scientific issue essential to determining the safety or effectiveness of the drug wasidentified after the testing began. 78 Table of Contents Orphan Drug Designation Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biological product intended to treat a rare disease or condition, which isa disease or condition that affects fewer than 200,000 individuals in the US, or if it affects more than 200,000 individuals in the US there is no reasonableexpectation that the cost of developing and making a drug product available in the US for this type of disease or condition will be recovered from sales of theproduct. Orphan product designation must be requested before submitting an NDA. After the FDA grants orphan product designation, the identity of thetherapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan product designation does not convey any advantage in or shortenthe duration of the regulatory review and approval process. If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, theproduct is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same drug or biologicalproduct for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphanexclusivity. The designation of such drug also entitles a party to financial incentives such as opportunities for grant funding towards clinical study costs, taxadvantages and user-fee waivers. Competitors, however, may receive approval of different products for the indication for which the orphan product hasexclusivity or obtain approval for the same product but for a different indication for which the orphan product has exclusivity. Orphan product exclusivityalso could block the approval of one of our products for seven years if a competitor obtains approval of the same drug or biological product as defined by theFDA or if our drug candidate is determined to be contained within the competitor’s product for the same indication or disease. If a drug product designated asan orphan product receives marketing approval for an indication broader than what is designated, it may not be entitled to orphan product exclusivity.Orphan drug status in the European Union has similar but not identical benefits in that jurisdiction. Disclosure of Clinical Trial Information Sponsors of clinical trials (other than Phase 1 trials) of FDA-regulated products, including drugs, are required to register and disclose certain clinical trialinformation. Information related to the product, comparator, patient population, phase of investigation, trial sites and investigators and other aspects of theclinical trial is made public as part of the registration. Sponsors are also obligated to disclose the results of their clinical trials after completion. Disclosure ofthe results of certain trials may be delayed until the new product or new indication being studied has been approved. However, there are evolving rules andincreasing requirements for publication of trial-related information, and it is possible that data and other information from trials involving drugs that nevergarner approval could in the future be required to be disclosed. In addition, publication policies of major medical journals mandate certain registration anddisclosures as a pre-condition for potential publication, even when this is not presently mandated as a matter of law. Competitors may use this publiclyavailable information to gain knowledge regarding the progress of development programs. Post-Approval Requirements Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among otherthings, requirements relating to recordkeeping, periodic reporting, product distribution, advertising and promotion and reporting of adverse experiences withthe product. After approval, most changes to the approved product, such as adding new indications or other labeling claims are subject to prior FDA reviewand approval. There also are continuing, annual user fee requirements for any marketed products and the establishments at which such products aremanufactured, as well as new application fees for supplemental applications with clinical data. In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register theirestablishments with the FDA and state agencies, and are subject to periodic unannounced inspections by the FDA and these state agencies for compliancewith cGMP requirements. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDAregulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon the sponsorand any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money, and effort in thearea of production and quality control to maintain cGMP compliance. Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or ifproblems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events ofunanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in 79 Table of Contents revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical studies to assess new safety risks; orimposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things: ·restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; ·fines, warning letters or holds on post-approval clinical studies; ·refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product license approvals; ·product seizure or detention, or refusal to permit the import or export of products; or ·injunctions or the imposition of civil or criminal penalties. The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs may be promoted only for theapproved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulationsprohibiting 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. Patent Term Restoration and Marketing Exclusivity Depending upon the timing, duration, and specifics of FDA approval of the use of our drug candidates, some of our U.S. patents may be eligible forlimited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Act. The Hatch-Waxman Act permits a patent term to be extended up to five years as compensation for patent term effectively lost due to the FDA’s pre-market approvalrequirements. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. Thepatent term restoration period is generally one-half the time between the effective date of an IND and the submission date of an NDA, plus the time betweenthe submission date of an NDA and the approval of that application, except that the review period is reduced by any time during which the applicant failed toexercise due diligence. Only one patent applicable to an approved drug is eligible for the extension. Extensions are not granted as a matter of right and theextension must be applied for prior to expiration of the patent and within a 60 day period from the date the product is first approved for commercialmarketing. The U.S. Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension orrestoration. Where a product contains multiple active ingredients, if any one active ingredient has not been previously approved, it can form the basis of anextension of patent term provided the patent claims that ingredient or the combination. In the future, we may apply for patent term restoration for some of our presently owned patents to add patent life beyond their current expiration date,depending on the expected length of clinical studies and other factors involved in the submission of the relevant NDA; however, there can be no assurancethat any such extension will be granted to us. The Biologics Price Competition and Innovation Act of 2009 provides up to twelve years of non-patent data exclusivity within the United States to thefirst applicant to gain approval of a BLA for a new biologic product that has not previously been approved by the FDA, which we refer to as a referenceproduct. This twelve-year data exclusivity may prohibit the FDA from approving a biosimilar or interchangeable product of such reference product untiltwelve years after the licensure of such reference product. In addition, the FDA will not accept a biosimilar or interchangeable product application for reviewuntil four years after the date of first licensure of such reference product. Moreover, pediatric exclusivity, if granted, may add six months of exclusivity if thereference product has been studied with respect to a pediatric indication in accordance with certain regulatory requirements. A reference product may also begranted seven years of orphan-drug exclusivity for the treatment of a rare disease or condition under section 527(a) of FDCA, which would run in parallelwith the twelve years of data exclusivity of the reference product, if applicable. Non-U.S. Regulation In order to market any product outside of the United States, we would need to comply with numerous and varying regulatory requirements of othercountries and jurisdictions regarding quality, safety and efficacy and 80 Table of Contents governing, among other things, clinical studies, marketing authorization, commercial sales and distribution of our products. Whether or not we obtain FDAapproval for a product, we would need to obtain the necessary approvals by the comparable foreign regulatory authorities before we can commence clinicalstudies or marketing of the product in foreign countries and jurisdictions. Although many of the issues discussed above with respect to the United Statesapply similarly in the context of the European Union, the approval process varies between countries and jurisdictions and can involve additional producttesting and additional administrative review periods, as described in greater detail below. The time required to obtain approval in other countries andjurisdictions might differ from and be longer than that required to obtain FDA approval. Regulatory approval in one country or jurisdiction does not ensureregulatory approval in another, but a failure or delay in obtaining regulatory approval in one country or jurisdiction may negatively impact the regulatoryprocess in others. European Union Drug Review Approval In the European Economic Area, or EEA (which is comprised of the 28 Member States of the European Union plus Norway, Iceland and Liechtenstein),medicinal products can only be commercialized after obtaining a Marketing Authorization, or MA. There are two types of marketing authorizations: theCommunity MA, which is issued by the European Commission through the Centralized Procedure based on the opinion of the Committee for MedicinalProducts for Human Use, or CHMP, a body of the EMA, and which is valid throughout the entire territory of the EEA; and the National MA, which is issuedby the competent authorities of the Member States of the EEA and only authorizes marketing in that Member State’s national territory and not the EEA as awhole. The Centralized Procedure is compulsory for human medicines for the treatment of human immunodeficiency virus (HIV) or acquired immune deficiencysyndrome (AIDS), cancer, diabetes, neurodegenerative diseases, auto-immune and other immune dysfunctions, and viral diseases; for veterinary medicines foruse as growth or yield enhancers; for medicines derived from biotechnology processes, such as genetic engineering; for advanced-therapy medicines, such asgene-therapy, somatic cell-therapy or tissue-engineered medicines; and for officially designated ‘orphan medicines’ (medicines used for rare human diseases).The Centralized Procedure is optional for products containing a new active substance not yet authorized in the EEA, or for products that constitute asignificant therapeutic, scientific or technical innovation or for products which are in the interest of public health in the European Union. The National MA isfor products not falling within the mandatory scope of the Centralized Procedure. Where a product has already been authorized for marketing in a MemberState of the EEA, this National MA can be recognized in another Member State through the Mutual Recognition Procedure. If the product has not received aNational MA in any Member State at the time of application, it can be approved simultaneously in various Member States through the DecentralizedProcedure. Under the Decentralized Procedure an identical dossier is submitted to the competent authorities of each of the Member States in which the MA issought, one of which is selected by the applicant as the Reference Member State, or RMS. If the RMS proposes to authorize the product, and the otherMember States do not raise objections, the product is granted a national MA in all the Member States where the authorization was sought. Before granting theMA, the EMA or the competent authorities of the Member States of the EEA make an assessment of the risk-benefit balance of the product on the basis ofscientific criteria concerning its quality, safety and efficacy. Regulation in the European Union Product development, the regulatory approval process, and safety monitoring of medicinal products and their manufacturers in the European Unionproceed in much the same manner as they do in the United States. Therefore, many of the issues discussed above apply similarly in the context of theEuropean Union. In addition, drugs are subject to the extensive price and reimbursement regulations of the various European Union Member States. Clinical Studies As is the case in the United States, the various phases of pre-clinical and clinical research in the European Union are subject to significant regulatorycontrols. The Clinical Trials Directive 2001/20/EC, as amended (and which will be replaced from May 2016 or later by Regulation (EU) No 536/2014)provides a system for the approval of clinical studies in the European Union via implementation through national legislation of the Member States. Underthis system, approval must be obtained from the competent national authorities of the European Union Member States in which the clinical trial is to beconducted. Furthermore, a clinical trial may only be started after a competent ethics committee has issued a favorable opinion on the clinical trialapplication, which must be supported by an investigational medicinal product dossier with supporting 81 Table of Contents information prescribed by the Clinical Trials Directive and corresponding national laws of the Member States and further detailed in applicable guidancedocuments. A clinical trial may only be undertaken if provision has been made for insurance or indemnity to cover the liability of the investigator or sponsor.In certain countries, the sponsor of a clinical trial has a strict (faultless) liability for any (direct or indirect) damage suffered by trial subjects. The sponsor of aclinical trial, or its legal representative, must be based in the European Economic Area. European regulators and ethics committees also require thesubmission of adverse event reports during a study and a copy of the final study report. Marketing Approval Marketing approvals under the European Union regulatory system may be obtained through a centralized or decentralized procedure. The centralizedprocedure results in the grant of a single marketing authorization that is valid for all (currently 28) European Union Member States and three EFTA members(Norway, Iceland, Liechtenstein). Pursuant to Regulation (EC) No. 726/2004, as amended, the centralized procedure is mandatory for drugs developed by means of specifiedbiotechnological processes, advanced therapy medicinal products, drugs for human use containing a new active substance for which the therapeuticindication is the treatment of specified diseases, including but not limited to acquired immune deficiency syndrome, neurodegenerative disorders, auto-immune diseases and other immune dysfunctions, as well as drugs designated as orphan drugs. The CHMP also has the discretion to permit other products touse the centralized procedure if it considers them sufficiently innovative or they contain a new active substance. In the marketing authorization application, or MAA, the applicant has to properly and sufficiently demonstrate the quality, safety and efficacy of thedrug. Under the centralized approval procedure, the CHMP, possibly in conjunction with other committees, is responsible for drawing up the opinion of theEMA on any matter concerning the admissibility of the files submitted in accordance with the centralized procedure, such as an opinion on the granting,variation, suspension or revocation of a marketing authorization, and pharmacovigilance. The CHMP and other committees are also responsible for providing guidelines and have published numerous guidelines that may apply to our productcandidates. These guidelines provide additional guidance on the factors that the EMA will consider in relation to the development and evaluation of drugproducts and may include, among other things, the pre-clinical studies required in specific cases; and the manufacturing and control information that shouldbe submitted in a MAA; and post-approval measures required to monitor patients and evaluate the long term efficacy and potential adverse reactions.Although these guidelines are not legally binding, we believe that our compliance with them is likely necessary to gain approval for any of our productcandidates. The maximum timeframe for the evaluation of an MAA by the CHMP under the centralized procedure is 210 days after receipt of a valid application.This period will be suspended until such time as the supplementary information requested by the CHMP, has been provided by the applicant. Likewise, thistime-limit will be suspended for the time allowed for the applicant to prepare oral or written explanations. When an application is submitted for a marketingauthorization in respect of a drug which is of major interest from the point of view of public health and in particular from the viewpoint of therapeuticinnovation, the applicant may request an accelerated assessment procedure. If the CHMP accepts such request, the time-limit of 210 days will be reduced to150 days but it is possible that the CHMP can revert to the standard time-limit for the centralized procedure if it considers that it is no longer appropriate toconduct an accelerated assessment. If the CHMP concludes that the quality, safety and efficacy of the product are sufficiently proven, it adopts a positive opinion. This is sent to theEuropean Commission which drafts a decision. After consulting with the Member States, the European Commission adopts a decision and grants a marketingauthorization, which is valid for the whole of the European Economic Area, or EEA. The marketing authorization may be subject to certain conditions, whichmay include, without limitation, the performance of post-authorization safety and/or efficacy studies. The EMA has various programs, including accelerated assessment, conditional approval, and PRIME, that are intended to increase agency interactions,expedite or facilitate the process for reviewing drug candidates, and/or provide for initial approval on the basis of surrogate endpoints. One or more of ourproduct candidates may qualify for some of these expedited development and review programs. Even if a drug candidate qualifies for one or more of theseprograms, the EMA may later decide that the drug candidate no longer meets the conditions for qualification. Eligibility to the PRIME scheme is limited toproducts considered to offer a major 82 Table of Contents therapeutic advantage in high unmet need populations. PRIME is a voluntary scheme aimed at enhancing interaction and early dialogue with developers ofpromising medicines through the early appointment of the product Rapporteur, optimizing development plans and speeding up evaluation so thesemedicines can reach patients earlier. Products benefiting from PRIME can expect to be eligible for accelerated assessment at the time of application for anMAA. European Union legislation also provides for a system of regulatory data and market exclusivity. According to Article 14(11) of Regulation (EC)No. 726/2004, as amended, and Article 10(1) of Directive 2001/83/EC, as amended, upon receiving marketing authorization, new chemical entities approvedon the basis of a complete independent data package benefit from eight years of data exclusivity and an additional two years of market exclusivity. Dataexclusivity prevents regulatory authorities in the European Union from referencing the innovator’s data to assess a generic (abbreviated) application. Duringthe additional two-year period of market exclusivity, a generic marketing authorization can be submitted, and the innovator’s data may be referenced, but nogeneric medicinal product can be marketed until the expiration of the market exclusivity. The overall ten-year period will be extended to a maximum ofeleven years if, during the first eight years of those ten years, the marketing authorization holder, or MAH, obtains an authorization for one or more newtherapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison withexisting therapies. Even if a compound is considered to be a new chemical entity and the innovator is able to gain the period of data exclusivity, anothercompany nevertheless could also market another version of the drug if such company obtained marketing authorization based on an MAA with a completeindependent data package of pharmaceutical test, pre-clinical tests and clinical studies. However, products designated as orphan medicinal products enjoy,upon receiving marketing authorization, a period of 10 years of orphan market exclusivity. See also “—Orphan Drug Regulation” below. Depending uponthe timing and duration of the EU marketing authorization process, products may be eligible for up to five years’ supplementary protection certification, orSPC, pursuant to Regulation (EC) No. 469/2009. Such SPCs extend the rights under the basic patent for the drug. In the EU, the pediatric regulation (Regulation (EC) No 1901/2006 as amended), requires sponsors to submit a pediatric investigation plan at the end ofPhase 1. This plan will provide the details of the quality, non-clinical and clinical studies required to support the authorization of a pediatric indication.Additional rules apply to medicinal products for pediatric use under Regulation (EC) No. 1901/2006. Potential incentives include a six-month extension ofany supplementary protection certificate granted pursuant to Regulation (EC) No. 469/2009, but not in cases in which the relevant product is designated asorphan medicinal products pursuant to Regulation (EC) No. 141/2000, as amended. Instead, medicinal products designated as orphan medicinal product mayenjoy an extension of the ten-year market exclusivity period granted under Regulation (EC) No. 141/2000 to twelve years subject to the conditionsapplicable to orphan drugs. Orphan Drug Regulation In the European Union, Regulation (EC) No. 141/2000, as amended, states that a drug will be designated as an orphan drug if its sponsor can establish: ·that it is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting not more thanfive in ten thousand persons in the Community when the application is made, or that it is intended for the diagnosis, prevention or treatment ofa life-threatening, seriously debilitating or serious and chronic condition in the European Union and that without incentives it is unlikely thatthe marketing of the drug in the European Union would generate sufficient return to justify the necessary investment; and ·that there exists no satisfactory method of diagnosis, prevention or treatment of the condition in question that has been authorized in theEuropean Union or, if such method exists, that the drug will be of significant benefit to those affected by that condition. Regulation (EC) No. 847/2000 sets out further provisions for implementation of the criteria for designation of a drug as an orphan drug. An applicationfor the designation of a drug as an orphan drug must be submitted at any stage of development of the drug before filing of a marketing authorizationapplication. If a European Union-wide community marketing authorization in respect of an orphan drug is granted or if all the European Union Member States havegranted marketing authorizations in accordance with the procedures for mutual recognition, the European Union and the Member States will not, for a periodof 10 years, accept another application for a marketing authorization, or grant a marketing authorization or accept an application to extend an existingmarketing authorization, for the same therapeutic indication, in respect of a similar drug. This 83 Table of Contents period may however be reduced to six years if, at the end of the fifth year, it is established, with respect to the drug concerned, that the criteria for orphan drugdesignation are no longer met, in other words, when it is shown on the basis of available evidence that the product is sufficiently profitable not to justifymaintenance of market exclusivity. Notwithstanding the foregoing, a marketing authorization may be granted, for the same therapeutic indication, to asimilar drug if: ·the holder of the marketing authorization for the original orphan drug has given its consent to the second applicant; ·the holder of the marketing authorization for the original orphan drug is unable to supply sufficient quantities of the drug; or ·the second applicant can establish in the application that the second drug, although similar to the orphan drug already authorized, is safer, moreeffective or otherwise clinically superior. Other incentives available to orphan drugs in the European Union include financial incentives such as a reduction of fees or fee waivers and protocolassistance. Orphan drug designation does not shorten the duration of the regulatory review and approval process. Manufacturing and Manufacturers’ License Pursuant to Directive 2003/94/EC, as transposed into the national laws of the Member States, the manufacturing of investigational medicinal productsand approved drugs is subject to a separate manufacturer’s license and must be conducted in strict compliance with cGMP requirements, which mandate themethods, facilities, and controls used in manufacturing, processing, and packing of drugs to assure their safety and identity. Manufacturers must have at leastone qualified person permanently and continuously at their disposal. The qualified person is ultimately responsible for certifying that each batch of finishedproduct released onto the market has been manufactured in accordance with cGMP and the specifications set out in the marketing authorization orinvestigational medicinal product dossier. cGMP requirements are enforced through mandatory registration of facilities and inspections of those facilities.Failure to comply with these requirements could interrupt supply and result in delays, unanticipated costs and lost revenues, and subject the applicant topotential legal or regulatory action, including but not limited to warning letters, suspension of manufacturing, seizure of product, injunctive action orpossible civil and criminal penalties. Wholesale Distribution and License Pursuant to Directive 2001/83/EC, the wholesale distribution of medicinal products is subject to the possession of an authorization to engage in activityas a wholesaler in medicinal products. Possession of a manufacturing authorization includes authorization to distribute by wholesale the medicinal productscovered by that authorization. The distribution of medicinal products must comply with the principles and guidelines of good distribution practices, or GDP. Advertising In the European Union, the promotion of prescription medicines is subject to intense regulation and control, including EU and national legislation aswell as self-regulatory codes (industry codes). Advertising legislation inter alia includes a prohibition on direct-to-consumer advertising. All prescriptionmedicines advertising must be consistent with the product’s approved summary of products characteristics, and must be factual, accurate, balanced and notmisleading. Advertising of prescription medicines pre-approval or off-label is not allowed. Some jurisdictions require that all promotional materials forprescription medicines be subjected to either prior internal or regulatory review and approval. Other Regulatory Requirements A marketing authorization holder, or MAH, for a medicinal product is legally obliged to fulfill a number of obligations by virtue of its status as an MAH.The MAH can delegate the performance of related tasks to third parties, such as distributors or marketing partners, provided that this delegation isappropriately documented and the MAH maintains legal responsibility and liability. 84 Table of Contents The obligations of an MAH include: Manufacturing and batch release—MAHs should guarantee that all manufacturing operations comply with relevant laws and regulations,applicable good manufacturing practices, with the product specifications and manufacturing conditions set out in the marketing authorizationand that each batch of product is subject to appropriate release formalities. Availability and continuous supply—Pursuant to Directive 2001/83/EC, as transposed into the national laws of the Member States, the MAHfor a medicinal product and the distributors of the said medicinal product actually placed on the market in a Member State shall, within the limitsof their responsibilities, ensure appropriate and continued supplies of that medical product to pharmacies and persons authorized to supplymedicinal products so that the needs of patients in the Member State in question are covered. Pharmacovigilance—MAHs are obliged to establish and maintain a pharmacovigilance system, including a qualified person responsible foroversight, submit safety reports to the regulators and comply with the good pharmacovigilance practice guidelines adopted by the EMA. Advertising and promotion—MAHs remain responsible for all advertising and promotion of its products, including promotional activities byother companies or individuals on their behalf and in some cases must conduct internal or regulatory pre-approval of promotional materials.Regulation in this area also covers interactions with healthcare practitioners and/or patient groups, and in some jurisdictions legal or self-regulatory obligations to disclose such interactions exist. Medical affairs/scientific service—MAHs are required to disseminate scientific and medical information on its medicinal products tohealthcare professionals, regulators and patients. Legal representation and distributor issues. MAHs are responsible for regulatory actions orinactions of their distributors and agents. Preparation, filing and maintenance of the application and subsequent marketing authorization— MAHs must maintain appropriaterecords, comply with the marketing authorization’s terms and conditions, fulfill reporting obligations to regulators, submit renewal applicationsand pay all appropriate fees to the authorities. We may hold any future marketing authorizations granted for our product candidates in our ownname, or appoint an affiliate or a collaboration partner to hold marketing authorizations on our behalf. Any failure by an MAH to comply withthese obligations may result in regulatory action against an MAH and ultimately threaten our ability to commercialize our products. Price and Reimbursement In the European Union, the pricing and reimbursement mechanisms by private and public health insurers vary largely by country and even withincountries. The public systems reimbursement for standard drugs is determined by guidelines established by the legislator or responsible national authority.The approach taken varies by Member State. Some jurisdictions operate positive and negative list systems under which products may only be marketed oncea reimbursement price has been agreed. Other Member States allow companies to fix their own prices for medicines, but monitor and control company profitsand may limit or restrict reimbursement. The downward pressure on healthcare costs in general, particularly prescription drugs, has become very intense. As aresult, increasingly high barriers are being erected to the entry of new products and some of EU countries require the completion of studies that compare thecost-effectiveness of a particular product candidate to currently available therapies in order to obtain reimbursement or pricing approval. Special pricing andreimbursement rules may apply to orphan drugs. Inclusion of orphan drugs in reimbursement systems tend to focus on the medical usefulness, need, qualityand economic benefits to patients and the healthcare system as for any drug. Acceptance of any medicinal product for reimbursement may come with cost, useand often volume restrictions, which again can vary by country. In addition, results based rules of reimbursement may apply. Other Healthcare Laws In addition to FDA restrictions on marketing of pharmaceutical products, federal and state healthcare laws restrict certain business practices in thebiopharmaceutical industry. These laws include, but are not limited to, anti-kickback, false claims, data privacy and security, and transparency statutes andregulations. The federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration, directlyor indirectly, to induce, or in return for, purchasing, leasing, ordering or arranging for the purchase, lease or order of any good, facility, item or servicereimbursable under 85 Table of Contents Medicare, Medicaid or other federal healthcare programs. The term “remuneration” has been broadly interpreted to include anything of value, including forexample, gifts, discounts, the furnishing of supplies or equipment, credit arrangements, payments of cash, waivers of payment, ownership interests andproviding anything at less than its fair market value. The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceuticalmanufacturers on one hand and prescribers, purchasers and formulary managers on the other. Although there are a number of statutory exceptions andregulatory safe harbors protecting certain common activities from prosecution, the exceptions and safe harbors are drawn narrowly, and our practices may notin 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 intendedto 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 ofthe requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the Anti-KickbackStatute. 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 statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to inducereferrals of federal healthcare covered business, the statute has been violated. The Patient Protection and Affordable Care Act as amended by the Health Careand Education Reconciliation Act, or collectively, PPACA, amended the intent requirement under the Anti-Kickback Statute and criminal healthcare fraudstatutes (discussed below) such that a person or entity no longer needs to have actual knowledge of the statute or the specific intent to violate it in order tohave committed a violation. In addition, PPACA provides that the government may assert that a claim including items or services resulting from a violationof the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act (discussed below). Further, the civilmonetary penalties statute imposes penalties against any person or entity that, among other things, is determined to have presented or caused to be presenteda 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 prohibit, among other things, any person or entity from knowingly presenting, or causing to be presented, a false orfraudulent claim for payment or approval to the federal government or knowingly making, using or causing to be made or used a false record or statementmaterial 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, aclaim includes “any request or demand” for money or property presented to the U.S. government. Recently, several pharmaceutical and other healthcarecompanies have been prosecuted under these laws for, among other things, allegedly providing free product to customers with the expectation that thecustomers would bill federal programs for the product. Other companies have been prosecuted for causing false claims to be submitted because of thecompanies’ 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 healthcarebenefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up a material fact or making anymaterially 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 its implementing regulations, imposescertain requirements relating to the privacy, security and transmission of individually identifiable health information. Among other things, HITECH makesHIPAA’s privacy and security standards directly applicable to business associates—independent contractors or agents of covered entities that receive orobtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also created four new tiers of civilmonetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general newauthority 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 withpursuing federal civil actions. In addition, state laws govern the privacy and security of health information in certain circumstances, many of which differfrom each other in significant ways and may not have the same effect, thus complicating compliance efforts. Additionally, the PPACA 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 certainexceptions) to report information related to certain payments or other transfers of value made or distributed to physicians and teaching hospitals, or to entitiesor individuals at the request of, or designated on behalf of, the physicians and teaching hospitals and to report annually certain ownership and investmentinterests held by physicians and their immediate family members. 86 Table of Contents 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 toimplement a comprehensive compliance program that includes a limit on expenditures for, or payments to, individual medical or health professionals andtrack 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 healthregulatory laws described above or any other laws that apply to us, we may be subject to penalties, including potentially significant criminal, civil and/oradministrative 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. To the extent that any of our products will be sold in aforeign 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 ofvalue to healthcare professionals. Pharmaceutical Coverage, Pricing and Reimbursement In both domestic and foreign markets, our sales of any approved products will depend in part on the availability of coverage and adequatereimbursement from third-party payors. Third-party payors include government authorities, managed care providers, private health insurers and otherorganizations. Patients who are prescribed treatments for their conditions and providers performing the prescribed services generally rely on third-partypayors to reimburse all or part of the associated healthcare costs. Patients are unlikely to use our products, if approved, unless coverage is provided andreimbursement is adequate to cover a significant portion of the cost of our products. Sales of our products will therefore depend substantially, bothdomestically and abroad, on the extent to which the costs of our products will be paid by third-party payors. These third-party payors are increasinglyfocused on containing healthcare costs by challenging the price and examining the cost-effectiveness of medical products and services. In addition, significant uncertainty exists as to the coverage and reimbursement status of newly approved healthcare product candidates. The market forour product candidates for which we may receive regulatory approval will depend significantly on access to third-party payors’ drug formularies, or lists ofmedications for which third-party payors provide coverage and reimbursement. The industry competition to be included in such formularies often leads todownward pricing pressures on pharmaceutical companies. Also, third-party payors may refuse to include a particular branded drug in their formularies orotherwise restrict patient access to a branded drug when a less costly generic equivalent or other alternative is available. Because each third-party payorindividually approves coverage and reimbursement levels, obtaining coverage and adequate reimbursement is a time-consuming, costly and sometimesunpredictable process. We may be required to provide scientific and clinical support for the use of any product to each third-party payor separately with noassurance that approval would be obtained, and we may need to conduct expensive pharmacoeconomic studies in order to demonstrate the cost-effectivenessof our products. This process could delay the market acceptance of any product and could have a negative effect on our future revenues and operating results.We cannot be certain that our product candidates will be considered cost-effective. Because coverage and reimbursement determinations are made on apayor-by-payor basis, obtaining acceptable coverage and reimbursement from one payor does not guarantee the Company will obtain similar acceptablecoverage or reimbursement from another payor. If we are unable to obtain coverage of, and adequate reimbursement and payment levels for, our productcandidates from third-party payors, physicians may limit how much or under what circumstances they will prescribe or administer them and patients maydecline to purchase them. This in turn could affect our ability to successfully commercialize our products and impact our profitability, results of operations,financial condition and future success. Furthermore, in many foreign countries, particularly the countries of the European Union, the pricing of prescription drugs is subject to governmentcontrol. In some non-U.S. jurisdictions, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governingdrug pricing vary widely from country to country. For example, the European Union provides options for its member states to restrict the range of medicinalproducts for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. A memberstate may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the companyplacing the medicinal product on the market. We may face competition for our product candidates from lower-priced products in foreign countries that haveplaced price controls on pharmaceutical products. In 87 Table of Contents addition, there may be importation of foreign products that compete with our own products, which could negatively impact our profitability. Healthcare Reform In the United States and other jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes tothe healthcare system that could affect our future results of operations as we begin to directly commercialize our products. 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. Initiativesto reduce the federal deficit and to reform healthcare delivery are increasing cost-containment efforts. We anticipate that Congress, state legislatures and theprivate sector will continue to review and assess alternative benefits, controls on healthcare spending through limitations on the growth of private healthinsurance premiums and Medicare and Medicaid spending, the creation of large insurance purchasing groups, price controls on pharmaceuticals and otherfundamental changes to the healthcare delivery system. Any proposed or actual changes could limit or eliminate our spending on development projects andaffect our ultimate profitability. In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, theHealth Care Reform Law was signed into law. The Health Care Reform Law has the potential to substantially change the way healthcare is financed by bothgovernmental and private insurers. The Health Care Reform Law among other things, established an annual, nondeductible fee on any entity thatmanufactures or imports certain branded prescription drugs and biologic agents; revised the methodology by which rebates owed by manufacturers forcovered outpatient drugs under the Medicaid Drug Rebate Program are calculated; increased the minimum Medicaid rebates owed by most manufacturersunder the Medicaid Drug Rebate Program; extended the Medicaid Drug Rebate program to utilization of certain injectable outpatient drugs, as well asprescriptions of individuals enrolled in Medicaid managed care organizations; required manufacturers to offer 50% point-of-sale discounts on negotiatedprices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to becovered 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. The future of the Health Care Reform Law remains uncertain. In January 2017, Congress voted to adopt a budget resolution for fiscal year 2017, or theBudget Resolution, that authorized the implementation of legislation that would repeal portions of the Health Care Reform Law. Further, on January 20,2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under the Health Care Reform Law to waive,defer, grant exemptions from, or delay the implementation of any provision of the Health Care Reform Law that would impose a fiscal or regulatory burdenon states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. The practical implications of that orderare unclear, and the future of the Health Care Reform Law is uncertain. Congress also could consider subsequent legislation to replace elements of the HealthCare Reform Law that are repealed. In the future, there may continue to be additional proposals relating to the reform of the United States healthcare system, some of which could furtherlimit the prices we are able to charge for our products candidates, or the amounts of reimbursement available for our product candidates. If future legislationwere to impose direct governmental price controls and access restrictions, it could have a significant adverse impact on our business. Managed careorganizations, as well as Medicaid and other government agencies, continue to seek price discounts. Some states have implemented, and other states areconsidering, price controls or patient access constraints under the Medicaid program, and some states are considering price-control regimes that would applyto broader segments of their populations that are not Medicaid-eligible. Due to the volatility in the current economic and market dynamics, we are unable topredict the impact of any unforeseen or unknown legislative, regulatory, payor or policy actions, which may include cost containment and healthcare reformmeasures. Such policy actions could have a material adverse impact on our profitability. Moreover, the recently enacted federal Drug Supply Chain Security Act imposes new obligations on manufacturers of pharmaceutical products, amongothers, related to product tracking and tracing. Among the requirements of this new federal legislation, manufacturers will be required to provide certaininformation regarding the drug product to individuals and entities to which product ownership is transferred, label drug product with a product identifier, andkeep certain records regarding the drug product. Further, under this new legislation, manufacturers will have drug product investigation, quarantine,disposition, and notification responsibilities related to counterfeit, diverted, stolen, and intentionally adulterated products, as well as products 88 Table of Contents that are the subject of fraudulent transactions or which are otherwise unfit for distribution such that they would be reasonably likely to result in serious healthconsequences or death. Physician Payment Sunshine Act The Physician Payment Sunshine Act requires most pharmaceutical manufacturers to report annually to the Secretary of HHS any and all financialarrangements, payments, or other transfers of value made by that entity to physicians and teaching hospitals. The payment information is made publiclyavailable in a searchable format on a CMS website. Over the next several years, we will need to dedicate significant resources to establish and maintainsystems and processes in order to comply with these regulations. Failure to comply with the reporting requirements can result in significant civil monetarypenalties. Similar laws have been enacted or are under consideration in foreign jurisdictions, including France which has adopted the Loi Bertrand, or FrenchSunshine Act, which became effective in 2013. Environmental, Health and Safety Laws and Regulations We are subject to numerous environmental, health and safety laws and regulations and permitting requirements, including those governing laboratoryprocedures, decontamination activities and the handling, transportation, use, remediation, storage, treatment, and disposal of hazardous materials and wastes.Our operations involve the use of hazardous and flammable materials, and the risk of injury, contamination or noncompliance with environmental, health andsafety requirements cannot be eliminated. Although compliance with such laws and regulations and permitting requirements has not had a material effect onour capital expenditures, earnings or competitive position, environmental, health and safety laws and regulations and permitting requirements have tended tobecome increasingly stringent and, to the extent legal or regulatory changes occur in the future, they could result in, among other things, increased costs to usor the impairment of our research, development or production efforts. C. Organizational structure We are a Swiss stock corporation (société anonyme) organized under the laws of Switzerland. We were formed as a Swiss limited liability company(société à responsabilité limitée) on February 13, 2003 with our registered office and domicile in Basel, Switzerland. We converted to a Swiss stockcorporation (société anonyme) under the laws of Switzerland on August 25, 2003. Prior to our initial public offering, we were a privately owned company.Our domicile and registered office is in Ecublens, near Lausanne, Canton of Vaud, Switzerland. Our registered and principal executive offices are located atEPFL Innovation Park, Building B, 1015 Lausanne, Switzerland, our general telephone number is (41) 21 345 91 21 and our internet address iswww.acimmune.com. We did not have any subsidiaries as of December 31, 2017. D. Property, plant and equipment The Company’s capital expenditures were CHF 1.8 million in 2017 with CHF 1.5 million for lab equipment and leasehold improvements. Theseinvestments are to enhance our research facilities. Facilities We lease approximately 13,200 square feet of space at the Innovation Park of the EPFL (École Polytechnique Fédérale Lausanne), Switzerland as ofDecember 31, 2017. This property serves as our corporate headquarters, our research facility and laboratories. We believe that using the EPFL facilitiesinstead of building our own infrastructure helps us to maximize the value of our research and development capital and make efficient use of our funds as wecontinue to build and develop our pipeline. Due to the expansion of our research and development team and addition of scientists, we have agreed inFebruary 2018 with the EPFL to lease more than 4,300 square feet of additional space in the Innovation Park. We believe that with this additional space, ourexisting facilities are sufficient to meet our current needs. ITEM 4A. UNRESOLVED STAFF COMMENTS None. 89 Table of Contents ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS You should read the following discussion and analysis of our financial condition and results of operations together with the information under “Item 3.Key Information—A. Selected Financial Data” and our consolidated audited financial statements, including the notes thereto, included in this AnnualReport. The following discussion is based on our financial information prepared in accordance with IFRS as issued by the IASB, which might differ inmaterial respects from generally accepted accounting principles in other jurisdictions. The following discussion includes forward-looking statements thatinvolve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result ofmany factors, including but not limited to those described under “Item 3. Key Information—D. Risk Factors” and elsewhere in this Annual Report. A. Operating results Overview We are a clinical stage biopharmaceutical company leveraging our two proprietary technology platforms to discover, design and develop novel,proprietary medicines for prevention, diagnosis and treatment of neurodegenerative diseases associated with protein misfolding. Our lead product candidateis crenezumab, a humanized, monoclonal, conformation-specific anti-Abeta antibody that we developed using our proprietary SupraAntigen platform.Crenezumab commenced Phase 3 clinical studies in the first quarter of 2017 and the first quarter of 2016 and we believe it has the potential to become a best-in-class disease-modifying treatment for Alzheimer’s disease, or AD. Genentech, Inc., a wholly owned subsidiary of Roche, or Genentech, is advancingcrenezumab for the treatment of AD under a collaboration agreement with us, pursuant to which it is responsible for the clinical development of crenezumab,including the costs associated with seeking and obtaining regulatory and marketing approvals, manufacturing costs and sales and marketing costs. Two of our other clinical product candidates, ACI-24 and ACI-35, are being developed using our SupraAntigen platform and target AD through activeimmunization, where the immune system is stimulated to make its own antibodies against pathological proteins: ·ACI-24 is our wholly-owned anti-Abeta vaccine candidate currently in a Phase 1/2a study. Due to the clean safety profile and potential dosedependent reduction of Abeta plaques as measured by PET imaging it is planned to move this program forward into a Phase 2. The main objective ofthe trial will be to analyze ACI-24’s efficiency to reduce Abeta plaques in a larger cohort size. The preparation of the Phase 2 is ongoing and weexpect to start this study in the second half of 2018. ·ACI-35 is an anti-Tau vaccine candidate that we are developing under a collaboration agreement with Janssen. The Phase 1b treatment part isfinished and final data analysis is ongoing. AC Immune and Janssen jointly decided to advance the anti-Tau vaccine program into furtherdevelopment. The elaboration of the development plan is under preparation. In a scientific advisory meeting, the regulatory authorities weresupportive of a shortened pre-clinical development of new formulations of the anti-Tau vaccine program. Both parties are currently focusing on themanufacturing of the new formulations and additional safety studies to advance these formulations into the next stage of development. Additionally, a passive anti-Tau monoclonal antibody candidate is being developed under a collaboration agreement with Genentech. The Phase 1clinical study in patients with AD and healthy volunteers was completed in the second quarter of 2017. Based on the results, the Phase 2 clinical study in 360prodromal-to-mild AD patients commenced in the fourth quarter of 2017. We are also using our Morphomer platform to develop complementary diagnostic products such as positron emission tomography, or PET, ligands,which are tracers that can directly measure misfolded Tau and alpha-synuclein in the brain, to enable early and reliable disease diagnoses. We use our two unique proprietary platform technologies, SupraAntigen (conformation-specific biologics) and Morphomer (conformation-specific smallmolecules), to discover, design and develop medicines and diagnostics to target misfolded proteins. These platforms are our engines for generating novelmolecules that are designed to bind to their targets with high affinity and conformational specificity, meaning they are enabled to differentiate betweenmisfolded proteins and normally-folded proteins. All of our product candidates and our development programs have been derived from our proprietaryplatforms. 90 Table of Contents To date, we have primarily financed our operations through the proceeds from our initial public offering, private placements of preferred securities andupfront and milestone payments from our collaboration partners. We have no products approved for commercialization and have never generated anyrevenues from product sales. Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk. It may beseveral years, if ever, before we or our collaboration partners complete pivotal clinical studies and have a product candidate approved for commercializationand we begin to generate revenue and royalties from product sales. Since our inception, we have received upfront and milestone payments from ourcollaboration partners and certain other revenue. However, we have also incurred significant operating losses. For example, we incurred net losses of CHF26.4 million for the fiscal year ended December 31, 2017. Strategic Collaborations and Licensing Agreements Since our inception, we have entered into strategic collaboration agreements with a range of partners covering a number of our product candidates. Weentered into a strategic collaboration with Genentech in November 2006 (as amended in May 2015) regarding the development, manufacture andcommercialization of crenezumab, and we refer to this agreement as the 2006 Genentech agreement. In June 2012, we entered into an additional strategiccollaboration agreement with Genentech regarding the development, manufacture and commercialization of our anti-Tau antibodies, and we refer to thisagreement as the 2012 Genentech agreement. We expect to capitalize on Genentech’s drug development and regulatory expertise and commercialcapabilities to bring our partnered therapeutic products to market. In May 2014, we entered into a license and collaboration agreement with Piramal Imaging,a leader in imaging agents, covering our Tau PET Imaging tracer. In December 2014 (and as amended in April 2016 and July 2017), we entered into astrategic collaboration agreement with Janssen regarding the development, manufacture and commercialization of ACI-35, an anti-Tau vaccine. We expect tocapitalize on Janssen and Johnson & Johnson’s extensive regulatory expertise and experience in developing, manufacturing and, if approved,commercializing vaccines to bring ACI-35 to market. In April 2016, we entered into a non-exclusive collaboration with Biogen covering our alpha-synuclein PET imaging tracer and future initiativestargeted at TDP-43 PET imaging tracers, which is a protein that has been recently linked to neurodegeneration in diseases including AD, PD and amyotrophiclateral sclerosis (commonly known as ALS or Lou Gehrig’s disease). In May 2017, we entered into a Research Project Agreement with Essex to develop arecombinant protein therapeutic candidate acting on a unique neuroprotective mechanism for treatment of neurological diseases, such as Alzheimer’s diseaseand frontotemporal dementia. Essex will provide joint research commitment as well as financial support to AC Immune for the pre-IND development of thebiological agent. As part of this agreement, the parties thereto have agreed to an initial two year Research Plan, which intends to develop a basic FibroblastGrowth Factor as a therapeutic for the treatment of neurodegenerative diseases and to generate of novel antibody therapeutics. Genentech We have two partnership agreements with Genentech, a company with a reputation for scientific excellence and a history of bringing innovative proteintherapeutics to market. Crenezumab Collaboration Agreement of 2006 We signed our first agreement with Genentech in November 2006 and amended the agreement in May 2015. This is an exclusive, worldwide licensingagreement for crenezumab, our humanized monoclonal antibody targeting misfolded Abeta. The agreement provides for a second therapeutic product basedon the same intellectual property and anti-Abeta antibody compound, as well as an anti-Abeta diagnostic product. Genentech commenced Phase 3 clinicalstudies for crenezumab in the first quarter of 2016 and the first quarter of 2017. Under the agreement with Genentech, we may become eligible to receive payments totaling up to approximately $340 million, excluding royalties. Theagreement includes upfront and milestone payments. In addition, we will receive royalties on sales. The structure of the collaboration agreement is as follows: ·An upfront payment; ·Clinical milestone payments are payable upon commencement of each of Phase 1 and Phase 2 of clinical developments, and upon the earlier ofGenentech’s decision to authorize Phase 3 or the commencement of Phase 3 of clinical developments. In addition, for a second indication, clinicalmilestone payments would be payable upon commencement of Phase 2 of clinical developments and upon the earlier of Genentech’s decision toauthorize Phase 3 or the commencement of Phase 3 of clinical developments; 91 Table of Contents ·Regulatory milestone payments upon making regulatory filings in the U.S. and Europe, respectively, and milestone payments upon obtainingmarketing approval in each of the U.S. and Europe. In addition, for a second indication, additional regulatory and approval milestones would bepayable. ·Royalties on sales with different royalty rates applicable in the U.S. and Europe. Royalty levels are tied to annual sales volumes. We will receiveroyalties on sales of crenezumab with the percentage rates ranging from net high single digits to the mid-teens. To date, we have received total payments of $65 million (CHF 70.1 million) which comprise upfront and clinical milestone payments. We received a $25million upfront payment at the time of signing of the collaboration agreement and have since then obtained three milestone payments totaling $40 million,including the Phase 3 milestone payment we received in July 2015. Under the terms of the agreement, Genentech bears all the costs of developing crenezumab through the clinical phases. In addition, Genentech isresponsible for the costs associated with seeking and obtaining regulatory and marketing approvals, manufacturing costs, sales and marketing costs.Intellectual property costs related to any crenezumab-related intellectual property filed solely by us and any costs associated with filing, maintaining andprotecting intellectual property filed jointly we share with Genentech. The agreement will terminate by its terms on the date on which all obligations betweenthe parties with respect to the payment of milestones or royalties for licensed products have passed or expired. However, Genentech may terminate theagreement at any time by providing three months’ notice to us. Anti-Tau Antibody Collaboration Agreement of 2012 In June 2012, we entered into a second partnership with Genentech to commercialize our anti-Tau antibodies for use as immunotherapeutics. The valueof this exclusive, worldwide alliance is potentially greater than CHF 400 million and includes upfront and milestone payments. In addition to milestones, wewill be eligible to receive royalties on sales at percentage rates ranging from the mid-single digits to high single digits. The agreement also provides forcollaboration on two additional indications built on the same anti-Tau antibody program, as well as a potential anti-Tau diagnostic product. To date, we have received payments totaling CHF 59 million, including a CHF 14 million milestone payment recognized and payment received in thefourth quarter of 2017 associated with the first patient dosing in a Phase 2 clinical trial for Alzheimer’s Disease with an anti-Tau monoclonal body known asRO7105705, a CHF 14 million milestone payment recognized in the second quarter of 2016 and received in July 2016, associated with the announcement ofthe commencement of the Phase 1 clinical study of the lead anti-Tau antibody candidate and a CHF 14 million milestone payment received in 2015 inconnection with the ED-GO decision. The structure of the collaboration agreement is as follows: ·An upfront payment; ·Preclinical and clinical milestone payments upon selection of a lead candidate, commencement of each of Phase 1, 2 and 3 of clinical development.In addition, for a second indication, clinical milestone payments would be payable upon commencement of each of Phase 2 and 3 of clinicaldevelopment; ·Regulatory milestones payments upon making regulatory filings for marketing approvals in the U.S., Europe, and Japan, respectively. In addition, fora second indication, similar regulatory milestones would be payable; ·Commercialization milestones payable upon making a first commercial sale in each of the U.S., Europe and Japan. For a second indication,commercialization milestones exist for each of the U.S., Europe and Japan which are triggered by the first commercial sale for the second indicationin each of those jurisdictions; and ·Royalties on sales with royalty rates differing based on the source of the intellectual property underlying the commercial product. Under the terms of the agreement, Genentech bears all the costs of developing the anti-Tau antibody compound through the clinical phases. In addition,Genentech is responsible for the costs associated with 92 Table of Contents seeking and obtaining regulatory and marketing approvals, manufacturing costs, sales and marketing costs. Intellectual property costs related to any anti-Tauantibody-related intellectual property filed solely by us and any costs associated with filing, maintaining and protecting intellectual property filed jointly weshare with Genentech. The agreement will terminate by its terms on the date on which all obligations between the parties with respect to the payment ofmilestones or royalties for licensed products have passed or expired. However, Genentech may terminate the agreement at any time by providing threemonths’ notice to us. Janssen Pharmaceuticals In December 2014, we entered into a partnership with Janssen Pharmaceuticals, a Johnson & Johnson company, to develop and commercializetherapeutic anti-Tau vaccines for the treatment of AD and potentially other Tauopathies. The partnership includes a worldwide exclusive license and researchcollaboration. We and Janssen will co-develop the lead therapeutic vaccine, ACI-35, through Phase 1b completion. From Phase 2 and onward, Janssen willassume responsibility for the clinical development, manufacturing and commercialization of ACI-35. ACI-35 is an active therapeutic vaccine stimulating thepatient’s immune system to produce a polyclonal antibody response against phosphorylated Tau protein. The agreement also allows for the collaboration to be expanded to a second indication based on the same anti-Tau vaccine program and intellectualproperty related to this program. In January 2016, we received a pre-payment of CHF 1.5 million for research and external research costs for 2016. We recognized the proceeds over a 12-month period on a straight-line basis pursuant to the terms of the collaboration agreement. In May 2016, we received a CHF 4.9 million payment for reachinga clinical milestone in the Phase 1b study. As we met all performance obligations on reaching the milestone, we have recognized this milestone as revenue. As part of this agreement, AC Immune and Janssen have committed to spending approximately CHF 13.8 million in clinical development until the endof the Phase 1b clinical study. Any remaining commitment not spent on the Phase 1b study will be carried forward to cover additional development costswith Janssen continuing to be responsible for any costs above the stated CHF 13.8 million. In July 2017, AC Immune and Janssen entered into a Second Amendment to the December 2014 License, Development and CommercializationAgreement. The Amendment allows for the alignment of certain payment provisions with the new Development Plan and Research Plan activities. ACI andJanssen will jointly share R&D costs until the completion of the first Phase 2. Under the terms of the agreement, Janssen may terminate the agreement at anytime after completion of the Phase 1b clinical study by providing 90 days’ notice to us. The structure of the collaboration agreement is as follows: ·An upfront payment; ·Clinical milestone payments upon completion of Phase 1b, commencement of each of Phase 2 and 3 of clinical development. For a second cohort, amilestone payment is payable to us upon commencement of Phase 2 clinical studies. In addition, for a second indication, clinical milestonepayments would be payable upon commencement of Phase 3 clinical studies; ·Regulatory milestone payments upon making regulatory filings in the U.S., Europe, and Japan, respectively. In addition, for a second indication,similar regulatory milestones would be payable. For a second indication, additional regulatory milestone payments are payable by Janssen to usupon receipt of each of the regulatory approvals in the U.S., Europe and Japan; ·Commercialization milestones payable upon making a first commercial sale in each of the U.S., Europe and Japan, and upon achieving certaincommercial milestones; and ·Royalties on sales with royalty rates differing based on the level of annual sales. The agreement will terminate by its terms on the date on which all royalty obligations have been paid thereunder. However, under the terms of theagreement, Janssen may terminate the agreement at any time after completion of the Phase 1b clinical study by providing 90 days’ notice to us. 93 Table of Contents Piramal Imaging In May 2014, we entered into the LCA for our first diagnostic partnership with Piramal Imaging, one of the world leaders in imaging products. Theagreement with Piramal is for a compound from the Morphomer chemical library that binds to pathogenic Tau for use as a PET tracer. The exclusive, worldwide licensing agreement with Piramal Imaging includes upfront and milestone payments totaling up to EUR 157 million plusroyalties on sales at percentage rates ranging from mid-single digits to low double digits. The structure of the collaboration agreement is as follows: ·An upfront payment; ·Clinical milestone payments upon the commencement of the Phase 1 study in PSP, commencement of Phase 2 and 3 for generation of data intendedto support a regulatory submission in the U.S. or EU and acceptance of Regulatory filing (NDA) and Regulatory approval for Commercialization inthe US or EU. We would be entitled to further clinical milestone payments for the commencement of Phase 2 and 3 for a second indication; and ·Sales milestones tied to specific annual net sales amounts. The LCA agreement will terminate by its terms on the date of expiration of the last-to-expire royalty term, where each royalty term under the LCA expireson a product-by-product basis and country-by-country basis on the later of (i) ten years after the first commercial sale of the relevant product in such countryor (ii) the date on which the patent covering the sale of such product in such country is no longer valid or enforceable. However, Piramal Imaging mayterminate the LCA at any time after the first eighteen months from the effective date of this LCA on a Product-by-Product and country-by-country basis byproviding three months’ notice to us. Alpha-synuclein and TDP-43 PET Imaging Tracers – Collaboration with Biogen In April 2016, we entered into a non-exclusive research and development agreement with Biogen International GmbH, or Biogen. Under the agreement,we and Biogen have agreed to collaborate in the research and early clinical development of our alpha-synuclein PET Tracer program for Parkinson’s diseaseand other synucleinopathies, and a second program for the identification, research and development of novel PET ligands against TDP-43, a protein recentlylinked to neurodegeneration in diseases such as amyotrophic lateral sclerosis. In addition, we have agreed to share the costs of the collaboration with Biogen,with Biogen primarily funding the majority of research costs, subject to a cap, which includes an upfront technology access fee and funding towards researchand development personnel and activities. We will own all intellectual property rights to any invention relating to alpha-synuclein or TDP-43 PET tracers. Unless earlier terminated, the agreement will expire upon the later of three years or the completion of the collaboration, but in no event later than fouryears, unless we and Biogen mutually agree to extend the term of the agreement. Biogen may terminate the agreement for any reason upon thirty days’written notice to us. Following the expiration of the agreement, we may be required to negotiate and enter into a supply agreement with Biogen pursuant towhich we would supply Biogen with PET tracers created under the collaboration for Biogen’s continued development activities. Under certain circumstances,including prior to the expiration of the collaboration agreement, we may also be required to grant Biogen a license or other rights to develop andcommercialize such PET tracers outside of the collaboration. Recombinant protein therapeutic candidate – Collaboration with Essex Bio-Technology Limited On May 19, 2017, we entered into a Research Project Agreement with Essex Bio-Technology Limited, or Essex, to develop a recombinant proteintherapeutic candidate acting on a unique neuroprotective mechanism for treatment of neurological diseases, such as Alzheimer’s disease and frontotemporaldementia. Essex will provide a joint research commitment as well as financial support to AC Immune for the pre-IND development of the biological agent. As part of this agreement, the parties thereto have agreed to an initial two-year Research Plan, which intends to develop a basic Fibroblast Growth Factoras a therapeutic for the treatment of neurodegenerative diseases and to generate novel antibody therapeutics. 94 Table of Contents Under the terms of the agreement, Essex will provide support to AC Immune until the selection of a collaboration product by the Joint SteeringCommittee, up to a maximum of CHF 750 thousand per year. Michael J. Fox Foundation for Parkinson’s Research In 2015, we were awarded an important grant from the Michael J. Fox Foundation for Parkinson’s Research (MJFF). The grant is funding thedevelopment of a diagnostic imaging agent capable of detecting PD at an early stage. The project focuses on alpha-synuclein PET tracers. We have identifiedmolecules from our Morphomer library that stain selectively alpha-synuclein pathological structures in human PD brain sections. We are optimizing thepotency, selectivity and pharmacokinetics of these tracers and expect to select a lead candidate. We were awarded a one year continuation of this grant inSeptember 2017 for activities scheduled through September 2018. Critical Accounting Policies and Significant Judgments and Estimates Revenue Recognition We have historically generated revenues from funds received under collaboration and license agreements as well as research grants. Revenues fromresearch activities made under collaboration arrangements are recognized when there is persuasive evidence that an arrangement exists, services have beenrendered, the price is fixed or determinable and collectability is reasonably assured. Since our inception, we have entered into strategic collaborationagreements with a range of partners covering a number of our product candidates. For collaborations established on programs in pre-clinical stage, we recognize revenue from upfront payments under our collaboration agreementsratably over the term of our estimated period of performance under each agreement. For collaboration agreements on product candidates that are (i) in clinicaldevelopment, (ii) where the upfront payment reflects a payment for past investments we have made in the development of the product candidate, access to theproduct candidate, the associated intellectual property and our knowledge, and (iii) where there is no further performance commitment, we recognize the fairvalue of the upfront payment at the time of entering into the collaboration agreement. For collaboration agreements with product candidates in clinicaldevelopment but where the conditions described in clauses (ii) and (iii) are not met, we recognize the upfront payments ratably over the term of our estimatedperiod of performance under each agreement. We record amounts received prior to satisfying the above revenue recognition criteria as deferred revenue until all applicable revenue recognitioncriteria are met. Deferred revenue represents the portion of research or license payments received that have not been earned. Milestones are considered substantive if all of the following conditions are met: (i) the milestone is non-refundable, (ii) achievement of the milestonewas not reasonably assured at the inception of the arrangement, (iii) substantive effort is involved to achieve the milestone and (iv) the amount of themilestone appears reasonable in relation to the effort expended, and the other milestones in the arrangement and the related risk associated with theachievement of the milestone and any ongoing research and development or other services are priced at fair value. Such payments that are contingent uponachievement of a substantive milestone are recognized entirely as revenues in the period in which the milestone is achieved. To the extent that non-substantive milestones are achieved and we have remaining performance obligations, milestones are deferred and recognized as revenue over the estimatedremaining period of performance. If there are no remaining performance obligations, we recognize the revenue in the period it is earned. Grants provide funding for certain types of expenditures in connection with research and development activities over a contractually-defined period.Revenue related to grants is recognized in the period during which the related costs are incurred and the related services are rendered, provided that theapplicable performance obligations under the grants have been met. We intend to continue to evaluate pursuing additional grant opportunities on a case-by-case basis. Accrued Research and Development Costs We record accrued expenses for estimated costs of our research and development activities conducted by third party service providers, which includeamongst others the conduct of preclinical studies and clinical studies and contract manufacturing activities. We record accrued expenses for estimated costsof our research and development activities based upon the estimated amount of services provided but not yet invoiced, and we include these costs in accruedliabilities on the balance sheets and within research and development expenses in the Statements of Income / (Loss). These costs are a significant componentof our research and development 95 Table of Contents expenses. We record accrued expenses for these costs based on the estimated amount of work completed in accordance with agreements established withthese third parties. We estimate the amount of work completed through discussions with our project leaders and external service providers as to the progress or stage ofcompletion of the services and the agreed-upon fee to be paid for such services. We make significant judgments and estimates in determining the accruedbalance in each reporting period. As actual costs become known, we adjust our accrued estimates. Although we do not expect our estimates to be materiallydifferent from amounts actually incurred, our understanding of the status and timing of services performed, the number of patients enrolled and the rate ofpatient enrollment may vary from our estimates and could result in us reporting amounts that are too high or too low in any particular period. Our accruedexpenses are dependent, in part, upon the receipt of timely and accurate reporting from CROs and other third-party service providers. To date, there have beenno material differences from our accrued expenses to actual expenses. Share-Based Compensation Options The Company operates an equity-settled, share-based compensation plan. We account for awards of equity instruments issued to employees and directorsunder the fair value method of accounting and recognize such amounts in our Statements of Income / (Loss). The total amount to be expensed over thevesting period is determined by reference to the fair value of the instruments granted, excluding the impact of any non-market vesting conditions. Non-market vesting conditions are included in assumptions about the number of instruments that are expected to become exercisable. At each balance sheet date,the Company revises its estimates of the number of instruments that are expected to become exercisable. It recognizes the impact of the revision of originalestimates, if any, in the Statements of Income / (Loss), and a corresponding adjustment to equity over the remaining vesting period. We estimate the fair value of all time-vested options as of the date of grant using the Black-Scholes option pricing model. Key assumptions indetermining the fair value of share options granted utilizing the Black-Scholes valuation method include the following: Expected Term The expected term represents the period that share-based awards are expected to be outstanding. We used the simplified method to determine theexpected term, which for the Company closely approximates the midpoint between the vesting date and the end of the contractual term of the options. Expected Volatility For grants issued prior to being a public company we did not have any trading history for our common shares, the expected volatility was estimatedbased on the average historical volatilities of common shares of comparable publicly traded entities over a period equal to the expected term of the stockoption grants. The comparable companies were chosen based on similar geographic location, similar size, and similar stage in the life cycle or area ofspecialty. We will continue to apply this process to grants made as a public company until a sufficient amount of historical information regarding thevolatility of our own stock price becomes available. Risk-Free Interest Rate The risk-free rate is based on long dated Swiss government zero coupon bond issues in effect at the time of the grant for periods corresponding with theexpected term of the option. Expected Dividends We have never paid dividends on our common shares and have no plans to pay dividends on our common shares. Therefore, we used an expecteddividend yield of zero percent. In addition to Black-Scholes assumptions, we estimate our forfeiture rate based on our actual and expected forfeitures and we continue to evaluate theadequacy of the forfeiture rate based on the actual forfeiture experience, analysis of employee turnover behavior and other factors. The impact from anyforfeiture rate adjustment would be recognized in full in the period of adjustment, and if the actual number of future forfeitures 96 Table of Contents differs from our estimates, we might be required to record adjustments to share-based compensation in future periods. Historically, for all periods prior to the IPO, the fair value of the common shares underlying our share-based awards was estimated on each grant date byour management and approved by our board of directors. In order to determine the fair value of our common shares underlying option grants, our board ofdirectors considered, among other things, the breadth of our product candidate portfolio, the stages of development of our various product candidates andmajor changes to stage of development, the progress and additions to our collaboration agreements, risks inherent in our activities, the lack of liquidity of ourCompany’s securities and the valuations and sentiment toward biotech companies. Given the absence of a public trading market for our common shares, ourboard of directors exercised reasonable judgment and considered a number of objective and subjective factors to determine the best estimate of the fair valueof our common shares, including our stage of development, progress of our research and development efforts, the strength of our balance sheets and capitalbase, equity market conditions affecting comparable public companies and the lack of liquidity of our common shares. Amendment of 2015 Option Plan We grant options at the outset of the award period with the options vesting over a four year period. In line with IFRS accounting principles for optionawards, we are using the graded methodology to expense the fair value of the awards on a straight line basis over the four year vesting period of the options.Specifically, the accounting rules require us to recognize that four separate options with four separate option periods were issued. Consequently, in year one,we need to expense (i) the fair value of the awards issued in the first year, (ii) one half of the fair value of the awards to be issued in year two, (iii) one third ofthe value of the awards to be issued in year three and (iv) one quarter of the fair value of the options issued to be in year four. The result in the change in theway we expense options means that we are recognizing a larger expense in years one and two (relative to the traditional straight line expensing method)while recognizing a smaller expense in years three and four (relative to the traditional straight line expensing method). Amendment of Plan A Stock Option Plan In 2015 and 2017, we amended the Plan A stock option plan that we established in 2004. Two key amendments were made to the program: (i) theduration of the stock option plan was increased from 10.5 to 15.5 years and (ii) the split adjusted strike price of the option was reduced from CHF 0.93188 toa split adjusted strike price of CHF 0.14548. The lengthening of the plan’s term and lowering of the strike price was effected to bring the plan in line with ourother plans, and resulted in a material increase in the value of the options to the option holders and required us to recognize the increase of the transfer invalue on our accounts in the first half of 2015 and first half of 2017. The impact of the amendment of the Plan A stock option plan totaled CHF 0.4 million in2015 and an immaterial amount in 2017. As these expenses were incremental charges from the date of the amendment, there was no incremental expense in2016. There are no further expenses that we need to recognize in the future associated with this plan. Acceleration of Options The original terms of our Stock Option Plan of 2005 (Plan C) contained a provision that would result in the automatic acceleration of all unvestedoptions upon the consummation of an initial public offering. Pursuant to a board resolution on October 13, 2015 the Stock Option Plan of 2005 was amendedand the automatic acceleration feature was removed. Instead, employees had the right, but not the obligation, to have their unvested options accelerated suchthat they vest immediately. Accordingly, a total of 1,250 options were accelerated as a result of AC Immune’s IPO in September 2016. Our board of directors had the authority to accelerate the vesting of all outstanding unvested options granted to employees prior to July 2014, in theevent of an initial public offering. Pursuant to a board decision on September 18, 2015, 76,000 options previously granted to directors and executive officerswere accelerated upon consummation of AC Immune’s IPO in September 2016. Restricted Shares and Restricted Share Units We estimate the fair value of non-vested stock awards (restricted shares and restricted share units) using a reasonable estimate of market value of thecommon stock on the date of the award. We classify our share-based payments as equity-classified awards as they are settled in shares of our common stock.We measure equity-classified awards at their grant date fair value and do not subsequently remeasure them. Compensation costs 97 Table of Contents related to equity-classified awards are equal to the fair value of the award at grant-date amortized over the vesting period of the award using the gradedmethod. We reclassify that portion of vested awards to share premium as the awards vest. Financial Operations Overview Revenue Given our stage of development, we have not generated any revenue from product sales. Our revenue to date has been derived primarily from six separatecollaboration agreements on some of our product candidates in various stages of pre-clinical and clinical developments and a number of research grants wehave secured. For collaborations established on programs in pre-clinical stage, we recognize revenue from upfront payments under our collaborationagreements ratably over the term of our estimated period of performance under each agreement. For collaboration agreements on product candidates that are(i) in clinical development, (ii) where the upfront payment reflects a payment for past investments we have made in the development of the productcandidate, access to the product candidate, the associated intellectual property and our knowledge, and (iii) where there is no further performancecommitment, we recognize the fair value of the upfront payment at the time of entering into the collaboration agreement. For collaboration agreements withproduct candidates in clinical development but where the conditions described in clauses (ii) and (iii) above are not met, we recognize the upfront paymentsratably over the term of our estimated period of performance under each agreement. For all of our collaboration agreements, in addition to receiving upfrontpayments, we are entitled to milestone and other contingent payments upon achieving pre-defined objectives. Revenue from milestones, if they are non-refundable and deemed substantive, is recognized upon successful accomplishment of the milestones. To the extent that non-substantive milestones areachieved and we have remaining performance obligations, milestones are deferred and recognized as revenue over the estimated remaining period ofperformance. Our revenues have experienced fluctuations over the past three years as a result of securing new collaboration agreements, the timing of milestoneachievement and the size of each milestone payment. We expect that any revenue we generate from our two collaboration agreements with Genentech, ourcollaboration agreements with each of Janssen, Piramal Imaging, Biogen and Essex, research and development grants, and any other current or futurecollaboration partners will fluctuate from year to year as a result of the timing and amount of milestones and other payments. Research and Development Expenses Research and development expenses comprise direct research costs, including the use of CROs, consultants and experts hired to assist on our researchand development activities, consumables used for research and development purposes, employment compensation for our research and development,intellectual property, regulatory affairs, quality control and manufacturing personnel, as well as expenses related to regulatory affairs and quality control. Ourresearch and development costs include the costs associated with our recurrent maintenance costs associated with our portfolio of intellectual propertyincluding patents. In addition, research and development expenditures include the depreciation of fixed assets used in research and development. The largest component of our total operating expenses has historically been, and will continue to be, our investment in research and developmentactivities, including the clinical development of our product candidates. Historically, research and development expenses have represented over 75% of ourtotal annual operating costs. Research and development expenses represent costs incurred to conduct research, such as the discovery and development of ourproduct candidates, as well as development of new product candidates from our SupraAntigen and Morphomer platforms as well as the development ofproduct candidates pursuant to our collaboration agreements with Genentech, Janssen, Piramal Imaging, Biogen and Essex. We recognize all research anddevelopment costs as they are incurred. Clinical study costs, contract manufacturing and other development costs incurred by third parties are expensed asthe contracted work is performed. At present, our research activities comprise three major areas: ·Alzheimer’s disease; ·Non-Alzheimer’s diseases; and ·Diagnostics 98 Table of Contents We expect our research and development expenses to increase substantially in the future and expect to fund a broader number of projects, which willimpact our research strategy in four key ways: (i) we expect to undertake later-stage research and development of our product candidates and, if approved, to take some of those product candidatesinto commercialization; (ii) we will allocate more funding to existing programs to advance the development of these programs; (iii) we will increase our research and development efforts on non-AD indications including neuro-orphans and diagnostics; and (iv) we will initiate a number of new research initiatives that are complementary to our existing and planned research initiatives. We expect that our total future research and development costs will continue to increase over current levels in line with our three-pillar strategy thatfocuses on (i) Alzheimer’s disease, (ii) other significant neurodegenerative diseases and neuro-orphan indications, and (iii) diagnostics for early detection andearlier treatment of these diseases. General and Administrative Expenses General and administrative expenses include personnel costs, expenses for outside professional services, and all other allocated expenses. Personnelcosts consist of salaries, cash bonuses, benefits and share-based compensation. Outside professional services consist of legal, accounting and audit services,IT and other consulting fees. Allocated expenses consist of rent expense related to our office and research and development facility. We continue to incuradditional expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC, andthose of any national securities exchange on which our securities are traded (NASDAQ), additional insurance expenses, investor relations activities and otheradministrative and professional services. Finance Result, net Financial income and expenses include bank fees associated with charges levied by banks on foreign payments and foreign exchange transactions andremeasurement gains and losses which arise from our cash held in currency other than Swiss Francs, certain collaboration agreements such as thecollaboration agreements with Genentech and Piramal Imaging being denominated in currencies other than Swiss Francs and selected purchases, which weeffect in foreign currencies. Interest income consists of interest received from banks on our cash balances. Interest expense relates to interest paid to banks and accrued interest forour long-term financing obligation (Note 12). Taxation We are subject to corporate taxation in Switzerland. We are also entitled under Swiss laws to carry forward any losses incurred for a period of seven years and can offset our losses carried forward againstfuture taxes. As of December 31, 2017, we had tax loss carryforwards totaling CHF 62.6 million. There is no certainty that we will make sufficient profits to beable to utilize these tax loss carryforwards in full. The corporate tax rate in the Canton of Vaud where we are domiciled is currently 20.5%. The Canton does from time to time, amend the level of taxationlevied on corporations and there is no certainty that the tax rate currently in effect will not change in the future. At present, it is expected that a total effectivetax rate of 13.8% will be effective in the Canton of Vaud for the fiscal year 2019. Value Added Tax, or VAT, is charged on all qualifying goods and services by VAT-registered businesses. An amount of 8.0% of the value of the goods orservices is added to all sales invoices and is payable to the Swiss tax authorities. Similarly, VAT paid on purchase invoices is reclaimable from the Swiss taxauthorities. 99 Table of Contents Results of Operations The numbers below have been derived from our audited financial statements included elsewhere herein. The discussion below should be read along withthese financial statements and it is qualified in its entirety by reference to them. Comparison of the Years Ended December 31, 2017 and 2016 Revenue The following table summarizes our revenues during the years ended December 31, 2017 and 2016: For the Years EndedDecember 31, 2017 2016 Change (in CHF thousands)Contract revenue 20,255 23,214 (2,959)Total revenues 20,255 23,214 (2,959) Our revenues experience fluctuations as a result of securing new collaboration agreements, the timing of milestone achievements and the size of eachmilestone payment. The decline in revenues in 2017 compared to the same period in 2016 is primarily related to the timing and size of clinical milestonesrecognized in each of those periods. In 2017, the Company recorded a CHF 14 million milestone for Genentech dosing the first patient in a Phase 2 clinicaltrial for Alzheimer’s Disease (AD) with an anti-Tau monoclonal antibody known as RO7105705. The Company also recorded a CHF 1.1 million milestonefrom Piramal related to the initiation of “Part B” of the first-in-man Phase 1 clinical trial for PSP (Progressive Supranuclear Palsy). Finally, in its collaborationwith Biogen, AC Immune recognized CHF 0.5 million for the Technology Access Fee. As AC Immune began the second year of its collaboration with Biogenin April 2017, the Company additionally recognized CHF 3.4 million for research and collaboration services which were not recorded in 2016. In 2016, revenues resulted from the recognition of a CHF 4.9 million clinical milestone and CHF 1.5 million recognized for research contributionsreceived related to ACI-35 pursuant to our collaboration agreement with Janssen, the recognition of a CHF 14 million milestone payment for commencementof phase 1 clinical studies for the anti-Tau antibody under collaboration with Genentech, the recognition of an approximate CHF 1.0 million share of theBiogen upfront payment received in April 2016 that was recognized over a twelve month period and CHF 1.1 million in research contribution revenuesrelated to the Biogen collaboration. Research and Development Expenses Research and development activities are essential to our business and represent the majority of our costs incurred. Costs for certain developmentactivities, such as clinical trials, are recognized based on an evaluation of the progress to completion of specific tasks using information from the clinicalsites and our vendors. Our collaboration arrangements share costs for the development of our product candidates differently. We have completed our researchand development spending in both of our Genentech collaborations. Janssen will be responsible for the full development cost from the completion of the firstPhase 2 clinical trial. In addition to these arrangements, we expect that our total future research and development costs will continue to increase over currentlevels in line with our three-pillar strategy that focuses on Alzheimer`s disease, neuro-orphan indications and diagnostics. The table below provides a breakdown of our research and development costs, including direct research and development costs and manufacturing costsrelated to research and development, by major development categories of our programs for the periods covered by this Annual Report. The research anddevelopment costs not allocated to specific programs include employment costs, regulatory, quality assurance and intellectual property costs. We do notassign our internal costs, such as salary and benefits, stock-based compensation expense, laboratory supplies and other direct expenses and infrastructurecosts to individual research and development projects, because the employees within our research and development groups typically are deployed acrossmultiple research and development programs. The following table summarizes our research and development expenses during the years ended December 31, 2017 and 2016: 100 Table of Contents Detailed Research and Development Expenditures by Major Development Category For the Years EndedDecember 31, 2017 2016 Change (in CHF thousands)Alzheimer’s disease 10,473 10,678 (205)Non-Alzheimer’s diseases 2,259 2,039 220 Diagnostics 1,759 1,031 728 New discovery programs 7,871 4,111 3,760 Total Programs 22,362 17,859 4,503 R&D Expenses not allocated to specific programs 10,301 7,915 2,386 Total 32,663 25,774 6,889 R&D expenses in Alzheimer’s disease were driven by the investments related to the completion of the Phase 1b study for ACI-35, as well as costs relatedto the combined Phase 1/2a study for ACI-24 AD. In addition, the Company incurred costs for the next stages of clinical development for each of theserespective candidates. In Non-Alzheimer’s diseases, the Company continues to incur costs in ACI-24 for Down syndrome’s Phase 1b clinical study.Diagnostic investments entail predominantly increases in spending related to our alpha-synuclein and TDP-43 PET tracer programs. New discovery programsincrease CHF 3.8 million was driven by CHF 3.3 million related to finalizing the proof-of-concept and manufacturing activities for studies related to our leadcompounds in the Anti-Tau Morphomers and investments in new therapeutic and preventive vaccine technology. R&D Expenses not allocated to specificprograms increased CHF 2.4 million predominantly driven by a CHF 1.8 million increase in salaries and related costs, CHF 0.3 million in depreciationexpense and CHF 0.1 million in regulatory costs. Our total research and development costs are likely to rise substantially in the coming years as theCompany continues to develop and advance product candidates from the pre-clinical to clinical stages across its three-pillar strategy. For the Years Ended December 31, 2017 2016 Change (in CHF thousands)Operating expenses (1) 23,822 18,767 5,055 Salaries and related costs (2) 8,841 7,007 1,834 Total research and development expenses 32,663 25,774 6,889 (1)Includes depreciation expense (2)Includes share-based compensation Our research and development expenses increased to CHF 32.7 million for the year ended December 31, 2017, from CHF 25.8 million, an increase ofCHF 6.9 million, as compared to year ended December 31, 2016 as discussed in the Major Development Category comparison above. Our salaries and costs related to our research and development activities rose by CHF 1.8 million to CHF 8.8 million for the year ended December 31,2017 from CHF 7.0 million for the year ended December 31, 2016. The increase is primarily due to the hiring of more than 15 full time equivalent employeesin the Company’s research and development organization to accelerate the development of its proprietary and partnered pipeline candidates. General and Administrative Expenses The following table summarizes our general and administrative expenses during the years ended December 31, 2017 and 2016: For the Years EndedDecember 31, 2017 2016 Change (in CHF thousands)Operating expenses 3,857 3,168 689 Salaries and related costs (1) 6,274 4,728 1,546 Total general and administrative expenses 10,131 7,896 2,235 (1)Includes share-based compensation. 101 Table of Contents For the year ended December 31, 2017 our general and administrative expenses totaled CHF 10.1 million, up by CHF 2.2 million from CHF 7.9 millionwe incurred during the year ended December 31, 2016. The increase is due to a CHF 1.5 million increase in salary and benefit related costs, including higherstock based compensation expense of CHF 0.8 million relating to stock options and non-vested stock awards issued to executive officers and directors, boardcompensation as we were a U.S. public company for all of 2017 and bonus accruals. Additionally, there was an increase of CHF 0.3 million increase intemporary assistance as the Company expanded operations in 2017. Operating expenses were CHF 0.7 million higher driven by increased professional service costs recorded in General and Administrative expenses in 2017compared to 2016, such as legal and audit fees costs. AC Immune was a public company for the full year in 2017. Additionally, certain legal and audit feeswere offset within equity as transaction costs associated with the IPO in 2016 and not reflected in the Statements of Income / (Loss). This net increase totaledCHF 248 thousand. The Company also incurred incremental costs for public relations and rents of CHF 250 thousand in 2017 compared to 2016. Finance Result, Net The following table summarizes our financial income and expenses during the years ended December 31, 2017 and 2016: For the Years EndedDecember 31, 2017 2016 Change (in CHF thousands)Interest income/(expense), net 184 36 148 Foreign currency remeasurement gain/(loss), net (4,049) 3,443 (7,492)Other finance costs (7) (119) 112 Finance result, net (3,872) 3,360 (7,232) Net finance result was a loss of CHF 3.9 million for the year ended December 31, 2017, from a gain of CHF 3.4 million for the year ended December 31,2016. The decrease was driven by losses related to foreign exchange rates on our cash balances in U.S. dollars of CHF 4.2 million in 2017 compared to a CHF3.4 million gain in 2016. The variance is offset by an increase in net interest income of CHF 148 thousand. Comparison of the Years Ended December 31, 2016 and 2015 Revenue The following table summarizes our revenues during the years ended December 31, 2016 and 2015: For the Years EndedDecember 31, 2016 2015 Change (in CHF thousands)Contract revenue 23,214 39,090 (15,876)Total revenues 23,214 39,090 (15,876) Our revenues experience fluctuations as a result of securing new collaboration agreements, the timing of milestone achievements and the size of eachmilestone payment. The decline in revenues in 2016 compared to the same period in 2015 is primarily related to the timing and size of clinical milestonesrecognized in each of those periods. Revenues in 2016 resulted from the recognition of a CHF 4.9 million clinical milestone and CHF 1.5 million recognizedfor research contributions received related to ACI-35 pursuant to our collaboration agreement with Janssen, the recognition of a CHF 14 million milestonepayment for commencement of phase 1 clinical studies for the anti-Tau antibody under collaboration with Genentech, the recognition of an approximateCHF 1.0 million share of the Biogen upfront payment received in April 2016 that was recognized over a twelve month period and CHF 1.1 million in researchcontribution revenues related to the Biogen collaboration. 102 Table of Contents In 2015, we recognized revenue from two collaboration agreements, including a $25 million (CHF 24.3 million) milestone payment related to ourcollaboration with Genentech for crenezumab and a CHF 14 million milestone payment associated with the Genentech collaboration agreement for our anti-Tau antibody candidate. Research and Development Expenses The following table summarizes our research and development expenses during the years ended December 31, 2016 and 2015: Detailed Research and Development Expenditures by Major Development Category For the Years EndedDecember 31, 2016 2015 Change (in CHF thousands)Alzheimer’s disease 10,678 5,932 4,746 Non-Alzheimer’s diseases 2,039 728 1,311 Diagnostics 1,031 506 525 New discovery programs 4,111 1,304 2,807 Total Programs 17,859 8,470 9,389 R&D Expenses not allocated to specific programs 7,915 8,579 (664)Total 25,774 17,049 8,725 The increase in research and development spending in 2016 was driven by a CHF 1.0 million increase for research and development expenses related toACI-35, a CHF 3.6 million increase in the outlays related to the two ACI-24 programs driven principally by investment in manufacturing, a CHF 0.8 millionincrease in Parkinson’s disease focused program including the alpha synuclein PET imaging collaboration with Biogen and a CHF 2.6 million increase intotal research and development expenses for new discovery programs that we believe will help us to maintain a scientific leadership position inneurodegenerative diseases. For the Years Ended December 31, 2016 2015 Change (in CHF thousands)Operating expenses (1) 18,767 10,763 8,004 Salaries and related costs (2) 7,007 6,286 721 Total research and development expenses 25,774 17,049 8,725 (1)Includes depreciation expense (2)Includes share-based compensation Our research and development expenses increased to CHF 25.8 million for the year ended December 31, 2016, from CHF 17.0 million, an increase ofCHF 8.8 million, as compared to year ended December 31, 2015. Our salaries and costs related to our research and development activities rose by CHF 0.7 million to CHF 7.0 million for the year ended December 31,2016 from CHF 6.3 million for the year ended December 31, 2015. The increase is primarily due to growth of the Company’s research and developmentorganization to accelerate the development of its proprietary and partnered pipeline candidates. General and Administrative Expenses The following table summarizes our general and administrative expenses during the years ended December 31, 2016 and 2015: For the Years EndedDecember 31, 2016 2015 Change (in CHF thousands)Salaries and related costs (1) 4,728 2,040 2,688Operating expenses 3,168 1,377 1,791Total general and administrative expenses 7,896 3,417 4,479 (1)Includes share-based compensation. 103 Table of Contents For the year ended December 31, 2016 our general and administrative expenses totaled CHF 7.9 million, up CHF 4.5 million from CHF 3.4 million weincurred during the year ended December 31, 2015. The increase is due to a CHF 1.8 million increase in operating expenses driven by higher professionalservice costs, such as legal costs, related to AC Immune becoming a public company. The remaining increase is primarily attributable to salary and benefitrelated costs, including higher stock based compensation expense of CHF 0.6 million relating primarily to a replacement grant issued to a departingexecutive officer, and the 2016 bonus accruals. Finance Result, Net The following table summarizes our financial income and expenses during the years ended December 31, 2016 and 2015: For the Years EndedDecember 31, 2016 2015 Change (in CHF thousands)Interest income/(expense) 36 55 (19)Foreign currency remeasurement gain/( loss) 3,443 1,598 1,845Other finance costs (119) (7) (112)Finance result, net 3,360 1,646 1,714 Net financial income increased to CHF 3.4 million for the year ended December 31, 2016, from CHF 1.6 million for the year ended December 31, 2015.The increase was driven by gains related to foreign exchange rates on our cash balances in U.S. dollars offset by higher bank fees during 2016 as compared to2015. B. Liquidity and capital resources Our operations have been financed primarily by proceeds from our initial public offering in September 2016, net proceeds from the issuance of preferredshares, and from collaboration and license agreements we have with a number of partners. At December 31, 2017, we had cash and cash equivalents of CHF124.4 million. Our primary uses of capital are, and we expect will continue to be, research and development expenses, compensation and related expenses, and otheroperating expenses including rent. Cash used to fund operating expenses is impacted by the timing of when we pay expenses, as reflected in the change inour outstanding accounts payable and accrued expenses. We expect to incur substantial expenses in connection with a number of our product candidates invarious stages of clinical development including co-funding ACI-35 through the completion of the first Phase 2 trial, material increases in spending on ACI-24 in AD to fund a Phase 2 study, ACI-24 in Down syndrome, our PET imaging candidates focused on alpha-synuclein and TDP-43 which we are developingtogether with Biogen and a number of research initiatives focused on neurodegenerative orphan diseases other than AD. We plan to continue to fund our operating and capital funding needs through proceeds received from collaboration and licensing agreements andthrough equity capital offerings or other forms of financing. We may also consider entering into additional collaboration agreements and selectivelypartnering for clinical development and commercialization. The sale of additional equity would result in additional dilution to our shareholders. Cash Flows Comparison of the Years Ended December 31, 2017 and 2016 The following table summarizes our cash flows for the periods indicated: For the Years EndedDecember 31, 2017 2016 Change (in CHF thousands)Net cash provided by (used in): Operating activities (22,094) (5,646) (16,448) Investing activities (1,842) (899) (943) Financing activities 271 78,790 (78,519) Net change in cash and cash equivalents (23,665) 72,245 (95,910) 104 Table of Contents Operating activities The net cash used in operating activities was CHF 22.1 million for the year ended December 31, 2017, compared to net cash used in operating activitiesof CHF 5.6 million for the year ended December 31, 2016. The change in operating cash flows is driven by three factors: (i) reporting a net loss of CHF 26.4million in 2017 compared with a CHF 7.1 million net loss for 2016, (ii) a CHF 7.2 million variance in financial results, net driven by a CHF 4.2 millionforeign currency loss on cash and cash equivalents compared to a CHF 3.4 million gain in 2016, and (iii) offsets due to changes in working capital. Investing activities Net cash used in investing activities was CHF 1.8 million for the year ended December 31, 2017, compared with CHF 0.9 million for the year endedDecember 31, 2016. The CHF 0.9 million increase in cash used in investing activities was due to an increase in investments in fixed assets, primarily forlaboratory equipment. Financing activities Net cash provided by financing activities was CHF 0.3 million for the year ended December 31, 2017, compared to CHF 78.8 million for the year endedDecember 31, 2016. The decrease in financing activity cash inflows was driven primarily by the CHF 74.5 million in gross proceeds (CHF 65.3 million netunderwriting fees and IPO related costs) raised from the IPO in September 2016 and a Series E Private Placement Extension in 2016 of CHF 13.2 million.There were no such financing activities completed in 2017. Operating Capital Requirements and Plan of Operations We do not expect to generate revenues from royalties based on product sales unless and until our partners obtain regulatory approval of andcommercialize our current or any future product candidates. There can be no certainty as to the exact timing, or in fact whether any future milestone paymentswill ever be made given that these milestone payments are contingent on clear milestones being reached. As of December 31, 2017 we had cash balancestotaling CHF 124.4 million. To date, the Company has financed its cash requirements primarily from its initial public offering, share issuances and revenuesfrom collaboration agreements. Accordingly, assuming we do not receive further milestone payments and based on our currently contemplated research and development strategy andexpenditures, we believe that our existing capital resources, not including potential milestone payments, will be sufficient to meet our projected operatingrequirements through at least the second quarter of 2019. We expect to generate losses for the foreseeable future, and these losses could increase as we continue product development and if we successfullyachieve regulatory approvals for our product candidates and begin to commercialize any approved products. We are subject to all the risks pertinent to thedevelopment of new products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may harm ourbusiness. Upon closing of the IPO, we incurred additional costs associated with operating a public company and we anticipate that we will need substantialadditional funding in connection with our continuing operations. Our future funding requirements will depend on many factors, including but not limited to the following: ·The scope, rate of progress, results and cost of our pre-clinical and clinical studies and other related activities; ·The cost of manufacturing clinical supplies and establishing commercial supplies of our product candidates and any other products we maydevelop; 105 Table of Contents ·The cost, timing and outcomes of regulatory approvals; ·The costs and timing of establishing sales, marketing and distribution capabilities; ·The terms and timing of any collaborative, licensing and other arrangements that we may establish, including any required milestone and royaltypayments thereunder; ·The emergence of competing technologies or other adverse market developments; and ·The potential cost and timing of managing and protecting our portfolio of intellectual property. Comparison of the Years Ended December 31, 2016 and 2015 The following table summarizes our cash flows for the periods indicated: For the Years EndedDecember 31, 2016 2015 Change (in CHF thousands)Net cash provided by (used in): Operating activities (5,646) 44,084 (49,730) Investing activities (899) (244) (655) Financing activities 78,790 27,778 51,012 Net change in cash and cash equivalents 72,245 71,618 627 Operating activities The net cash used in operating activities was CHF 5.6 million for the year ended December 31, 2016, compared to net cash provided by operatingactivities of CHF 44.1 million for the year ended December 31, 2015. The decrease in operating cash flows is driven by three factors: (i) reporting a net loss ofCHF 7.1 million in 2016 compared with a CHF 20.3 million of income for 2015, (ii) no material changes in receivables balances in 2016 while in 2015 ACImmune received the CHF 25.9 million upfront payment from Janssen in connection with the ACI-35 collaboration, and (iii) offsets due to changes inworking capital, for example, accounts payable and accrued expenses positively impacted cash provided by operating activities by CHF 4.2 million. Investing activities Net cash used in investing activities was CHF 0.9 million for the year ended December 31, 2016, compared with CHF 0.2 million for the year endedDecember 31, 2015. The CHF 0.7 million increase in cash used in investing activities was due to an increase in investments in fixed assets, primarily forlaboratory equipment. Financing activities Net cash provided by financing activities was CHF 78.8 million for the year ended December 31, 2016, compared to CHF 27.8 million for the year endedDecember 31, 2015. The increase was driven primarily by the CHF 74.5 million in gross proceeds (CHF 65.3 million net underwriting fees and IPO relatedcosts) raised from the IPO in September 2016. The Company also raised CHF 13.2 million in a Preferred Series E extension financing in 2016, a CHF 16.3million reduction from the CHF 29.5 million Preferred Series E financing raised in 2015. C. Research and development, patents and licenses, etc. See “Item 4. Information on the Company – B. Business Overview” and Item 5. Operating and Financial Review and Prospects –A. Operating Results –Results of Operations.” D. Trend information See “Item 5. Operating and Financial Review and Prospects”. 106 Table of Contents E. Off-balance sheet arrangements We do not have any material off-balance sheet arrangements or commitments. F. Tabular disclosure of contractual obligations We have been a tenant at our current location in the EPFL Innovation Park since shortly after our inception in 2003. We have entered into long-termrental lease agreements with respect to these facilities. However, our lease agreements are structured such that we can exit these lease agreements withoutpenalty provided we give the owner of our premises sufficient notice. The following table presents information relating to our contractual obligations as of December 31, 2017: Payments Due by Period Less Than 1 Year Between 1-3Years Between 3-5years More than 5years Total (in thousands of CHF) Operating lease obligations 243 — — — 243 Research and development obligations 9,443 2,052 140 — 11,635 Long-term debt-obligation and accrued interest — 494 — — 494 Total 9,686 2,546 140 — 12,372 The Company has a contractual obligation that requires the payment of royalties to a third party, which is associated with the achievement of programmilestones. As of December 31, 2017, the Company’s contractual obligation associated with this agreement was CHF 420 thousand. G. Safe harbor See “Forward-Looking Statements.” H. Non-IFRS Financial Measures In addition to our operating results, as calculated in accordance with International Financial Reporting Standards, or IFRS, as adopted by theInternational Accounting Standards Board, we use Adjusted Income/(Loss) and Adjusted Earnings/(Loss) per share when monitoring and evaluating ouroperational performance. Adjusted Income/(Loss) is defined as income/(loss) for the relevant period, as adjusted for certain items that we believe are notindicative of our ongoing operating performance. Adjusted Earnings/(Loss) per share is defined as Adjusted Income/(Loss) for the relevant period divided bythe weighted-average number of shares for such period. We believe that these measures assist our shareholders because they enhance comparability of our results each period and provide more useful insightinto operational results for the period. The Company’s executive management uses these non-IFRS measures to evaluate our operational performance. Thesenon-IFRS financial measures are not meant to be considered alone or substitute for our IFRS financial measures and should be read in conjunction with ACImmune’s financial statements prepared in accordance with IFRS. The most directly comparable IFRS measure to these non-IFRS measures is netincome/(loss) and earnings/(loss) per share. The following table reconciles net income/(loss) and earnings/(loss) per share to Adjusted Net Earnings/(Loss)and Adjusted Net Earnings/(Loss) per share for the periods presented: 107 Table of Contents Reconciliation of Income/(Loss) to Adjusted Income/(Loss) andEarnings/(Loss) Per Share to Adjusted Earnings/(Loss) Per Share For the Years Ended December 31, 2017 2016 2015in CHF thousands except for share and per share data Income/(Loss) (26,411) (7,096) 20,270 Adjustments: Non-cash share-based payments (a) 1,579 1,317 540 Foreign currency (gains)/losses (b) 4,168 (3,443) (1,598)Adjusted Income/(loss) (20,664) (9,222) 19,212 Earnings/(Loss) per share – basic (0.46) (0.14) 0.47 Earnings/(Loss) per share – diluted (0.46) (0.14) 0.44 Adjustment to earnings/(loss) per share – basic 0.10 (0.04) (0.03)Adjustment to earnings/(loss) per share – diluted 0.10 (0.04) (0.02)Adjusted Earnings/(Loss) per share – basic (0.36) (0.18) 0.44 Adjusted Earnings/(Loss) per share –diluted (0.36) (0.18) 0.42 Weighted-average number of shares used to compute Adjusted Earnings/(Loss) per share – basic 57,084,295 50,096,859 43,412,250 Weighted-average number of shares used to compute Adjusted Earnings/(Loss) per share –diluted 57,084,295 50,059,859 46,043,198 (a)Reflects non-cash expenses associated with share-based compensation for equity awards issued to Directors, Management and employees of theCompany. This expense reflects the awards’ fair value recognized for the portion of the equity award which is vesting over the period. (b)Reflects foreign currency remeasurement gains and losses for the period, predominantly impacted by the change in the exchange rate between the USDollar and the Swiss Franc. Adjustments for the years ended December 31, 2017, 2016 and 2015, were CHF 5.7 million in net losses, CHF 2.1 million in net gains and CHF 1.1 millionin net gains, respectively. These were largely due to foreign currency remeasurement losses of CHF 4.2 million, gains of CHF 3.4 million and gains of CHF1.6 million for the years ended December 31, 2017, 2016 and 2015, respectively, predominantly related to the cash balance of the Company as a result of afluctuations of the US Dollar against the Swiss Franc. The Company also recorded CHF 1.6 million, CHF 1.3 million and CHF 0.5 million for the years endedDecember 31, 2017, 2016 and 2015, respectively, for share-based compensation expenses. ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES A. Directors and senior management Executive Officers, Other Key Employees and Board of Directors The following table presents information about our executive officers, other key employees and, directors and director nominees, including their ages, asof December 31, 2017. The term of each of our directors is one year and, accordingly, will expire at our 2018 annual shareholder meeting to be held in June2018. NamePositionAgeInitial Year ofAppointmentExecutive Officers Andrea Pfeifer, Ph.D.Chief Executive Officer and Director Nominee602003Andreas Muhs, Ph.D.Chief Scientific Officer562005Joerg Hornstein Jean-Fabien MoninChief Financial OfficerChief Administrative Officer4047 20172009 Other Key Employees Olivier Sol, M.D.Head of Clinical Team512016David A. Lowe, Ph.D.Innovation Fellow712014Joseph Wettstein, Ph.D.Chief Scientific Officer, Deputy632016Julian Gray, M.D., Ph.D.Clinical Advisor612007Non-Executive Directors Martin VelascoChairman and Director632003Detlev Riesner, Ph.D.Director762004Friedrich von Bohlen und Halbach, Ph.D.Director552015Peter Bollmann, Ph.D.Director642015Thomas GraneyDirector532016 108 Table of Contents The current business addresses for our executive officers, other key employees, directors and director nominee is AC Immune SA, EPFL Innovation Park,Building B, 1015 Lausanne, Switzerland. Executive Officers Andrea Pfeifer, Ph.D., Co-Founder, Chief Executive Officer and Director: Dr. Pfeifer co-founded AC Immune in April 2003, and has agreed to serve asa director on our board effective upon completion of the IPO. Prior to founding us, Dr. Pfeifer was head of Nestlé’s Global Research in Lausanne, Switzerland.While at Nestlé, she led the scientific development of the first Functional Food, LC1, and one of the first Cosmoceutical products in a joint venture withL’Oreal, Innéov Fermeté. She also co-founded the Nestlé Venture Capital Fund, a Life Sciences corporate venture fund. She serves as chairwoman ofInvestment Fund BioMedInvest, Basel and AB2 Bio, Lausanne and is a member of the Supervisory Board of Symrise AG, Holzminden. Dr. Pfeifer is a memberof the CEOi Initiative on Alzheimer’s Disease. Dr. Pfeifer holds a Ph.D. in Toxicology, Cancer Research from the University of Würzburg, Germany. She continued with post-doctoral work inMolecular Carcinogenesis at the National Institutes of Health, Human Carcinogenesis Branch, in Bethesda, Maryland. Dr. Pfeifer is a registered toxicologistand pharmacist. She received her habilitation from the University of Lausanne, Switzerland and is also an honorary professor at the École PolytechniqueFédérale de Lausanne (EPFL). Andreas Muhs, Ph.D., Chief Scientific Officer: Dr. Muhs has served as our Chief Scientific Officer since 2005. Prior to joining AC Immune in 2005, hewas responsible for the development of the cardiac stem cell-based program to treat myocardial infarction, including worldwide pre-clinical programcollaborations and technology transfers at ViaCell Inc., Cambridge, MA. Prior to ViaCell Inc., he was the Director of Pharmacology and Histology at CardionAG where he developed research projects with translation into clinical applications in the fields of heart and circulation, angiogenesis and immunology andbased on gene-, protein- and stem cell therapies. Dr. Muhs holds a Ph.D. in Biology from the University Düsseldorf, Germany, where he worked on regulationof endothelial barrier functions. Joerg Hornstein, Chief Financial Officer: Mr. Hornstein has served as our Chief Financial Officer since April 2017. Prior to joining AC Immune, Mr.Hornstein served as Senior Vice President Group Controlling for Unternehmensgruppe Theo Müller based in Luxembourg from January 2014 to March 2017.Between 2002 and 2013 he worked for Merck KGaA, a leading science and technology company in healthcare, life science and performance materials, wherehe held various senior finance roles. Amongst others, he was CFO for Merck’s operations in Indonesia and Merck Serono’s operations in China. Furthermore,he served as Vice President Group Controlling for Merck Group Headquarters in Germany and as Divisional CFO for Merck Millipore in the U.S. Mr.Hornstein holds an MBA with Distinction from London Business School, UK, and a Bachelor of Business Administration from Baylor University in the U.S. Jean-Fabien Monin, Chief Administrative Officer: Mr. Monin was nominated Chief Administrative Officer in July 2015 following his role as our ChiefFinancial Officer from March 2009 to July 2015. Prior to AC Immune, he held several positions during his tenure of 14 years at bioMérieux, a leadinginternational in vitro diagnostics group, culminating in his nomination as Chief Financial Officer. His last position was CFO of bioMérieux Central Europebased in Vienna, Austria from December 2006 to March 2009. Mr. Monin holds a Masters in Finance and International Business from the University of Paris-Dauphine, France. 109 Table of Contents Other Key Employees Oliver Sol, MD, Head of Clinical Team: Prior to joining AC Immune, Dr. Olivier Sol was Clinical Director of Exonhit (Paris) and thereafter Medical &Regulatory Affairs Director for Diaxonhit, where he was responsible for the development and medical validation of in-vitro diagnostic products in cancer,infectious diseases and Alzheimer's disease. Dr. Sol spent his over 20-year career as a Medical Expert in several therapeutic areas with a strong focus oncentral nervous system diseases, within pharmaceutical companies as Janssen, UCB-Pharma, GlaxoSmithKline and Sanofi. He contributed to the clinicaldevelopment of currently marketed drugs in epilepsy (topiramate and levetiracetam) and galantamine in Alzheimer’s. He has also gained significantexperience in the field of biological biomarkers. Dr. Sol holds an MD from the Paris-Sud University (Paris-Saclay) with a specialization in Medical Biology. David A. Lowe, Ph.D., Innovation Fellow: Dr. Lowe has served as our Deputy Chief Scientific Officer and more recently as Innovation Fellow sinceJanuary 2014. Previously, Dr. Lowe was the Chief Scientific Officer at PsychoGenics Inc., Chief Scientific Officer at Memory Pharmaceuticals (acquired byRoche), Executive Vice President and Chief Scientific Officer at Fidelity Biosciences Group in Boston, President, CEO and Director of EnvivoPharmaceuticals (now Forum Pharmaceuticals), Vice President and therapeutic area head at Roche Bioscience in Palo Alto, Vice President and globaltherapeutic area head at Bayer AG, and head of CNS Biology and deputy head of CNS Research at Sandoz Ltd (now Novartis). Dr. Lowe is also an adjunctprofessor of Neuroscience at the Icahn School of Medicine in New York City. He received his Ph.D. in Neurobiology from the University of Leeds, UK. Joseph G. Wettstein, Ph.D., Chief Scientific Officer Deputy: Dr. Wettstein has served as our Chief Scientific Officer Deputy since February 2016 Prior toAC Immune, Dr. Wettstein was Vice President in Neuroscience with Roche Pharmaceuticals in Basel where he oversaw R&D activities associated withprograms designed to discover drugs for patients covering a range of brain disorders including Parkinson’s, schizophrenia, Huntington’s, Down syndrome,Alzheimer’s, autism, bipolar disorder, depression and Fragile X. As Head of Systems Pharmacology, CNS Research at Aventis, he played a critical role in thediscovery of the immunomodulatory drug teriflunomide (Aubagio®) for multiple sclerosis. Dr. Wettstein holds a Ph.D. from the College of Medicine at theUniversity of Kentucky and was a Postdoctoral Fellow then instructor at Harvard Medical School. Julian Gray, M.D., Ph.D., Clinical Advisor: Dr. Gray has served as Clinical Advisor to our programs in neurodegenerative diseases since January 2007and works in this function exclusively for AC Immune. He has previously held the position of Head of CNS Therapeutics at Eisai Ltd in London leading theglobal development of early and late-stage CNS projects in Alzheimer’s disease, Parkinson’s disease and other CNS areas. Prior to this he served as Head ofAlzheimer Clinical Research at Hoffmann-La Roche in Basel where he conducted large scale clinical trials in the US and Europe. After his studies he wasMedical Expert at Sandoz Pharmaceuticals in Basel undertaking clinical studies of different compounds in dementia and Parkinson’s disease. Dr. Gray holdsthe title of a Specialist in Pharmaceutical Medicine (Switzerland). He received his medical degree (MBBS) from the University of London, a BA and Ph.D.from the University of Oxford and an MBA from the Oxford Brookes University. Non-Executive Directors Martin Velasco, Chairman and Director: Mr. Velasco has served on our board of directors since December 2003. Martin Velasco is an entrepreneur andBusiness Angel with extensive experience in the IT, medical and biotech areas. He serves on the board of directors or advisory board of several other high-tech companies including: as Founder, Chairman and Chief Executive Officer of Anecova, an assisted reproductive technology (ART) company and WorldEconomic Forum Technology Pioneer 2008 as Chairman of the Supervisory Board of Cocomore, a digital communications agency and IT services firm and asa Board Member of Aridhia, a Health Informatics company. Martin is also the Founder of Infantia Foundation, a philanthropic organization aiding children inthe developing world. He is an Ambassador of BlueOrchard, the leading private microfinance investment advisory company and a member of the StrategicAdvisory Board of the EPFL. Detlev H. Riesner, Ph.D., Director: Prof. Riesner has served on our board since 2004. He held the Chair of Biophysics at the Heinrich-Heine-Universityin Düsseldorf, Germany from 1980 to 2007. He has also held the positions of Dean of the Science Faculty and Vice-President of Research. From 2007 through2017, he was a member of the university’s Board of Trustees. He worked as a research fellow at Princeton University and held a guest professorship at thedepartment of Neurology at the University of California, San Francisco. Prof. Riesner is a co-founder of Qiagen N.V., Netherlands, was a member and from1999 to 2014 chairman of the Supervisory Board. He was also a member of the supervisory boards of NewLab Bioquality AG, Erkrath, Direvo AG, Köln, andAlantos AG, Heidelberg. Currently, he is the chairman of the Advisory Board of Evoxx 110 Table of Contents Technologies GmbH, Monheim am Rhein. Prof. Riesner was a member of the scientific advisory boards of the Friedrich-Löffler-Institut, Isle of Riems, andPrioNet and APRI, both Canada. He received the Max-Planck Forschungspreis for International Co-operation and the Bundesverdienstkreuz 1. Klasse fromthe Bundespresident of Germany. Friedrich von Bohlen und Halbach, Ph.D., Director: Dr. von Bohlen has served on our board since October 2015. He is co-founder and managingdirector of dievini Hopp BioTech holding GmbH & Co. KG. He brings extensive industry experience from Fresenius AG, FAG Kugelfischer, and WASAG-Chemie AG, founded LION bioscience AG in 1997 (now SYGNIS Pharma AG) and served as the company’s CEO. Dr. von Bohlen is a board member ofvarious companies of the dievini portfolio and Chairman of Apogenix AG, CureVac AG and Novaliq GmbH. He holds a PhD in Neurobiology from the SwissFederal Institute of Technology in Zurich, Switzerland. Peter Bollmann, Ph.D., Director: Dr. Bollmann has joined our board in December 2015. He has extensive management and finance experience inSwitzerland and abroad as CEO, CFO and member of the board. His broad industry experience embraces biotechnology and medical technology firmsincluding previous Board positions with Cytos Biotechnology and Prionics. Thomas Graney, Director: Mr. Thomas Graney joined our board in November 2016. He is the Senior Vice President and Chief Financial Officer ofVertex Pharmaceuticals, Inc. since September 2017. Prior to joining Vertex in September 2017, Mr. Graney served as the CFO and Senior Vice President ofFinance and Corporate Strategy at Ironwood Pharmaceuticals. At Ironwood, he was responsible for Finance, Corporate Strategy, Corporate Development,Quality, Supply Chain, IT, Corporate Communications and Investor Relations. Before Ironwood, he was with Johnson & Johnson for 20 years in various rolesin the U.S. and abroad. Most recently he was the Worldwide VP of Finance and CFO for Ethicon Surgical Care, a leading medical device company. Inaddition, Mr. Graney has extensive global experience that spans corporate development, commercial strategy, portfolio management and supply chainmanagement. A Chartered Financial Analyst charterholder, Mr. Graney holds a B.S. in Accounting from the University of Delaware and an M.B.A. inMarketing Finance and International Business from the Leonard N. Stern School of Business at New York University. B. Compensation Compensation of Directors and Executive Officers For the year ended December 31, 2017, the aggregate compensation accrued or paid to the members of our board of directors and our executive officersfor services in all capacities was CHF 5.7 million. During the year ended December 31, 2017, the total fair value of stock options and non-vested share awards (restricted shares and restricted share units)granted to directors and executive officers was CHF 3.1 million. The amount set aside or accrued by us to provide pension, retirement or similar benefits to members of our board of directors and executive officersamounted to a total of CHF 166 thousand in the year ended December 31, 2017. We incorporate by reference into this Annual Report the information in “Item 1.C—2017 Board Compensation” and “Item 2.C—2017 ExecutiveCompensation” of Exhibit 99.3 to our report on Form 6-K filed with the SEC on March 20, 2018. Equity Incentive Plans We ceased issuing new grants under our existing equity incentive plans, which we refer to as the Prior Plans, and adopted a new omnibus equityincentive plan under which we have the discretion to grant a broad range of equity-based awards to eligible participants. Prior Plans: A, B, C1, and C2 Since our inception in 2003, we have had five separate Plans: Plan A, which was established in 2004 and amended in June 2015 and June 2017; Plan B,which was established in 2005; Plan C1, which was established in 2006; and Plan C2, which was also established in 2006 but which is intended specificallyfor members of our board of directors to purchase our common shares. Options granted under the C1 Plan from 2013 through the 111 Table of Contents current 2016 Equity Incentive Plan were taxed upon exercise instead of at grant for prior C1 options due to a change in taxation rules. Furthermore, pursuant to a board resolution on October 13, 2015 all options which were granted to directors and executive officers in connection withIPO were accelerated upon consummation of the IPO. This resulted in the acceleration of a total of 76,000 unvested options. Plan Administration. Under each of the Prior Plans (A, B, C1, and C2), an option, which can only be granted with the approval of our board of directors,is evidenced by an option agreement signed by the participant to indicate his or her acceptance of the option subject to the terms and conditions of theapplicable Prior Plan. Eligibility. Under Plans A, B and C1, options were granted to our directors, employees, advisors and agents. Under Plan C2, options were granted only toselected members of our board of directors. Option Exercise Price. With the exception of Plan A, the exercise price of all options issued under the Prior Plans is CHF 0.14548. The original exerciseprice for options issued under Plan A was CHF 0.93186. However, this exercise price was amended in June 2015 with the approval of our board of directors tobe CHF 0.14548. As a result, as of December 31, 2017, all options outstanding under our Prior Plans have an exercise price of CHF 0.14548. Vesting Period. The vesting periods of options issued under our Prior Plans vary. The options granted under Plan A vested immediately but were subjectto a four year lockup period. The options granted under Plan B vested over a four year period with 25% of these options vested after one year of service andthereafter, 6.25% of the options granted vesting each quarter. Under Plan C1, the vesting period for options was four years with 25% of the options vestingeach year. Under Plan C2, options were immediately exercisable. Expiration Period. The expiry dates for each plan are as follows : Plan A: 15.5 years (amended from 10.5 years) Plan B: 10.5 years Plan C1: 10 years Plan C2: 10 years Amendment. Our board of directors has the authority to amend each of the Prior Plans. 2016 Stock Option and Incentive Plan At the November 15, 2016 AGM of the Company our board of directors approved the 2016 Stock Option and Incentive Plan (the “2016 Plan”). Themaximum number of shares available for issuance under the 2016 Plan is 2,057,740 common shares. The Plan was registered with the SEC on March 8, 2017.As of December 31, 2017, there were a total aggregate of 907,815 exercisable and 1,481,905 outstanding common shares underlying outstanding options,restricted share awards and restricted share units issued from both our Prior Plans and the 2016 Stock Option and Incentive Plan. Plan Administration. The 2016 Plan is administered by the either our board of directors or the compensation committee, or a similar committeeperforming the functions of the compensation committee. Approval of the plan administrator is required for all grants of awards under the 2016 Plan, but theadminister may delegate to our Chief Executive Officer the authority to grant awards, subject to certain limitations set forth on the plan. Awards. Awards may be granted in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted share units,restricted share awards, unrestricted share awards, performance share awards and dividend equivalent rights. Eligibility. Under the 2016 Plan, full or part-time officers and other employees, non-employee directors and consultants of the Company and itssubsidiaries who are selected by the administrator are eligible to participate in the plan. Option Exercise Price. Under the 2016 Plan, the option exercise price is determined by the plan administrator at the time of grant, but will not beless than fair market value (as defined in the 2016 Plan) on the grant date, and for incentive stock options granted to any employee who is a 10 percent ownerin the Company, will not be less than 110 percent of the fair market value on the grant date. 112 Table of Contents Vesting Period. Vesting conditions are determined by the administrator at the time of grant and are specified in the applicable award certificate. Accelerated Vesting. The administrator may accelerate the exercisability or vesting of all or any portion of any award in circumstances involving thegrantee’s death, disability, retirement or termination of employment, or a change in control. Amendment. Our board of directors has the authority to amend the 2016 Plan. Equity Compensation For the fiscal year ended December 31, 2017, we have granted our directors and executive officers, in the aggregate, options for the right to acquire257,916 shares at an exercise price of CHF 9.53 per share, that vest over a four year period with vesting to occur quarterly. In addition to the stock optionsgranted, the Company also granted 125,332 restricted share units to its directors and executive officers. The restricted share units granted to directors total29,375 and vest over a one-year period. The remaining 95,957 restricted share units were granted to executives and have a four year vesting life to be vestedquarterly. Finally, we have granted 4,023 restricted shares as part of a Restricted Share Award to one of our Directors. C. Board practices Board Composition and Election of Directors Our board of directors is composed of six directors. Each director is elected for a one-year term. The current members of our board of directors wereappointed at a shareholders’ meeting held on June 28, 2017 to serve until the 2018 shareholders’ meeting to be held in June 2018. We are a foreign private issuer. As a result, in accordance with the NASDAQ stock exchange listing requirements, we rely on home country governancerequirements and certain exemptions thereunder rather than relying on the stock exchange corporate governance requirements. For an overview of ourcorporate governance principles, see “Item 16G. Corporate governance.” Board Meetings Our Board of Directors held five physical meetings in 2017 and several additional meetings by conference call. The Board discussed and analyzed thescientific, business, financial and organizational risks of the Company based on the external factors and internal changes impacting the risks for theCompany in the future. Director Independence As a foreign private issuer, under the listing requirements and rules of NASDAQ, we are not required to have independent directors on our board ofdirectors, except to the extent that our audit and finance committee is required to comply with independence requirements, subject to certain phase-inschedules. However, our board of directors has determined that, under current listing requirements and rules of NASDAQ (which we are not subject to) andtaking into account any applicable committee independence standards, Martin Velasco, Detlev Riesner , Friedrich von Bohlen Und Halbach, Peter Bollmannand Thomas Graney are “independent directors.” In making such determination, our board of directors considered the relationships that each non-employeedirector has with us and all other facts and circumstances our board of directors deemed relevant in determining the director’s independence, including thenumber of ordinary shares beneficially owned by the director and his or her affiliated entities, if any. Committees of the Board of Directors Our board of directors established two separate committees: an audit and finance committee and a compensation, nomination and governance committee. Audit and Finance Committee The audit and finance committee, which consists of Peter Bollmann, Thomas Graney and Martin Velasco, assists our board of directors in overseeing ouraccounting and financial reporting processes and the audits of 113 Table of Contents our financial statements. In addition, the audit and finance committee is directly responsible for the appointment, compensation, retention and oversight ofthe work of our independent registered public accounting firm. Peter Bollmann serves as Chairman of the committee. The audit and finance committeeconsists exclusively of members of our supervisory board who are financially literate, and Peter Bollmann and Thomas Graney are considered to be “auditcommittee financial experts” as defined by the SEC. Our board of directors has determined that Peter Bollmann, Thomas Graney and Martin Velasco satisfythe “independence” requirements set forth in Rule 10A-3 under the Exchange Act. The audit and finance committee is governed by a charter that complies with NASDAQ rules. The audit and finance committee has the responsibility to,among other things: ·review and assess the qualifications, independence, performance and effectiveness of the independent auditor; ·review the scope of the prospective audit by the independent auditor, the estimated fees, and any other matters pertaining to the audit; ·approve any audit and non-audit services proposed to be provided by the independent auditor to ensure independent auditor independence; ·review and assess the independent auditor’s report, management letters and take notice of all comments of the independent auditor on accountingprocedures and systems of control, and review the independent auditor’s reports with management; ·be responsible for the resolution of disagreements between the management and the independent auditor; ·review and evaluate the lead audit partner of the independent audit team and confirm and evaluate their rotation; ·review, discuss with the chief financial officer and the independent auditor and approve (i) the annual and quarterly financial statements, (ii) reportsintended for publication and (iii) any other financial statements intended for publication to consider significant financial reporting issues andjudgments made in connection with the preparation of our financial statements, including any significant changes in our selection or application ofaccounting principles; ·review with the management, personnel responsible for the design and implementation of the internal audit function and the independent auditor inseparate meetings any analysis or other written communication prepared by the management and/or the independent auditor setting forth significantfinancial reporting issues and judgments made in connection with the preparation of the financial statements, including critical accounting policies,the effect of regulatory and accounting initiatives, as well as off-balance sheet transactions and structures on our financial statements; ·review and approve our quarterly financial statements for the first three quarters of each calendar year and the corresponding financial resultsreleases; ·review in cooperation with the independent auditor and the management whether the accounting principles applied are appropriate in view of oursize and complexity; ·periodically review our policies and procedures for risk management and assess the effectiveness thereof including discussing with management ourmajor financial risk exposures and the steps that have been taken to monitor and control such exposures; ·discuss with management and external advisors any legal matters that may have a material impact on our financial statements and any materialreports or inquiries from regulatory or governmental agencies which could materially impact our contingent liabilities and risks; ·review our disclosure controls and procedures and internal control over financial reporting which shall include significant deficiencies and materialweaknesses in the design or operation of internal controls over financial reporting; ·establish procedures for the receipt, retention and treatment of complaints received regarding 114 Table of Contents accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by employees of concerns regardingquestionable accounting or auditing matters; and ·recommend to the board whether to approve and ratify any related person transaction in accordance with our related person transaction policy. The audit and finance committee will meet as often as it determines is appropriate to carry out its responsibilities, but in any event will meet at least fourtimes per year. Compensation, Nomination and Governance Committee The compensation, nomination and governance committee, consists of Detlev Riesner (chair), Martin Velasco and Thomas Graney and will assist ourboard of directors in overseeing our cash compensation and equity award recommendations for our executive officers along with the rationale for suchrecommendations, as well as summary information regarding the aggregate compensation provided to our executive officers. Swiss law requires that we adopta compensation committee, so in accordance with NASDAQ Listing Rule 5615(a)(3), we will follow home country requirements with respect to thecompensation, nomination and governance committee. As a result, our practice will vary from the requirements of NASDAQ Listing Rule 5605(d), which setsforth certain requirements as to the responsibilities, composition and independence of compensation committees, and from the independent directoroversight of director nominations requirements of NASDAQ Listing Rule 5605(e). We will be subject to the Swiss Ordinance Against ExecutiveCompensation (“Say on Pay” Rule). This means that the compensation of our board of directors and Executive Officers must be presented by the board ofdirectors to our shareholders and our shareholders must vote on the proposed compensation. In addition, this committee will also be responsible for director and board committee nominations as well as reviewing and amending, if required, ourcorporate governance framework and guidelines. D. Employees As of December 31, 2017, we employed 86 employees, 11 of whom were part-time employees. 47 of our employees hold Ph.D. degrees and 28 hold M.Sc.degrees. Our 86 employees are from over 20 countries. The average number of employees (calculated on full time equivalents) in 2017 was 75.4. As ofDecember 31, 2016 and 2015 we had 67 and 55 employees, respectively. We have never had a work stoppage, and none of our employees are represented bya labor organization or under any collective-bargaining arrangements. We consider our employee relations to be good. E. Share ownership See “Item 7. Major Shareholders and Related Party Transactions-A. Major shareholders.” ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS A. Major shareholders The following table presents information relating to the beneficial ownership of our common shares as of the date of this Annual Report by: ·each person, or group of affiliated persons, known by us to own beneficially 5% or more of our outstanding common shares; ·each of our executive officers and directors; and ·all executive officers and directors as a group. The number of common shares beneficially owned by each entity, person, executive officer or director is determined in accordance with the rules of theSEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes anycommon shares over which the individual has sole or shared voting power or investment power as well as any common shares that the individual has the rightto acquire within 60 days of March 1, 2018 through the exercise of any option, warrant or other right. Except as otherwise indicated, and subject toapplicable community property laws, the 115 Table of Contents persons named in the table have sole voting and investment power with respect to all common shares held by that person. The percentage of outstanding common shares is computed on the basis of 57,355,188 common shares outstanding as of March 1, 2018. Common sharesthat a person has the right to acquire within 60 days of March 1, 2018 are deemed outstanding for purposes of computing the percentage ownership of theperson holding such rights, but are not deemed outstanding for purposes of computing the percentage ownership of any other person, except with respect tothe percentage ownership of all executive officers and directors as a group. Unless otherwise indicated below, the address for each beneficial owner is ACImmune, EPFL Innovation Park, Building B, Lausanne. Shares Beneficially OwnedShareholder Number Percent5% Shareholders dievini Hopp BioTech holding GmbH & Co KG(1) 18,041,000 31.5%Varuma AG(2) 11,410,700 19.9%Executive Officers and Directors Andrea Pfeifer(3) 2,796,937 4.9%Andreas Muhs(4) 802,510 1.4%Joerg Hornstein(5) * * Jean-Fabien Monin(6) * * Martin Velasco(7) * * Detlev Riesner(8) 759,000 1.3%Friedrich von Bohlen und Halbach(9) * * Peter Bollmann(10) * * Thomas Graney(11) * * All executive officers and directors as a group (9 persons) 5,278,857 10.3%________________* Indicates beneficial ownership of less than 1% of the total issued and outstanding common shares. 1)Represents 18,041,000 shares held by dievini Hopp BioTech holding GmbH & Co KG. Dietmar Hopp controls the voting and investment decisionsof the ultimate parent company of dievini Hopp BioTech holding GmbH & Co KG. The shares registered in the name of dievini Hopp BioTechholding GmbH & Co KG may also be deemed to be beneficially owned by Friedrich von Bohlen und Halbach, who is a managing director of dieviniHopp BioTech holding GmbH & Co KG. The address for dievini Hopp BioTech holding GmbH & Co KG and Friedrich von Bohlen und Halbach isJohann-Jakob-Astor Str. 57, 69190 Walldorf, Germany. 2)The address for Varuma AG is Aeschenvorstadt 55, CH-4051 Basel, Switzerland. Rudolf Maag controls the voting and investment decisions ofVaruma AG. 3)Consists of 2,596,809 of our common shares with 12,851 restricted stock units and options to purchase 187,277 of our common shares exercisablewithin 60 days of March 1, 2018. 4)Consists of 475,050 of our common shares with 4,284 restricted stock units and options to purchase 323,176 of our common shares exercisablewithin 60 days of March 1, 2018. 5)Consists of 0 of our common shares and options to purchase 28,495 of our common shares exercisable within 60 days of March 1, 2018. 6)Consists of 275,000 of our common shares with 857 restricted stock units and options to purchase 53,785 of our common shares exercisable within60 days of March 1, 2018. 7)Consists of 469,250 of our common shares and options to purchase 10,250 of our common shares exercisable within 60 days of March 1, 2018. 8)Consists of 759,000 of our common shares. Includes shares held through an entity controlled by Dr. Riesner and, as such, Dr. Riesner has sole votingand dispositive power over such shares. 9)Consists of 78,750 of our common shares, and excludes the 18,041,000 shares registered in the name of dievini Hopp BioTech holding GmbH & CoKG that may also be beneficially owned by Friedrich von Bohlen und Halbach. See note (1) above. 116 Table of Contents 10)Dr. Bollmann holds neither common shares nor non-vested equity instruments exercisable within 60 days as of March 1, 2018. 11)Consists of 4,023 of our common shares with no equity instruments exercisable within 60 days as of March 1, 2018. Holders As of March 10, 2018, we had 96 shareholders of record of our common stock. Significant Changes in Ownership by Major Shareholders We have experienced significant changes in the percentage ownership held by major shareholders as a result of our initial public offering. Prior to ourinitial public offering in September 2016, our principal shareholders were dievini Hopp BioTech holding GmbH & Co KG (36.5%) and Varuma AG (23.1%). In September 2016, we completed our initial public offering and listed our common shares on the NASDAQ Global Market. In the initial public offering,we issued and sold 6,900,000 common shares, including 900,000 common shares sold to the underwriters pursuant to the underwriters’ over-allotmentoption. While none of our existing shareholders sold common shares in the initial public offering, the percentage ownership held by certain shareholdersdecreased as a result of the issuance of the common shares sold by us in the initial public offering. B. Related party transactions The following discussion pertains to a Registration Rights Agreement entered by the Company, which represents the only related party transaction wehave entered into since January 1, 2017 with any of our executive officers, directors and holders of more than 10% of any class of our voting securities, or anymember of the immediate family of any of the foregoing persons, other than the compensation arrangements we describe under “Item 6. Directors, SeniorManagement and Employees–B. Compensation.” Registration Rights Agreement We entered into a registration rights agreement in connection with the Series E Private Placement with certain investors in the Series E Private Placementpursuant to which we granted them certain demand and piggyback registration rights for the resale of the common shares held by them, as described below.The registration rights described below will expire on the earlier to occur of (i) the fifth anniversary of the completion of our initial public offering and (ii) thedate on which there are no remaining registrable securities held by the parties to the registration rights agreement. The registration rights agreement providesthat we must pay certain registration expenses in connection with any demand, piggyback or shelf registration. The registration rights agreement containscustomary indemnification and contribution provisions. Demand Registration Rights Pursuant to the terms of the registration rights agreement, a shareholder or group of shareholders holding at least 10% of our outstanding common sharesmay request that we effect a registration under the Securities Act of all or any portion of such requesting shareholders’ registrable securities. As of March 1,2018 dievini Hopp BioTech holding GmbH & Co KG and Varuma AG were our only shareholders party to the registration rights agreement holding at least10% of our outstanding commons shares, and together they beneficially held 29,451,700 of our common shares, representing approximately 51.4% of thevoting power of our common shares outstanding as of March 1, 2018. At least 10 business days prior to the anticipated filing date of the registrationstatement relating to such demand registration, we must give all other shareholders party to the registration rights agreement notice of such requestedregistration. Within five business days of such notice, any of the other shareholders party to the registration rights agreement may request that we also effectthe registration of the registrable securities held by them. We will not be required to effect a registration of all such registrable securities unless the aggregateproceeds expected to be received from the sale of such registrable securities equals or exceeds $10 million or such lesser amount that constitutes all of therequesting shareholders’ registrable securities (provided that such lesser amount is at least $5 million). In no event will we be required to effect more than twodemand registrations or underwritten take downs referred to under “Shelf Registration 117 Table of Contents Rights” below. Depending on certain conditions, we may postpone a demand registration on two occasions during any period of twelve consecutive monthsfor up to 90 days. Piggyback Registration Rights Pursuant to the terms of the registration rights agreement, at any time after the trigger date, if we propose to register any of our securities, whether or notfor sale for our own account, we must give notice to the shareholders party to the registration rights agreement, and they will be entitled to certain piggybackregistration rights allowing them to add any of their remaining registrable securities in the registration, subject to certain marketing and other limitations. Asa result, whenever we propose to file a registration statement under the Securities Act, the holders of these shares are entitled to notice of the registration andto request that we include their shares in the registration. Shelf Registration Rights Pursuant to the terms of the registration rights agreement, if we are eligible to use a shelf registration statement, then a shareholder or group ofshareholders holding at least 10% of our outstanding common shares may request that we effect a shelf registration on similar terms as the demandregistrations described above, except that offerings will be conducted as underwritten takedowns. As of March 1, 2018 dievini Hopp BioTech holding GmbH& Co KG and Varuma AG were our only shareholders party to the registration rights agreement holding at least 10% of our outstanding commons shares,representing approximately 51.4% of the voting power of our common shares outstanding as of March 1, 2018. We will only be required to effect one publicoffering from such shelf registration statement within any six month period, each of which shall be deemed to constitute a demand registration for purposes ofthe number of demand registrations we are required to effect as described under “—Demand Registration Rights” above. Related Person Transaction Policy Prior to our initial public offering, we entered into a new related person transaction policy under which any such transaction must be approved or ratifiedby the audit and finance committee. Indemnification Agreements In connection with our initial public offering, we entered into indemnification agreements with our executive officers and directors. The indemnificationagreements and our Articles of Association require us to indemnify our executive officers and directors to the fullest extent permitted by law. C. Interests of Experts and Counsel Not applicable. ITEM 8. FINANCIAL INFORMATION A. Consolidated statements and other financial information Financial statements See “Item 18. Financial Statements,” which contains our financial statements prepared in accordance with IFRS. Legal Proceedings From time to time we may become involved in legal proceedings that arise in the ordinary course of business. During the period covered by the financialstatements contained herein, we have not been a party to or paid any damages in connection with litigation that has had a material adverse effect on ourfinancial position. No assurance can be given that future litigation will not have a material adverse effect on our financial position. When appropriate inmanagement’s estimation, we may record reserves in our financial statements for pending litigation and other claims. 118 Table of Contents Dividends and Dividend Policy We have never declared or paid cash dividends on our capital stock. We intend to retain all available funds and any future earnings, if any, to fund thedevelopment and expansion of our business and we do not anticipate paying any cash dividends in the foreseeable future. Any future determination relatedto dividend policy will be made at the discretion of our board of directors. Under Swiss law, any dividend must be proposed by our board of directors and approved by our shareholders. In addition, our auditors must confirm thatthe dividend proposal of our board of directors conforms to Swiss statutory law and our articles of incorporation. A Swiss corporation may pay dividends onlyif it has sufficient distributable profits brought forward from the previous business years (“report des bénéfices”) or if it has distributable reserves (“réserves àlibre disposition”), each as evidenced by its audited standalone statutory balance sheet prepared pursuant to Swiss law and after allocations to reservesrequired by Swiss law and its articles of association have been deducted. Distributable reserves are generally booked either as “free reserves” (“réserveslibres”) or as “reserve from capital contributions” (“apports de capital”). Distributions out of nominal share capital, which is the aggregate nominal value ofa corporation’s issued shares, may be made only by way of a share capital reduction. B. Significant changes A discussion of the significant changes in our business can be found under “Item 4. Information on the Company–A. History and development of theCompany” and “Item 4. Information on the Company–B. Business Overview.” ITEM 9. THE OFFER AND LISTING A. Offering and listing details See “–C. Markets” below. B. Plan of distribution Not applicable. C. Markets Our common shares began trading on the NASDAQ Global Market on September 23, 2016 under the symbol “ACIU”. The following table sets forth thehigh and low sales prices as reported in USD by NASDAQ for the periods presented: High LowYear Ended December 31, 2016: Third Quarter (since September 23) 19.97 14.11Fourth Quarter 18.95 10.36Year Ended December 31, 2017: First Quarter 13.66 10.36Second Quarter 10.17 8.51Third Quarter 11.70 6.03Fourth Quarter 13.09 10.10Month Ended: September 30, 2017 11.70 7.57October 31, 2017 12.10 10.10November 30, 2017 12.76 10.20December 31, 2017 13.09 10.87January 31, 2018 13.91 12.31February 28, 2018 13.50 10.52March 2017 (through March 10, 2018) 12.34 10.31 D. Selling shareholders Not applicable. 119 Table of Contents E. Dilution Not applicable. F. Expenses of the issue Not applicable. ITEM 10. ADDITIONAL INFORMATION A. Share capital Not applicable. B. Memorandum and articles of association On March 30, 2017, we adopted the Articles of Association filed as Exhibit 3.1 hereto. The updated Articles of Association reflected the increase of theCompany's issued share capital following various exercises of options and the corresponding adjustment of the conditional share capital increase foremployee benefit plans. We incorporate by reference into this annual report on Form 20-F the description of our Articles of Association contained in our Registration Statementon Form F-1 (File No. 333-211714) filed with the SEC on September 23, 2016. Such description, together with the immediately preceding paragraph, setsforth a summary of certain provisions of our Articles of Association as currently in effect. C. Material contracts Except as otherwise disclosed in this Annual Report on Form 20-F (including the Exhibits), we are not currently, and have not been in the last two years,party to any material contract, other than contracts entered into in the ordinary course of business. D. Exchange controls There are no Swiss governmental laws, decrees or regulations that restrict, in a manner material to us, the export or import of capital, including anyforeign exchange controls, or that generally affect the remittance of dividends or other payments to non-residents or non-citizens of Switzerland who hold ourcommon shares. E. Taxation The following summary contains a description of the material Swiss and U.S. federal income tax consequences of the acquisition, ownership anddisposition of common shares, but it does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision topurchase common shares. The summary is based upon the tax laws of Switzerland and regulations thereunder and on the tax laws of the United States andregulations thereunder as of the date hereof, which are subject to change. Taxation of AC Immune SA As disclosed in Note 14 of the financial statements, the Company has tax losses which are subject to expiration. These tax losses represent potentialvalue to the Company to the extent that the Company is able to create taxable profits before the expiry period of these tax losses. Consistent with prior years, the Company has not recognized any deferred tax asset relating to tax losses available for offset against future profits as therecognition criteria have not been met as of the balance sheet date. Switzerland is currently in the process of reforming certain elements of its corporate tax law (Swiss Corporate Tax Reform III, “CTR III”) to align Swisscorporate taxation with international recommendations. The recent dispatch of CTR III included proposed changes which may impact the taxation of ACImmune SA (including the abolition of the holding taxation at cantonal level). Voters in Switzerland rejected a CTR III tax reform proposed by the SwissFederal government in a national referendum on February 12, 2017. As a result, uncertainty will continue regarding the future level of Swiss corporateincome taxes that may apply to us until revised proposals are put forward and gain acceptance. 120 Table of Contents Swiss Tax Considerations Individual income tax and corporate income tax Non-Resident Shareholders Shareholders who are not resident in Switzerland for tax purposes, and who, during the relevant taxation year, have not engaged in a trade or businesscarried on through a permanent establishment or fixed place of business situated in Switzerland for tax purposes (all such shareholders for purposes of thissection, “Non-Resident Shareholders”), will not be subject to any Swiss Federal, cantonal and communal income tax on dividends and similar cash or in-kinddistributions on Shares (including dividends on liquidation proceeds and stock dividends) (such dividends for the purposes of this, “Dividends”),distributions based upon a capital reduction (remboursements liés à la réduction de la valeur nominale des actions ) and reserves paid out of capitalcontributions (apports de capital) on Shares, or capital gains realized on the sale or other disposition of Shares (see, however, “—Swiss Federal WithholdingTax” below for a summary of Swiss Federal withholding tax on Dividends, and “— Foreign final withholding tax” below for a summary on final withholdingtaxes in respect of Shares held in Swiss accounts by Non-Resident Shareholders). Resident Private Shareholders Swiss resident individuals who hold their Shares as private assets are required to include Dividends, but not distributions based upon a capital reduction(remboursements liés à la réduction de la valeur nominale des actions) and reserves paid out of capital contributions (Apports de capital), in their personalincome tax return and are subject to Swiss Federal, cantonal and communal income tax on any net taxable income for the relevant taxation period, includingthe Dividends, but not the distributions based upon a capital reduction (remboursements liés à la réduction de la valeur nominale des actions) and reservespaid out of capital contributions (apports de capital). Capital gains resulting from the sale or other disposition of Shares are not subject to Swiss Federal,cantonal and communal income tax, and conversely, capital losses are not tax-deductible for Resident Private Shareholders (the shareholders referred to inthis paragraph for the purposes of this section, “Resident Private Shareholders”). See “— Domestic Commercial Shareholders” below for a summary of thetaxation treatment applicable to Swiss resident individuals, who, for income tax purposes, are classified as “professional securities dealers”. Domestic Commercial Shareholders Corporate and individual shareholders who are resident in Switzerland for tax purposes, and corporate and individual shareholders who are not residentin Switzerland, and who, in each case, hold their Shares as part of a trade or business carried on in Switzerland, in the case of corporate and individualshareholders not resident in Switzerland, through a permanent establishment or fixed place of business situated, for tax purposes, in Switzerland, are requiredto recognize Dividends, distributions based upon a capital reduction (remboursements liés à la réduction de la valeur nominale des actions) and reservespaid out of capital contributions (apports de capital) received on Shares and capital gains or losses realized on the sale or other disposition of Shares in theirincome statement for the relevant taxation period and are subject to Swiss Federal, cantonal and communal individual or corporate income tax, as the casemay be, on any net taxable earnings for such taxation period. The same taxation treatment also applies to Swiss-resident private individuals who, for incometax purposes, are classified as “professional securities dealers” for reasons of, inter alia, frequent dealing, or leveraged investments, in shares and othersecurities (the shareholders referred to in this paragraph for purposes of this section, “Domestic Commercial Shareholders”). Domestic CommercialShareholders who are corporate taxpayers may be eligible for dividend relief (réduction pour participations) in respect of Dividends and distributions basedupon a capital reduction (remboursements liés à la réduction de la valeur nominale des actions) and reserves paid out of capital contributions (apports decapital) if the Shares held by them as part of a Swiss business have an aggregate market value of at least CHF 1 million. Swiss cantonal and communal private wealth tax and capital tax Non-Resident Shareholders Non-Resident Shareholders, in principle, are not subject to Swiss cantonal and communal private wealth tax or capital tax. Resident Private Shareholders and Domestic Commercial Shareholders 121 Table of Contents Resident Private Shareholders and Domestic Commercial Shareholders who are individuals are required to report their Shares as part of private wealth ortheir Swiss business assets, as the case may be, and will be subject to Swiss cantonal and communal private wealth tax on any net taxable wealth (includingShares), in the case of Domestic Commercial Shareholders to the extent the aggregate taxable wealth is allocable to Switzerland. Domestic CommercialShareholders who are corporate taxpayers are subject to Swiss cantonal and communal capital tax on taxable capital to the extent the aggregate taxablecapital is allocable to Switzerland. Swiss Federal Withholding Tax Dividends that the Company pays on the Shares are subject to Swiss Federal withholding tax (impôt anticipé) at a rate of 35% on the gross amount of theDividend. The Company is required to withhold the Swiss Federal withholding tax from the Dividend and remit it to the Swiss Federal Tax Administration.Distributions based upon a capital reduction (remboursements liés à la réduction de la valeur nominale des actions) and reserves paid out of capitalcontributions (apports de capital) are not subject to Swiss Federal withholding tax. The Swiss Federal withholding tax on a Dividend will be refundable in full to a Resident Private Shareholder and to a Domestic CommercialShareholder, who, in each case, inter alia, as a condition to a refund, duly reports the Dividend in his individual income tax return as income or recognizesthe Dividend in his income statement as earnings, as applicable. A Non-Resident Shareholder may be entitled to a partial refund of the Swiss Federal withholding tax on a Dividend if the country of his or her residencefor tax purposes has entered into a bilateral treaty for the avoidance of double taxation with Switzerland and the conditions of such treaty are met. Suchshareholders should be aware that the procedures for claiming treaty benefits (and the time required for obtaining a refund) might differ from country tocountry. For example, a shareholder who is a resident of the U.S. for the purposes of the U.S.-Swiss Treaty is eligible for a partial refund of the amount of thewithholding tax in excess of the 15% treaty rate, provided such shareholder: (i) qualifies for benefits under this treaty and qualifies as beneficial owner of theDividends; (ii) holds, directly or indirectly, less than 10% of the voting stock of the Company; (iii) does not qualify as a pension scheme or retirementarrangement for the purpose of the bilateral treaty; and (iv) does not conduct business through a permanent establishment or fixed base in Switzerland towhich the Shares are attributable. Such an eligible U.S. share may apply for a refund of the amount of the withholding tax in excess of the 15% treaty rate.The applicable refund request form may be filed with the Swiss Federal Tax Administration following receipt of the Dividend and the relevant deductioncertificate, however no later than 31 December of the third year following the calendar year in which the Dividend was payable. Swiss Federal Stamp Taxes The Company will be subject to and pay to the Swiss Federal Tax Administration a 1% Swiss Federal issuance stamp tax (taxe sur les émissions) on theconsideration received by it for the issuance of the Shares less certain costs incurred in connection with the issuance. The issuance of the Shares to the initialshareholders at the offering price is not subject to Swiss Federal securities turnover tax (droit de timbre de négociation). Any subsequent dealings in the Shares, where a bank or another securities dealer in Switzerland, as defined in the Swiss Federal Stamp Tax Act, acts as anintermediary, or is a party, to the transaction, are, subject to certain exemptions provided for in the Swiss Federal Stamp Tax Act, subject to Swiss securitiesturnover tax at an aggregate tax rate of up to 0.15% of the consideration paid for such Shares. Material U.S. Federal Income Tax Considerations for U.S. Holders The following is a description of the material U.S. federal income tax consequences to U.S. Holders, as defined below, of owning and disposing of ourcommon shares. It does not describe all tax considerations that may be relevant to a particular person’s decision to acquire common shares. This discussion applies only to a U.S. Holder that holds common shares as capital assets for U.S. federal income tax purposes. In addition, it does notdescribe all of the U.S. federal income tax consequences that may be relevant in light of a U.S. Holder’s particular circumstances, including alternativeminimum tax consequences, the potential application of the provisions of the Code known as the Medicare contribution tax and tax consequences applicableto U.S. Holders subject to special rules, such as: ·certain financial institutions; 122 Table of Contents ·dealers or traders in securities who use a mark-to-market method of tax accounting; ·persons holding common shares as part of a hedging transaction, straddle, wash sale, conversion transaction or other integrated transaction orpersons entering into a constructive sale with respect to the common shares; ·U.S. Holder whose functional currency for U.S. federal income tax purposes is not the U.S. dollar; ·entities classified as partnerships for U.S. federal income tax purposes; ·tax-exempt entities, including an “individual retirement account” or “Roth IRA”; ·persons that own or are deemed to own ten percent or more of our voting shares; or ·persons holding common shares in connection with a trade or business conducted outside of the United States. If an entity that is classified as a partnership for U.S. federal income tax purposes holds common shares, the U.S. federal income tax treatment of a partnerwill generally depend on the status of the partner and the activities of the partnership. Partnerships holding common shares and partners in such partnershipsshould consult their tax advisers as to the particular U.S. federal income tax consequences of owning and disposing of the common shares. This discussion is based on the Code, administrative pronouncements, judicial decisions, final, temporary and proposed Treasury regulations, and theincome tax treaty between Switzerland and the United States (the “Treaty”) all as of the date hereof, any of which is subject to change or differinginterpretations, possibly with retroactive effect. A “U.S. Holder” is a holder who, for U.S. federal income tax purposes, is a beneficial owner of common shares, who is eligible for the benefits of theTreaty and who is: ·a citizen or individual resident of the United States; ·a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state therein or the Districtof Columbia; or ·an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source. 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 ofcommon shares in their particular circumstances. Taxation of Distributions As discussed above under “Dividends and Dividend Policy,” we do not currently expect to make distributions on our common shares. In the event thatwe do make distributions of cash or other property, subject to the passive foreign investment company rules described below, distributions paid on commonshares, other than certain pro rata distributions of common shares, will generally be treated as dividends to the extent paid out of our current or accumulatedearnings and profits (as determined under U.S. federal income tax principles). Because we do not maintain calculations of our earnings and profits under U.S.federal income tax principles, we expect that distributions generally will be reported to U.S. Holders as dividends. For so long as our common shares are listedon NASDAQ or we are eligible for benefits under the Treaty, dividends paid to certain non-corporate U.S. Holders will be eligible for taxation as “qualifieddividend income” and therefore, subject to applicable limitations, will be taxable at rates not in excess of the long-term capital gain rate applicable to suchU.S. Holder. U.S. Holders should consult their tax advisers regarding the availability of the reduced tax rate on dividends in their particular circumstances. Theamount of a dividend will include any amounts withheld by us in respect of Swiss income taxes. The amount of the dividend will be treated as foreign-sourcedividend income to U.S. Holders and will not be eligible for the dividends-received deduction generally available to U.S. corporations under the Code.Dividends will be included in a U.S. Holder’s income on the date of the U.S. Holder’s receipt of the dividend. The amount of any dividend income paid inSwiss Francs will be the U.S. dollar amount calculated 123 Table of Contents by reference to the exchange rate in effect on the date of actual or constructive receipt, regardless of whether the payment is in fact converted into U.S. dollarsat that time. If the dividend is converted into U.S. dollars on the date of receipt, a U.S. Holder should not be required to recognize foreign currency gain orloss in respect of the dividend income. A U.S. Holder may have foreign currency gain or loss if the dividend is converted into U.S. dollars after the date ofreceipt. Subject to applicable limitations, some of which vary depending upon the U.S. Holder’s particular circumstances, Swiss income taxes withheld fromdividends on common shares at a rate not exceeding the rate provided by the Treaty will be creditable against the U.S. Holder’s U.S. federal income taxliability. The rules governing foreign tax credits are complex and U.S. Holders should consult their tax advisers regarding the creditability of foreign taxes intheir particular circumstances. In lieu of claiming a foreign tax credit, U.S. Holders may, at their election, deduct foreign taxes, including any Swiss incometax, in computing their taxable income, subject to generally applicable limitations under U.S. law. An election to deduct foreign taxes instead of claimingforeign tax credits applies to all foreign taxes paid or accrued in the taxable year. Sale or Other Disposition of Common Shares Subject to the passive foreign investment company rules described below, gain or loss realized on the sale or other disposition of common shares will becapital gain or loss, and will be long-term capital gain or loss if the U.S. Holder held the common shares for more than one year. The amount of the gain orloss will equal the difference between the U.S. Holder’s tax basis in the common shares disposed of and the amount realized on the disposition, in each caseas determined in U.S. dollars. This gain or loss will generally be U.S.-source gain or loss for foreign tax credit purposes. The deductibility of capital losses issubject to various limitations. Passive Foreign Investment Company Rules Under the Code, we will be a PFIC for any taxable year in which, after the application of certain “look-through” rules with respect to subsidiaries, either(i) 75% or more of our gross income consists of “passive income,” or (ii) 50% or more of the average quarterly value of our assets consist of assets thatproduce, or are held for the production of, “passive income.” For purposes of the above calculations, we will be treated as if we hold our proportionate shareof the assets of, and receive directly our proportionate share of the income of, any other corporation in which we directly or indirectly own at least 25%, byvalue, of the shares of such corporation. Passive income generally includes interest, dividends, rents, certain non-active royalties and capital gains. Based onour business plan and certain estimates and projections, including as to the relative values of our assets, we do not believe that we were a PFIC for our 2017taxable year and do not expect to be a PFIC in the immediately foreseeable future. However, there can be no assurance that the IRS will agree with ourconclusion. In addition, whether we will be a PFIC in 2018 or any future years is uncertain because, among other things, (i) we currently own, and will ownafter the completion of the IPO, a substantial amount of passive assets, including cash, and (ii) the valuation of our assets that generate non-passive incomefor PFIC purposes, including our intangible assets, is uncertain and may vary substantially over time. Accordingly, there can be no assurance that we will notbe a PFIC for any taxable year. If we are a PFIC for any year during which a U.S. Holder holds common shares, we generally would continue to be treated as aPFIC with respect to that U.S. Holder for all succeeding years during which the U.S. Holder holds common shares, even if we ceased to meet the thresholdrequirements for PFIC status. If we were a PFIC for any taxable year during which a U.S. Holder held common shares (assuming such U.S. Holder has not made a timely mark-to-marketelection, as described below), gain recognized by a U.S. Holder on a sale or other disposition (including certain pledges) of the common shares would be allocated ratably over the U.S. Holder’s holding periodfor the common shares. The amounts allocated to the taxable year of the sale or other disposition and to any year before we became a PFIC would be taxed asordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for individuals or corporations, asappropriate, for that taxable year, and an interest charge would be imposed on the amount allocated to that taxable year. Further, to the extent that anydistribution received by a U.S. Holder on its common shares exceeds 125% of the average of the annual distributions on the common shares received duringthe preceding three years or the U.S. Holder’s holding period, whichever is shorter, that distribution would be subject to taxation in the same manner as gain,described immediately above. A U.S. Holder can avoid certain of the adverse rules described above by making a mark-to-market election with respect to its common shares, providedthat the common shares are “marketable.” Common shares will be marketable if they are “regularly traded” on a “qualified exchange” or other market withinthe meaning of applicable Treasury regulations. If a U.S. Holder makes the mark-to-market election, it generally will recognize 124 Table of Contents as ordinary income any excess of the fair market value of the common shares at the end of each taxable year over their adjusted tax basis, and will recognizean ordinary loss in respect of any excess of the adjusted tax basis of the common shares over their fair market value at the end of the taxable year (but only tothe extent of the net amount of income previously included as a result of the mark-to-market election). If a U.S. Holder makes the election, the holder’s taxbasis in the common shares will be adjusted to reflect the income or loss amounts recognized. Any gain recognized on the sale or other disposition ofcommon shares in a year when 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 thenet amount of income previously included as a result of the mark-to-market election). In addition, in order to avoid the application of the foregoing rules, a United States person that owns stock in a PFIC for U.S. federal income tax purposesmay make a “qualified electing fund” election (a “QEF Election”) with respect to such PFIC if the PFIC provides the information necessary for such electionto be made. If a United States person makes a QEF Election with respect to a PFIC, the United States person will be currently taxable on its pro rata share ofthe PFIC’s ordinary earnings and net capital gain (at ordinary income and capital gain rates, respectively) for each taxable year that the entity is classified as aPFIC and will not be required to include such amounts in income when actually distributed by the PFIC. We do not intend to provide information necessaryfor U.S. Holders to make qualified electing fund elections. In addition, if we were a PFIC or, with respect to particular U.S. Holder, were treated as a PFIC for the taxable year in which we paid a dividend or for theprior taxable year, the preferential dividend rates discussed above with respect to dividends paid to certain non-corporate U.S. Holders would not apply. If a U.S. Holder owns common shares during any year in which we are a PFIC, the holder generally must file annual reports containing such informationas the U.S. Treasury may require on IRS Form 8621 (or any successor form) with respect to us, generally with the holder’s federal income tax return for thatyear. U.S. Holders should consult their tax advisers concerning our potential PFIC status and the potential application of the PFIC rules. Information Reporting and Backup Withholding Payments of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries generally aresubject to information reporting, and may be subject to backup withholding, unless (i) the U.S. Holder is a corporation or other exempt recipient or (ii) in thecase of backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that it is not subject to backup withholding. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the holder’s U.S. federal income tax liabilityand may entitle it to a refund, provided that the required information is timely furnished to the IRS. Information With Respect to Foreign Financial Assets Certain U.S. Holders who are individuals (and, under proposed regulations, certain entities) may be required to report information relating to an interestin our common shares, subject to certain exceptions (including an exception for common shares held in accounts maintained by certain U.S. financialinstitutions). U.S. Holders should consult their tax advisers regarding the effect, if any, of this legislation on their ownership and disposition of the commonshares. F. Dividends and paying agents Not applicable. G. Statement by experts Not applicable. H. Documents on display We are subject to the informational requirements of the Exchange Act. Accordingly, we are required to file reports and other information with the SEC,including annual reports on Form 20-F and reports on Form 6-K. You may inspect and copy reports and other information filed with the SEC at the PublicReference Room at 125 Table of Contents 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet website that contains reports and other information about issuers, like us, that file electronically with theSEC. The address of that website is www.sec.gov. Additionally, pursuant to Swiss law, any shareholder of record has the right to receive a free copy of this Annual Report and to inspect this AnnualReport at any time at our registered office in Lausanne. As a foreign private issuer, we are exempt under the Exchange Act from, among other things, the rules prescribing the furnishing and content of proxystatements, and our executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisionscontained in Section 16 of the Exchange Act. In addition, we will not be required under the Exchange Act to file periodic reports and financial statementswith the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. I. Subsidiary information Not applicable. ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company’s activities expose it to the following financial risks: market risk (currency risk), credit risk and liquidity risk. The Company’s overall riskmanagement program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company’s financialperformance. Market risk arises from our exposure to fluctuation in currency exchange rates. We are exposed to market risks in the ordinary course of our business,which are principally limited to foreign currency exchange rate fluctuations and to a lesser degree, interest rate fluctuations. Market Risk Foreign exchange risk The Company is exposed to foreign exchange risk arising from currency exposures, primarily with respect to the EUR, USD and to a lesser extent to GBP,DKK and SEK. The currency exposure is not hedged. However, the Company has the policy of matching its cash holdings to the currency structure of itsexpenses. As of December 31, 2017, the Company holds more than 83% of its overall cash and cash equivalents balance in CHF with the remainderpredominantly in EUR and USD (see also Note 8 of the financial statements). We have a number of collaboration agreements where the upfront payments, milestone payments and future royalty payments are not denominated inSwiss Francs, our reporting currency. Furthermore, many of our research and development activities are subcontracted to parties outside of Switzerland andwe purchase materials from suppliers outside of Switzerland. As a result, we are exposed to foreign exchange risk. Approximately 42% of our total costs areincurred in currencies other than the Swiss Franc. Due to the size of some of the income received from collaboration agreements but also the high percentageof our costs indirectly being in foreign currencies, a hypothetical 10% change in exchange rates relative to the Swiss Franc could have a material impact onour financial statements. Credit risk The majority of the cash and cash equivalents is held within one bank. However, the credit risk on liquid funds is limited because the counterparty is abank with a high credit-rating assigned by international credit-rating agencies. The maximum amount of credit risk is the carrying amount of the financialassets. Trade and other receivables are fully performing, not past due and not impaired (see Note 7 to the financial statements). Liquidity risk Inherent in the Company’s business are various risks and uncertainties, including its limited operating history and the high uncertainty that newtherapeutic concepts will succeed. AC Immune’s success may depend in part upon its ability to (i) establish and maintain a strong patent position andprotection, (ii) enter into collaborations with partners in the biotech and pharmaceutical industry, (iii) acquire and keep key personnel employed, and(iv) acquire additional capital to support its operations. 126 Table of Contents The Company’s approach of managing liquidity is to ensure sufficient cash to meet its liabilities when due. Therefore, management closely monitors thecash position on rolling forecasts based on expected cash flow to enable the Company to finance its operations for at least 18 months. Based on the current cash position, the Company is well financed until the end of the second quarter of 2019, not considering any potential milestonepayments. ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES A. Debt securities Not applicable. B. Warrants and rights Not applicable. C. Other securities Not applicable. D. American Depositary Shares Not applicable. PART II ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES A. Defaults No matters to report. B. Arrears and delinquencies No matters to report. ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS E. Use of Proceeds On September 23, 2016, we completed our initial public offering of common shares pursuant to a Registration Statement on Form F-1, as amended(Registration No. 333-211714) that was declared effective on September 22, 2016. Under the registration statement, we sold an aggregate of 6,900,000common shares (which includes 900,000 common shares from the full exercise of the underwriters’ over-allotment option to purchase additional shares). Allof these common shares were sold at a price to the public of $11.00 per share, yielding net proceeds of $70.5 million (CHF 69.4 million) after underwritingdiscounts and commissions. Credit Suisse, Jefferies LLC and Leerink Partners LLC were joint book-running managers for the initial public offering. We paidthe offering expenses in connection with the initial public offering, which were approximately CHF 3.5 million ($3.6 million), and which included SECregistration 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. In addition, wereceived gross proceeds of approximately $13.5 million (CHF 13.2 million) from the Series E Private Placement Extension. Between the effective date of the Registration Statement and December 31, 2017, we used approximately CHF 54.6 million of the net proceeds to fundresearch and development expenses for our Alzheimer’s disease, Non-Alzheimer’s disease including neuro-orphan diseases, Diagnostic and New discoveryprograms and general administrative expenses. None of the net proceeds were used to make payments (other than compensation paid 127 Table of Contents 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 ourdirectors, 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 theremaining net proceeds has not changed from the information mentioned in the prospectus relating to the Registration Statement. ITEM 15. CONTROLS AND PROCEDURES A. Disclosure Controls and Procedures As of December 31, 2017, under the supervision and with the participation of our management, including our Chief Executive Officer and ChiefFinancial Officer, we performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule13a-15(e) under the Exchange Act). There are inherent limitations to the effectiveness of any disclosure controls and procedures system, including thepossibility of human error and circumventing or overriding them. Even if effective, disclosure controls and procedures can provide only reasonable assuranceof achieving their control objectives. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effectivein recording, processing, summarizing and reporting on a timely basis, information required to be included in periodic filings under the Exchange Act andthat such information is accumulated and communicated to management, including our Chief Executive and Chief Financial Officers, as appropriate to allowtimely decisions regarding required disclosure. B. Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief FinancialOfficer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based upon criteria established in Internal Control –Integrated Framework (2013) by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, our Chief ExecutiveOfficer and Chief Financial Officer concluded that our internal control over financial reporting was effective as of December 31, 2017. C. Attestation Report of the Registered Public Accounting Firm This Annual Report does not include an attestation report of our registered public accounting firm due to an exemption provided to emerging growthcompanies under the JOBS Act. D. Changes in Internal Control over Financial Reporting In order to address the material weaknesses disclosed in our 2016 Form 20-F, during 2017 we hired additional qualified personnel to enhance our financedepartment to be responsible for the preparation of financial statements under U.S. Securities laws, including hiring additional qualified personnel asnecessary in our accounting department, and implementing, strengthening and formally documenting the internal control policies and procedures toremediate the material weaknesses disclosed in 2016. We have hired a new CFO and two U.S. CPAs to serve as our Head of Finance and Director of Financial Reporting, respectively. These three havecoordinated efforts internally and with the Audit and Finance Committee Chair to identify risks and develop the processes and controls necessary to prepareour financial statements and disclosures under the requirements of IFRS and of the SEC. We have provided resources for additional training to our accountingand finance personnel, including areas of new and emerging standards, and enhanced various accounting and finance policies and procedures to provideguidance to our finance and accounting department personnel in addressing significant accounting issues and preparing our financial statements so that theyare in compliance with IFRS and SEC requirements. We have taken additional measures to enhance our internal controls over financial reporting. We have implemented a more structured monthly, quarterlyand annual close process through the development of an integrated closing checklist to improve the completeness, timeliness and accuracy of our financialreporting and disclosures including, but not limited to, those regarding proper financial statement classification, revenue recognition, share-basedcompensations, and recognition of clinical trial and other accruals. We continue to formalize and standardize our financial reporting policies and proceduresas well as create a uniform set of standards and procedures for our finance, accounting and operations personnel across our Company. This approach willallow us to streamline and enhance consistency of our reporting processes and to strengthen our 128 Table of Contents processes for year-end and quarter-end reporting. In addition, our policies and procedures will continue to expand and evolve as we continue to deploy morefunctionality upon the implementation of an upgraded Enterprise Resource Planning system. ITEM 16. [RESERVED] ITEM 16A. Audit committee financial experts Our board of directors has determined that Peter Bollmann and Thomas Graney are audit committee financial experts, as that term is defined by the SEC,and are independent for the purposes of SEC and NASDAQ rules. ITEM 16B. Code of ethics Code of business conduct and ethics We have adopted a Code of Business Conduct and Ethics which covers a broad range of matters including the handling of conflicts of interest,compliance issues and other corporate policies such as insider trading and equal opportunity and non-discrimination standards. Our Code of BusinessConduct applies to all of our directors, executive officers and employees. We have published our Code of Business Conduct and Ethics on our website,www.acimmune.com. The information contained on our website is not a part of this Annual Report. ITEM 16C. Principal accountant fees and services (in CHF and thousands) 2017 2016 (in CHF thousands)Audit Fees 392 340 Audit-related Fees 26 419 Total Fees 418 759 For the year ended December 31, 2017, Ernst & Young AG (“Ernst & Young”) was the Company’s auditor for the IFRS and statutory accounts. At theordinary annual general meeting on June 28, 2017, the shareholders appointed Ernst & Young as the Company’s auditor for a term of office of one year. Audit fees for services provided by Ernst & Young include the standard audit work performed each fiscal year necessary to allow the auditor to issue anopinion on our Financial Statements and to issue an opinion on the local statutory financial statements. Audit fees also include services that can be providedonly by the external auditor such as reviews of quarterly financial results. Audit-related fees consisted of fees billed for assurance and related services that were reasonably related to the performance of the audit or review of ourfinancial statements or for services that were traditionally performed by the external auditor. In 2016, this included audit fees in connection with theCompany’s initial public offering activities. Pre-Approval Policies and Procedures In accordance with the requirements of the U.S. Sarbanes-Oxley Act of 2002 and rules issued by the SEC, we review and pre-approve of any servicesperformed by Ernst & Young. The procedure requires that all proposed engagements of Ernst & Young for audit and permitted non-audit services aresubmitted to the Audit and Finance Committee for approval prior to the beginning of any such services. In accordance with this policy, all services performedby and fees paid to Ernst & Young in this Item 16C, were approved by the Audit and Finance Committee. ITEM 16D. Exemptions from the listing standards for audit committees Not applicable ITEM 16E. Purchases of equity securities by the issuer and affiliated purchasers In 2017, no purchases of our equity securities were made by or on behalf of AC Immune SA or any affiliated purchaser. 129 Table of Contents ITEM 16F. Change in registrant’s certifying accountant Not applicable. ITEM 16G. Corporate governance Summary of Significant Corporate Governance Differences from NASDAQ Listing Standards Our common shares are listed on the NASDAQ Global Market. We are therefore required to comply with certain of the NASDAQ’s corporate governancelisting standards, or the NASDAQ Standards. As a foreign private issuer, we may follow our home country’s corporate governance practices in lieu of certainof the NASDAQ Standards. Our corporate governance practices differ in certain respects from those that U.S. companies must adopt in order to maintain aNASDAQ listing. A brief, general summary of those differences is provided as follows. Independent Directors Swiss law does not require that a majority of our board of directors consist of independent directors. Our board of directors therefore may include fewerindependent directors than would be required if we were subject to NASDAQ Listing Rule 5605(b)(1). In addition, we are not subject to NASDAQ ListingRule 5605(b)(2), which requires that independent directors must regularly have scheduled meetings at which only independent directors are present. Compensation Committee Although Swiss law also requires that we have a compensation committee, we will follow home country requirements with respect to such committee. Asa result, our practice will vary from the requirements of NASDAQ Listing Rule 5605(d), which sets forth certain requirements as to the responsibilities,composition and independence of compensation committees. Quorum requirements In accordance with Swiss law and generally accepted business practices, our articles of association do not provide quorum requirements generallyapplicable to general meetings of shareholders. Our practice thus varies from the requirement of NASDAQ Listing Rule 5620(c), which requires an issuer toprovide in its bylaws for a generally applicable quorum, and that such quorum may not be less than one-third of the outstanding voting stock. Solicitation of proxies Our articles of association provide for an independent proxy holder elected by our shareholders, who may represent our shareholders at a general meetingof shareholders, and we must provide shareholders with an agenda and other relevant documents for the general meeting of shareholders. However, Swiss lawdoes not have a regulatory regime for the solicitation of proxies and company solicitation of proxies is prohibited for public companies in Switzerland. Thus,our practice will vary from the requirement of NASDAQ Listing Rule 5620(b), which sets forth certain requirements regarding the solicitation of proxies. Shareholder approval We have opted out of shareholder approval requirements for the issuance of securities in connection with certain events such as the acquisition of stockor assets of another company, the establishment of or amendments to equity-based compensation plans for employees, a change of control of us and certainprivate placements. To this extent, our practice varies from the requirements of NASDAQ Listing Rule 5635, which generally requires an issuer to obtainshareholder approval for the issuance of securities in connection with such events. ITEM 16H. Mine safety disclosure Not applicable. 130 Table of Contents PART III ITEM 17. Financial statements We have responded to Item 18 in lieu of this item. ITEM 18. Financial statements Financial Statements are filed as part of this Annual Report, see page F-1. ITEM 19. Exhibits (a) The following documents are filed as part of Annual Report on Form 20-F: 3.1Articles of Association of AC Immune SA (incorporated herein by reference to Exhibit 99.4 to the Company’s Report on Form 6-K, filedwith the SEC on May 11, 2017)2.1Registration Rights Agreement (incorporated herein by reference to Exhibit 4.1 to the Company’s Registration Statement on Form F-1(File No. 333-211714) filed with the SEC on May 31, 2016)4.1Research Collaboration and License Agreement between AC Immune SA Corporation and Genentech, Inc. dated November 6, 2006(incorporated herein by reference to Exhibit 10.1 to the Company’s Registration Statement on Form F-1 (File No. 333-211714) filed withthe SEC on May 31, 2016)4.2Amendment to the Research Collaboration and License Agreement between AC Immune SA Corporation and Genentech, Inc. dated May7, 2015 (incorporated herein by reference to Exhibit 10.2 to the Company’s Registration Statement on Form F-1 (File No. 333-211714)filed with the SEC on May 31, 2016)4.3Research Collaboration and License Agreement between AC Immune SA Corporation and Genentech, Inc. dated June 15, 2012(incorporated herein by reference to Exhibit 10.3 to the Company’s Registration Statement on Form F-1 (File No. 333-211714) filed withthe SEC on May 31, 2016)4.4License and Collaboration Agreement between Piramal Imaging Ltd., Piramal Imaging SA and AC Immune SA, dated May 9, 2014(incorporated herein by reference to Exhibit 10.4 to the Company’s Registration Statement on Form F-1 (File No. 333-211714) filed withthe SEC on May 31, 2016)4.5License, Development and Commercialization Agreement between Janssen Pharmaceuticals, Inc. and AC Immune SA, dated December 24,2014 (incorporated herein by reference to Exhibit 10.5 to the Company’s Registration Statement on Form F-1 (File No. 333-211714) filedwith the SEC on May 31, 2016)4.6Form of Indemnity Agreement (incorporated herein by reference to Exhibit 10.6 to the Company’s Registration Statement on Form F-1(File No. 333-211714) filed with the SEC on May 31, 2016)4.7AC Immune SA 2013 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.7 to the Company’s Registration Statement onForm F-1 (File No. 333-211714) filed with the SEC on May 31, 2016)4.8Subscription Agreement among Fidelity entities and AC Immune SA, dated October 16, 2015 (incorporated herein by reference to Exhibit10.8 to the Company’s Registration Statement on Form F-1 (File No. 333-211714) filed with the SEC on May 31, 2016)4.9Subscription Agreement among Temasek entities and AC Immune SA, dated October 16, 2015 (incorporated herein by reference to Exhibit10.9 to the Company’s Registration Statement on Form F-1 (File No. 333-211714) filed with the SEC on May 31, 2016) 131 Table of Contents 4.10Stock Option Plan - AC Immune of December 31, 2004 (incorporated herein by reference to Exhibit 99.03 to the Company’s RegistrationStatement on Form S-8, filed with the SEC on September 29, 2016)4.11Employee Stock Option and Share Plan of AC Immune (2005 Plan) (incorporated herein by reference to Exhibit 99.02 to the Company’sRegistration Statement on Form S-8, filed with the SEC on September 29, 2016)4.12AC Immune SA 2013 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.7 to the Company’s Registration Statement onForm F-1, filed with the SEC on May 31, 2016)4.13AC Immune SA 2016 Stock Option and Incentive Plan (incorporated herein by reference to Exhibit 99.08 to the Company’s Report onForm 6-K, filed with the SEC on October 13, 2016)12.1*Certification of Andrea Pfeifer pursuant to 17 CFR 240.13a-14(a)12.2*Certification of Joerg Hornstein pursuant to 17 CFR 240.13a-14(a).13.1*Certification of Andrea Pfeifer pursuant to 17 CFR 240.13a-14(b) and 18 U.S.C.135013.2*Certification of Joerg Hornstein pursuant to 17 CFR 240.13a-14(b) and 18 U.S.C.135015.1*Consent of Ernst & Young AG101.INSXBRL Instance Document101.SCHXBRL Taxonomy Extension Schema Document101.CALXBRL Taxonomy Extension Calculation Linkbase Document101.DEFXBRL Taxonomy Extension Definition Linkbase Document101.LABXBRL Taxonomy Extension Label Linkbase Document101.PREXBRL Taxonomy Extension Presentation Linkbase Document ________________ * Filed herewith (b) Financial Statement Schedules None. 132 AC IMMUNE SA By:/s/ Andrea Pfeifer Name:Andrea Pfeifer Title:Chief Executive OfficerBy:/s/ Joerg Hornstein Name:Joerg Hornstein Title:Chief Financial OfficerTable of Contents Signatures The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned tosign this Annual Report on its behalf. Date: March 20, 2018 133 Table of Contents INDEX TO FINANCIAL STATEMENTS Audited Financial Statements — AC IMMUNE SA Report of Independent Registered Public Accounting FirmF-2Balance Sheets as of December 31, 2017 and 2016F-3Statements of Income / (Loss) and Statements of Comprehensive Income / (Loss) for the fiscal years ended December 31, 2017, 2016 and 2015F-4Statements of Changes in Equity for the fiscal years ended December 31, 2017, 2016 and 2015F-5Statements of Cash Flows for the fiscal years ended December 31, 2017, 2016 and 2015F-6Notes to the Financial StatementsF-7 F-1Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors of AC Immune SA Opinion on the Financial Statements We have audited the accompanying balance sheets of AC Immune SA (the Company) as of December 31, 2017 and 2016, and the related statements ofincome, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2017, and the related notes(collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position ofthe Company at December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31,2017, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. 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 ofthe Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, norwere we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding ofinternal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financialreporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures inthe financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Ernst & Young AG We have served as the Company’s auditor since 2009. Petit-Lancy, Switzerland March 20, 2018 F-2 Table of Contents Financial Statements (IFRS) Balance Sheets in CHF thousands As of the Years Ended December 31,ASSETS Notes 2017 2016Non-current assets Property, plant and equipment 4 2,353 1,120 Financial assets 5 126 86 Total non-current assets 2,479 1,206 Current assets Prepaid expenses 6 1,440 1,278 Accrued income 6 2,799 889 Other current receivables 7 918 517 Cash and cash equivalents 8 124,377 152,210 Total current assets 129,534 154,894 Total assets 132,013 156,100 SHAREHOLDERS’ EQUITY AND LIABILITIES Shareholders’ equity Share capital 9 1,147 1,135 Share premium 188,299 188,166 Accumulated losses (72,607) (46,921)Total shareholders’ equity 116,839 142,380 Non-current liabilities Accrued interest – long-term 12 99 — Long-term financing obligation 12 395 — Net employee defined benefit liabilities 17 4,926 3,798 Total non-current liabilities 5,420 3,798 Current liabilities Trade payables and other payables 10 1,092 4,035 Accrued expenses 10 8,307 5,366 Deferred income 11 355 521 Total current liabilities 9,754 9,922 Total liabilities 15,174 13,720 Total shareholders’ equity and liabilities 132,013 156,100 The accompanying notes are an integral part of these financial statements. F-3 Table of Contents Statements of Income / (Loss) For the Years Ended December 31, Notes 2017 2016 2015 in CHF thousands except for shareand per share dataRevenue Contract revenue 13 20,255 23,214 39,090 Total revenue 20,255 23,214 39,090 Operating expenses Research and development expenses 14 (32,663) (25,774) (17,049)General and administrative expenses 14 (10,131) (7,896) (3,417) Total operating expenses (42,794) (33,670) (20,466) Operating income / (loss) (22,539) (10,456) 18,624 Finance income / (expense), net 14 (4,055) 3,324 1,591 Interest income 14 330 43 55 Interest expense 14 (147) (7) —_ Finance result, net (3,872) 3,360 1,646 Income / (loss) before tax (26,411) (7,096) 20,270 Income tax expense 16 — — — Income / (loss) for the period (26,411) (7,096) 20,270 Earnings / (loss) per share (EPS): Basic, income / (loss) for the period attributable to equity holders 20 (0.46) (0.14) 0.47 Diluted, income / (loss) for the period attributable to equity holders (0.46) (0.14) 0.44 Weighted-average number of shares used to compute EPS basic 57,084,295 50,096,859 43,412,250 Weighted-average number of shares used to compute EPS fully diluted 57,084,295 50,096,859 46,043,198 Statements of Comprehensive Income / (Loss) For the Years Ended December 31, 2017 2016 2015 in CHF thousandsIncome / (loss) for the period (26,411) (7,096) 20,270 Other comprehensive income / (loss) not to be reclassified to income or loss in subsequentperiods (net of tax) Re-measurement losses on defined benefit plans (net of tax of CHF 0 for all periods) (780) (761) (736)Total comprehensive income / (loss), net of tax (27,191) (7,857) 19,534 The accompanying notes are an integral part of these financial statements. F-4 Table of Contents Statements of Changes in Equity in CHF thousands Share capital Share premium Accumulatedlosses TotalBalance as of January 1, 2015 854 83,068 (60,455) 23,467 Net income for the period — — 20,270 20,270 Other comprehensive loss — — (736) (736)Total comprehensive income — — 19,534 19,534 Share-based payments — — 540 540 Issuance of preferred Series E shares 62 29,437 — 29,499 Exercise of options 12 130 — 142 Transaction costs — (2,139) — (2,139) Balance as of December 31, 2015 928 110,496 (40,381) 71,043 in CHF thousands Share capital Share premium Accumulatedlosses TotalBalance as of January 1, 2016 928 110,496 (40,381) 71,043 Net loss for the period — — (7,096) (7,096)Other comprehensive loss — — (761) (761)Total comprehensive loss — — (7,857) (7,857) Share-based payments — — 1,317 1,317 Preferred Series E extension shares 28 13,177 — 13,205 Proceeds from IPO net of underwriting fees 138 69,250 — 69,388 Exercise of options 41 260 — 301 Transaction costs — (5,017) — (5,017) Balance as of December 31, 2016 1,135 188,166 (46,921) 142,380 in CHF thousands Share capital Share premium Accumulatedlosses TotalBalance as of January 1, 2016 1,135 188,166 (46,921) 142,380 Net loss for the period — — (26,411) (26,411)Other comprehensive loss — — (780) (780)Total comprehensive loss — — (27,191) (27,191) Share-based payments — — 1,579 1,579 Issuance of shares: Restricted Share Awards — 74 (74) — Exercise of options 12 59 — 71 Balance as of December 31, 2017 1,147 188,299 (72,607) 116,839 The accompanying notes are an integral part of these financial statements. F-5 Table of Contents Statements of Cash Flows For the Years EndedDecember 31,in CHF thousands 2017 2016 2015Operating activities Net income / (loss) for the period (26,411) (7,096) 20,270 Adjustments to reconcile net income for the period to net cash flows: Depreciation of property, plant and equipment 580 278 287 Finance result, net 3,872 (3,360) (1,646)Share-based compensation expense 1,579 1,317 540 Changes in pensions 348 250 (359)Accrued interest on long-term debt 99 — — Changes in working capital: Prepaid expenses (162) (494) (2,135)Accrued income (1,910) (842) 6 Other current receivables (401) (248) 25,666 Accrued expenses 2,940 1,564 1,707 Deferral of unearned revenue (156) 476 (160)Long-term financing obligation 204 — — Accounts payable (2,853) 2,592 (141) Cash provided by/(used in) operating activities (22,271) (5,563) 44,035 Interest income 330 43 55 Finance costs (153) (126) (6)Net cash flows provided by/(used in) operating activities (22,094) (5,646) 44,084 Investing activities Purchases of property, plant and equipment (1,802) (899) (244)Rent deposit (40) — — Net cash flows used in investing activities (1,842) (899) (244) Financing activities Proceeds from issuance of preferred Series E — 13,206 29,499 Proceeds from issuance of common shares — 69,388 — Transaction costs of issue of shares — (4,105) (1,859)Proceeds from issuance of shares-option plans 71 301 83 Proceeds from long-term debt 200 — — Proceeds from employee loan repayments — — 55 Net cash flows provided by financing activities 271 78,790 27,778 Net increase / (decrease) in cash and cash equivalents (23,665) 72,245 71,618 Cash and cash equivalents at January 1 152,210 76,522 3,306 Exchange gains on cash and cash equivalents (4,168) 3,443 1,598 Cash and cash equivalents at December 31 124,377 152,210 76,522 Net increase / (decrease) in cash and cash equivalents (23,665) 72,245 71,618 Non-cash transactions: In 2016, proceeds from the issuance of common shares represents cash received relating to our initial public offering completed inSeptember 2016 and is net of CHF 5.1 million in non-cash underwriting fees. The accompanying notes are an integral part of these financial statements. F-6 Table of Contents Notes to the Financial Statements 1.General information AC Immune SA (the “Company,” or “AC Immune,” “ACI,” “we,” “our,” “ours,” “us”) is a clinical stage biopharmaceutical company leveraging our twoproprietary technology platforms to discover, design and develop novel, proprietary medicines for prevention, diagnosis and treatment of neurodegenerativediseases associated with protein misfolding. Misfolded proteins are generally recognized as the leading cause of neurodegenerative diseases, such asAlzheimer’s disease, or AD, and Parkinson’s disease, or PD, with common mechanisms and drug targets, such as Abeta, Tau and alpha-synuclein. Ourcorporate strategy is founded upon a three-pillar approach that targets Alzheimer’s disease, non-Alzheimer’s neurodegenerative diseases including neuro-orphan indications and diagnostics. Our lead product candidate is crenezumab, a humanized, monoclonal, conformation-specific anti-Abeta antibody that wedeveloped using our proprietary SupraAntigen platform. The two Phase 3 clinical studies for crenezumab were commenced in early 2016 and in February2017, respectively. We use our two unique proprietary platform technologies, SupraAntigen (conformation-specific biologics) and Morphomer(conformation-specific small molecules), to discover, design and develop medicines and diagnostics to target misfolded proteins. The Company was initially incorporated as a limited liability company on February 13, 2003 in Basel and effective August 25, 2003 was transitionedinto a stock company. The Company’s corporate headquarters are located at EPFL Innovation Park Building B, Ecublens/Lausanne, Vaud, Switzerland. 2.Basis of preparation Going concern The financial statements have been prepared on the basis that the Company will continue as a going concern after considering the Company’s cashposition of CHF 124.4 million as of December 31, 2017. The Company received CHF 14 million in 2017 for the clinical milestone related to thecollaboration with Genentech on the first dosing in a Phase 2 clinical trial for Alzheimer’s Disease (AD) with an anti-Tau monoclonal antibody, CHF 14million in 2016 for the clinical milestone related to the collaboration with Genentech on the anti-Tau antibody program and CHF 4.9 million in 2016 for theclinical milestone related to ACI-35 pursuant to its collaboration with Janssen. This total also reflects the $75.9 million (CHF 74.5 million) in gross proceedsraised in the initial public offering (“IPO”) in September 2016 and the $13.5 million (CHF 13.2 million) the Company raised in the Series E PrivatePlacement Extension financing in April 2016. To date, the Company has financed its cash requirements primarily from its initial public offering, share issuances and revenues from collaborationagreements. The Company is a clinical stage company and is exposed to all the risks inherent to establishing a business. Inherent to the Company’s businessare various risks and uncertainties, including the substantial uncertainty as to whether current projects will succeed. The Company’s success may depend inpart upon its ability to (i) establish and maintain a strong patent position and protection, (ii) enter into collaborations with partners in the biotech andpharmaceutical industry, (iii) successfully move its product candidates through clinical development, (iv) attract and retain key personnel, and (v) acquirecapital to support its operations. Statement of compliance The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the InternationalAccounting Standards Board (“IASB”). These financial statements have been approved for issue by the Board of Directors on March 20, 2018. Basis of measurement The financial statements have been prepared under the historical cost convention except for items that are required to be accounted for at fair value. F-7 Table of Contents Functional currency The financial statements of the Company are presented in Swiss Francs (CHF), which is also the functional currency of the Company. All financialinformation presented in Swiss Francs (except for share capital and earnings per share data) has been rounded to the nearest thousand CHF (CHF thousands),unless otherwise indicated. The Company also has transactions denominated in U.S. Dollars ($) and Euros (EUR) that are translated to CHF using prevailingexchange rates at the date of transaction or as of the balance sheet date. 3.Summary of significant accounting policies The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistentlyapplied to all the years presented, unless otherwise stated. Current vs. non-current classification The Company presents assets and liabilities in the balance sheet based on current/non-current classification. The Company classifies all amounts to berealized or settled within twelve months after the reporting period to be current and all other amounts to be non-current. Foreign currency transactions Foreign currency transactions are translated into the functional currency Swiss Francs (CHF) using prevailing exchange rates at the dates of thetransactions. Monetary assets and liabilities denominated in foreign currencies are translated into CHF at rates of exchange prevailing at reporting date. Anygains or losses from these translations are included in the statement of income in the period in which they arise. Revenue recognition Revenue includes upfront fees, milestone payments as well as revenue from research and development agreements associated with collaborations withthird parties and grants from public institutions and foundations. License of intellectual property Revenue from non-refundable, upfront license payments and performance milestones where the Company has continuing involvement is recognizedover the estimated performance or agreement period, depending on the terms of the agreement. The recognition of revenue is prospectively changed forsubsequent changes in the development or agreement period. For collaboration agreements on product candidates (i) that are in clinical development, (ii) where the upfront payment reflects a payment for pastinvestments the Company has made in the development of the product candidate, access to the product candidate, the associated intellectual property andour knowledge, and, (iii) where there is no further performance commitment, the Company recognizes the fair value of the upfront payment at the time ofentering into the collaboration agreement. For collaboration agreements (i) in clinical development but where conditions (ii) and (iii) are not met, theCompany recognizes revenue from upfront payments under our collaboration agreements pro-rata over the term of the estimated period of performance undereach agreement. For collaboration agreements, in addition to receiving upfront payments, the Company is also entitled to milestone and other contingent payments uponachieving pre-defined objectives. Milestone payments Revenue from milestones, if they are non-refundable and deemed substantive, is recognized upon successful accomplishment of the milestones. To theextent that non-substantive milestones are achieved and the Company has remaining performance obligations, milestones are deferred and recognized asrevenue over the estimated remaining period of performance. F-8 Table of Contents Research and Development Services The Company has certain arrangements with our collaboration partners that include contracting our full-time employees for research and developmentprograms. These revenues are recorded in contract revenue as the services are performed. Research and development expenditure Given the stage of development of the Company’s products, all research expenditure is recognized as expense when incurred. Research and developmentexpenditures include: ·the cost of acquiring, developing and manufacturing active pharmaceutical ingredients for product candidates that have not received regulatoryapproval, clinical trial materials and other research and development materials;·fees and expenses incurred under agreements with contract research organizations, investigative sites, and other entities in connection with theconduct of clinical trials and preclinical studies and related services, such as administrative, data management, and laboratory services;·fees and costs related to regulatory filings and activities;·costs associated with pre-clinical and clinical activities; and·employee-related expenses, including salaries and bonuses, benefits, travel and stock-based compensation expense For external research contracts the “stage of completion” method is used to estimate the amount of accrued expense related to the research projects for itsclinical studies. The Company estimates its accrued expenses as of the balance sheet date in the financial statement based on facts and circumstances knownat the time. Registration costs for patents are part of the expenditure for research and development projects. Therefore, registration costs for patents are expensedwhen incurred as long as the research and development project concerned does not meet the criteria for capitalization. Property, plant and equipment Equipment is shown at historical acquisition cost, less accumulated depreciation and any accumulated impairment losses. Historical costs includeexpenditures that are directly attributable to the acquisition of the property, plant and equipment. Depreciation is calculated using a straight-line method towrite off the cost of each asset to its residual value over its estimated useful life as follows: IT equipment 3 yearsLaboratory equipment 5 yearsLeasehold improvements / furniture 5 years The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Where an asset’s carrying amount isgreater than its estimated recoverable amount, it is written down to its recoverable amount. Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amount and are included in the Statements of Income/ (Loss). Financial assets and liabilities The Company’s financial assets and liabilities are comprised of receivables, cash and cash equivalents, trade payables and a long-term financingobligation. The carrying amount for these financial assets and liabilities approximates fair value. F-9 Table of Contents Receivables Receivables are non-derivative financial assets with fixed payments that are not quoted in an active market. They arise when the Company providesmoney, goods or services directly to a debtor with no intention of trading the receivable. They are included in current assets, except for those with maturitiesgreater than 12 months after the balance sheet date, which are classified as long-term assets. Receivables are recognized at their billing value. An allowancefor doubtful accounts is recorded for potential estimated losses when there is objective evidence of the debtor’s inability to make required payments. Cash and cash equivalents Cash and cash equivalents include deposits held with external financial institutions and cash on hand. All cash and cash equivalents are either in cash orin deposits with less than 3 months’ duration. The Company assesses at each period whether there is objective evidence that financial assets are impaired. Recognized impairment losses would beimmediately recognized in the Statements of Income / (Loss). Trade payables Trade payables are recognized initially at fair value, which represents cost incurred. Long-term financing obligation The Company’s long-term financing obligation is measured as of the period end date based on the repayment terms when originated. Share capital and Initial Public Offering Ordinary (Common) Shares are classified as equity, as were all Preferred Shares previously outstanding prior to the IPO. Expenses directly attributable tothe issuance of new shares are shown in equity as a deduction, net of tax, from the proceeds. Preferred Shares AC Immune had five classes (Class A, B, C, D and E) of Preferred Shares outstanding as of December 31, 2015. These Preferred Shares remainedoutstanding until the Company completed an IPO in September 2016 and at that time the Preferred Shares were converted to Common Shares on a one-for-one basis. The Preferred Shares were a class of shares that AC Immune SA issued in connection with five separate capital increases and conveyed voting rightsand certain other rights to their holders. The holders of Preferred Shares owned 80.1% of the total amount of shares outstanding (assuming conversion of the Preferred Shares into CommonShares on a one-for-one basis) as of December 31, 2015 and the Company’s Board of Directors were predominantly the holders of Preferred Shares. ThePreferred Shares had been the primary source of equity financing for the Company for more than 13 years until the Company completed an IPO in September2016, at which point all Preferred Shares were converted to Common Shares. The Preferred Shares did not have mandatory redemption features; however, theShareholders’ Agreement provided for conversion of Preferred Shares into Common Shares as a result of an IPO. The redemption of the Preferred Shares wasauthorized by the Company’s Board of Directors. The voting rights associated with Preferred Shares were the same as for Common Shares. Each Preferred Share entitled the holder to one vote. Nodividends were paid on the Preferred Shares and the holders of Preferred Shares were not entitled to any dividends unless dividends are paid on the CommonShares. The Preferred Shares had a liquidation preference wherein, in the event of a change of control or a liquidation of the Company, the holders of PreferredShares were entitled to receive, prior and in preference to the holders of Common Shares, the amount corresponding to the price paid for each Preferred Share.Thereafter, all holders of Preferred Shares participated with the holders of Common Shares on an as-if-converted basis in any remaining proceeds. F-10 Table of Contents On October 23, 2015, AC Immune completed a 250-for-1 stock split. The split was applied to all of AC Immune’s outstanding common shares, preferredshares (Series A, B, C, D and E) and vested and unvested options. The stock split impacted earnings per share (“EPS”). To facilitate a comparison of EPSfigures, the 2015 reported EPS figures were adjusted to reflect the stock split. 2015 disclosures in notes 9 (share capital), 18 (share-based compensation) and20 (earnings per share) have all been prepared taking into consideration the 250-for-1 stock split. On April 15, 2016, AC Immune completed a private placement of Series E preferred shares, each with a nominal value of CHF 0.02 per share (the “SeriesE Private Placement Extension”). An aggregate 1,401,792 Series E preferred shares were issued at a price of $9.6384 per preferred share to certain strategicinvestors, individuals and existing shareholder in the Series E Private Placement Extension for an aggregate subscription amount of approximately $13.5million. The Series E preferred shares had substantially the same terms as the Series A, B, C and D preferred shares and were accounted for as equity on ACImmune’s balance sheet and subsequently converted to Common Shares as a result of the IPO. Initial Public Offering (IPO) On September 22, 2016, AC Immune successfully priced a 6.0 million common share IPO at $11.00 per share. On the same day, the underwritersexercised the overallotment option which resulted in a further 900,000 common shares being placed in the market and took the total number of shares offeredto investors to 6.9 million common shares. The gross proceeds received were $75.9 million (CHF 74.5 million) while the proceeds net of underwriting feesamounted to $70.6 million (CHF 69.3 million). The IPO resulted in an increase of CHF 64.2 million in the share premium of AC Immune excluding the effect of transaction costs associated with the IPOrelated to the issuance of new shares. Transaction costs associated with the IPO and related to the issuance of new shares were charged directly against theshare premium account thereby reducing the total equity reported. Employee benefits Post-employment benefits The Company operates the mandatory pension schemes for its employees in Switzerland. The schemes are generally funded through payments toinsurance companies or trustee-administered funds. The Company has a pension plan designed to pay pensions based on accumulated contributions onindividual savings accounts. However, this plan is classified as a defined benefit plan under IAS 19. The net defined benefit liability is the present value of the defined benefit obligation at the balance sheet date minus the fair value of plan assets. Thedefined benefit obligation is in all material cases calculated annually by independent actuaries using the projected unit credit method, which reflects servicesrendered by employees to the date of valuation, incorporates assumptions concerning employees’ projected salaries, pension increases as well as discountrates of highly liquid corporate bonds which have terms to maturity approximating the terms of the related liability. Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest), arerecognized immediately in Other Comprehensive Income. Past service costs, including curtailment gains or losses, are recognized immediately in general andadministrative expenses within the operating results. Settlement gains or losses are recognized in general and administrative expenses within the operatingresults. The Company determines the net interest expense (income) on the net defined benefit liability for the period by applying the discount rate used tomeasure the defined benefit obligation at the beginning of the annual period or in case of any significant events between measurement dates to the then-netdefined benefit liability, taking into account any changes in the net defined benefit liability during the period as a result of contributions and benefitpayments. Net interest expense and other expenses related to defined benefit plans are recognized in the statement of income. F-11 Table of Contents Share-based compensation The Company operates an equity-settled, share-based compensation plan. The fair value of the employee services received in exchange for the grant ofequity based awards is recognized as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of theinstruments granted, excluding the impact of any non-market vesting conditions. Non-market vesting conditions are included in assumptions about thenumber of instruments that are expected to become exercisable. At each balance sheet date, the Company revises its estimates of the number of instrumentsthat are expected to become exercisable. It recognizes the impact of the revision of original estimates, if any, prospectively in the income statement, and acorresponding adjustment to equity over the remaining vesting period. Stock options granted under the Company’s stock option plans A, B, C and the 2016 Stock Option and Incentive Plan are valued using the Black-Scholes option pricing model (see Note 18). This valuation model as well as parameters used such as expected volatility and expected term of the stockoptions are partially based on management’s estimates. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the optionsare exercised. We estimate the fair value of non-vested stock awards (restricted shares and restricted share units) using a reasonable estimate of market value of thecommon stock on the date of the award. We classify our share-based payments as equity-classified awards as they are settled in shares of our common stock.We measure equity-classified awards at their grant date fair value and do not subsequently remeasure them. Compensation costs related to equity-classifiedawards are equal to the fair value of the award at grant-date amortized over the vesting period of the award using the graded method. We reclassify thatportion of vested awards to share premium as the awards vest. Provisions Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events where it is more likely than not thatan outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Taxation Current income tax assets and liabilities for the period are measured at the amount expected to be recovered from or paid to the taxation authorities. Thetax rates and tax laws used to compute the tax amounts are those that are enacted or substantively enacted, at the reporting date in accordance with the fiscalregulations of the respective country where the Company operates and generates taxable income. Deferred tax is provided using the liability method ontemporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled,based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. If required, deferred taxation is provided in full usingthe liability method, on all temporary differences at the reporting dates. It is calculated at the tax rates that are expected to apply to the period when it isanticipated the liabilities will be settled, and it is based on tax rates (and laws) that have been enacted or substantively enacted at the reporting date. Deferred income tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporarydifferences can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the relatedtax benefit will be realized. Although the Company has substantial tax loss carryforwards, historically, due to the fact that the Company had limited certaintyon the achievement of key milestones, it has not recognized any deferred tax assets. Earnings per share The Company presents basic earnings per share for each period in the financial statements. The earnings per share is calculated by dividing the earningsof the period by the weighted average number of shares (common and F-12 Table of Contents preferred) outstanding during the period. Diluted earnings per share reflect the potential dilution that could occur if dilutive securities such as share optionswere vested or exercised into common shares or resulted in the issuance of common shares that would participate in net income. Anti-dilutive shares areexcluded from basic and dilutive earnings per share calculation. Critical judgments and accounting estimates The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect theapplication of accounting policies and the reported amounts of assets, liabilities, income and expenses. The areas where AC Immune has had to make judgments, estimates and assumptions relate to (i) revenue recognition on collaboration and licensingagreements, (ii) clinical development accruals, (iii) net employee defined benefit liability, (iv) income taxes and (v) share-based compensation. Actual resultsmay differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognizedin the period in which the estimates are revised and in any future periods affected. Income taxes As disclosed in Note 16, the Company has tax losses that can generally be carried forward for a period of 7 years from the period the loss was incurred.These tax losses represent potential value to the Company to the extent that the Company is able to create taxable profits before the expiry period of thesetax losses. The Company has not recorded any deferred tax assets in relation to these tax losses. Preferred shares Significant judgment was required in determining the classification of the Preferred Shares issued by the Company as either equity or liabilities. ThePreferred shareholders received certain preference rights that represented a significant proportion of the net assets of the Company in the case of liquidationor certain exit events, the occurrence of which was outside the control of the Company. These Preferred Shares remained outstanding until the Companycompleted an IPO in September 2016 and at that time the Preferred Shares were converted from Preferred Shares to Common Shares on a one-for-one basis. Segment reporting The Company has one segment. The Company currently focuses all of its resources on discovering and developing therapeutic and diagnostic productstargeting misfolded proteins. The Company is managed and operated as one business. A single management team that reports to the chief operating decision maker comprehensivelymanages the entire business. Accordingly, the Company views its business and manages its operations as one reportable segment. Non-current assets arelocated in and revenue is attributable to the Company’s country of domicile, Switzerland. Accounting pronouncements – not yet adopted IFRS 9 Financial Instruments will supersede IAS 39 Financial Instruments: Recognition and Measurement and is effective for annual periods beginningon or after January 1, 2018. IFRS 9 covers classification and measurement of financial assets and financial liabilities, impairment of financial assets andhedge accounting. The Company expects to adopt this standard on January 1, 2018, and after completing its assessment of the standard, AC Immune does notanticipate IFRS 9 to have a material impact on the financial statements. IFRS 16 Leases provides a new model for lessee accounting in which all leases, other than short-term and small-ticket-item leases, will be accounted forby the recognition on the balance sheet of a right-to-use asset and a lease liability, and the subsequent amortization of the right-to-use asset over the leaseterm. IFRS 16 will be effective for annual periods beginning on or after January 1, 2019 with early adoption permitted. AC Immune is still assessing theimpact of this standard on its financial statements. F-13 Table of Contents The Company has completed its analysis of the impact of IFRS 15 Revenue from Contracts with Customers, which amends revenue recognitionrequirements and establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising fromcontracts with customers. The standard replaces IAS 18 Revenue and IAS 11 Construction Contracts and Related Interpretations. The new standard, asamended, becomes effective for the Company in the first quarter of fiscal year 2018, but allows the Company to adopt early. The Company will adopt thisaccounting standard in the first quarter of fiscal year 2018. The Company will adopt this standard using the modified retrospective method. Under this method, the cumulative effect of adopting the standard willbe recorded to retained earnings on January 1, 2018. We have completed our assessment of the effect of this adoption, including a detailed review of all ofour contracts to identify potential differences in accounting as a result of the new standard and use of the practical expedient regarding contractmodifications. The new standard will result in additional revenue-related disclosures in the footnotes to our financial statements. Adoption of this standardwill also require changes to certain business processes which are in place to ensure our compliance. Based on our analysis, we do not anticipate a materialimpact on our total revenues or costs. 4.Property, plant and equipment As of December 31, 2017 Furniture Computers/IT Lab Equipment LeaseholdImprovements TotalAcquisition Cost: Balance at the end of the previous year 81 298 2,792 103 3,274 Acquisitions 4 271 1,369 169 1,813 Balance at end 85 569 4,161 272 5,087 Accumulated depreciation: Balance at the end of the previous year (45) (172) (1,858) (79) (2,154)Depreciation expense (14) (87) (453) (26) (580)Balance at end (59) (259) (2,311) (105) (2,734) Carrying Amount: December 31, 2016 36 126 934 24 1,120 December 31, 2017 26 310 1,850 167 2,353 As of December 31, 2016 Furniture Computers/IT Lab Equipment LeaseholdImprovements TotalAcquisition Cost: Balance at the end of the previous year 43 172 2,058 103 2,376 Acquisitions 38 126 734 — 898 Balance at end 81 298 2,792 103 3,274 Accumulated depreciation: Balance at the end of the previous year (36) (138) (1,629) (73) (1,876)Depreciation expense (9) (34) (229) (6) (278)Balance at end (45) (172) (1,858) (79) (2,154) Carrying Amount: December 31, 2015 7 34 429 30 500 December 31, 2016 36 126 934 24 1,120 F-14 Table of Contents For the years ended December 31, 2017, 2016 and 2015, the Company incurred CHF 580 thousand, 278 thousand and 287 thousand in depreciationexpense, respectively. 5.Financial Assets AC Immune has two deposits in escrow accounts totaling CHF 126 thousand associated with the lease of the Company’s premises as of December 31,2017 and CHF 86 thousand as of December 31, 2016. 6.Prepaid expenses and accrued income For the Years Ended December 31,in CHF thousands 2017 2016Prepaid expenses 1,440 1,278 Accrued income 2,799 889 Total 4,239 2,167 The prepaid expenses relate mainly to research contracts with down-payments at contract signature and the related activities will start or continue into2018. Accrued income consists of CHF 1.5 million as of December 31, 2017 associated with our Biogen collaboration and CHF 1.2 million associated with ourJanssen collaboration (see Note 13). CHF 0.9 million was accrued as of December 31, 2016 and subsequently invoiced in 2017. 7.Other current receivables For the Years Ended December 31,in CHF thousands 2017 2016Other receivables 691 182 Swiss VAT 112 320 Withholding tax 115 15 Total 918 517 The maturity of these assets is less than three months. The Company considers the counterparty risk as low and the carrying amount of these receivablesis considered to correspond to their fair value. 8.Cash and cash equivalents For the Years Ended December 31,in CHF thousands 2017 2016Cash 124,377 152,210 Total 124,377 152,210 By Currency CHF 103,272 41,322 EUR 3,658 6,727 USD 17,447 104,161 Total 124,377 152,210 At the balance sheet dates, Company funds were held in CHF, EUR and USD currencies. As of December 31, 2017, funds in EUR and USD were translatedinto CHF at a rate of 1.169 and 0.976, respectively. F-15 Table of Contents 9.Share capital As of December 31, 2017 and 2016, the issued share capital amounted to CHF 1,147,104 and CHF 1,135,468 respectively and comprised of CommonShares of 57,355,188 and 56,773,392, respectively. The table below summarizes the Company’s capital structure: For the Years Ended December 31, 2017 2016 Number CHF Number CHFCommon shares with a nominal value of CHF 0.02 each 57,355,188 1,147,104 56,773,392 1,135,468 Total 57,355,188 1,147,104 56,773,392 1,135,468 The Common Shares nominal values of CHF 0.02 per share are fully paid in. The changes in common shares outstanding for the year ended December 31, 2017 represent 4,023 Restricted Shares issued, 5,998 Restricted Share Unitswhich vested and 571,775 share options that were exercised. On April 15, 2016, AC Immune completed a private placement of Series E preferred shares, each with a nominal value of CHF 0.02 per share (the “SeriesE Private Placement Extension”). An aggregate 1,401,792 Series E preferred shares were issued at a price of $9.6384 per preferred share to certain strategicinvestors, individuals and existing shareholder in the Series E Private Placement Extension for an aggregate subscription amount of approximately $13.5million. As previously referenced in Note 3 in the summary of significant accounting policies, all outstanding Preferred Shares were converted to commonshares as a result of the IPO completed in September 2016. The changes in common shares outstanding for the year ended December 31, 2016 represent (i) 6.9 million common shares issued as a result of theCompany’s 2016 IPO, (ii) 38,577,042 additional common shares as a result the conversion of all outstanding preferred shares (including the 1.4 millionpreferred Series E shares issued in April 2016) on a one-for-one basis as a result of the Company’s 2016 IPO and (iii) 2,069,100 share options exercised during2016. 10.Trade payables and accrued liabilities For the Years Ended December 31,in CHF thousands 2017 2016Trade payables and other payables 1,092 4,035 Accrued research and development costs 5,430 3,265 Accrued payroll expenses 2,420 1,419 Other accrued expenses 457 682 Deferred income 355 521 Total 9,754 9,922 An accrual of CHF 1.1 million and CHF 1.0 million was recognized for performance-related remuneration relating to 2017 and 2016, respectively. 11.Deferred income For the year ended December 31, 2017, the Company has recorded CHF 0.4 million in deferred income in relation to research funding commitments fromBiogen. For the year ended December 31, 2016, we received a research contribution from Biogen for research collaboration of $1.5 million (CHF 1.5 million)for the alpha-synuclein and TDP-43 PET imaging programs. As of December 31, 2016, the remaining CHF 521 thousand was recorded as a current liability indeferred income and was recognized as revenue in 2017 as remaining performance obligations were completed. F-16 Table of Contents 12.Long term financing obligation On January 4, 2016 and September 13, 2016 for fiscal years 2016 and 2017, respectively, AC Immune obtained separate funding commitment noticesfrom the LuMind Research Down Syndrome Foundation (“LuMind”) totaling $200 thousand in each instance. Per the Research Grant Agreement, the termsstipulate that AC Immune has an obligation to reimburse LuMind for an amount equal to 125% of the then funding commitment made by LuMind to ACImmune. AC Immune has accordingly recorded a long-term financing obligation for the total $400 thousand (CHF 395 thousand) committed and acorresponding interest accrual of $100 thousand (CHF 99 thousand). 13.Revenues For the Years EndedDecember 31,in CHF thousands 2017 2016 2015Contract revenue 20,255 23,214 39,090 Total 20,255 23,214 39,090 Anti-Abeta antibody in AD - Collaboration agreement of 2006 with Genentech In November 2006, AC Immune signed an exclusive, worldwide licensing agreement for crenezumab, our humanized monoclonal antibody targetingmisfolded Abeta. Genentech commenced Phase 3 clinical studies for crenezumab in the first quarter of 2016. In February 2017, Genentech started a secondPhase 3 clinical trial. If crenezumab receives regulatory approval, we will be entitled to receive royalties that are tied to annual sales volumes with differentroyalty rates applicable in the U.S. and Europe. These percentage rates range from net high single digits to the mid-teens. Under the agreement with Genentech, we may become eligible to receive payments totaling up to approximately $340 million, excluding royalties. As ofDecember 31, 2017 we have received total payments of $65 million (CHF 70.1 million). We recognized the Phase 3 July 2015 payment as revenue in our 2015 fiscal year since there was no further performance requirement to be met by theCompany. The agreement provides for a second therapeutic product based on the same intellectual property and anti-Abeta antibody compound as well as ananti-Abeta diagnostic product. Genentech may terminate the agreement at any time by providing three months’ notice to us. In such event all costs incurredare still refundable. Anti-Tau antibody in AD – Collaboration agreement of 2012 with Genentech In June 2012, we entered into a second partnership with Genentech to commercialize our anti-Tau antibodies for use as immunotherapeutics. The valueof this exclusive, worldwide alliance is potentially greater than CHF 400 million and includes upfront and milestone payments. In addition to milestones, wewill be eligible to receive royalties on sales at a percentage rate ranging from the mid-single digits to high single digits. The agreement also provides forcollaboration on two additional indications built on the same anti-Tau antibody program as well as a potential anti-Tau diagnostic product. To date, we have received payments totaling CHF 59 million, including a CHF 14 million milestone payment recognized and payment received in thefourth quarter of 2017 associated with the first patient dosing in a Phase 2 clinical trial for Alzheimer’s Disease with an anti-Tau monoclonal body known asRO7105705, a CHF 14 million milestone payment recognized in the second quarter of 2016 and received in July 2016, associated with the recentannouncement of the commencement of the Phase 1 clinical study of the lead anti-Tau antibody candidate and a CHF 14 million milestone payment receivedin 2015 in connection with the ED-GO decision. Genentech may terminate the agreement at any time by providing three months’ notice to us. In such event all costs incurred are still refundable. Tau Vaccine in AD – Collaboration agreement of 2014 with Janssen Pharmaceuticals In December 2014, we entered into a partnership with Janssen Pharmaceuticals, a Johnson & Johnson company, to develop and commercializetherapeutic anti-Tau vaccines for the treatment of AD and potentially other F-17 Table of Contents Tauopathies. The partnership includes a worldwide exclusive license and research collaboration. We and Janssen will co-develop the lead therapeuticvaccine, ACI-35, through Phase 1b completion. From Phase 2 and onward, Janssen will assume responsibility for the clinical development, manufacturingand commercialization of ACI-35. ACI-35 is an active therapeutic vaccine stimulating the patient’s immune system to produce a polyclonal antibodyresponse against phosphorylated Tau protein. The agreement also allows for the collaboration to be expanded to a second indication based on the same anti-Tau vaccine program and intellectualproperty related to this program. We received an upfront payment of CHF 25.9 million which we recognized in 2014 and are eligible to receive development, regulatory andcommercialization milestone payments for AD and a potential second indication outside of AD. Additionally, we will receive royalties on sales at apercentage rate ranging from the low double digits to mid-teens. The two companies have entered into a three-year joint research collaboration, which wassubsequently amended to five years, to further characterize and develop novel vaccine therapies for the treatment of Tauopathies. The recognition of the upfront payment from Janssen was recorded at the time of receipt as the Company determined that the license granted to Janssenwas a separate, non-contingent deliverable under the agreement. The Company determined the license had stand-alone value based on Janssen’s ability tocreate value from the license without our research and development support services due their extensive experience in vaccine development and productionwhich would allow them to complete the phase 1b clinical trials. In 2016, we received payments of CHF 1.5 million for pre-payment of research and external research costs. Pursuant to the terms of the collaborationagreement, there is a performance obligation until the end of the year. As a result, we recognized the proceeds from the milestone payment over a 12-monthperiod on a straight-line basis. In May 2016, we received a CHF 4.9 million payment for reaching a clinical milestone in the Phase 1b study. As we met allperformance obligations on reaching the milestone, we have recognized related revenue. In July 2017, AC Immune and Janssen entered into a Second Amendment to the December 2014 License, Development and CommercializationAgreement. The Amendment allows for the alignment of certain payment provisions with the new Development Plan and Research Plan activities. ACI andJanssen will jointly share R&D costs until the completion of the first Phase 2. Under the terms of the agreement, Janssen may terminate the agreement at anytime after completion of the Phase 1b clinical study by providing 90 days’ notice to us. Tau-PET imaging agent in AD – License and Collaboration agreement of 2014 with Piramal Imaging In May 2014, AC Immune SA entered into an LCA, our first diagnostic partnership with Piramal Imaging (“Piramal”), a division of Piramal Enterprises,Ltd. The LCA with Piramal is an exclusive, worldwide licensing agreement for the research, development and commercialization of the Company’s Tauprotein positron emission tomography (PET) tracers supporting the diagnosis and clinical management of AD and potential Tau-related disorders andincludes upfront and sales milestone payments totaling up to EUR 157 million, plus royalties on sales at a percentage rate ranging from mid-single digits tolow double digits. The upfront payment of EUR 500 thousand received from this collaboration was deferred over a period of 12 months which was the joint ResearchCollaboration period. As such, the residual balance in deferred revenue related to this collaboration at December 31, 2014, was fully recognized until May2015. In March 2017, we invoiced Piramal for a CHF 1.1 million milestone related to the initiation of “Part B” of the first-in-man Phase 1 clinical trial for PSP(Progressive Supranuclear Palsy). As we met all performance obligations on reaching the milestone, we have recognized this milestone as revenue in the firstquarter of fiscal 2017 and received payment in Q4 2017. We are also entitled to further clinical milestones totaling EUR 6 million should the compoundmake it through to Phase 3 clinical studies and are further entitled to potential regulatory, commercialization and sales based milestones totaling EUR 150million. Piramal may terminate the LCA agreement by providing three months’ notice to the Company. Alpha-synuclein and TDP-43 PET tracer in AD – Collaboration agreement of 2016 with Biogen F-18 Table of Contents On April 13, 2016, AC Immune entered into a non-exclusive research collaboration agreement with Biogen International GmbH, or Biogen. Under theagreement, we and Biogen have agreed to collaborate in the research and early clinical development of our alpha-synuclein PET Tracer program forParkinson’s disease and other synucleinopathies, and a second program for the identification, research and development of novel PET ligands against TDP-43, a protein recently linked to neurodegeneration in diseases such as amyotrophic lateral sclerosis. In addition, we have agreed to share the costs of thecollaboration, with Biogen primarily funding the majority of research costs, subject to a cap, which includes an upfront technology access fee and fundingtowards research and development personnel. We will own all intellectual property rights to any invention relating to alpha-synuclein or TDP-43 PET tracers. In April 2017, we began the second year of our collaboration and have recognized CHF 3.4 million for research contribution and collaboration services.We have also recognized the remaining CHF 0.5 million related to the technology access fee bill in April 2016 which was amortized over a 12-month period. As of December 31, 2017, CHF 355 thousand is recorded as a current liability in deferred income and is expected to be recognized as revenue in 2018 asremaining performance obligations are completed. Recombinant protein therapeutic candidate – Collaboration with Essex Bio-Technology Limited On May 19, 2017, we entered into a Research Project Agreement with Essex Bio-Technology Limited, or Essex, to develop a recombinant proteintherapeutic candidate acting on a unique neuroprotective mechanism for treatment of neurological diseases, such as Alzheimer’s disease and frontotemporaldementia. Essex will provide joint research commitment as well as financial support to AC Immune for the pre-IND development of the biological agent. As part of this agreement, the parties have agreed to an initial two year Research Plan, which intends to develop a basic Fibroblast Growth Factor(“bFGF”) as a therapeutic for the treatment of neurodegenerative diseases and to generate novel antibody therapeutics. Under the terms of the agreement, Essex will provide support to AC Immune until the selection of a collaboration product by the Joint SteeringCommittee, up to a maximum of CHF 750 thousand per year. The Company recognized CHF 78 thousand for the year ended December 31, 2017. Continuation of 2015 Grant from the Michael J. Fox Foundation On September 16, 2017, AC Immune formally signed a one year grant continuation with the Michael J. Fox Foundation for Parkinson’s Disease research.This grant provides funds for the development of Positron Emission Tomography (PET) tracers for the alpha-synuclein protein, to support the early diagnosisand clinical management of Parkinson’s disease. The Company recognized CHF 95 thousand for research services performed for the year ended December 31,2017. 14.Expenses by category Research and Development For the Years EndedDecember 31,in CHF thousands 2017 2016 2015Operating expenses 23,822 18,767 10,763 Payroll expenses 8,552 6,450 5,879 Share-based compensation 289 557 407 Total research and development expenses 32,663 25,774 17,049 F-19 Table of Contents General and Administrative For the Years EndedDecember 31,in CHF thousands 2017 2016 2015Operating expenses 3,857 3,168 1,377 Payroll expenses 4,984 3,969 1,908 Share-based compensation 1,290 759 132 Total general and administrative expenses 10,131 7,896 3,417 Financial Result, net For the Years Ended December 31,in CHF thousands 2017 2016 2015Interest income/ (expense) 184 36 55 Foreign currency remeasurement gain/(loss), net (4,049) 3,443 1,598 Other finance income/(expense) (7) (119) (7)Finance result, net (3,872) 3,360 1,646 15.Related-party transactions Key management including the Board of Directors (five individuals excluding the CEO) and the Executive Management (four individuals)compensation was: For the Years Ended December 31,in CHF thousands 2017 2016 2015Short-term employee benefits 2,463 2,251 1,776 Post-employment benefits 166 154 124 Share-based compensation 1,267 832 8 Total 3,896 3,237 1,908 In April 2017, Joerg Hornstein was named the Chief Financial Officer and a member of the Executive Management. He replaced the former CFO whosetenure ended in November 2016. Friedrich von Bohlen and Peter Bollmann joined the Board of Directors of AC Immune in October and December 2015, respectively. Friedrich vonBohlen replaced Christof Hettich who stepped down from the Board in August 2015. Hans-Beat Guertler resigned from the board in December 2015. Hisposition was assumed by Peter Bollmann. In November 2016, Mr. Thomas Graney joined the Board of Directors of AC Immune, replacing Mathias Hothum ashis term expired. Short-term employee benefits comprise of salaries, bonuses, social security and expense allowances. 257,916, 98,500, and 45,000 options were granted in 2017, 2016 and 2015, respectively, to the Executive Management of the Company. No optionswere granted in 2017, 2016, and 2015, respectively, to the Directors of the Company. In connection with his departure in the fourth quarter of 2016, theformer Chief Financial Officer forfeited his initial 2016 grant (included in the aggregate 2016 total above), and in its place was awarded 49,250 options. Thefourth quarter 2016 grant date fair value of the replacement award was CHF 674 thousand. The Company granted 4,023 Restricted Shares as part of a Restricted Share Award to one of our Directors in accordance with our 2016 Stock Option andIncentive Plan in 2017. No such awards were issued in 2016 and 2015. In the third quarter of fiscal 2017, the Company granted 125,332 Restricted Share Units to certain members of the Board of Directors and ExecutiveManagement. No such awards were issued in 2016 and 2015. F-20 Table of Contents 16.Income taxes The Company recognized no income tax expense or deferred tax asset or liability positions for the years ended December 31, 2017, 2016, and 2015. The income tax expense for each year can be reconciled to Income / (loss) before tax as follows: For the Years Ended December 31,in CHF thousands 2017 2016 2015Income / (loss) before income tax (26,411) (7,096) 20,270 Tax expense / (benefit) calculated at the statutory rate of 20.5% (21% for 2016 and 22% for2015) (5,420) (1,504) 4,566 Effect of Swiss Tax Holidays — — — Permanent differences 40 (166) — Effect of unrecognized carry forward tax loss — — (4,566)Effect of unused tax losses and tax offsets not recognized as deferred tax assets 5,380 1,670 — Effective income tax rate benefit / (expense) — — — The tax rate used for the 2017 reconciliations above is the corporate tax rate of 20.5% (21%: 2016 and 22% : 2015) payable by corporate entities in theCanton of Vaud, Switzerland on taxable profits under tax law in that jurisdiction. In 2015, AC Immune was able to apply tax loss carryforwards to reduce its effective tax rate to zero. For the Years Ended December 31,in CHF thousands 2017 2016 2015Unrecognized deductible temporary differences, unused tax losses and unused tax credits Deductible temporary differences, unused tax losses and unused tax credits for which nodeferred tax assets have been recognized are attributable to the following: - Tax losses 62,575 36,707 29,079 - Deductible temporary differences related to the retirement benefit plan 4,926 3,798 2,787 Total 67,501 40,505 31,866 Deductible temporary differences related to the retirement benefit plan do not expire. Tax losses expiry dates are shown in the table below: in CHF thousands 2017 2016 2015Tax losses split by expiry date December 31, 2017 — — — December 31, 2018 2,175 2,175 2,175 December 31, 2019 16,566 16,566 16,566 December 31, 2020 10,338 10,338 10,388 December 31, 2021 — — — December 31, 2022 — — — December 31, 2023 7,628 7,628 — December 31, 2024 25,868 — — Total 62,575 36,707 29,079 The tax losses available for future offset against taxable profits have increased by CHF 25.9 million from 2016, representing the amount of tax losses thatare additionally available as an offset, subject to expiration as disclosed in the table above, against future taxable income. F-21 Table of Contents Consistent with prior years, the Company has not recorded any deferred tax assets in relation to the past tax losses available for offset against futureprofits as the recognition criteria have not been met at the balance sheet date. 17.Retirement benefit plan The Company participates in a collective foundation covering all of its employees including its executive officers. In addition to retirement benefits, theplan provides death or long-term disability benefits. Contributions paid to the plan are computed as a percentage of salary, adjusted for the age of the employee and shared approximately 47% and 53% byemployee and employer, respectively. This plan is governed by the Swiss Law on Occupational Retirement, Survivors and Disability Pension Plans (BVG), which requires contributions to bemade to a separately administered fund. The fund has the legal form of a foundation and it is governed by the board of trustees, which consists of an equalnumber of employer’s and employee’s representatives. The board of trustees is responsible for the administration of the plan assets and for the definition ofthe investment strategy. The collective foundation is governed by a foundation board. The board is made up of an equal number of employee and employer representatives of thedifferent affiliated companies. The Company has no direct influence on the investment strategy of the foundation board. The assets are invested by the pension plan, to which many companies contribute, in a diversified portfolio that respects the requirements of the SwissBVG. Therefore disaggregation of the pension assets and presentation of plan assets in classes that distinguish the nature and risks of those assets is notpossible. Under the Plan, both the Company and the employee share the costs equally. The structure of the plan and the legal provisions of the BVG meanthat the employer is exposed to actuarial risks. The main risks are investment risk, interest risk, disability risk and the life expectancy of pensioners. Throughour affiliation with the pension plan, the Company has minimized these risks, since they are shared between a much greater number of participants. Onleaving the Company, a departing employee’s retirement savings are transferred to the pension institution of the new employer or to a vested benefitsinstitution. This transfer mechanism may result in pension payments varying considerably from year to year. The pension plan is exposed to Swiss inflation, interest rate risks and changes in the life expectancy for pensioners. For accounting purposes under IFRS, the plan is treated as a defined benefit plan. Liabilities are calculated annually by an independent actuary. Planassets have been estimated at their fair market value and liabilities have been calculated according to the “Projected Unit Credit” method. The following table sets forth the status of the defined benefit pension plan and the amount that should be recognized in the balance sheet: For the Years Ended December 31,in CHF thousands 2017 2016 2015Defined benefit obligation (14,278) (11,596) (9,439)Fair value of plan assets 9,352 7,798 6,652 Total liability (4,926) (3,798) (2,787) The following amounts have been recorded as net pension cost in the statement of income: For the Years Ended December 31,in CHF thousands 2017 2016 2015Service cost 912 742 641 Interest cost 81 75 101 Interest income (55) (56) (76)Impact of plan amendment — — (584)Net pension cost 938 761 82 F-22 Table of Contents The changes in defined benefit obligation, fair value of plan assets and unrecognized (gains) / losses are as follows: A. Change in defined benefit obligation in CHF thousands 2017 2016 2015Defined benefit obligation as of January 1 (11,596) (9,439) (8,091)Service cost (912) (742) (641)Interest cost (81) (75) (101)Change in demographic assumptions — (389) — Change in financial assumptions — (26) (591)Other actuarial gains / (losses) (735) (378) (176)Plan amendment — — 584 Benefit payments (426) (111) (48)Employees’ contributions (528) (436) (375)Defined benefit obligation as of December 31 (14,278) (11,596) (9,439) B.Change in fair value of plan assets in CHF thousands 2017 2016 2015Fair value of plan assets as of January 1 7,798 6,652 5,681 Interest income 55 56 76 Employees’ contributions 528 436 375 Employer’s contributions 590 511 441 Benefits payments 426 111 48 Plan assets gains/(losses) (45) 32 31 Fair value of plan assets as of December 31 9,352 7,798 6,652 Employer’s contribution to the pension plan for the financial year 2018 are estimated to be CHF 630 thousand. C.Change in net defined benefit liability in CHF thousands 2017 2016 2015Net defined benefit liabilities as of January 1 3,798 2,787 2,410 Net pension cost through statement of income 938 761 82 Re-measurement through other comprehensive income 780 761 736 Employer’s contribution (590) (511) (441)Net defined benefit liabilities as of December 31 4,926 3,798 2,787 The fair value of the plan assets is the cash surrender value of the insurance with AXA. The investment strategy defined by the board of trustees follows aconservative profile. The plan assets are primarily held within instruments with quoted market prices in an active market, with the exception of real estate and mortgages. The weighted average duration of the defined benefit obligation is 20.5 years as of December 31, 2017. The actuarial assumptions used for the calculation of the pension cost and the defined benefit obligation of the defined benefit pension plan for the year2017, 2016 and 2015 are as follows: For the Years Ended December 31, 2017 2016 2015Discount rate 0.70% 0.70% 1.25%Rate of future increase in compensations 1.50% 1.50% 1.50%Rate of future increase in current pensions 0.50% 0.50% 0.50%Mortality and disability rates BVG 2015G BVG 2015G BVG 2010G F-23 Table of Contents In defining the benefits, the minimum requirements of the Swiss Law on Occupational Retirement, Survivors and Disability Pension Plans (BVG) and itsimplementing provisions must be observed. The BVG defines the minimum pensionable salary and the minimum retirement credits. A quantitative sensitivity analysis for significant assumption as of December 31, 2017 is as shown below: Discount rate Future salary increase Future pension costAssumptions +0.5% increase -0.5% decrease +0.5% increase -0.5% decrease +0.5% increase -0.5% decrease in CHF thousandsDefined benefit obligation 12,707 15,849 14,449 14,121 14,989 13,564 Impact on the net defined benefitobligation 1,571 (1,571) (171) 157 (711) 714 The sensitivity analyses above is subject to limitations and has been determined based on a method that extrapolates the impact on net defined benefitobligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period. 18.Share-based compensation Through the year ended December 31, 2017, the Company has issued equity-based instruments under four different plans that existed in 2017 asoutlined in the table below. The Company’s 2016 Share Option and Incentive Plan (“Plan”) was approved by the shareholders at the Ordinary Shareholder’s meeting in November2016. The 2016 Plan authorizes the grant of incentive and non-qualified share options, share appreciation rights, restricted share awards, restricted shareunits, unrestricted share awards, performance share awards, performance-based awards to covered employees and dividend equivalent rights. The following table summarizes equity settled share option grants since inception under each plan: PLAN Number of optionsawarded (since inception) Vesting conditions Contractual life ofoptionsShare option plan A 362,750 At grant 15.5 yearsShare option plan B 819,000 At grant 10.5 yearsShare option plan C1 6,775,250 4 years’ service fromgrant date 10 years2016 Share Option and Incentive Plan: Executives and Directors 257,916 4 years’ service fromthe date of grant,quarterly 10 yearsEmployees 18,850 4 years’ service fromthe date of grant,annually 10 years F-24 Table of Contents The number and weighted average exercise prices (in CHF) of options under the share option programs for Plans A, B, C1 and 2016 are as follows: Number ofOptions WeightedAverageExercisePrice WeightedAverageRemainingTerm (Years)Outstanding at January 1, 2015 4,006,500 0.21668 4.5 Forfeited during the year (23,250) 0.14548 - Cancelled during the year (15,250) 0.14548 - Exercised during the year (594,250) 0.14548 - Granted during the year 223,250 0.14548 - Outstanding at December 31, 2015 3,597,000 0.14548 3.6 Exercisable at December 31, 2015 3,032,500 0.14548 3.4 Outstanding at January 1, 2016 3,597,000 0.14548 3.6 Forfeited during the year (106,000) 0.14548 - Cancelled during the year (19,250) 0.14548 - Exercised during the year (2,069,100) 0.14548 - Granted during the year 285,250 0.14548 - Outstanding at December 31, 2016 1,687,900 0.14548 5.6 Exercisable at December 31, 2016 1,284,525 0.14548 6.5 Outstanding at January 1, 2017 1,687,900 0.14548 5.6 Forfeited during the year (1,750) 0.14548 - Cancelled during the year (31,250) 0.14548 - Exercised during the year (571,775) 0.14548 - Granted during the year 276,766 9.70 - Outstanding at December 31, 2017 1,359,891 2.09 5.8 Exercisable at December 31, 2017 900,474 0.39 4.3 The weighted average exercise price for options granted in 2017, 2016 and 2015 is CHF 9.70, CHF .14548 and CHF .14548, respectively. The range ofexercise prices for outstanding options was CHF 0.14548 to CHF 12.00 as of December 31, 2017 and 0.14548 as of December 31, 2016 and 2015. The weighted average fair values of the options granted in 2017, 2016 and 2015 are CHF 7.29, CHF 5.85, and CHF 1.77, respectively. These fair valuesof options granted have been determined using the Black-Scholes option pricing model and an exercise price ranging from CHF 9.53 to CHF 12.00 in 2017(2016 and 2015: CHF 0.14548), a weighted average share price of CHF 8.77 (2016: CHF 5.96 and 2015: CHF 1.91), a risk-free interest rate of 0% (2016 and2015: 0%) and a volatility of 80% (2016: 80% and 2015: 50%) with an expected duration of 6 years (2016 and 2015: 6 years). All options expire 10 yearsfrom the grant date unless otherwise noted. Prior to the IPO, the exercise price was set by the Board of Directors. The volatility is based on the historical trend of an appropriate sample of companiesoperating in the biotech and pharmaceutical industry. The risk-free interest rate is based on the CHF swap rate for the expected life of the option. Theweighted average share price of common share options exercised in 2017 is CHF 10.53 (2016: CHF 6.22 and 2015: CHF 1.91). The expense charged against the income statement for the financial year 2017 amounts to CHF 1,579 thousand (2016: CHF 1,317 thousand and 2015:540 thousand). The expense is revised by the Company based on the number of instruments that are expected to become exercisable. The 2016 expense alsoreflects a share based option award that was modified in 2016 to amend the option grant’s contractual life and the issuance of a replacement award. Anincremental fair value of CHF 238 thousand was immediately recognized in 2016 as a result of the modification of the share options contractual life.Additionally, in connection with former CFO departure in the fourth quarter of 2016, the former Chief Financial Officer forfeited his initial 2016 grant(included in the aggregate 2016 total of 98,500), and in its place was awarded 49,250 options, which has been accounted for as a new award granted on thedate of forfeiture of the original award. The fourth quarter 2016 grant date fair value of the replacement award was CHF 674 thousand. The fair value of themodified award was measured using the Black-Scholes option pricing model with similar assumptions to the 2016 option, except for a currently quotedcommon share price as of the date of the modification. The following table summarizes non-vested share awards (restricted share and restricted share units) during the year ended December 31, 2017 (no suchawards were granted in 2016 and 2015, respectively): F-25 Table of Contents Grantee Type Number of non-vested shareawards granted Vesting conditions Contractual life of non-vestedshare awardsRestricted Share Units Directors 29,375 1 year service from date ofgrant, annually 10 yearsExecutives 95,957 4 years’ service from the dateof grant, quarterly 10 yearsRestricted Share Awards 4,023 2.75 years’ service from date ofgrant, quarterly 10 years Number ofnon-vested shares Weightedaveragegrant date fairvalueNon-vested at January 1, 2017 — — Forfeited during the year — — Cancelled during the year — — Exercised during the year — — Granted during the year 129,355 9.62 Non-vested at December 31, 2017 122,014 9.59 Vested at December 31, 2017 7,341 10.06 The weighted average grant date fair value of the restricted share awards granted (restricted shares and restricted share units) in 2017 was CHF 9.62. No RSAsor RSUs were granted in 2016 and 2015. The weighted average grant date fair values of the non-vested share awards granted (restricted shares and restrictedshare units) in 2017, 2016 and 2015 are CHF 9.59, 0 and 0, respectively. These fair values of non-vested share awards granted have been determined using areasonable estimate of market value of the common stock on the date of the award. 19.Commitments and contingencies For the Years Ended December 31,in CHF thousands 2017 2016Within one year 9,686 9,175 Between one and three years 2,546 1,624 Between three and five years 140 — More than five years — — Total 12,372 10,799 The Company has research contracts with several external service providers. As of December 31, 2017 external research projects for CHF 9.4 million werecommitted for 2018. Rental contract for laboratory and offices space at the EPFL Innovation Park in Ecublens/Lausanne can be cancelled within a 6 monthnotice period. Lease expense in 2017 was CHF 0.5 million. As of December 31, 2017, rental contracts for CHF 0.2 million were committed for 2018. The Company has a contractual obligation that requires the payment of royalties to a third party, which is associated with the achievement of programmilestones. As of December 31, 2017, the Company’s contractual obligation associated with this agreement was CHF 0.4 million. F-26 Table of Contents 20.Earnings per share For the Years Ended December 31,in CHF thousands except for share and per share data 2017 2016 2015Net income / (loss) attributable to owners of the Company (26,411) (7,096) 20,270 Earnings per share (EPS): Basic, income / (loss) for the period attributable to equity holders (0.46) (0.14) 0.47 Diluted, income / (loss) for the period attributable to equity holders (0.46) (0.14) 0.44 Weighted-average number of shares used to compute EPS basic 57,084,295 50,096,859 43,412,250 Weighted-average number of shares used to compute EPS fully diluted 57,084,295 50,096,859 46,043,198 For the years ended December 31, 2017, 2016 and 2015 basic and diluted earnings per share is based on the weighted average number of shares issuedand outstanding. Weighted-average dilutive shares outstanding excludes antidilutive shares to be issued that totaled 1,463,056 and 1,687,900 from thecomputation of diluted income (loss) per common share for the years-ended December 31, 2017 and 2016, respectively. The weighted average number ofequity awards outstanding for the years ended December 31, 2017 and 2016 was 1,582,612 and 2,784,245, respectively. 21.Financial instruments and risk management The Company’s activities expose it to the following financial risks: market risk (currency risk), credit risk and liquidity risk. The Company’s overall riskmanagement program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company’s financialperformance. The following table shows the carrying amounts of financial assets and financial liabilities: For the Years Ended December 31,in CHF thousands 2017 2016Financial assets Other current receivables 918 517 Cash and cash equivalents 124,377 152,210 Total financial assets 125,295 152,727 Financial liabilities Long-term financing obligation 395 — Trade and other payables 1,092 4,035 Accrued expenses 8,307 5,366 Total financial liabilities 9,794 9,401 Foreign exchange risk The Company is exposed to foreign exchange risk arising from currency exposures, primarily with respect to the EUR, USD and to a lesser extent to GBP,DKK and SEK. The currency exposure is not hedged. However, the Company has a policy of matching its cash holdings to the currency structure of itsexpenses, which means that the Company holds predominately CHF, EUR and USD (see also Note 8). In the Company’s income statements for the yearsended December 31, 2017, 2016 and 2015 a loss of 4.2 million and a gain of CHF 3.4 million and CHF 1.6 million, respectively, is recognized in thefinancial statement line item “Finance Income/(expense), net.” Credit risk The majority of the cash and cash equivalents is held within one bank. However, the credit risk on liquid funds is limited because the counterparty is abank with a high credit-rating assigned by international credit-rating agencies. The maximum amount of credit risk is the carrying amount of the financialassets. Trade and other receivables are fully performing, not past due and not impaired (see Note 6). F-27 Table of Contents Liquidity risk Inherent in the Company’s business are various risks and uncertainties, including its limited operating history and the high uncertainty that newtherapeutic concepts will succeed. AC Immune’s success may depend in part upon its ability to (i) establish and maintain a strong patent position andprotection, (ii) enter into collaborations with partners in the biotech and pharmaceutical industry, (iii) acquire and keep key personnel employed, and(iv) acquire additional capital to support its operations. The Company’s approach of managing liquidity is to ensure sufficient cash to meet its liabilities when due. Therefore, management closely monitors thecash position on rolling forecasts based on expected cash flow to enable the Company to finance its operations for at least 18 months. Based on the current cash position, the Company is well financed through the second quarter of 2019. Foreign currency The Company undertakes certain transactions denominated in foreign currencies. Hence, exposure to exchange rate fluctuations arises. Exchange rateexposures are managed by matching its cash holdings to the currency structure of its expenses. As of December 31, 2017, if the CHF had strengthened/weakened by 10% against the EUR and the USD with all other variables held constant, the netloss for the period would have been lower/higher by CHF 2.1 million (2016: CHF 10.9 million), mainly as a result of foreign exchange gains/losses onpredominantly EUR/USD denominated cash and cash equivalents. Interest rates The Company is not materially exposed to any interest rates fluctuations. 22.Capital risk management The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern and to preserve the capital onthe required statutory level in order to succeed in developing a cure against AD. 23.Post balance sheet events On February 2, 2018, we entered into an additional lease with the EPFL Innovation Park to expand our premises by more than 4,300 square feet effectiveMarch 1, 2018. As part of this expansion, the Company agreed to purchase CHF 750 thousand of the previous tenant’s lab equipment. F-28  Exhibit 12.1 CERTIFICATION I, Andrea Pfeifer, certify that: 1. I have reviewed this annual report on Form 20-F of AC Immune SA; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report; 4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the companyand have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure thatmaterial information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly duringthe period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles; (c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annualreport that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and 5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to thecompany’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company’s ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control overfinancial reporting. Date: March 20, 2018 /s/ Andrea Pfeifer Andrea Pfeifer Chief Executive Officer Exhibit 12.2 CERTIFICATION I, Joerg Hornstein, certify that: 1. I have reviewed this annual report on Form 20-F of AC Immune SA; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the company as of, and for, the periods presented in this report; 4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the companyand have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure thatmaterial information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly duringthe period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles; (c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annualreport that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and 5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to thecompany’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the company’s ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control overfinancial reporting. Date: March 20, 2018 /s/ Joerg Hornstein Joerg Hornstein Chief Financial Officer Exhibit 13.1 CERTIFICATION The certification set forth below is being submitted in connection with AC Immune SA’s annual report on Form 20-F for the year ended December 31, 2017(the “Report”) for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section1350 of Chapter 63 of Title 18 of the United States Code. Andrea Pfeifer, the Chief Executive Officer of AC Immune SA, certifies that, to the best of her knowledge: 1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of AC Immune SA. Date: March 20, 2018 /s/ Andrea Pfeifer Name: Andrea Pfeifer Chief Executive Officer Exhibit 13.2 CERTIFICATION The certification set forth below is being submitted in connection with AC Immune SA’s annual report on Form 20-F for the year ended December 31, 2017(the “Report”) for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section1350 of Chapter 63 of Title 18 of the United States Code. Joerg Hornstein, the Chief Financial Officer of AC Immune SA, certifies that, to the best of his knowledge: 1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of AC Immune SA. Date: March 20, 2018 /s/ Joerg Hornstein Name: Joerg Hornstein Chief Financial Officer EXHIBIT 15.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in the following Registration Statements: (1)Registration Statement (Form S-8 No. 333-213865) pertaining to the AC Immune SA 2013 Equity Incentive Plan, the Employee Stock Option and SharePlan of AC Immune (2005), and the Stock Option Plan – AC Immune of December 31, 2004 of AC Immune SA, and (2)Registration Statement (Form S-8 No. 333-216539) pertaining to the AC Immune SA 2016 Stock Option and Incentive Plan of AC Immune SA; of our report dated March 20, 2018, with respect to the financial statements of AC Immune SA, included in this Annual Report (Form 20-F) for the year endedDecember 31, 2017. /s/ Ernst & Young AG Petit-Lancy, SwitzerlandMarch 20, 2018 

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