Addex Pharmaceuticals Annual Report 2012

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FY2012 Annual Report · Addex Pharmaceuticals

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Annual Report 2012

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Addex Therapeutics Annual Report 2012 | Contents and Key FaCts

Contents

Letter to Shareholders

Financial Review

Corporate Governance

Consolidated Financial Statements

Statutory Financial Statements

Key Facts / Addex Therapeutics

focus:

disease areas:

lead programs:

Pioneering oral small molecule allosteric modulation-based drug discovery
and development against diseases with high unmet medical needs,
especially rare diseases.

CNS & Inflammation

Dipraglurant (ADX48621) to treat Parkinson’s disease levodopa-induced
dyskinesia (PD-LID) and dystonia / ADX71149 to treat schizophrenia and
anxious depression / ADX71441 to treat Charcot-Marie-Tooth disease /
mGlu4 PAM to treat multiple sclerosis.

Corporate partner:

Janssen Pharmaceuticals Inc.

total employees
as of dec 31, 2012:

stock symbol/exchange:

ADXN (ISIN:CH0029850754) / SIX Swiss Exchange

shares outstanding
as of february 28, 2013:

9,002,964

Cash as of dec 31, 2012:

CHF15.3 million

headquarters:

Geneva, Switzerland

Addex Therapeutics Annual Report 2012 | LETTER To ShAREhoLDERS

Letter to Shareholders

André J. Mueller
Chairman

Bharatt Chowrira
President and Chief Executive Officer

Our 2012 achievements included:

• Positive Phase 2a data from ADX48621 (mGlu5 NAM – dipraglurant)

PD-LID study

• Positive Phase 2a data from ADX71149 (mGlu2 PAM – Janssen

Pharmaceuticals, Inc.) schizophrenia study

• Initiation of Phase 2a PoC anxious depression study with ADX71149

(mGlu2 PAM – Janssen Pharmaceuticals, Inc.)

• Completion of preclinical development activities in support of CTA

filing for Phase 1 testing of ADX71441 (GABA-BR PAM)

• Demonstration of preclinical PoC in multiple sclerosis (MS) pre-clinical

models with mGlu4 PAM compound

• Screening and identification of validated PAM hits targeting A2AR

GPCR target

• Completion of a USD10M PIPE financing

• Filing of 7 new patent applications and granting of key composition

of matter patents, for dipraglurant and GABAB-R PAMs

• Publication of 8 scientific papers in peer reviewed journals authored

by Addex scientists

• Expansion of the allosteric modulator discovery technology platform

In the following sections, we would like to highlight these achievements and emphasize
our strategy for building shareholder value.

Dear Shareholders,
2012 was an important and pivotal year
for Addex as we began our transition from
a predominately drug discovery company
to a clinically focused development
company. With regard to the clinical
efforts that laid the foundation for
this transition, we saw positive Phase
2a data with two of our orally active
allosteric modulators and our partner
Janssen Pharmaceuticals, Inc. initiated
a new Phase 2 proof-of-concept (PoC).
Furthermore, several preclinical and
discovery programs for diseases with
major unmet medical needs in the CNS,
inflammatory and metabolic therapeutic
areas, made significant progress toward
human clinical testing.

Letter to Shareholders

Addex Therapeutics Annual Report 2012 | LETTER To ShAREhoLDERS

Strategy
Over the past several years, we have
established ourselves as a leading
allosteric modulation-based drug
discovery company and now find
ourselves in a strong position to transition
from a platform and discovery-based
company to a development stage
company. We have a strong clinical
and pre-clinical pipeline and believe
that focusing our resources on the
advancement of that pipeline to market is
critical to continuing to build shareholder
value. We will focus our resources on
developing our clinical stage pipeline for
rare diseases. In pursuing this strategy,
Addex will advance current clinical and
pre-IND programs in certain diseases
where orphan drug designation can
be reasonably achieved in the major
commercial markets – U.S., Europe and
Japan. In executing this strategy and
to maximize potential clinical success
in at least two programs over the next
12 months, the company reduced its
overall cost structure, particularly related
to our early-stage discovery efforts.
We have maintained the capability to
rapidly re-build our discovery effort to
support potential collaborations or our
own internal discovery needs in the
future by maintaining key intellectual
property as well as critical know-how.
Pending the potential future success
of our clinical programs, and industry
and market drivers, we would be in a
position to restart our drug discovery
engine. We continue to seek means of
increasing our cash position through
non-dilutive partnerships and will
endeavour to monetize both the drug
discovery platform capability as well as
our discovery programs via licensing and
strategic transactions. Finally, to improve
the Company’s liquidity and long term
outlook, Addex will secure a listing on a
US stock exchange.

We believe we have successfully redefined
Addex and positioned ourselves as a
development-focused company. We
will utilize our cash runway through
2013 to achieve key value drivers in the
following three programs: dipraglurant,
ADX71441 targeting GABAB-Receptor
and our mGlu4 PAM program. In
addition, continued clinical progress
with ADX71149 by our partner Janssen
Pharmaceuticals, Inc., could potentially
drive additional value for Addex.

Dipraglurant
Dipraglurant is a novel oral small molecule,
which inhibits the metabotropic glutamate
receptor 5 (mGlu5) as a negative allosteric
modulator (NAM), and has the potential
to be used in combination with levodopa
or dopamine agonists for treatment of
Parkinson’s disease (PD). Our initial focus is
on testing dipraglurant for the treatment
of PD levodopa-induced dyskinesia (PD-
LID). In addition, we plan to evaluate
dipraglurant for the treatment of certain
rare disease indications such as dystonias.
Towards the end of March 2012, we
reported positive top line data from our
Phase 2a trial in PD-LID patients. In this
double-blind, placebo-controlled, EU and
U.S. trial in PD-LID patients, the primary
objective was safety and tolerability. In
addition, the trial was designed to evaluate
exploratory efficacy as a secondary
objective. Efficacy was measured using:
the modified Abnormal Involuntary
Movement Scale (mAIMS); patient diaries
documenting “on” time (with/without
dyskinesias), “off” time and sleep time;
the Unified Parkinson’s Disease Rating
Scale; and the Clinician & Patient Global
Impression of Change (CGIC & PGIC).

The data demonstrated that dipraglurant
met the primary objective of the study by
exhibiting a good safety and tolerability
profile. Further, dipraglurant reduced
dyskinesia severity and appeared to have
an effect on both the dystonia and chorea
components of dyskinesia. Dipraglurant
increased the “on” time with dyskinesia
in all four treatment weeks and appeared
to reduce the “off” time in the final week
of the treatment. In addition, clinicians
rated dipraglurant as giving greater
improvement in dyskinesia than placebo
while maintaining the anti-parkinsonian
effectiveness of levodopa.

We believe a successful treatment for
PD-LID will change the way Parkinson’s
disease is treated by enabling physicians
to use the most effective drug for
Parkinson’s disease – levodopa – earlier
and more aggressively. PD-LID has been
identified by the regulatory authorities,
patient advocacy groups such as The
Michael J. Fox Foundation for Parkinson’s
Research and key opinion leaders as a
very important unmet medical need and
yet there is no approved drug to treat
this condition. We are also developing
an extended release formulation

of dipraglurant. The choice of two
formulations offers the flexibility to tailor
treatment to individual patients and
their particular situation. It also offers
the possibility of an extensive product
range and comprehensive lifecycle
management. For example and based on
robust preclinical data, label expansions
for dipraglurant could include treatment
for: PD motor symptoms and/or non-
motor symptoms, anxiety and depression,
as well as a variety of dystonias. The
potential market opportunity for
dipraglurant in Parkinson’s disease is
well in excess of $1 billion, according
to market research carried out by The
Datamonitor Group for Addex. Further
label expansion outside of Parkinson’s
disease could more than double the peak
sales potential for dipraglurant.

We continue to be engaged in partnering
discussions with a number of global
players who we believe have the
expertise and capability to fully exploit
dipraglurant and are confident to have a
deal completed sometime this year. We
will carry out certain additional studies
this year to support those discussions
and continue to increase the value of
this important asset to the company.
While partnering discussions continue to
support the advancement of dipraglurant
in the treatment of PD-LID, we have
decided to invest our own internal
resources to advance dipraglurant into
Phase 2 studies for a rare form of dystonia
and expect to report data by the end of
2013.

Dystonia is a movement disorder that
causes the muscles to contract and
spasm involuntarily forcing the body into
repetitive and often twisting movements,
as well as awkward irregular postures.
There are approximately 13 forms of
dystonia some of which are represented
by small patient populations, i.e. fewer
than 200,000 in the United States.
Dystonia causes varying degrees of
disability and pain from mild to severe,
and there is presently no cure. Although
several drugs are utilized to treat dystonia,
many patients are left inadequately
treated. For example, botulinum toxin,
which is a leading treatment focal
dystonia, is not appropriate for segmental
and generalized dystonia. Dipraglurant
has been shown to be effective in treating
dystonia in both humans and preclinical
animal studies.

Addex Therapeutics Annual Report 2012 | LETTER To ShAREhoLDERS

In late 2012, we announced that
ADX71441 achieved positive proof of
concept in a validated pre-clinical model
of Charcot-Marie-Tooth 1a or CMT1a.
CMT1a is a rare (1:10,000) hereditary
motor and sensory demyelinating
peripheral neuropathy which involves
duplication of the PMP22 gene; and is
characterized by severe and uniformly
reduced nerve conduction velocities
and primary hypertrophic myelin.
CMT1a is one of the most common
nerve-related disorders passed down
through families. The disease is highly
debilitating and accompanied by severe
cases of neurological pain and muscular
disability. There is no known cure for this
incapacitating disease.

In keeping with our strategy to pursue
rare disease indications for our internal
clinical and pre-clinical pipeline, we plan
to file for orphan drug designation and
advance ADX71441 for CMT1a. We hope
to move rapidly to a Phase 2 study in
CMT1a in 2014.

mGlu4 PAM
In 2012, we also made significant
progress in profiling mGlu4 PAMs. We
announced positive proof of concept data
for our lead mGlu4 PAM compound series
in a validated rodent model for multiple
sclerosis (MS). We believe mGlu4 PAM
has the potential to offer a differentiated
approach to treating MS. The preclinical
data suggest that the mGlu4 PAM
worked by promoting regulatory T-cell
formation and reversing pro-inflammatory
T-cell release. We believe that positive
modulation of mGlu4 could potentially
stop the destruction of myelin in MS in a
robust and durable manner. Further, we
believe this represents a major advance in
the treatment of MS as our mGlu4 has the
potential to not only treat symptoms, but
also to slow disease progression and offer
neuroprotection. In addition, we believe
there may be application of this approach
in the treatment of amyotrophic lateral
sclerosis (ALS or Lou Gehrig disease)
which would be appropriate for orphan
drug designation. We expect to complete
candidate selection this year and move
into IND-enabling studies by early next
year.

Janssen Partnership
In 2012, our partner Janssen
Pharmaceuticals, Inc. (Janssen) completed
a 92-patient Phase 2a study of ADX71149
for the treatment of schizophrenia.
ADX71149 is an mGlu2 positive
allosteric modulator (PAM), discovered
and developed in collaboration with
Janssen that has the potential to be
the first oral non-dopaminergic drug
that may address both the positive and
negative symptoms of schizophrenia,
in addition to other indications, such as
anxiety. ADX71149 is differentiated from
marketed antipsychotics in that it may
show efficacy on negative symptoms and
avoid compliance-limiting side effects
like weight gain, hyperprolactinemia and
tardive dyskinesia, which are associated
with the use of dopamine antagonists.

The data from the Phase 2a study
showed that ADX71149 met the primary
objectives of safety and tolerability. In
addition, ADX71149 also demonstrated
an effect in schizophrenia patients with
residual negative symptoms. Negative
symptoms (typically comprising apathy,
social withdrawal, loss of emotional
expression and sleep disorders) are
common, and occur in up to 90% of
patients with schizophrenia. Currently
available drugs do not always provide
effective control and many patients
remain with substantial disability as a
result. Therefore, effective treatment
of negative symptoms is a major unmet
medical need in the management of
schizophrenia.

Janssen has also initiated in 2012 a
second Phase 2 PoC trial with ADX71149
for the treatment of patients with major
depressive disorder with anxiety co-
morbidity (anxious depression). Janssen
has targeted completion of this phase 2a
study by year end.

Janssen is a great partner and we are
pleased with the progress that they are
making on this program. Under the terms
of this partnership, Janssen is responsible
for all the costs of advancing this program
through commercialization. We are
eligible to receive development milestones
totalling up to EUR112 million and low
double-digit royalties on product sales.

We plan to apply for an orphan-drug
designation for dipraglurant since the
designation would provide us regulatory
and financial incentives to rapidly move
the drug to market. Orphan-drug
designation can also provide market
exclusivity for a number of years. Overall,
an orphan-drug approach can potentially
provide Addex the opportunity to attain
faster regulatory approvals; run relatively
smaller and thus less costly clinical trials;
gain market exclusivity upon launch;
and therefore giving us an overall better
chance of clinical and marketing success.
It is worth noting that nearly half of the
39 drugs approved by the US FDA in
2012 had orphan-drug designations. We
believe the data generated so far with
dipraglurant and other mGlu5 NAMs in
rare diseases such as dystonia combined
with the benefit of potentially obtaining
orphan-drug designation represent a
compelling opportunity for Addex.

GABAB Receptor PAM
In 2012, we also made significant
progress towards advancing several
earlier stage programs. In our GABA-B
receptor PAM program, we have selected
a clinical candidate (ADX71441) and
completed preclinical studies in support
of a clinical trial application (CTA) filing
for Phase 1 testing in Europe. This
novel, first-in-class, oral, small molecule
GABA-B receptor PAM, has demonstrated
excellent preclinical efficacy and
tolerability in several rodent models of
pain, overactive bladder (OAB), anxiety,
autism and Charcot-Marie-Tooth (CMT)
disease. Activation of GABA-B receptor,
a Family C class of GPCR, is clinically and
commercially validated. Generic GABA-B
receptor agonist, baclofen, is marketed
for spasticity and some spinal cord
injuries, and used for OAB, but its usage
is limited due to rapid clearance, receptor
sensitization and compliance-limiting side
effects of the drug.

Earlier this year, the United States Patent
and Trademark Office granted Addex a
composition of matter patent covering
ADX71441 and other GABA-B receptor
PAMs. We are planning to file the CTA this
quarter and dose first subjects in a Phase
1 clinical study in the first half of this year.
The early biomarker pharmacology data
from this Phase 1 study are expected to be
reported by the end of 2013.

Addex Therapeutics Annual Report 2012 | LETTER To ShAREhoLDERS

we believe is achievable with our current
cash. In addition, our partner Janssen
expects to complete Phase 2 PoC trial with
ADX71149 for the treatment of patients
with anxious depression by year end.

In summary, we believe 2013 will be
an important year for Addex. We have
a robust pipeline with important near-
term milestones, and cutting edge
science. In addition, we are executing
on our strategy of building a strong
and successful clinical-stage company
focused on development of innovative
oral small molecule drugs for treatment
of rare diseases and conditions. We are
committed to building significant value for
our shareholders and believe our ability to
execute a clinical and regulatory strategy
directed at rare diseases and orphan
indications can drive this value. Finally,
we would like to acknowledge and thank
all our employees for their hard work,
dedication, loyalty and perseverance
through all the recent changes. We would
also like to thank our shareholders for
your continued support of the Company.

Discovery Programs
Our discovery efforts have led to multiple
early stage programs including: A2AR
PAM, GLP-1 PAM, mGlu2 PAM/NAM,
mGlu7 NAM, TNFR1 NAM, and TrkB PAM.
These programs cover broad therapeutic
indications from CNS to metabolism
to inflammation. We expect to bring
additional non-dilutive capital to the
company by partnering these via licensing
and strategic transactions in 2013.

Allosteric Modulation Technology
Platform
Underlying the robust pipeline is our
industry leading proprietary allosteric
modulator discovery technology platform.
Over the last 10 years, the Company
has invested significant resources and
time in building the infrastructure and
developing the expertise for discovering
and developing highly selective oral
small molecule allosteric modulators.
Our platform allows industrial scale high
throughput screening and can be adapted
for a broad range of targets, including
targets considered “undruggable” using
conventional approaches. Already we
have succeeded in selectively targeting
GPCRs, such as the glutamate receptors,
GABA-B and A2A receptors with potent
oral small molecules. Our platform has
shown success with other receptor
targets, such as receptor tyrosine kinases
(RTKs), like TrkB, and other single-pass
transmembrane receptors, such as the
cytokine receptor TNFR1. Our technology
platform can also be used effectively
to target enzymes in a very selective
manner, such as epigenetic and bacterial
enzymes as well as kinases. These targets
span a broad range of therapeutic
areas, including CNS, inflammation,
metabolic and oncology indications.
In 2012, we continued to enhance our
allosteric modulator discovery technology
platform capabilities via both investment
in novel proprietary screening tools and
the expansion of our knowledge-based
chemical library. Consistent with our
new strategy, we plan to monetize the
platform capability via licensing and
strategic transactions.

Strong Intellectual Property
Portfolio
In 2012, we continued to expand
our dominant intellectual property
portfolio with the filing of 7 new patent
applications covering novel chemical
entities and proprietary discovery
technologies. In addition, new patents
were issued for our lead compounds
dipraglurant and GABA-BR PAMs.

Restructuring & Cash Conservation
Following a careful review of Addex
operations over the past year as well
as market, regulatory and partnering
trends, the management and the Board
of Directors decided that the Company
should focus its capital and resources on
clinical and pre-clinical-stage pipeline
opportunities, especially in rare disease
indications. To that end, we reduced the
size of our operations in Geneva. Changes
to organizational structure and operations
will focus on advancing pipeline programs
but will ensure that Addex maintains
its core competencies and leadership
position in oral small molecule allosteric
modulator-based drug discovery.
A significant reduction in discovery
operations provides cash to fund our pre-
clinical and clinical programs through the
end of 2013. As a result, the Company
is now on a much stronger footing and
well positioned to achieve our near- and
medium-term objectives.

2013 Catalysts and Milestones
The transformation of Addex into a
development focused company is an
important step in driving future success.
We believe that the measures we took
over the past 12-months positions Addex
for long-term success and building
significant shareholder value.

In 2013, we expect to initiate Phase 2
clinical testing of dipraglurant (mGlu5
NAM) in dystonia; submit an Orphan
Drug Application in the U.S. and Europe
for dipraglurant for the treatment of this
rare disease; initiate Phase 1 testing of
ADX71441 (GABAB-R PAM) and report
early biomarker data by the end of the
year; select a clinical candidate for an
oral multiple sclerosis therapeutic (mGlu4
PAM), and establish a listing for Addex
on a U.S. stock exchange, all of which

Addex Therapeutics Annual Report 2012 | FINANCIAL REvIEw

Financial Review 2012

We are a development-stage
biopharmaceutical company focused on
building a sustainable pharmaceutical
business around our world-leading
expertise in the discovery and
development of oral small molecule
allosteric modulators of G-protein coupled
receptors. As a result, commercialization
is currently limited to out-licensing of
selected discovery and development stage
programs. We are pioneering oral small
molecule allosteric modulation-based
drug discovery and development against
traditionally “undruggable” targets.

In 2012, we completed the Phase II testing
in Parkinson’s disease levodopa induced
dyskinesia (PD-LID) of dipraglurant.
This program was partially funded by
an unrestricted grant of USD900,000
from the Michael J. Fox Foundation.
We continued to invest in formulation
development for dipraglurant and
our GABABR-PAM program for which
we selected ADX71441 for clinical
development. We also invested in our
discovery portfolio including further
characterization of mGlu4 PAM
compounds. We also enhanced our
allosteric modulator discovery technology
platform capabilities with investment
in both novel proprietary screening
tools and expansion of our allosteric
modulator biased chemical library. In
May, we implemented a restructuring of
the Group to focus on our core strengths
in allosteric modulator discovery and
development which contributed to a year-
on-year headcount reduction of 31%,
corresponding to 25 full time equivalent
employees (FTEs). At December 31, 2012
our headcount was 56.2 FTEs compared
to 81.2 FTEs at December 31, 2011,
and our average headcount excluding
temporary staff decreased to 70.8 FTEs in
2012, compared to 105.8 FTEs in 2011.

On October 12, 2012, the Group issued
1,156,712 new shares at CHF1 from the
authorized capital. 918,025 of these new
shares were placed in a private placement
at CHF10.50 per share and 238,687 new
shares are held as treasury shares. Gross
proceeds of CHF9,639,263 have been
recorded in share capital (CHF918,025)
and share premium (CHF8,721,238), net
of directly related share issuance costs of
CHF780,195.

Our 2012 research and development
expenditure decreased to CHF20.7 million
and our general and administrative
expenses were stable at CHF6.4 million.
Income decreased to CHF0.1 million
being recognized in the year resulting in
a reduction in our net loss to CHF27.0
million. In addition our investments in
property, plant and equipment remained
stable at CHF0.2 million and we ended
the year with a cash position of CHF15.3
million.

Results of operations
The following table presents our
consolidated results of operations for the
fiscal years 2012 and 2011:

Amounts in millions
of Swiss francs

Income

Research and
development expenses

General and
administrative expenses

Total operating
expenses

operating loss

Finance result, net

2012

2011

0.1

3.7

(20.7)

(28.0)

(6.4)

(6.7)

(27.1)

(34.7)

(27.0)

(31.0)

(0.1)

Net loss for the year

(27.0)

(31.1)

Income

2012 income was CHF0.1 million,
compared to CHF3.7 million recognized
in 2011, comprising amounts recognized
under the grant from the Michael J. Fox
Foundation for Parkinson’s Research to
support the dipraglurant Phase II study
in Parkinson’s disease levodopa-induced
dyskinesia.

Research and development expenses

As a result of the restructuring measures,
R&D expenses decreased by 26% to
CHF20.7 million in 2012, compared
to CHF28 million in 2011, mainly due
to a 26% decrease in our R&D staff
costs and a 61% decrease in laboratory
consumables, both directly resulting
from the headcount reduction. In 2012,
outsourced R&D services remained stable
at CHF4.8 million, mainly driven by the
cost of running the dipraglurant-IR Phase
II testing, and ADX71441 IND enabling

Overview
The following review and discussion of
our financial results for 2012 should be
read in conjunction with the consolidated
financial statements and related notes,
which have been prepared in accordance
with International Financial Reporting
Standards and are presented in this
Annual Report.

Addex Therapeutics Annual Report 2012 | FINANCIAL REvIEw

price remained under pressure in 2012
and our closing share price and market
capitalization increase to CHF9.59 and
CHF86.3 million, compared to CHF5.55
and CHF43.5 million at December 31,
2011, respectively.

2013 outlook
On February 28, 2013 we announced the
completion of a restructuring plan that
reduced the headcount by 37 full time
equivalents. The cost of the restructuring
is estimated between CHF1.7 and CHF3.1
million. In 2013, we plan to focus our
resources on our development stage
pipeline with the initiation of a Phase II
clinical trial of dipraglurant in dystonia
and completion of Phase I testing of
ADX71441. We also plan to invest in our
mGlu4 PAM program and list on a U.S.
stock exchange.

Tim Dyer
Chief Financial Officer

toxicology studies which together
represented approximately 80% of 2012
R&D outsourced expenses. The remaining
20% of 2012 R&D expenses relate to
investing in existing discovery programs,
including our mGlu4 PAM allosteric
modulator discovery program, and the
continued development of our allosteric
modulator discovery technology platform.

R&D expenses consist mainly of costs
associated with research, preclinical
and clinical testing and related staff
costs. They also include, though to a
lesser extent, depreciation of laboratory
equipment and leasehold improvements,
costs of materials used in research, costs
associated with renting and operating
facilities and equipment, as well as fees
paid to consultants, patent costs and
other outside service fees and overhead
costs. These expenses include costs for
proprietary and third party R&D.

General and administrative expenses

G&A expenses slightly decreased to
CHF6.4 million in 2012, compared to
CHF6.7 million in 2011, primarily due
to the net effect of the headcount
reduction that was off-set by increased
business development related costs
and professional fees associated with
implementing the restructuring of
the Group and other special projects.
G&A expenses consist primarily of staff
costs, professional fees for legal, tax
and strategic purposes and overheads
related to general management,
human resources, finance, information
technology, business development and
communication functions.

Net loss for the year

The net loss for the year decreased to
CHF27.0 million for 2012, compared to
CHF31.1 million for 2011, mainly due to
the decrease in our operating expenses.
Basic and diluted loss per share also
decreased accordingly to CHF3.41 for
2012, compared to CHF4.19 for 2011.

Balance sheet & cash flows
We closed 2012 with cash and cash
equivalents of CHF15.3 million, compared
to CHF36.1 million at the end of 2011.
This decrease of CHF20.8 million is mainly
due to the cash used in operations of
CHF29.5 million offset by cash inflows
of CHF9.6 million net of CHF0.8 million
of capital increase related costs from the
issuance of new shares in October 2012.
In addition CHF0.1 million was used for
equity incentive plan related loans made
to employees. Net cash used in operations
has increased to CHF29.5 million for
2012, compared to CHF26.6 million
for 2011 mainly due to reduced cash
inflows from revenues and reduced trade
payables.

Investments in property, plant and
equipment during 2012 and 2011 were
both limited to CHF0.2 million and related
mainly to the acquisition of laboratory
equipment. The net book value of
property, plant and equipment decreased
by CHF1.9 million to CHF2.1 million at
December 31, 2012 compared to CHF4.0
million at December 31, 2011, primarily
due to the annual depreciation charge as
well as both the sale and impairment of
certain assets which were affected by the
restructuring.

The total shareholders’ funds have
decreased to CHF16.3 million at
December 31, 2012 compared to
CHF33.8 million at December 31, 2011,
mainly due to the net loss for the year.

Shares and shareholders’
information
On October 12, 2012, the Group issued
1,156,712 new shares at CHF1 from the
authorized capital. 918,025 new shares
were used in a private placement for
CHF10.50 per share and 238,687 new
shares are held as treasury shares. Gross
proceeds of CHF9,639,263 have been
recorded in share capital (CHF918,025)
and share premium (CHF8,721,238),
net of directly related share issuance
costs of CHF780,195. At December
31, 2012 the Company had 9,002,964
outstanding shares and a free float of
100%, compared to 7,835,878 and
100% at December 31, 2011. Our share

Addex Therapeutics Annual Report 2012 | CoRPoRATE GovERNANCE

Corporate Governance 2012

General information
Addex’ Articles of Association (“Articles”),
Organizational Rules and Policies provide
the basis for the principles of Corporate
Governance.

Group structure
Description of Addex’ operational
group structure

Addex Therapeutics Ltd (“Addex” or
the “Company”) is the holding and
finance company of the Group. Addex
Pharma SA, based in Plan-les-Ouates,
Geneva, Switzerland, a 100% subsidiary
of Addex Therapeutics Ltd, is in charge
of research, development, registration,
commercialization and holds the Group’s
intellectual property. Addex Pharma SA
has a share capital of CHF3,987,492
divided into 3,987,492 registered shares
with a nominal value of CHF1 each. Addex
Pharmaceuticals France SAS, based in
Archamps, France, a 100% subsidiary
of Addex Pharmaceuticals Ltd performs
research and development services for
the Group. Addex Pharmaceuticals France
SAS has a share capital of EUR 37,000
divided into 37,000 registered shares with
a nominal value of EUR 1 each.

Listed company

Addex Therapeutics Ltd has its registered
office c/o Addex Pharma SA, Chemin
des Aulx 12, CH-1228 Plan-les-Ouates,
Geneva, Switzerland. Its shares have been
listed on the SIX Swiss Exchange since
May 21, 2007 under the Swiss security
number (Valorennummer) 2985075. The
ISIN is CH0029850754, the common code
is 030039254 and the ticker symbol is
ADXN.

Significant shareholders

As far as can be ascertained from the information available, the following shareholders
own 3% or more of the Company’s outstanding share capital as at December 31, 2012:

Shareholder

BVF Partners L.P.1

Sofinnova Capital IV FCPR2

TVM V Life Science Ventures3

Visium Asset Management L.P.4

Number of shares

% of capital

2 439 184

806 648

690 525

488 114

27.09%

8.96%

7.67%

5.42%

1 BVF Partners L.P., 900 North Michigan Avenue, Suite 1100, Chicago, Illinois, 60611, USA. BVF Partners L.P. comprises

Biotechnology Value Fund L.P., Biotechnology Value Fund II L.P., Samana Capital L.P. and Investment 10 L.L.C.

2 Sofinnova Capital IV FCPR has its principal office at 17, rue de Surène, 75008 Paris, France.

3 TVM V Life Science Ventures GmbH & Co. KG has its principal office at Maximilian Strasse 35C, 80539 Munich,

Germany.

4 Visium Asset Management L.P., Inc. has its principal office at 888 Seventh Avenue, 22nd floor, New York, New York

10019, USA.

On December 31, 2012, the
market capitalization of Addex was
CHF86,338,425.

For a comprehensive list of notifications
of shareholdings received during 2012
pursuant to article 20 of the Swiss Federal
Act on Stock Exchanges and Securities
Trading (“SESTA”) refer to the SIX Swiss
Exchange website (www.six-swiss-
exchange.com/shares/companies/major_
shareholders_en.html). The following
significant notifications of shareholdings
have been summarized below. The
notifications made pursuant to article
20 SESTA are based on the voting rights
entered into the commercial register at
the date they were made.

On October 26, 2012, Vincent Mutel,
86 Grand Rue, 1180 Rolle, Switzerland,
informed of reducing to below the
threshold of 3% in purchase positions.

Further to the capital increase on
October 12, 2012 and the consequential
change in the Company’s registered
capital published on October 17, 2012:
(1) on October 23, 2012, Visium Asset
Management L.P., 888 Seventh Avenue,
22nd floor, New York, New York 10019,
USA, informed of exceeding the threshold
of 5% in purchase positions, holding a
total of 488,114 shares, corresponding
to 6.23% of the voting rights; (2) on
October 23, 2012, Sofinnova Capital IV
FCPR, 17 rue de Surène, 75008 Paris,
France, informed of reducing to below
the threshold of 10% in purchase
positions, holding a total of 806,648
shares, corresponding to 8.97% of the

voting rights; (3) on October 26, 2012,
S.R. One Limited, One Franklin Plaza, 200
N. 16th Street, Philadelphia, PA 19102,
USA, informed of reducing to below the
threshold of 3% in purchase positions,
holding a total of 253,253 shares,
corresponding to 2.82% of the voting
rights; (4) on November 9, 2012, The
Swiss Helvetia Fund, Inc., 1270 Avenue of
the Americas, Suite 400, New York, New
York 10020, USA, informed of reducing
to below the threshold of 3% in purchase
positions, holding a total of 262,474
shares, corresponding to 2.92% of the
voting rights and (5) on October 19, 2012
and October 23, 2012, the Company
informed of exceeding the threshold of
3% in purchase positions, holding a total
of 369,433 shares, corresponding to
4.71% of the voting rights and reducing
to below the threshold of 20% in sale
positions, with a total of 1,700,000
outstanding rights attached to equity
instruments, corresponding to 18.90% of
the voting rights, respectively.

On May 15, 2012, the Company informed
of exceeding the threshold of 20% in
sale positions, with a total of 1,700,000
outstanding rights attached to equity
instruments, corresponding to 21.70% of
the voting rights.

On January 10, 2012, The Swiss Helvetia
Fund, Inc., 1270 Avenue of the Americas,
Suite 400, New York, New York 10020,
USA, informed of reducing to below the
threshold of 5% in purchase positions,
holding a total of 351,155 shares,
corresponding to 4.48% of the voting
rights.

Cross-shareholdings

There are no cross-shareholdings in terms
of capital shareholdings or voting rights in
excess of 5%.

Shareholder structure

There were 1,468 shareholders registered
in the share register on December 31,
2012. The distribution of shareholdings is
divided as follows:

Number of registered
shareholders on
December 31, 2012

Number
of shares

1 to 100

101 to 1,000

1,001 to 10,000

10,001 to 100,000

100,001 to 1,000,000

370

858

200

The shareholder base on December 31,
2012 was constituted as follows:

Shareholder structure according to
category of investors
(weighted by number of shares)

Private persons

Institutional shareholders

Not registered

13.17%

71.99%

14.84%

Shareholder structure by country
(weighted by number of shares)

United States

Switzerland

France

Germany

Singapore

Other

Not registered

42.63%

21.70%

9.82%

7.82%

1.03%

2.16%

14.84%

Capital structure
As of December 31, 2012, the
outstanding share capital amounted to
CHF9,002,964 consisting of 9,002,964
registered shares with a nominal value
of CHF1 per share. The share capital is
fully paid up. As of December 31, 2012,
Addex, directly or indirectly, held 369,433
shares in Addex.

Authorized share capital

According to the Articles, the Board of
Directors (Board) is authorized, at any time
until May 9, 2014 to increase the share
capital in an amount of CHF2,761,227
through the issuance of 2,761,227 fully
paid registered shares with a nominal
value of CHF1 each. An increase in partial
amounts is permitted. The Board shall
determine the issue price, the type of

Addex Therapeutics Annual Report 2012 | CoRPoRATE GovERNANCE

payment, the date of issue of new shares,
the conditions for the exercise of pre-
emptive rights and the beginning date
for dividend entitlement. In this regard,
the Board may issue new shares by
means of a firm underwriting through a
banking institution, a syndicate or another
third party with a subsequent offer of
these shares to the current shareholders
(unless the pre-emptive rights of current
shareholders are excluded). The Board
may permit pre-emptive rights that
have not been exercised to expire or it
may place these rights and/or shares as
to which pre-emptive rights have been
granted but not exercised, at market
conditions or use them for other purposes
in the interest of the Company.

The subscription and acquisition of the
new shares, as well as each subsequent
transfer of the shares, shall be subject to
the restrictions of Article 5 of the Articles.

The Board is authorized to restrict
or exclude the pre-emptive rights of
shareholders and allocate such rights to
third parties if the shares are to be used
(1) for the acquisition of enterprises,
parts of an enterprise, or participations,
or for new investments, or, in case of
a share placement, for the financing
or refinancing of such transactions; or
(2) for the purpose of the participation
of strategic partners (including in the
event of a public tender offer) or for
the purpose of an expansion of the
shareholder constituency in certain
investor markets; or (3) for the granting of
an over-allotment option (Greenshoe) of
up to 20 percent to the banks involved in
connection with a placement of shares; or
(4) for raising capital in a fast and flexible
manner, which would not be achieved
without the exclusion of the statutory
pre-emptive rights of the existing
shareholders.

Conditional share capital

According to the Articles, the share
capital of the Company may be increased
by a maximum aggregate amount of
CHF1,700,000 through the issuance
of a maximum of 1,700,000 registered
shares, which shall be fully paid-in, with
a par value of CHF1 per share by the
exercise of option rights or subscription
rights attached to bons de jouissance
which the employees and/or directors
of the Company or a group company
are granted according to respective
regulations of the Board. The pre-emptive
rights of the shareholders are excluded.
The acquisition of registered shares
through the exercise of option rights or

subscription rights granted to the holders
of bons de jouissance and the subsequent
transfer of the registered shares shall
be subject to the transfer restrictions
provided in Article 5 of the Articles.

The share capital of the Company may
be increased by a maximum aggregate
amount of CHF2,031,246 through the
issuance of a maximum of 2,031,246
registered shares, which shall be fully
paid-in, with a par value of CHF1 per
share by the exercise of option and/
or conversion rights which are granted
in connection with the issue of bonds,
similar obligations or other financial
instruments by the Company or another
group company. In the case of the issue
of bonds, similar obligations or other
financial instruments linked with option
and/or conversion rights, the pre-emptive
right of shareholders is excluded. The
holders of option and/or conversion rights
are entitled to receive the new shares.
The Board shall determine the terms of
the option and/or conversion rights. The
acquisition of registered shares through
the exercise of option or conversion
rights and the subsequent transfer of the
registered shares shall be subject to the
transfer restrictions provided in Article 5
of the Articles.

The Board is authorized to restrict
or exclude the pre-emptive rights of
shareholders (1) if the debt or other
financial instruments issued with
conversion rights or warrants are for the
purpose of financing or refinancing of
the acquisition of enterprises, parts of
an enterprise, or participations or new
investments; or (2) if such debt or other
financial instruments are issued on the
national or international capital markets
and for the purpose of a firm underwriting
by a banking institution or a consortium
of banks with subsequent offering to
the public. If the advance subscription
rights are excluded by the Board, the
following shall apply: the issuance of
convertible bonds or warrants or other
financial market instruments shall be
made at the prevailing market conditions
(including dilution protection provisions
in accordance with market practice) and
the new shares shall be issued pursuant
to the relevant conversion or exercise
rights in connection with bond or warrant
issue conditions. Conversion rights may
be exercised during a maximum 10-year
period, and warrants may be exercised
during a maximum 7-year period, in
each case from the date of the respective
issuance.

Addex Therapeutics Annual Report 2012 | CoRPoRATE GovERNANCE

Changes in capital

On October 12, 2012, Addex increased
its share capital by CHF1,156,712
(1,156,712 registered shares with
a nominal value of CHF1 per share)
out of its authorized share capital in
connection with a private placement
with international institutional investors,
excluding the pre-emption rights of
shareholders in order to raise capital in a
fast and flexible manner.

In 2012, Addex increased its share capital
by CHF10,374 (10,374 registered shares
with a nominal value of CHF1 per share)
out of its conditional share capital as a
result of the exercise of subscription rights
attached to equity sharing certificates
under the Addex equity sharing certificate
equity incentive plan.

For further information on changes in
capital in 2012 and 2011, including
changes in reserves, refer to the
consolidated statements of changes
in equity as well as note 14 of the
consolidated financial statements and
note 8 of the financial statements
included in this annual report.

Shares, participation and equity
sharing certificates

Addex has one class of shares, i.e.
registered shares with a nominal value
of CHF1 per share. Each share is fully
paid up and carries one vote and equal
dividend rights, with no privileges. The
Company has 1,700 outstanding equity
sharing certificates (Bon de Jouissance /
Genussscheine). Equity sharing certificates
are available for granting to employees
and/or directors of the Group under the
Group’s equity incentive plan. Equity
sharing certificates do not form part of
the share capital, have no nominal value,
and do not grant any right to vote nor the
right to attend meetings of shareholders.
Each equity sharing certificate grants

the right to subscribe for 1,000 shares of
the Company and a right to liquidation
proceeds of the Company calculated in
accordance with Article 25 of the Articles.
The Company has no participation
certificates.

The Company’s shares and equity
sharing certificates are not certificated.
Shareholders and equity sharing
certificate holders are not entitled
to request printing and delivery of
certificates, however, any shareholder or
equity sharing certificate holder may at
any time request the Company to issue a
confirmation of their holdings.

Limitations on transferability of
shares and nominee registration

A transfer of uncertified shares is effected
by a corresponding entry in the books of
a bank or depository institution following
an assignment in writing by the selling
shareholder and notification of such
assignment to Addex by the bank or the
depository institution. A transfer of shares
further requires that a shareholder files
a share registration form in order to be
registered in Addex’ share register with
voting rights. Failing such registration, a
shareholder may not vote at or participate
in a shareholders’ meeting.

A purchaser of shares will be recorded
in Addex’ share register as a shareholder
with voting rights if the purchaser
discloses its name, citizenship or
registered office and address and gives a
declaration that it has acquired the shares
in its own name and for its own account.

Addex’ Articles provide that a person or
entity that does not explicitly state in its
registration request that it will hold the
shares for its own account (Nominee) may
be entered as a shareholder in the share
register with voting rights for shares up
to a maximum of 5% of the share capital

as set forth in the commercial register.
Shares held by a Nominee that exceed
this limit are only registered in the share
register with voting rights if such Nominee
declares in writing to disclose the name,
address and shareholding of any person
or legal entity for whose account it is
holding 1% or more of the share capital
as set forth in the commercial register. The
limit of 1% shall apply correspondingly to
Nominees who are related to one another
through capital ownership or voting rights
or have a common management or are
otherwise interrelated. A share being
indivisible, hence only one representative
of each share will be recognized.
Furthermore, shares may only be pledged
in favor of the bank that administers
the bank entries of such shares for the
account of the pledging shareholders.
If the registration of shareholdings with
voting rights was effected based on false
information, the Board may cancel such
registration with retroactive effect.

Convertible bonds and options

As of December 31, 2012, the Company
has no convertible or exchangeable bonds
or loans outstanding.

For information on share option plans
for Non-Executive Directors, Executive
Management and employees, refer to
note 15 and note 27 of the consolidated
financial statements included in this
annual report.

Board of directors
The following table sets forth the name,
year joined the Board, position and
directorship term, as well as committee
memberships, of each member of the
Board, all of whom except for Bharatt
Chowrira are Non-Executive Directors,
followed by a short description of each
member’s business experience, education
and activities:

Elected until

Board

2015

2014

2015

Name

André J. Mueller

Vincent Lawton

Raymond Hill

Hoyoung Huh

Antoine Papiernik

Oleg Nodelman

Bharatt Chowrira

First elected

2007 (2002)1

2009

2008

2011

2007 (2002)1

2011

2012

1 Date when joined the Board of Addex Pharma SA

Chairman

Vice Chairman

member

CC: Compensation Committee
aC: Audit Committee
nC: Nomination Committee

Addex Therapeutics Annual Report 2012 | CoRPoRATE GovERNANCE

André J. Mueller
Chairman

Mr. Mueller was born in 1944 and is a
Swiss citizen. He has extensive experience
in creating and running successful
biopharmaceutical companies. Mr. Mueller
was a member of the founding team of
Actelion Ltd (SIX:ATLN), where he was
CFO for 5 years and vice chairman until
April 2009. He also was the first VP of
Finance and Administration and later,
CFO, at Biogen (now Biogen Idec), where
he oversaw several financing rounds,
including Biogen’s IPO. Mr. Mueller started
his career with CIBA Ltd and Sandoz (now
Novartis) where he held a number of
managerial positions in the Pharma, Plant
Protection and Finance divisions both at
headquarters in Basel and in the U.S. He
was a Founding Partner and Director of
Investments for Genevest, the first Swiss
venture capital organization. He has a
degree in Chemical Engineering from
the University of Geneva and an MBA
from INSEAD. He is a board member of
Sensimed SA.

vincent Lawton
Vice Chairman

Professor Lawton was born in 1949 and
is a U.K. citizen. He was Vice President
Merck Europe and Managing Director of
MSD UK until he stepped down in 2006,
after 26 years service internationally
for Merck & Co Inc. He was appointed
CBE (Commander of the British Empire)
by the Queen of England for services
to the Pharmaceutical Industry. During
his tenure, MSD UK achieved sustained
commercial success, launching many
new medicines to the market in a wide
range of therapeutic areas, becoming the
fastest growing company in the market
over a number of years. He worked
in commercial, research and senior
management roles in France, the US and
Canada, Spain and throughout Europe. As
President of the UK Industry Association,
the ABPI, he negotiated industry pricing,
worked with Government bodies to
help establish the UK Globally as a
leading centre of clinical research. He is
the Chairman of Aqix Ltd, a private UK
biotechnology company, member of the
Board of the Medicines Regulator, the

MHRA and is a Senior Strategy Advisor
for Imperial College Department of
Medicine, University of London. He also
serves as a consultant to a number of
leading healthcare organisations. He was
educated at the University of London and
holds undergraduate and PhD degrees in
Psychology.

Raymond hill

Dr. Hill was born in 1945 and is a UK
citizen. From 2002 until he retired on April
30, 2008, Dr. Hill was Executive Director,
Licensing and External Research, Europe
for Merck Sharp & Dohme Research
Laboratories, a subsidiary of Merck
& Co., Inc. From 1997-2002 he was
Executive Director, Pharmacology at the
Neuroscience Research Centre engaged
in drug discovery for Neuroscience
indications at Merck. After joining Merck/
MSD in 1990, Dr. Hill chaired a number of
discovery project teams including those
responsible for the marketed products
Maxalt (for migraine) and Emend (for
chemotherapy induced nausea and
vomiting). Dr. Hill is currently Visiting
Professor in Pharmacology and Honorary
Business Development Advisor, Imperial
College London; Visiting Industrial
Professor of Pharmacology at the
University of Bristol; Visiting Professor
and Chairman of the External Advisory
Board in the School of Biological and
Health Sciences at the University of Surrey;
and Visiting Professor in Physiology
and Pharmacology at the University of
Strathclyde. He is President Emeritus of the
British Pharmacological Society and is a
Member of Council, Academy of Medical
Sciences. Dr Hill received BPharm and PhD
degrees from the University of London.
He was a lecturer in Pharmacology at the
University of Bristol School of Medicine
from 1974 to 1983. He is currently a Non-
Executive Director of Orexo AB, Karolinska
Development AB and Covagen AG.

hoyoung huh

Dr. Huh was born in 1969 and is a U.S.
citizen. He is Chairman of the Board of
Geron Corporation (NASDAQ: GERN),
CytomX Therapeutics, and StemPar

Sciences. He serves on the Board of
Directors for AntriaBio, BayBio and EOS
S.p.A.. Dr. Huh has been involved in the
formation, management and investment
in over 20 successful entities across U.S,
Europe and Asia. He was previously
President, CEO and Chairman of BiPar
Sciences, Inc., which was acquired by
Sanofi-aventis (EURONEXT: SAN and
NYSE: SNY) in 2009. He was the former
Chairman of the Board of Epizyme, Inc.,
and served as Chief Operating Officer and
Board Director of Nektar Therapeutics
(NASDAQ: NKTR) and as Board Director
of Jennerex Biotherapeutics, Calibra
Medical, which was acquired by Johnson
& Johnson in 2012, and Facet Biotech
(NASDAQ: FACT), which was acquired
by Abbott Laboratories in 2010. Dr.
Huh was formerly a Partner at McKinsey
and Company in the healthcare and
technology practices. Dr. Huh holds an
M.D. from Cornell University Medical
College, a Ph.D. in Genetics/Cell Biology
from Cornell University/Sloan-Kettering
Institute, and a bachelor’s degree in
biochemistry from Dartmouth College.

Antoine Papiernik

Mr. Papiernik was born in 1966 and is a
French citizen. He is a Managing Partner
at Sofinnova Partners where he has been
investing in life sciences since 1997.
Previously he was with CDC-Innovation,
the venture arm of the Caisse des Dépôts
group. Since joining Sofinnova Partners,
Mr. Papiernik has been an initial investor
and active board member in public
companies like Actelion, Addex, Orexo,
NovusPharma (sold to CTI), Movetis
(sold to Shire) and Stentys, which went
public respectively on the Zürich stock
exchange, the Stockholm stock exchange,
the Milan Nuovo Mercato, the Belgium
Stock Exchange, the Paris Stock Exchange,
in Cotherix (initially NASDAQ listed,
then sold to Actelion), CoreValve (sold
to Medtronic) and Fovea (sold to Sanofi
Aventis). He has also invested in and is
a board member of private companies
CoAxia, EOS, ReCor and Mainstay
Medical. Antoine has an MBA from the
Wharton School of Business.

Addex Therapeutics Annual Report 2012 | CoRPoRATE GovERNANCE

Licensing & External Research at Merck
& Co., Inc. Prior to that, he was a key
member of the executive management
team that restructured and re-launched
Sirna Therapeutics, a development-
stage biopharmaceutical firm focused
on the discovery and development of
RNAi-based drugs, which was acquired
by Merck & Co., Inc. He has a Ph.D. in
Microbiology and Molecular Genetics
from the University of Vermont and a law
degree (J.D.) from the College of Law at
the University of Denver. Dr. Chowrira
is a registered U.S. patent attorney and
a licensed member of the Colorado Bar
Association.

Except for Bharatt Chowrira, the President
and Chief Executive Officer (CEO), none
of the members of the Board have served
in the management of the Company
or any of its subsidiaries in 2012. There
are no significant business connections
between members of the Board and the
Company or any of its subsidiaries.

Elections and terms of office

Addex’ Articles provide for a Board
consisting of between five and eleven
members. We currently have seven
members on the Board. Members of
the Board are appointed and removed
exclusively by shareholders’ resolution.
Their maximum term of office is three
years, re-election is allowed and elections
are staggered with approximately a third
of the Board elected yearly. The Chairman
and Vice-Chairman of the Board are
designated by the Board.

Changes in the board of directors

At the shareholders meeting on May
9, 2012, André J. Mueller and Vincent
Lawton were re-elected as Chairman and
Vice-Chairman of the Board, respectively,
for a term of three years, Bharatt
Chowrira was elected as member of
the Board for a term of three years, and
Andrew Galazka resigned.

Internal organization and areas of
responsibility

Addex’ Articles and Organizational
Rules define the Company’s internal
organization and areas of responsibility
of the Board, Chairman, CEO and the
Executive Management.

Responsibilities of the board of
directors

The Board is entrusted with the
ultimate direction of the Company
and the supervision of management.
The Board’s non-transferable and
irrevocable duties include managing

the Company and issuing the necessary
directives, determining the organization
including adoption and revision of
the Organizational Rules, organizing
the accounting system, the financial
controls, the financial and strategic
planning, as well as appointing, recalling,
setting remuneration and ultimately
supervising the persons entrusted with
the management and representation
of the Company, including the CEO.
Furthermore, these duties include the
responsibility for the preparation of the
annual report and the shareholders’
meetings, the carrying out of
shareholders’ resolutions, the notification
of the judge in case of over indebtedness
of the Company, and, passing resolutions
regarding supplementary contributions
for shares not fully paid-in, increases in
capital to the extent that such power is
vested in the Board, and of resolutions
concerning the confirmation of capital
increases and corresponding amendments
to the Articles as well as making the
required report on capital increases.

In addition to these duties the Board
specifically retains responsibility for the
non-delegable and inalienable duties and
powers pursuant to the Swiss Merger Act
and any other law; the examination of the
necessary qualifications of the auditors;
the adoption of, and any amendments
or modifications to any equity incentive
plans; and the decisions regarding
entering into any financing arrangement
in excess of CHF2 million including loan
agreements, credit lines, letters of credit
or capitalized leases; the issuance of
convertible debentures or other financial
market instruments; and the approval of
any recommendation made by any of the
Committees.

According to the current Organizational
Rules enacted by the Board, resolutions
of the Board are passed by way of simple
majority vote. To validly pass a resolution,
more than half of the members of the
Board have to attend the meeting. No
quorum is required for confirmation
resolutions and adaptations of the Articles
in connection with capital increases
pursuant to articles 634a, 651a, 652g
and 653g of the Swiss Federal Code of
Obligations.

Chairman of the board of directors

The Chairman of the Board calls,
prepares, and chairs the meetings of
the Board. The Chairman also chairs the
shareholders’ meetings. He supervises the
implementation of the resolutions of the
Board and generally supervises the CEO,

oleg Nodelman

Oleg Nodelman was born in 1977 and
is a U.S. citizen. He is the Founder and
Managing Director of EcoR1 Capital,
a San Francisco-based, value-oriented
healthcare investment fund. Before
founding EcoR1, Mr. Nodelman was
a portfolio manager at BVF Partners
L.P., one of the oldest dedicated
biotechnology hedge funds. At BVF, Mr.
Nodelman’s responsibilities included
all aspects of the business including
opportunity generation, deep diligence,
portfolio management and trading.
Prior to joining BVF in 2001, Mr.
Nodelman was a consultant with Mercer
Management Consulting (now Oliver
Wyman), a consulting firm focused on
strategy, operations, risk management,
organizational transformation and
leadership development. At Mercer, he
worked with senior management from
companies in a variety of industries
to develop and implement long-term
strategy and build shareholder value. Mr.
Nodelman is a member of the President’s
Council at the Gladstone Institute. He
holds a Bachelor of Science in Foreign
Service with a concentration in Science
and Technology from Georgetown
University.

Bharatt
Chowrira

President and
Chief Executive
Officer

Dr. Chowrira was born in 1965 and is a
U.S. citizen. He has a strong track record
in the biopharmaceutical industry with
over 18-years of experience, combining
a unique blend of research, licensing,
corporate development, operations
and legal expertise. Dr. Chowrira
previously was the Senior Vice President
and Chief Operating Officer of Nektar
Therapeutics, a NASDAQ-traded U.S.
biopharmaceutical company. At Nektar
he led a team that established several
revenue-generating strategic alliances.
He also led efforts to streamline, realign
and integrate operations across research,
manufacturing, business development,
marketing and multiple R&D sites.
Before joining Nektar, Dr. Chowrira
served as Executive Director, Worldwide

who regularly reports to the Chairman
on the meetings of the Executive
Management and all important matters
of the Group. Should the Chairman
be unable to exercise his function,
his function is assumed by the Vice-
Chairman.

Committees of the board of directors

The Board has three standing committees,
the Audit Committee, the Compensation
Committee and the Nomination
Committee, that were operational
during the year 2012. The tasks and
responsibilities of these Committees are
set forth in the Organizational Rules.
These Committees make proposals to
the Board in their areas of responsibilities
while the resolutions are passed by the full
Board.

audit committee

The Audit Committee consists of the
following members: Vincent Lawton
(chairman) and Oleg Nodelman. The Audit
Committee assists the Board in fulfilling
its duties of supervision of management.
It is responsible for the guidelines for
risk management and the internal
control system, review of the compliance
system, review of the auditors’ audit
plans, review of annual and interim
financial statements, monitoring of
the performance and independence of
external auditors (including authorizing
non-audit services by the auditors and
their compliance with applicable rules),
review of the audit results and monitoring
of the implementation of their findings by
management.

In 2012, the Audit Committee held two
meetings to review the half year 2012 and
full year 2011 financial statements and
to generally review legal and regulatory
compliance matters. The CEO was present
at a portion of all meetings.

Compensation committee

The Compensation Committee consists
of the following members: Raymond Hill
(chairman), André J. Mueller and Antoine
Papiernik. The Compensation Committee
assists the Board in compensation related
matters. It provides the Board with
recommendations on the compensation
of the members of the Board and the
Executive Management of the Group
(the “Executive Management”), the
policies for the compensation of the
Executive Management and the Group’s
other employees and the basic principles
for the establishment, amendment and
implementation of incentive plans.

Addex Therapeutics Annual Report 2012 | CoRPoRATE GovERNANCE

The Compensation Committee meets
as often as business requires. The
Compensation Committee held two
meetings in 2012 to review the 2011
achievements versus the planned
corporate objectives and determination
of the performance related bonus pool,
the annual salary review process and
recommendation of the CEO, grants
under the Groups equity incentive plans
and remuneration of the Board. The CEO
was present at a portion of all meetings.

Nomination committee

The Nomination Committee consists
of the following members: Hoyoung
Huh (chairman), André J. Mueller and
Raymond Hill. It recommends to the Board
qualified candidates to serve as Board
members and reviews candidates for
Executive Management positions.

The Nomination Committee held five
meetings during the year 2012 to review
Board composition and nomination
related matters, including identification,
review and evaluation of candidates
including the new CSO.

working methods of the board of
directors

In 2012, the Board held eight meetings
with average duration of one half to two
thirds of a day. All meetings were held at
the Company’s offices with virtually full
attendance at all meetings. In addition to
formal Board meetings, the Board holds
additional ad hoc meetings or telephone
conferences to discuss specific matters.
The CEO is entitled to attend every Board
meeting and to participate in its debates
and deliberations with the exception of
non-executive sessions.

During Board meetings, each member of
the Board may request information from
the other members of the Board, as well
as from the members of the Executive
Management present on all affairs of
the Company. The CEO reports at each
meeting of the Board on the course of
business of the Company in a manner
agreed upon from time to time between
the Board and the CEO. The chairman
of each Board Committee reports to the
full Board at the Board meeting following
the relevant Committee meeting. Any
resolutions on matters assigned to the
Committees are taken by the Board on the
basis of recommendations of the relevant
Committee.

In addition to reporting at Board
meetings, the CEO reports immediately
any extraordinary event and any
significant change within the Company to
the Chairman. Outside of Board meetings,
each member of the Board may request
from the CEO information concerning the
course of business of the Company.

Definition of areas of responsibility

The Board has delegated all areas of
management of the Group’s business to
the CEO and the Executive Management,
and has granted the CEO the power to
appoint the members of the Executive
Management. The Board carries
out the responsibilities and duties
reserved to it by law, the Articles and
the Organizational Rules as detailed in
section “Responsibilities of the board of
directors” on page 14.

Information and control instruments
of the board of directors

The Board ensures that it receives
sufficient information from the CEO
and Executive Management to perform
its supervisory duty and to make the
decisions that are reserved to the Board.
At each board meeting the Board
receives reports from the CEO, the CFO
and selected members of the Executive
Management on the status of finance,
business, research and development.
These reports focus on the main risks
and opportunities related to the Group.
In addition, the Board is provided with a
status report prior to each board meeting,
a monthly finance report and other ad hoc
reports on significant matters related to
the Group’s operations.

Furthermore, the Board receives
unaudited annual and interim financial
statements for all group companies
including consolidated financial
statements for the Company. The Board
receives a written report from the auditors
on the results of the audit which includes
any findings with respect to internal
control risks arising as a result of their
audit procedures. The auditor was invited
to the Audit Committee meeting two
times and attended two meetings. Addex
does not have an independent internal
audit function.

For further information on the risk
management and the financial risks
factors inherent to the Group’s activities,
refer to note 3 of the consolidated
financial statements.

Addex Therapeutics Annual Report 2012 | CoRPoRATE GovERNANCE

Executive management
In accordance with the Articles and the Organizational Rules, the Board has delegated the operational management to the CEO.

The CEO together with the Executive Management and under the control of the Board, conducts the operational management
of the Company pursuant to the Organizational Rules and reports to the Board on a regular basis.

The following table sets forth the name, year of birth and principal position of those individuals who currently are part of the
Executive Management followed by a short description of each member’s business experience, education and activities:

Year of birth

Position

Nationality

1965

1968

1961

1965

President and Chief Executive Officer

Chief Financial Officer

Chief Scientific Officer and Head of Research

Vice President Translational Science

USA

British

Italian

team. He serves on the boards of Abionic
SA, a private medical device start-up
company focused on allergy diagnostics
and Qwane Biosciences SA, a private
drug development tool company focused
on commercializing microelectrode
array technologies. He is a UK Chartered
Accountant and holds a BSc (Hons) in
Biochemistry and Pharmacology from the
University of Southampton.

Graham Dixon

Chief Scientific
Officer and Head
of Research

Dr. Dixon has more than 20 years of
experience in pharmaceutical research.
Before joining Addex, Dr. Dixon was Chief
Scientific Officer at Galapagos NV. In this
role, Dr. Dixon was responsible for all
research & early development within the
company in multiple therapeutic areas as
well as the management of more than
260 scientific personnel across three
sites in the Netherlands, Belgium and
France. Prior to Galapagos, Dr. Dixon was
Chief Scientific Officer at Entomed SA,
a developer of natural anticancer and
anti-infective agents. Dr. Dixon joined
Entomed from a similar role at antifungal
therapeutic company, F2G Ltd. Before
joining F2G, Dr. Dixon held several roles at
AstraZeneca starting as a project manager
in anti-infective research and culminating
in the role of Global Product Director
in the oncology division. He started
his career as Head of Biochemistry at
Dowelanco (UK) Ltd. Dr. Dixon earned his
PhD in biochemistry from the University
of Swansea and a BSc in applied biology
from the University of Bradford.

Sonia Poli

Vice President
Translational
Science

Dr. Poli, who joined Addex in 2004, is an
accomplished drug R&D professional with
over 16 years international experience in
large and small pharmaceutical companies
with extensive experience and knowledge
of drug discovery and preclinical
development. At Addex she has provided
preclinical support for ongoing clinical
development programs and has overseen
the transition of four products into clinical
development for indications including
smoking cessation, anxiety, schizophrenia,
migraine, gastroesophageal reflux disease
and Parkinson’s disease. She worked from
1997 to 2004 in the drug metabolism and
pharmacokinetics (DMPK) area at Roche,
where she was a key inventor and global
head of a multidimensional optimization
approach for drug discovery and
development and played an important
role in selecting clinical candidates in CNS
indications, including Alzheimer’s disease,
Parkinson’s disease, bi-polar disorders
and anxiety. Dr. Poli obtained her degree
and doctorate in Industrial Chemistry
at the University of Milan in 1993 and
completed a post doctoral fellowship at
the CNRS, in Paris, in the group of Prof.
D. Mansuy in 1997. Dr. Poli is co-author of
more than 30 research publications and
patents.

Name

Bharatt Chowrira

Tim Dyer

Graham Dixon

Sonia Poli

Refer to page 14.

Bharatt
Chowrira

President and
Chief Executive
Officer

Tim Dyer

Chief Financial
Officer

Since co-founding Addex in 2002,
Mr. Dyer has played a pivotal role in
building the Addex Group, raising
CHF 273 million of capital, including
Addex IPO, and negotiating licensing
agreements with pharmaceutical industry
partners. Prior to joining Addex he spent
10 years with Price Waterhouse (PW) &
PricewaterhouseCoopers (PwC) in the
UK and Switzerland as part of the audit
and business advisory group. At PwC in
Switzerland, Mr Dyer’s responsibilities
included managing the service delivery to
a diverse portfolio of clients including high
growth start-up companies, international
financial institutions and venture capital
and investment companies. At PW in the
UK, Mr Dyer gained extensive experience
in audit and transaction support; spending
2 years performing inward investment
due diligence on local financial institutions
in the Ex-Soviet Union. Mr Dyer has
extensive experience in finance, corporate
development, business operations and the
building of start-up companies and serves
as a member of the Swiss government
innovation promotion agency coaching

Management contracts

There are no management contracts
between Addex and third parties.

other vested activities and vested
interests

None of the members of the Executive
Management has had other activities
in governing and supervisory bodies
of important Swiss and foreign
organizations, institutions and
foundations under private and public law.
No member of the Executive Management
has permanent management and
consultancy functions for important Swiss
and foreign interest groups, or holds any
official functions and political posts.

Changes in executive management

The Executive Management was
decreased from nine to eight members
in 2012, with the departure of both
the Head of Metabolic Disorders and
Inflammation Projects and the Head of
Human Resources during the year and
the appointment of Dr. Graham Dixon
as Chief Scientific Officer and Head of
Research on July 3, 2012. On February
28, 2013, the Executive Management
was reduced from eight to four members
with the departure of the Chief Medical
Officer, the Head of Chemistry, the Head
of Biology and the Director of Business
Development.

Compensation, shareholdings
and loans
Total Compensation of the Non-Executive
Directors and Executive Management
slightly decreased in 2012 compared to
2011 primarily due to the reduction in
the number of equity sharing certificates
granted under the Group’s equity
incentive plan to the Executive Managers.
Fixed cash compensation remained stable
in 2012 for Non-Executive Directors
and Executive Managers. The variable
cash compensation decreased in 2012
compared to 2011 due to the reduction
in the cash bonuses and the absence
of interim committee of Non-Executive
Directors.

Content and method of determining
compensation and the shareholding
program

The Board determines the amount of
the fixed remuneration of its members,
taking into account their responsibilities,
experience, and the time they invest in
their activity as members of the Board.
The compensation of the members of the
Board and the Executive Management is

Addex Therapeutics Annual Report 2012 | CoRPoRATE GovERNANCE

determined and reviewed annually by the
Board, based on recommendations of the
Compensation Committee in accordance
with the Group’s compensation policies.
The Compensation Committee makes
its recommendations based on an
assessment of market conditions, changes
in responsibilities of individuals within
the Executive Management, comparison
with compensation levels within other
biotech and pharmaceutical companies of
a similar size conducting similar activities
within Switzerland and Europe. The
weighting of these criteria in determining
the compensation of the Executive
Management is at the discretion of the
Board and reviewed annually by it.

Non-Executive Directors receive an annual
fee based on the responsibilities of each
Director of which half is paid based on
attendance at meetings and an annual
committee fee for each of the board
standing committees for which they
are member. Extraordinary assignments
or work which a member of the Board
accomplishes outside of his activity as a
Board member is remunerated separately
after approval by the Board. In addition,
expenses incurred by the non-executive
Board members in the discharge of their
duties are reimbursed. Non-Executive
Directors are also eligible to participate in
the Company’s equity incentive plans.

Members of the Executive Management
receive a base salary as well as a variable
cash bonus and participate in the
Company’s equity incentive plans. The
cash bonus basis is in the range of 15%
to 35% of the base salary. In addition,
the CEO and the CSO receive certain
benefits in kind associated with their
living expenses. The bonus and the grant
of equity incentive plan units are defined
once per year based on achievement of
personal targets and Group performance.
Achievement of personal targets
represent between 30% and 50% of
the total amount of the bonus with the
remaining part being based on Group
performance, however, the Board retains
total discretion over bonus allocation.
Bonuses are not tied to specific financial
targets, however, certain business
development and share price performance
objectives are included in both the
Group performance objectives and the
personal targets of certain members of
the Executive Management. As part of
the Group’s post retirement and social
security plans, Executive Managers receive
post employment benefits, disability
and life insurance benefits. Executive
Management employment contracts

provide for a termination notice period
of 4 to 6 months which can be extended
in the event of a change of control. Refer
to the section “Changes of control and
defense measures” on page 18. No other
fringe benefits are paid to Executive
Managers. The remuneration of the CEO
and other Executive Managers is approved
by the Board on the recommendation of
the Compensation Committee.

The Group has an equity sharing
certificate equity incentive plan in
place that provides for grants to new
joiners and an annual grant to Executive
Management and other staff based on
a recommendation of the CEO which
is reviewed by the Compensation
Committee and approved by the Board.
The number of equity incentive units
granted annually is at the discretion of
the Board. The individual grants depend
on the individual responsibilities of the
members of the Executive Management
and Board. In respect of structuring
compensation and benefits, the Group
may consult, from time to time, external
advisors in the areas of human resources,
tax and legal, and also use formal salary
comparisons and benchmarking studies.

In connection with the granting of
equity sharing certificates, Executive
Management and other staff were offered
loans to finance the tax and social charges
consequences. These loans are repayable
immediately on the realization of capital
gains under the respective equity incentive
plan.

For further information on compensation,
shareholdings and loans, refer to notes
15, 25 and 27 of the consolidated
financial statements.

Shareholders’ participation
voting rights and representation
restrictions

Voting rights may be exercised only after
a shareholder has been recorded in the
Company’s share register as a shareholder
or usufructuary with voting rights. No
exceptions from these restrictions were
granted in 2012. A shareholder may be
represented by his legal representative,
the corporate proxy, the independent
proxy, by a depositary or by another
shareholder. Subject to the registration
of shares in the share register within the
deadline set from time to time by the
Board before shareholders’ meetings,
the Company’s Articles do not impose
any restrictions on the voting rights of
shareholders. Specifically, there is no

Addex Therapeutics Annual Report 2012 | CoRPoRATE GovERNANCE

limitation on the number of voting rights
per shareholder. For further information
on the conditions for registration in the
share register (including in relation to
Nominees) and for attending and voting
at a shareholders’ meeting, please refer to
the sections “Limitations on transferability
of shares and nominee registration” on
page 12 and “Registration in the share
register” below.

Resolutions of shareholders’ meetings
generally require the approval of the
simple majority of the votes represented
at the shareholders meeting. Such
resolutions include amendments to
the Articles, elections of the members
of the Board and statutory and group
auditors, approval of the annual financial
statements, setting the annual dividend,
decisions to discharge the members of
the Board and management for liability
for matters disclosed to the shareholders’
meeting and the ordering of an
independent investigation into specific
matters proposed to the shareholders’
meeting.

A resolution passed at a shareholders’
meeting with a qualified majority of at
least two-thirds of the votes represented
and the absolute majority of the nominal
share capital represented at the meeting
is required by law for: (i) changes to
the business purpose; (ii) the creation
of shares with privileged voting rights;
(iii) restrictions on the transferability of
registered shares; (iv) an increase of the
authorized or conditional share capital;
(v) an increase in the share capital by
way of capitalization of reserves against
contribution in kind, for the acquisition
of assets or involving the grant of special
privileges; (vi) the restriction or elimination
of pre-emptive rights of shareholders;
(vii) a relocation of the registered office,
and (viii) the dissolution of the Company.
Special quorum rules apply by law to a
merger, demerger, or conversion of the
Company. The introduction or abolition of
any provision in the Articles introducing a
majority greater than that required by law
must be resolved in accordance with such
greater majority.

Statutory quorums

There is no provision in the Articles
requiring a majority for shareholders’
resolutions beyond the majority
requirements set out by applicable legal
provisions.

Convening of shareholders’ meetings
and agenda items

The shareholders’ meeting is the supreme
institution of the Company and under
Swiss law, the ordinary shareholders’
meeting takes place annually within six
months after the close of the business
year. Shareholders’ meetings may be
convened by the Board or, if necessary,
by the auditors. Furthermore, the Board
is required to convene an extraordinary
shareholders’ meeting if so requested in
writing by holders of shares representing
at least 10% of the share capital and
who submit a petition specifying the
item for the agenda and the proposals.
Shareholders representing shares with a
nominal value of at least CHF1,000,000 or
10% of the share capital have the right to
request in writing that an item be included
on the agenda of the next shareholders’
meeting, setting forth the item and the
proposal. A request to put an item on
the agenda has to be made at least 60
days prior to the meeting. Extraordinary
shareholders’ meetings may be called as
often as necessary, in particular in all cases
required by law.

A shareholders’ meeting is convened by
publishing a notice in the Swiss Official
Commercial Gazette (Feuille Officielle
Suisse du Commerce/Schweizerisches
Handelsamtsblatt) at least 20 days prior
to such meeting. In addition, holders of
shares may be informed by a letter sent to
the address indicated in the share register.

Registration in the share register

The Board determines the relevant
deadline for registration in the share
register giving the right to attend and to
vote at the shareholders’ meeting. Such
deadline is published by Addex on the
Company’s website, usually in connection
with the publication of the invitation to
the shareholders’ meeting in the Swiss
Official Commercial Gazette.

The registration deadline for the ordinary
shareholders’ meeting to be held on
March 19, 2013 has been determined to
be March 12, 2013.

Addex has not enacted any rules on the
granting of exceptions in relation to these
deadlines. No exceptions were granted in
2012, and the Board does not anticipate
granting any exceptions related to the
shareholders’ meeting on March 19, 2013.

For further information on registration in
the share register, please refer to section
“Limitations on transferability of shares
and nominee registration” on page 12.

Changes of control and defense
measures
Duty to make an offer

Swiss law provides for the possibility
to have the Articles contain a provision
which would eliminate the obligation
of an acquirer of shares, exceeding the
threshold of 33 1/3% of the voting rights,
to proceed with a public purchase offer
(opting-out provision pursuant to Article
22 para. 2 SESTA) or which would increase
such threshold to 49% of the voting
rights (opting-up provision pursuant to
Article 32 para. 1 SESTA). The Company’s
Articles do not contain an opting-out or
an opting-up provision.

Clauses on change of control

Addex’ equity sharing certificate equity
incentive plan contains a provision in
respect of changes of Addex shareholder
base. In the event of a change of control
over Addex (defined as a change of
control event triggering a mandatory
public purchase offer according to
applicable stock exchange rules) all
outstanding unexercised share options
and subscription rights attached to equity
sharing certificates, vest, and in the
case of subscription rights attached to
equity sharing certificates, they become
exercisable with their remaining term
being reduced proportionally.

Executive Management employment
contracts include a change of control
provision that provides for the extension
of the notice period by 1 year and the
payment of 1.5 times the annual target
bonus in the event of the Managers
employment contract being terminated
or there being a material change in job
description or activities in connection with
a change of control.

Auditors
Duration of the mandate and term of
office of the lead auditor

Pursuant to the Articles the auditor shall
be elected every year and may be re-
elected. The statutory and group auditors
of Addex are PricewaterhouseCoopers
SA, Geneva, Switzerland.
PricewaterhouseCoopers SA has held
the function of statutory auditor since
inception of the Company in February
2007 and of Addex Pharma SA since
its inception in 2002, and acts as group
auditor since 2004. The lead auditor of
Addex since 2009 is Mr. Michael Foley.

Addex Therapeutics Annual Report 2012 | CoRPoRATE GovERNANCE

will be informed in compliance with the
requirements of the SIX Swiss Exchange.
The Group’s investor relations department
is available to respond to shareholders’
or potential investors’ queries under
IR@addextherapeutics.com or via post
at Addex Therapeutics Ltd., Investor
Relations, Chemin des Aulx 12, CH-1228
Plan-les-Ouates, Geneva, Switzerland.
Additional inquiries may also be made by
phone at +41 22 884 1555.

Insider policy

The Board has issued an insider policy
and implemented procedures to prevent
insiders from benefiting from confidential
information. The policy defines guidelines
on how to deter corporate insiders from
making use of confidential information.
The Board has established blocking
periods to prevent insiders from trading
during sensitive periods.

Ethical business conduct

The Group is committed to the highest
standards of ethical conduct. As a
pharmaceutical business, the Group is
operating in a highly regulated business
environment. Strict compliance with all
legal and health authority requirements,
as well as requirements of other
regulators, is mandatory. The Group
expects its employees, contractors and
agents to observe the highest standards
of integrity in the conduct of the Group’s
business. The Code of Conduct sets forth
the Group’s policy embodying the highest
standards of business ethics and integrity
required of all directors, executives,
employees and agents when conducting
business affairs on behalf of the Group.
The Group is committed to complying
with the spirit and letter of all applicable
laws and regulations where the Group
engages in business.

Audit fees

In 2012, PricewaterhouseCoopers SA and
its affiliates charged the Group audit fees
in the amount of CHF105,454.

Additional fees

In 2012, PricewaterhouseCoopers SA and
its affiliates charged the Group additional
fees in the amount of CHF15,563.

Control instruments of the auditors

The Audit Committee of the Board
assumes the task of supervising the
auditors. The Audit Committee meets
with external auditors at least once a
year to discuss the scope and the results
of the audit and to assess the quality
of their service. The auditors prepare a
management letter addressed to the
Board and the Audit Committee two
times per year, informing them of their
audit plan for the year under review
followed by a report detailing the result of
their annual audit.

In 2012, the Audit Committee met with
the auditors twice to discuss the scope
and the results of their year-end audit for
2011 and the scope of the 2012 audit.

Information policy

Addex publishes financial results in the
form of an Annual Report and a Half-
year Report (Interim Report). In addition,
Addex informs shareholders and the
public regarding the Group’s business
through press releases, conference calls,
as well as roadshows. Where required by
law or Addex’ Articles, publications are
made in the Swiss Official Commercial
Gazette. The Annual Report, usually
published no later than in March of the
following year, and the Interim Report,
usually published no later than in July,
are both announced by press release.
Annual Reports, Interim Reports and press
releases are available on request in printed
form to all registered shareholders, and
are also made available on the Group’s
website at www.addextherapeutics.com.
The Group’s website, which is the Group’s
permanent source of information,
also provides other information useful
to investors and the public, including
information on the Group’s research and
development programs as well as contact
information. It is the Group’s policy not
to release explicit earnings projections,
but it will provide general guidance to
enable the investment community and
the public to better evaluate the Group
and its prospective business and financial
performance. The Board has issued a
disclosure policy to ensure that investors

Addex Therapeutics Annual Report 2012 | CoNSoLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements of Addex Therapeutics Ltd as at December 31, 2012

Consolidated Balance Sheets as at December 31, 2012 and December 31, 2011

Amounts in Swiss francs

assets

Current assets

Cash and cash equivalents

Other current assets

Total current assets

Non-current assets

Intangible assets

Property, plant and equipment

Other non-current assets

Total non-current assets

Total assets

LIABILITIES AND ShAREhoLDERS’ EQUITY

Current liabilities

Payables and accruals

Provision for other current liabilities

Total current liabilities

Non-current liabilities

Retirement benefit obligations

Provision for other non-current liabilities

Total non-current liabilities

Shareholders’ equity

Share capital

Share premium

Other reserves

Accumulated deficit

Total shareholders’ equity

Total liabilities and shareholders’ equity

Notes

2012

2011

15,256,707

1,763,918

17,020,625

97,596

2,089,574

2,527,895

4,715,065

21,735,690

4,590,992

65,193

4,656,185

788,615

8,633,531

257,715,600

6,030,657

(256,088,898)

16,290,890

21,735,690

36,065,379

2,002,589

38,067,968

32,217

3,964,409

1,551,483

5,548,109

43,616,077

8,513,410

214,628

8,728,038

988,271

63,812

1,052,083

7,705,132

249,753,750

5,447,145

(229,070,071)

33,835,956

43,616,077

The accompanying notes form an integral part of these consolidated financial statements.

Addex Therapeutics Annual Report 2012 | CoNSoLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Income for the years ended December 31, 2012 and 2011

Amounts in Swiss francs

Income

Fees from collaborations & sale of license rights

Other income

Total income

operating expenses

Research and development

General and administration

Total operating expenses

operating loss

Finance income

Finance expense

Finance result, net

Net loss before tax

Income tax expense

Net loss for the year

Loss per share for loss attributable to the equity holders of the Company,
expressed in Swiss francs per share basic and diluted

Notes

2012

121,089

20,650,240

6,481,263

27,131,503

2011

2,823,447

919,546

3,742,993

27,985,645

6,731,247

34,716,892

27,010,414

30,973,899

22,662

(31,075)

(8,413)

27,018,827

72,199

(239,368)

(167,169)

31,141,068

(3.41)

(4.19)

Consolidated Statements of Comprehensive Income for the years ended December 31, 2012 and 2011

Amounts in Swiss francs

Net loss for the year

other comprehensive loss

Currency translation differences

other comprehensive (gain) / loss for the year, net of tax

2012

27,018,827

2011

31,141,068

(3,030)

48,864

Total comprehensive loss for the year

27,015,797

31,189,932

The accompanying notes form an integral part of these consolidated financial statements.

Addex Therapeutics Annual Report 2012 | CoNSoLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Changes in Equity for the years ended December 31, 2012 and 2011

Amounts in Swiss francs

Notes

Share
capital

Share
premium

other
reserves

Equity
instruments

Accumulated
deficit

Total

Balance at January 1, 2011

6,334,180

237,487,830

4,723,069

13,798,126

(197,929,003)

64,414,202

(48,864)

3,030

(31,141,068)

(48,864)

(31,141,068)

(31,189,932)

(13,798,126)

(161,137)

772,940

(117)

(229,070,071)

33,835,956

(27,018,827)

3,030

(27,018,827)

(27,015,797)

9,639,263

(780,195)

41,496

(10,315)

580,482

(256,088,898)

16,290,890

Net loss for the year

Translation differences

Other comprehensive loss for the year

Total comprehensive loss for the year

Issue of shares - MCN conversion

1,371,069

12,427,057

Cost of share capital issuance

Share based compensation

Purchase of treasury shares

(117)

(161,137)

772,940

Balance at December 31, 2011

7,705,132

249,753,750

5,447,145

Net loss for the year

Translation differences

Other comprehensive gain for the year

Total comprehensive loss for the year

Issue of shares - capital increase

918,025

8,721,238

Cost of share capital issuance –
capital increase

Issue of shares - ESC exercise

Cost of share capital issuance –
ESC exercise

Share based compensation

(780,195)

10,374

31,122

(10,315)

580,482

Balance at December 31, 2012

8,633,531

257,715,600

6,030,657

The accompanying notes form an integral part of these consolidated financial statements

Addex Therapeutics Annual Report 2012 | CoNSoLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Cash Flows for the years ended December 31, 2012 and 2011

Amounts in Swiss francs

Cash flows from operating activities

Net loss for the year

Adjustments for:

Depreciation and amortization

(Gain) / loss on disposal of fixed assets

Write off of non-current assets

Impairment of non-current assets

Value of share-based services

Changes in pension costs

Finance result, net

Changes in working capital:

Other current assets

Deferred income, payables and accruals

Net cash used in operating activities

Cash flows from investing activities

Proceeds from sale of fixed assets

Purchase of intangible assets

Purchase of property, plant and equipment

Loans granted to employees

Loans granted to related parties

Loans repayments received from employees

Loans repayments received from related parties

Interest received

Net cash used in investing activities

Cash flows from financing activities

Proceeds from issue of shares – capital increase

Proceeds from issue of shares – ESCs exercise

Costs paid on issue of shares

Purchase of treasury shares

Net cash from / (used in) financing activities

Decrease in cash and cash equivalents

Cash and cash equivalents at beginning of the year

Exchange loss on cash and cash equivalents

Cash and cash equivalents at end of the year

Notes

2012

2011

(27,018,827)

(31,141,068)

9/10

2,104,420

(75,531)

85,432

287,344

580,482

(199,656)

8,413

(1,113,302)

(4,111,713)

(29,452,938)

144,452

(111,759)

(219,147)

(45,917)

(82,737)

44,663

22,747

22,662

(225,036)

9,639,263

41,496

(780,195)

8,900,564

2,927,636

(50,713)

130,839

772,940

395,794

167,169

690,114

(443,342)

(26,550,631)

21,820

(15,034)

(189,280)

(183,423)

(464,557)

72,199

(758,275)

(183,137)

(117)

(183,254)

(20,777,410)

36,065,379

(31,262)

15,256,707

(27,492,160)

63,797,325

(239,786)

36,065,379

The accompanying notes form an integral part of these consolidated financial statements.

Addex Therapeutics Annual Report 2012 | CoNSoLIDATED FINANCIAL STATEMENTS

Notes

Notes to the Consolidated Financial Statements for the years ended December 31, 2012 and 2011
(amounts in Swiss francs)

1. General information
Addex Therapeutics Ltd (the Company), formerly Addex Pharmaceuticals
Ltd, and its subsidiaries (together, the Group) are a discovery based
pharmaceutical group focused on discovery, development and
commercialization of small-molecule pharmaceutical products for the
treatment of human health. The Company is a Swiss stockholding
corporation domiciled c/o Addex Pharma SA, Chemin des Aulx 12, CH-
1228 Plan-les-Ouates, Geneva, Switzerland and the parent company of
Addex Pharma SA and Addex Pharmaceuticals France SAS. Its registered
shares are traded at the SIX, Swiss Exchange, under the ticker symbol
ADXN.

To date, the Group has financed its cash requirements primarily
from share issuances and out-licensing certain of its research and
development stage products. The Group is a development stage
enterprise and is exposed to all the risks inherent in establishing
a business. Inherent in the Group’s business are various risks and
uncertainties, including the substantial uncertainty that current projects
will succeed. The Group’s success may depend in part upon its ability
to (i) establish and maintain a strong patent position and protection, (ii)
enter into collaborations with partners in the pharmaceutical industry,
(iii) acquire and retain key personnel, and (iv) acquire additional capital
to support its operations. The Board of Directors (Board) believes the
Group will be able to meet all of its obligations for a further 12 months
as they fall due and, hence, the consolidated financial statements have
been prepared on a going concern basis. There is significant uncertainty
with respect to the going concern assumption and consequently further
analysis is disclosed in note 4.1.

These consolidated financial statements have been approved by the
Board of Directors on January 31, 2013. They are subject to approval by
the shareholders on March 19, 2013.

2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these
consolidated financial statements are set out below. These policies have
been consistently applied to all the years presented, unless otherwise
stated.

New standards, amendments to standards and interpretations, that
have been issued but are not mandatory for the financial year beginning
January 1, 2012, have not been applied in preparing these consolidated
financial statements. None of these are expected to have a significant
effect on the consolidated financial statements of the group, except the
following set out below:

- IAS 19 (revised), effective January 1, 2013, will have an impact on the
Group financial position as well as on the disclosure. Under the revised
standard, the “corridor and spreading” option to account for actuarial
gains and losses (now called re-measurements) will be replaced by the
requirements to present those re-measurements including other changes
in defined benefit obligation and plan assets ceiling effects in other
comprehensive income. The Group has assessed the full impact of the
adoption of the revised standard, with the preparation of comparative
data for the year ended December 31, 2012: had the Group early
adopted IAS 19 (revised) and applied it for the year ended December
31, 2012, then the Group would have recognized a total liability of
CHF2,763,829 for its defined benefit plan as at December 31, 2012,
out of which CHF381,268 would have been recognized through the
statement of income and CHF2,382,561 would have been recognized
as other comprehensive loss. This is compared with the total liability
of CHF788,715, which was fully recognized through the statement of
income as at December 31, 2012, based on currently applicable standards

2.2 Consolidation

Subsidiaries are all entities over which the Group has the power to
govern the financial and operating policies generally accompanying a
shareholding of more than one half of the voting rights. Subsidiaries are
fully consolidated from the date on which control is transferred to the
Group. They are de-consolidated from the date that control ceases.

Inter-company transactions, balances and unrealized gains on
transactions between Group companies are eliminated. Unrealized
losses are also eliminated unless the transaction provides evidence
of an impairment of the asset transferred. Accounting policies of
subsidiaries have been changed where necessary to ensure consistency
with the policies adopted by the Group. The reporting date of all Group
companies is December 31.

2.1 Basis of preparation

2.3 Segment reporting

The consolidated financial statements of Addex Therapeutics Ltd have
been prepared in accordance with IFRS and under the historical cost
convention.

The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also requires
management to exercise its judgment in the process of applying the
Group’s accounting policies. The areas involving a higher degree of
judgment or complexity, or areas where assumptions and estimates are
significant to the consolidated financial statements are disclosed in
note 4.

Changes in accounting policies

The accounting policies used in the preparation of the consolidated
financial statements are consistent with those used in the consolidated
financial statements for the year ended December 31, 2011.

The adoption of new standards, amendments to standards and
interpretations which are mandatory for financial periods beginning on
or after 1 January 2012 did not have a material impact on the Group
financial position or on the disclosure.

Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for allocating
resources and assessing performance of the operating segments, has
been identified as the Chief Executive Officer.

2.4 Foreign currency transactions

Functional and presentation currency

Items included in the financial statements of each of the Group’s entities
are measured using the currency of the primary economic environment
in which the entity operates (“the functional currency”). The
consolidated financial statements are presented in Swiss francs, which is
the Company’s functional and presentation currency.

Transactions and balances

Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the dates of the transactions or
valuation where items are re-measured. Foreign exchange gains and
losses resulting from the settlement of such transactions and from the
translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognized in the statement of
income.

Addex Therapeutics Annual Report 2012 | CoNSoLIDATED FINANCIAL STATEMENTS

Foreign exchange gains and losses that relate to borrowings and cash
and cash equivalents are presented in the statement of income within
‘finance result, net’. All other foreign exchange gains and losses are
presented in the statement of income within ‘operating expenses’.

Group companies

The results and financial position of the Group’s subsidiary that has
a functional currency different from the presentation currency are
translated into the presentation currency as follows:

• assets and liabilities for each balance sheet presented are translated

at the closing rate at the date of that balance sheet;

• income and expenses for each statement of income are translated at

the average exchange rate; and

• all resulting exchange differences are recognized in other

comprehensive income.

2.5 Property, plant and equipment

Property, plant and equipment are stated at historical cost less
depreciation. Historical cost includes expenditure that is directly
attributable to the acquisition of the item. Subsequent costs are
included in the asset’s carrying amount or recognized as a separate
asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably. All other repairs and maintenance
are charged to the statement of income during the financial period in
which they are incurred. Depreciation is calculated using the straight-
line method to allocate their cost to their residual values over their
estimated useful lives as follows:

Buildings

Leasehold improvements

Computer equipment

Laboratory equipment

Furniture and fixtures

Chemical library

25 years

(over life of lease)

3 years

4 years

5 years

The assets’ residual values and useful lives are reviewed, and adjusted
if appropriate, at each balance sheet date. An asset’s carrying amount
is written down immediately to its recoverable amount if the asset’s
carrying amount is greater than its estimated recoverable amount (see
note 2.7). Gains and losses on disposals are determined by comparing
proceeds with carrying amount, and are included in the statement of
income.

2.6 Intangible assets

Acquired computer software licenses are capitalized on the basis of the
costs incurred to acquire and bring to use the specific software. These
costs are amortized over their estimated useful lives (2 to 5 years) on
a straight-line basis. Costs associated with developing or maintaining
computer software programs are recognized as an expense as incurred.

2.7 Impairment of non-financial assets

Assets that are subject to amortization are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss is recognized
for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an
asset’s fair value less costs to sell and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash flows (cash generating units). Non-
financial assets other than goodwill that suffered an impairment are
reviewed for possible reversal of the impairment at each reporting date.

2.8 Financial assets

The Group has one category of financial assets which is “loans and
receivables”.

Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They
arise when the Group provides money, goods or services directly to a
debtor with no intention of trading the receivable. They are included in
current assets, except for maturities greater than 12 months after the
balance sheet date, which are classified as non-current assets. Loans
and receivables are included in other current assets and other non-
current assets in the balance sheet (see note 8 and 11).

Loans and receivables are initially measured at fair value plus transaction
costs that are directly attributable and subsequently measured at
amortized cost. Amortized cost is the amount at which the loan or
receivable is measured at initial recognition minus principal repayments,
plus or minus the cumulative amortization using the effective interest
method of any difference between that initial amount and the maturity
amount.

Loans and receivables are recognized on the trade-date, the date on
which the Group commits to purchase or sell the asset. Loans and
receivables are derecognized when settled or when the rights to receive
cash flows have expired.

A provision for impairment of loans and receivables is established when
there is objective evidence that the Group will not be able to collect all
amounts due. The amount of impairment is the difference between the
carrying amount and the present value of estimated future cash flows
discounted at the financial asset’s original effective interest rate, and
is recognized in the statement of income. If, in a subsequent period,
the amount of the impairment loss decreases and the decrease can
be related objectively to an event occurring after the impairment was
recognized, the reversal of the previously recognized impairment loss is
recognized in the statement of income.

2.9 Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call
with banks and other short-term highly liquid investments with original
maturities of three months or less.

2.10 Share capital

Common shares are classified as equity. Incremental costs directly
attributable to the issue of new shares are shown as a deduction, net of
tax, in equity from the proceeds.

Where any Group company purchases the Company’s equity share
capital (treasury shares), the consideration paid, including any directly
attributable incremental cost (net of income taxes) is deducted from
equity attributable to the Company’s equity holders until the shares are
cancelled, reissued or disposed of. Where such shares are subsequently
sold or reissued, any consideration received, net of any directly
attributable incremental transaction costs and the related income
tax effect, is included in equity attributable to the Company’s equity
holders.

2.11 Equity instruments

Equity instruments issued by the Group are recorded at the fair value of
the proceeds received, net of direct issuance costs.

2.12 Trade payables

Trade payables are recognized initially at fair value and subsequently
measured at amortized cost using the effective interest method.

2.13 Grants

Grants are recognized at their fair value where there is reasonable
assurance that the grant will be received and the Group will comply
with all attached conditions. Grants relating to costs are deferred and
recognized as other income in the statement of income over the period
necessary to match them with the costs that they are intended to
compensate.

Addex Therapeutics Annual Report 2012 | CoNSoLIDATED FINANCIAL STATEMENTS

2.14 Deferred income tax

Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated financial
statements. However, if the deferred income tax arises from initial
recognition of an asset or liability in a transaction other than a
business combination that at the time of the transaction affects neither
accounting nor taxable profit or loss, it is not accounted for. Deferred
income tax is determined using tax rates and laws that have been
enacted or substantively enacted by the balance sheet date and are
expected to apply when the related deferred income tax asset is realized
or the deferred income tax liability is settled.

The proceeds received net of any directly attributable transaction costs
are credited to share capital (nominal value) and share premium when
the ESCs are exercised.

2.16 Provisions

Provisions are recognized when the Group has a present legal or
constructive obligation as a result of past events; it is probable that an
outflow of resources will be required to settle the obligation; and the
amount has been reliably estimated. Provisions are measured at the
present value of the expenditures expected to be required to settle the
obligation using a pre-tax rate that reflects current market assessments
of the time value of money and the risks specific to the obligation.

Deferred income tax assets are recognized to the extent that it is
probable that future taxable profit will be available against which the
temporary differences can be utilized.

Deferred income tax is provided on temporary differences arising on
investments in subsidiaries, except where the timing of the reversal of
the temporary differences is controlled by the Group and it is probable
that the temporary difference will not reverse in the foreseeable future.

2.15 Employee benefits

Pension obligations

Group companies operate various pension schemes. The schemes are
generally funded through payments to insurance companies or trustee-
administered funds, determined by periodic actuarial calculations. The
Group has defined benefit plans. A defined benefit plan is a pension
plan that defines an amount of pension benefit that an employee will
receive on retirement, usually dependent on one or more factors such as
age, years of service and compensation.

The liability recognized in the balance sheet in respect of defined benefit
pension plans is the defined benefit obligation at the balance sheet
date less the fair value of the plan assets together with adjustments
for unrecognized actuarial gains or losses and past service costs. The
defined benefit obligation is calculated annually by an independent
actuary using the projected unit credit method. The present value of the
defined obligation is determined by discounting the estimated future
cash outflows using interest rates of high-quality corporate bonds that
are denominated in the currency in which the benefits will be paid, and
that have terms to maturity approximating to the terms of the related
pension liability.

Actuarial gains and losses arising from experience adjustments and
changes in actuarial assumptions in excess of the greater of 10% of
the value of plan assets or 10% of the defined benefit obligation are
charged or credited to income over the employees’ expected average
remaining working lives.

Past-service costs are recognized immediately in income, unless
the changes to the pension plan are conditional on the employees
remaining in service for a specific period of time (the vesting period).
In this case, the past-service costs are amortized on a straight-line basis
over the vesting period.

Share-based compensation

The Group operates an equity sharing certificates’ equity incentive plan:
The fair value of the employee services received in exchange for the
grant of equity sharing certificates (ESCs) is recognized as an expense.
The total amount to be expensed over the vesting period is determined
by reference to the fair value of the ESCs granted. The fair value of
instruments granted includes any market performance conditions
and excludes the impact of any service and non-market performance
vesting conditions. Service and non-market performance conditions are
included in assumptions about the number of equity sharing certificates
that are expected to vest.

At each balance sheet date, the Group revises its estimates for the
number of equity sharing certificates that are expected to vest. It
recognizes the impact of the revision to original estimates, if any, in the
statement of income, with a corresponding adjustment to equity.

2.17 Income recognition

Income, which currently relates primarily to collaborative arrangements,
comprises the fair value for the sale of products and services, net
of value-added tax, rebates and discounts. Income from the sale
of products is recognized when the product has been delivered
and accepted by the customer and collectability of the receivable is
reasonably assured. Income from the rendering of services is recognized
in the accounting period in which the services are rendered, by
reference to completion of the specific transaction assessed on the
basis of the actual service provided as a proportion of the total service
to be provided. Income from collaborative arrangements may include
the receipt of non-refundable license fees, milestone payments, and
research and development payments. When the Group has continuing
performance obligations under the terms of the arrangements, non-
refundable fees and payments are recognized as income by reference
to the completion of the performance obligation and the economic
substance of the agreement.

2.18 Finance income and expense

Interest received and interest paid are classified in the statement of cash
flows as interest received under investing activities and finance expense
under financing activities, respectively.

2.19 Leases

Leases in which a significant portion of the risks and rewards of
ownership are retained by the lessor are classified as operating leases.
Payments made under operating leases (net of any incentives received
from the lessor) are charged to the statement of income on a straight-
line basis over the period of the lease.

2.20 Research and development

Research and development costs are expensed as incurred. Costs
incurred on development projects are recognized as intangible assets
when the following criteria are fulfilled:

• it is technically feasible to complete the intangible asset so that it will

be available for use or sale;

• management intends to complete the intangible asset and use or sell it;

• there is an ability to use or sell the intangible asset;

• it can be demonstrated how the intangible asset will generate

probable future economic benefits;

• adequate technical, financial and other resources to complete the

development and to use or sell the intangible asset are available; and

• the expenditure attributable to the intangible asset during its

development can be reliably measured.

In the opinion of management, due to uncertainties inherent in the
development of the Group’s products, the criteria for development
costs to be recognized as an asset, as prescribed by IAS 38, “Intangible
Assets”, are not met.

Property, plant and equipment used for research and development
purposes are capitalized and depreciated in accordance with the
Group’s property, plant and equipment policy (see note 2.5).

Addex Therapeutics Annual Report 2012 | CoNSoLIDATED FINANCIAL STATEMENTS

3. Financial risk management
3.1 Financial risk factors

The Group’s activities expose it to a variety of financial risks: market
risk, credit risk, liquidity risk and capital risk. The Group’s overall risk
management program focuses on the unpredictability of financial
markets and seeks to minimize potential adverse effects on the Group’s
financial performance. Risk management is carried out by the Group’s
finance department (Group Finance) under the policies approved by
the Board. Group Finance identifies, evaluates and in some instances
economically hedges financial risks in close co-operation with the
Group’s operating units. The Board provides written principles for
overall risk management, as well as written policies covering specific
areas, such as foreign exchange risk, interest-rate risk, use of derivative
financial instruments and non-derivative financial instruments, credit
risk, and investing excess liquidity.

Market risk

The Group operates internationally and is exposed to foreign exchange
risk arising from various exposures, primarily with respect to the Euro,
US dollar and UK pound. Foreign exchange risk arises from future
commercial transactions, recognized assets and liabilities and net
investments in foreign operations. To manage foreign exchange risk
Group Finance maintains foreign currency cash balances to cover
anticipated future requirements. The Group’s risk management policy
is to economically hedge 50% to 100% of anticipated transactions
in each major currency for the subsequent 12 months. The Group
has a subsidiary in France, whose net assets are exposed to foreign
currency translation risk. In 2012, a 10% increase or decrease in the
EUR/CHF exchange rate would have resulted in a CHF222,763 (2011:
CHF181,369) increase or decrease in net income and shareholders’
equity as at December 31, 2012, a 10% increase or decrease in the
GBP/CHF exchange rate would have resulted in a CHF193,305 (2011:
CHF161,789) increase or decrease in net income and shareholders’
equity as at December 31, 2012 and a 10% increase or decrease in the
USD/CHF exchange rate would have resulted in a CHF145,287 (2011:
CHF301,139) increase or decrease in net income and shareholders’
equity as at December 31, 2012. Movements in other currencies would
not have had a material impact. The Group is not exposed to equity
price risk or commodity price risk as it does not invest in these classes
of investment. The Group’s income and operating cash flows are
substantially independent of changes in market interest rates. Therefore
the Group has no significant interest rate risk exposure.

Credit risk

Credit risk is managed on a Group basis. Credit risk arises from cash and
cash equivalents and deposits with banks, as well as credit exposures to
collaboration partners. The Group has a limited number of collaboration
partners and consequently has a significant concentration of credit
risk. The Group has policies in place to ensure that credit exposure is
kept to a minimum and significant concentrations of credit risk are
only granted for short periods of time to high credit quality partners.
The Group’s policy is to invest funds in low risk investments including
interest bearing deposits. For banks and financial institutions, only
independently rated parties with a minimum rating of “A” are accepted
(see note 7).

Liquidity risk

The Group’s principal source of liquidity is its cash reserves which are
obtained through the sale of new shares and to a lesser extent the
sale of its research and development stage products. Group Finance
monitors rolling forecasts of the Group’s liquidity requirements to ensure
it has sufficient cash to meet operational needs. The ability of the
Group to maintain adequate cash reserves to sustain its activities in the
medium term is highly dependent on the Group’s ability to raise further
funds from the licensing of its development stage products and the
sale of new shares. Consequently, the Group is exposed to significant
liquidity risk (see note 4.1).

3.2 Capital risk management

The Company and its subsidiaries are subject to capital maintenance
requirements under Swiss and French law, respectively. To ensure that
statutory capital requirements are met, the Group monitors capital
periodically, at the entity level, on an interim basis as well as annually.
From time to time the Group may take appropriate measures or propose
capital increases to ensure the necessary capital remains intact.

3.3 Fair value estimation

The nominal value less estimated credit adjustments of trade receivables
and payables are assumed to approximate to their fair values. The fair
value of other financial assets and liabilities for disclosure purposes
is estimated by discounting the future contractual cash flows at the
current market interest rate that is available to the Group for similar
financial instruments.

4. Critical accounting estimates and judgments
Estimates and judgments are continually evaluated and are based on
historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances.

4.1 Critical accounting estimates and assumptions

The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom equal
the related actual results. The estimates and assumptions that have a
significant risk of causing a material adjustment to the carrying amounts
of assets and liabilities or may have had a significant impact on the
reported results are disclosed below:

Uncertainties and ability to continue operations

As discussed on page 24 under “general information”, The Board
of Directors (Board) believes the Group will be able to meet all of its
obligations for a further 12 months as they fall due and, hence, the
consolidated financial statements have been prepared on a going
concern basis. The Group is currently engaged in a number of activities
to ensure that it can continue its operations, including monetizing its
assets, raising additional capital, pursuing strategic alternatives and
executing restructuring options (see note 26). Regarding restructuring,
the Board can align the cash outflows of the Group for 2013 to the
currently available cash resources by focusing activities around products
in the current clinical pipeline. The outcome of these activities is
inherently uncertain and had the Board assessed differently the ability
of the Group to execute on its current financial plans and the ability of
the Group to meet all of its obligations for a further 12 months then
the Group would have presented the consolidated financial statements
on a liquidation basis. Had the consolidated financial statements
been prepared on a liquidation basis then certain commitments and
contingencies (refer to details of operating lease commitments in note
24) would have been recorded on the balance sheet and certain assets
would have been written down to their recoverable amounts (refer to
other current assets in note 8 and other non-current assets in note 11).

Income taxes

As disclosed in note 20 the Group has significant Swiss tax losses.
These tax losses represent potential value to the Group to the extent
that the Group is able to create taxable profits within 7 years of the
end of the year in which the losses arose. The Group has not recorded
any deferred tax assets in relation to these tax losses. The key factors
which have influenced management in arriving at this evaluation are
the fact that the Group has not yet a history of making profits and
product development remains at an early stage. Should management’s
assessment of the likelihood of future taxable profits change, a deferred
tax asset will be recorded.

Commitments and contingencies

In assessing the need for provisions for legal cases, estimates and
judgements are made by the Group with support of external legal
advisors and other technical experts in order to determine the
probability, timing and amounts involved. The Group is currently in
dispute with the French tax authorities and in this regard an amount

Addex Therapeutics Annual Report 2012 | CoNSoLIDATED FINANCIAL STATEMENTS

of EUR1,116,467 (CHF1,348,022) has been deposited in an escrow
account until the outcome of the pending legal proceedings, that
could take up to 7 years (see note 11). Based on support provided by
French tax experts and lawyers, the management assessed the chance
of the claim of the French tax authorities being successful as remote
and therefore no provision has been made in the consolidated financial
statements. Had the management assessed the risk of a cash outflow
as probable, the Group would have provided for the amount and this
would have resulted in an additional charge to the statement of income
of CHF1,348,022.

Share-based compensation

The Group recognizes an expense for share-based compensation based
on a customized binomial model using a number of assumptions to
calculate the fair value of the financial instruments granted under the
Group’s equity incentive plan. Should the assumptions and estimates
underlying the fair value of these instruments vary significantly from
management’s estimates, then the share-based compensation expense
would be materially different from the amount recognized. As such,
the fair values of the equity sharing certificates (ESCs) granted in 2010,
2011 and 2012 were established based on a set of assumptions for
each grant. Had these assumptions been modified within their feasible
ranges and the Company calculated the share-based compensation
based on the higher and lower values of these ranges, share-based
compensation expense in 2012 for ESCs would have been CHF472,700
or CHF653,575, respectively (2011: CHF512,187 or CHF718,811,
respectively). This is compared to the amount recognized as an
expense for ESCs in 2012 of CHF554,444 (2011: 605,666). Additional
information is disclosed in note 15.

Pension obligations

The present value of the pension obligations depends on a number of
factors that are determined on an actuarial basis using a number of
assumptions. The assumptions used in determining the net cost for
pensions include the discount rate. Any changes in these assumptions
will impact the carrying amount of pension obligations. The Group
determines the appropriate discount rate at the end of each year. This
is the interest rate that should be used to determine the present value
of estimated future cash outflows expected to be required to settle the
pension obligations. In determining the appropriate discount rate, the
Group considers the interest rates of high-quality corporate bonds that
are denominated in the currency in which the benefits will be paid,
and that have terms to maturity approximating the terms of the related
pension liability. Other key assumptions for pension obligations are
based in part on current market conditions. Additional information is
disclosed in note 21.

Loans to employees

In connection with the granting of equity sharing certificates (ESCs),
the Group has made loans to its employees to finance the tax and
social charges consequences of the grant of ESCs. The loans are
only repayable if capital gains are realised from the exercise of
the subscription rights attached to the ESCs. ESCs’ subscription
rights are exercisable, subject to vesting, until their expiry date, at
their subscription price only if the underlying share price exceeds a
predefined floor price. As at December 31, 2012, the Group has made
loans to its employees for CHF1,393,672 (2011: CHF1,265,018), loans
amounting to CHF216,271 (2011: CHF130,839) relating to forfeited
or expired subscription rights or subscription rights that are expected
to forfeit or expire were written off and CHF67,410 (2011: nil) of
loans were reimbursed further to the exercise of subscription rights
attached to ESCs. The net loan amount as at December 31, 2012 was
CHF1,109,991 (2011: CHF1,134,179), out of which CHF135,936 (2011:
nil) were assessed as recoverable within 12 months and CHF974,055
(2011: CHF1,134,179) were assessed as recoverable in more than 1
year. The loan was tested for impairment based on the historic volatility,
the closing share price at December 31, 2012 of CHF9.59 and expected
forfeiture and expiry rates. As a result the non-current portion of the
loan was impaired by CHF227,994 (2011: nil) and the current portion
of the loan by CHF59,349. Had the Group made different assumptions
regarding the recoverability of the loan, then the provision would

have increased or decreased accordingly. This would have resulted in
an expense of between CHF0 and CHF1,109,991, compared to the
amount recognized as an expense in 2012 of CHF287,343 (2011: nil).

4.2 Critical judgments in applying the accounting policies

Income recognition

In 2011, the Group recognized a CHF2,598,200 milestone payment
received under the Janssen Pharmaceuticals Inc. agreement executed
on December 31, 2004 (see note 16) when the milestone payment
fell due, since there was no significant continuing involvement in the
development of the product. Had the Group been significantly involved
in the continuing development of the product, the Group would
have recognized the milestone of CHF2,598,200 over the period of
continuing involvement.

Development supplies

At December 31, 2012, the Group owns development supplies that
have been expensed in the statement of income. These amounts have
not been recognized on the balance sheet as an asset since they are to
be used in pre-clinical and clinical trials of specific products that have
not demonstrated technical feasibility.

5. Segment information
5.1 Reportable segments

The Group operates in one segment, which is the business of
developing drugs for human health.

5.2 Entity wide information

Information about products, services and major customers

External income of the Group for the years ended December 31, 2012
and 2011 is derived from the business of developing drugs for human
health. Income was earned from collaborative arrangements and the
sale of license rights to pharmaceutical companies.

Information about geographical areas

External income is recorded in the Swiss operating company as fees
from collaborations and sale of license rights.

Analysis of income by nature is detailed as follows:

Milestones

Technology access fees

Total income

2012

Analysis of income by major customer is detailed as follows:

Merck & Co., Inc (USA

Janssen Pharmaceuticals Inc., (USA

Total income

2012

For more detail, refer to note 16, “License and collaboration
agreements”.

The geographical analysis of assets is as follows:

2011

2,598,200

225,247

2,823,447

2011

225,247

2,598,200

2,823,447

Switzerland

Current

Non-current

Europe

Current

Non-current

Total assets

December 31, 2012 December 31, 2011

20,161,038

16,803,050

3,357,988

1,574,652

217,575

1,357,077

43,246,120

37,707,264

5,538,856

369,957

360,704

9,253

21,735,690

43,616,077

The geographical analysis of capital expenditure is as follows:

9. Intangible assets

Switzerland

Europe

Total capital expenditure

2012

300,422

2011

223,440

At January 1, 2011

3,903

Cost

227,343

Accumulated amortization

Net book value

The geographical analysis of operating expenses is as follows:

Switzerland

Europe

2012

27,066,232

65,271

Total operating expenses (note 18) 27,131,503

2011

32,409,129

2,307,763

34,716,892

6. Consolidated entities
The consolidated financial statements include the accounts of Addex
Therapeutics Ltd and its 100% owned subsidiaries, Addex Pharma SA
and Addex Pharmaceuticals France SAS.

7. Cash and cash equivalents

Year ended December 31, 2011

Opening net book amount

Exchange differences

Additions

Disposals

Amortization charge

Closing net book amount

At December 31, 2011

Cost

Accumulated amortization

Net book value

December 31, 2012 December 31, 2011

Year ended December 31, 2012

Cash at bank and on hand

15,256,707

28,565,379

Opening net book amount

Short term deposits

7,500,000

Additions

Total cash and cash equivalents

15,256,707

36,065,379

Amortization charge

In 2012, the effective interest rate on cash and cash equivalents was
0.10% (2011: 0.15%).

Credit quality of cash and cash equivalents

The table below shows the cash and cash equivalents by credit rating of
the major counterparties:

External credit rating
of counterparty

P-1 / A-1

Cash on hand

December 31, 2012 December 31, 2011

15,251,066

36,060,039

5,641

5,340

Total cash and cash equivalents

15,256,707

36,065,379

External credit ratings of counterparties were obtained from Moody’s
(P-1) or Standard & Poor’s (A-1), respectively.

8. Other current assets

December 31, 2012 December 31, 2011

Receivables

Loans to employees

Loans to related parties (note 25)

Prepayments

Accrued interest income

905,880

72,233

4,354

781,451

Total other current assets

1,763,918

666,536

1,326,941

9,112

2,002,589

As at December 31, 2012, the current portions of the loans made to
employees (CHF108,447) and of the loans made to related parties
(CHF27,489), respectively, to finance the tax and social charges
consequences of the grants of ESCs, were impaired by CHF59,349 and
the related charge was recognized in other employee costs (see note 19).

Addex Therapeutics Annual Report 2012 | CoNSoLIDATED FINANCIAL STATEMENTS

Computer software licenses

771,917

(687,999)

83,918

(126)

14,083

(2,385)

(63,273)

32,217

758,511

(726,294)

32,217

111,759

(46,380)

97,596

870,184

(772,588)

97,596

Closing net book amount

At December 31, 2012

Cost

Accumulated amortization

Net book value

The Group recorded an amortization charge in 2012 of CHF35,933
(2011: CHF52,712) as part of research and development expenses and
CHF10,447 (2011: CHF10,561) as part of general and administration
expenses.

Addex Therapeutics Annual Report 2012 | CoNSoLIDATED FINANCIAL STATEMENTS

10. Property, plant and equipment

At January 1, 2011

Cost

Accumulated depreciation

Net book value

Year ended December 31, 2011

Opening net book amount

Exchange differences

Additions

Disposals

Impairment charge

Depreciation charge

Closing net book amount

At December 31, 2011

Cost

Accumulated depreciation

Net book value

Year ended December 31, 2012

Leasehold
Buildings improvements

Equipment

Furniture
& fixtures

Chemical
library

Total

32,698

(8,173)

24,525

8,124,978

11,444,694

1,351,477

1,086,947

22,040,794

(4,627,868)

(8,824,020)

(1,006,240)

(906,292)

(15,372,593)

3,497,110

2,620,674

345,237

180,655

6,668,201

24,525

3,497,110

2,620,674

345,237

180,655

6,668,201

(8,604)

13,622

(1,173)

(399,848)

(3,692)

153,026

(33,690)

(11,705)

(364)

12,780

(5,166)

(8,940)

33,832

(12,660)

213,260

(40,029)

(420,493)

(1,307)

23,218

32,698

(9,480)

23,218

(776,546)

(1,475,966)

(128,087)

(61,964)

(2,443,870)

2,324,561

1,248,647

215,460

152,523

3,964,409

8,088,902

10,880,697

1,303,233

1,120,779

21,426,309

(5,764,341)

(9,632,050)

(1,087,773)

(968,256)

(17,461,900)

2,324,561

1,248,647

215,460

152,523

3,964,409

Opening net book amount

23,218

2,324,561

1,248,647

215,460

152,523

3,964,409

Additions

Disposals

Depreciation charge

Closing net book amount

At December 31, 2012

Cost

(1,308)

21,910

27,417

73,793

(5,327)

3,805

(131)

83,648

188,663

(5,458)

(874,324)

(975,589)

(133,581)

(73,238)

(2,058,040)

1,477,654

341,524

85,553

162,933

2,089,574

32,698

8,101,158

10,676,481

1,296,875

1,204,427

21,311,639

Accumulated depreciation

(10,788)

(6,623,504)

(10,334,957)

(1,211,322)

(1,041,494)

(19,222,065)

Net book value

21,910

1,477,654

341,524

85,553

162,933

2,089,574

The Group recorded a depreciation charge in 2012 of CHF1,940,554 (2011: CHF2,779,844) as part of research and development expenses and
CHF117,486 (2011: CHF84,519) as part of general and administration expenses.

11. Other non-current assets

12. Payables and accruals

December 31, 2012 December 31, 2011

Security rental deposit

Other deposits

Loans to employees

Loans to related parties (note 25)

433,812

1,348,022

187,210

558,851

417,304

Trade payables

Social security and other taxes

358,912

Accrued expenses

775,267

Total payables and accruals

709,643

332,250

3,549,099

4,590,992

1,685,696

871,649

5,956,065

8,513,410

Total other non-current assets

2,527,895

1,551,483

All payables mature within 3 months.

As at December 31, 2012, the Company has recorded an amount of
EUR1,116,467 (CHF1,348,022) in other non-current assets for an escrow
account related to claims from the French tax authorities that are in dispute.

As at December 31, 2012, the non-current portions of the loans made
to employees (CHF262,885) and of the loans made to related parties
(CHF711,170), respectively, to finance the tax and social charges
consequences of the grants of ESCs, were impaired by CHF227,994 and
the related charge was recognized in other employee costs (see note 19).

13. Provisions for other liabilities

Equity Sharing Certificate Equity Incentive Plan

Addex Therapeutics Annual Report 2012 | CoNSoLIDATED FINANCIAL STATEMENTS

Current

Non-current

At January 1, 2011

Provision linked to restructuring charges:

Termination of employment contracts

Costs of fixed assets disposal

Termination of lease contracts

At December 31, 2011

13,075

7,780

193,773

214,628

Amount utilized during the period

(212,702)

Amount transferred from non-current
to current

Exchange differences

At December 31, 2012

63,812

(545)

65,193

63,812

(63,812)

During 2012, CHF212,702 of the total amount of CHF278,440 provided
for as at December 31, 2011 were used. Provisions of CHF65,193 as
at December 31, 2012 pertain to the termination of lease contracts
and are expected to be fully utilized within 12 months. The costs of
provisions made have been recognized as operating expenses in the
consolidated statements of income.

14. Share capital and share premium

Number of shares

Common
shares

Treasury
shares

Total

Balance at January 1, 2011

6,464,809

(130,629) 6,334,180

Issue of shares - capital increase

1,371,069

- 1,371,069

Purchase of treasury shares

(117)

Balance at December 31, 2011

7,835,878

(130,746) 7,705,132

Issue of shares - capital increase

1,156,712

(238,687)

918,025

Issue of shares - exercise of ESCs

10,374

Balance at December 31, 2012

9,002,964

(369,433) 8,633,531

At December 31, 2012, the total outstanding share capital is
CHF9,002,964 (December 31, 2011: CHF7,835,878), consisting of
9,002,964 shares (December 31, 2011: 7,835,878). All shares have a
nominal value of CHF1 and are fully paid.

On October 12, 2012, the Group issued 1,156,712 new shares at CHF1
from the authorized capital. 918,025 new shares were used in a private
placement for CHF10.50 per share and 238,687 new shares are held as
treasury shares. Gross proceeds of CHF9,639,263 have been recorded in
share capital (CHF918,025) and share premium (CHF8,721,238), net of
directly related share issuance costs of CHF780,195.

During 2012, 10,374 subscription rights attached to equity sharing
certificates were exercised and 10,374 shares were issued from the
conditional capital. CHF10,374 and CHF31,122 were recognized in
share capital and share premium, respectively, net of share issuance
costs accrued as at December 31, 2012 for CHF10,315.

15. Share-based compensation

Non-executive directors and consultants

Executives and employees (note 19

Total share-based compensation

2012

9,783

570,699

580,482

2011

33,905

739,035

772,940

Analysis of share-based compensation by equity incentive plan is
detailed as follows:

Equity sharing certificate plan

Share option plans

Non voting share plans

2012

554,444

26,038

Total share-based compensation

580,482

2011

605,666

160,343

6,931

772,940

On June 1, 2010, the Company established an equity incentive plan
based on equity sharing certificates (ESCs and the ESC Plan) to provide
incentives to directors, executives, employees and consultants of
the Group. Each ESC provides the holder (i) a right to subscribe for
1,000 shares in the Company, and (ii) a right to liquidation proceeds
equivalent to that of shareholders. All rights of the ESCs expire after a 5
year period from date of grant with the ownership of the ESCs reverting
to the Group. ECSs granted are subject to certain vesting conditions
which are defined in each grant agreement. The right of the holder of
the ESCs to subscribe can only be exercised with respect to vested ESCs
if the underlying share price reaches a floor price that is calculated as
approximately 133% of the reference share price at the date of grant.
The subscription price is defined as 50% of the floor price. In the event
of a change in control, all ESCs automatically vest. The Group has no
legal or constructive obligation to repurchase or settle ESCs in cash.

On June 1, 2010, the Group granted 767 ESCs at a floor price of
CHF15.00 per share and a subscription price of CHF7.50 per share.
The ESCs granted are subject to a 4 year quarterly vesting period. In
accepting the grant of ESCs, the holders automatically forfeited all
previously granted share options and consequently the ESC grant has
been considered to be a replacement of the respective cancelled share
options, under IFRS 2.

On January 1, 2011 and July 1, 2011, the Group granted 6 ESCs,
respectively at a floor price of CHF14.00 per share and a subscription
price of CHF7.00 per share. The ESCs granted are subject to a 4 year
quarterly vesting period. On August 15, 2011, the Group granted 320
ESCs at a floor price of CHF15.00 per share and a subscription price
of CHF7.50 per share. The ESCs granted are subject to the following
vesting conditions: (a) 120 ESCs will vest over 4 years, with a 1 year cliff
period for 30 ESCs to vest, and the remaining 90 ESCs vesting quarterly
over the next 3 years; (b) 100 ESCs will vest anytime in the next 3 years
upon the earlier of (i) the Company’s stock reaching CHF25 per share
or (ii) the market capitalization of the Company reaching CHF240M,
or (iii) after the end of the 3 year service period, provided that if the
Company’s stock is trading at least CHF16.25 (on a 30-day trading
average), then at least 50% of the 100 ESCs shall vest on an upward
sliding scale depending on the stock price from CHF16.25 to CHF25;
and (c) 100 ESCs will vest anytime in the next 4 years upon the earlier
of (i) the Company’s stock reaching CHF40 per share or (ii) the market
capitalization of the Company reaching CHF360M or (iii) after the end
of the 4 year service period, provided that if the Company’s stock is
trading at least CHF26 (on a 30-day trading average) then at least 50%
of the 100 ESCs shall vest on an upward sliding scale depending on the
stock price from CHF26 to CHF40. In the event of a change of control
of Addex resulting from the “merger of equals” or if the market cap
of Addex reaches CHF 240 Million or CHF360 Million solely due to
recapitalization of the Company, then 200 ESCs shall not automatically
vest upon the occurrence of such event. In such a case the capitalization
targets will be adjusted by the Board of Directors to take into account
such circumstances. On November 15, 2011, the Group granted 360
ESCs at a floor price of CHF8.00 per share and a subscription price
of CHF4.00 per share. The ESCs granted are subject to the following
vesting conditions: (a) 225 ESCs are subject to a 4 year quarterly vesting
period; (b) 35 ESCs will vest at the earlier of (i) achieving undisclosed
performance conditions by certain predefined time points in 2012 or
(ii) the end a period ending December 31, 2012; (c) 40 ESCs will vest
at the achievement of undisclosed performance conditions by certain
predefined time points in 2012, with expiry at the end of 2012; (d)
25 ESCs will vest anytime in the next 2 years upon the Company’s
stock reaching CHF25 per share, with expiry at the end of 2013; and
(e) 35 ESCs will vest anytime in the next 4 years upon the Company’s
stock reaching CHF40 per share, with expiry at the end of 2014. Of
the 360 ESCs granted on November 15, 2011, 11 were granted to
holders of share options. In accepting the grant of ESCs, the option
holders automatically forfeit all previously granted share options and
consequently the grant of these 11 ESC have been considered to be a
replacement of the respective cancelled share options, under IFRS 2.

Addex Therapeutics Annual Report 2012 | CoNSoLIDATED FINANCIAL STATEMENTS

On April 1, 2012, the Group granted 1 ESC at a floor price of CHF13.00
per share and a subscription price of CHF6.50 per share. The ESC
granted is subject to a 4 year quarterly vesting period. On May 3, 2012,
the Group granted 50 ESCs at a floor price of CHF13.00 per share and
a subscription price of CHF6.50 per share. The ESCs will vest after the
end of a service condition ending December 31, 2012. On June 29,
2012, the Group granted 90 ESCs at a floor price of CHF13.00 per
share and a subscription price of CHF6.50 per share. The ESCs granted
are subject to the following vesting conditions: (a) 80 ESCs will vest over
4 years, with a 1 year cliff period; (b) 10 ESCs will vest quarterly over 4
years. On October 1, 2012, the Group granted 5 ESCs at a floor price of
CHF13.00 per share and a subscription price of CHF6.50 per share. The
ESCs granted are subject to a 4 year quarterly vesting period.

The Group has committed to grant a further 8 ESCs on January 1,
2013 at a floor price of CHF14.00 per share and a subscription price of
CHF7.00 per share. The ESCs granted are subject to a 4 year quarterly
vesting period, with a 1 year cliff period.

Movements in the number of subscription rights attached to the ESCs
outstanding are as follows:

At January 1

Granted

Forfeited

Expired

Exercised

2012

1,373,500

146,000

(169,817)

(44,270)

(10,374)

2011

725,000

692,000

(36,312)

(7,188)

At December 31

1,295,039

1,373,500

The total share-based compensation expense recognized in the statement
of income for ESCs granted to directors, executives, employees and
consultants has been recorded under the following headings:

Research and development

General and administration

Total share-based compensation
for ESCs

Share option plans

2012

407,685

146,759

2011

391,839

213,827

554,444

605,666

The Company established share option plans in 2007 and 2008 to
provide incentives to directors, executives, employees and consultants
of the Group. The Company is no longer issuing share options under
these equity incentive plans and there are no options outstanding as at
December 31, 2012 and December 31, 2011.

As a result of the granting of ESCs in 2011 and 2010, 2,500 and 226,000
options, respectively, were forfeited. For accounting purposes the
cancellation of these share options was treated as a modification under
IFRS 2 and the portion of the original fair value that was unrecognized at
the date of forfeiture is being recognized over the original vesting period.
The total share-based compensation expense recognized in the statement
of income for share options granted to directors, executives, employees
and consultants has been recorded under the following headings:

Research and development

General and administration

Total share-based compensation
for share options

2012

15,032

11,006

2011

84,704

75,639

26,038

160,343

At December 31, 2012, of the outstanding 1,295,039 subscription rights (2011: 1,373,500) attached to the ESCs, 548,293
(December 31, 2011: 257,813) were exercisable.

The outstanding subscription rights as at December 31, 2012 and 2011 have the following expiry dates, subscription prices and floor prices:

At December 31, 2012
Expiry date

2015

2016

2017

Total subscription rights

At December 31, 2011
Expiry date

2015

2016

Total subscription rights

4.00 / 8.00

6.50 / 13.00

7.00 / 14.00

7.50 / 15.00

Subscription prices / floor prices (ChF)

294,290

141,000

6,000

2,250

8,250

531,499

320,000

Total

537,499

616,540

141,000

851,499

1,295,039

Subscription prices / floor prices (ChF)

4.00 / 8.00

7.00 / 14.00

7.50 / 15.00

360,000

6,000

12,000

681,500

320,000

1,001,500

Total

687,500

686,000

1,373,500

The weighted average fair value of subscription rights attached to ESCs granted during 2012 determined using a customized binomial valuation
model was CHF0.64 (2011: CHF0.70). The significant inputs to the model were:

Weighted average share price / share price at the grant date

Weighted average subscription price / subscription price per share

Weighted average floor price / floor price per share

Weighted average volatility / volatility

Dividend yield

Weighted average annual risk free rate / annual risk-free rate

2012

CHF8.69

CHF6.50

CHF13.00

52.36%

0.07%

2011

CHF7.67

CHF5.67

CHF11.34

49.84%

0.40%

Non voting share equity incentive plans

19. Staff costs

Addex Therapeutics Annual Report 2012 | CoNSoLIDATED FINANCIAL STATEMENTS

Prior to December 31, 2006, the Group established two non voting
share equity incentive plans to provide certain directors, executives,
employees and consultants of the Group with an opportunity to
subscribe or purchase shares of the Company at a preferential price.
The plans established a right for the Company to repurchase a number
of shares on a straight line basis during a limited period of time of 4
or 5 years depending on the terms of each plan in the event of the
contractual relationship being terminated. As at December 31, 2011,
this right to repurchase has been terminated for both plans, and the
Company has no further right to repurchase the shares that became
fully owned by their holders. The total share-based compensation
expense recognized in the statement of income for non voting share
equity incentive plans was CHF6,931 in 2011 (2012: nil).

16. License and collaboration agreements
Janssen Pharmaceuticals Inc. (formerly Ortho-McNeil-Janssen
Pharmaceuticals Inc).

On December 31, 2004, the Group entered into a research collaboration
and license agreement with Janssen Pharmaceuticals Inc. (JPI). In
accordance with this agreement, JPI has acquired an exclusive worldwide
license to develop mGluR2PAM compounds for the treatment of human
health. The Group is eligible for future payments contingent on the
products from the research achieving certain development milestones.
The Group is also eligible for low double digit royalties on net sales.
Under the agreement, JPI made a EUR2,000,000 (CHF2,598,200)
milestone payment that has been recognized as income during 2011. No
income has been recognized under this agreement in 2012.

Merck Sharp & Dohme Research Ltd.

During 2011 total fees of CHF225,247 have been recognized as income
under the research collaboration and license agreement with Merck
Sharp & Dohme Research Ltd that was executed on November 30,
2007. This agreement was terminated in 2011.

17. Other income

Research grants

Research tax credit

Total other income

2012

121,089

2011

675,449

244,097

919,546

During 2012, the Group recognized CHF121,089 (2011: CHF675,449)
of other income from The Michael J. Fox Foundation for Parkinson’s
Research. The grant was received in instalments and recognized as
other income over the period necessary to match it against the specific
research costs it was intended to compensate.

18. Operating expenses by nature

2012

2011

Staff costs (note 19)

11,044,302

14,924,426

Depreciation and amortization

2,104,420

External research and development costs 4,755,956

Laboratory consumables

Operating leases

Other operating expenses

1,269,187

1,809,281

6,148,357

2,927,636

4,759,157

3,239,007

2,569,497

6,297,169

Total operating expenses

27,131,503

34,716,892

2012

2011

8,398,033

11,236,404

Wages and salaries

Social charges and insurances

Value of share-based services (note 15)

833,073

570,699

Pension costs – defined contribution plans

1,261,860

739,035

39,490

Pension costs – defined benefit plans
(note 21)

Other employee costs

492,469

750,028

1,272,913

374,724

Total staff cost (note 18)

11,044,302

14,924,426

20. Taxes

Loss before tax

Tax calculated at a tax rate of 7.8%
(2011:7.8%)

Effect of different tax rates in
other countries

Expenses charged against equity

December 31, December 31,
2011

2012

27,018,827

31,141,068

2,107,469

2,429,003

(4,564)

61,660

(146,806)

12,568

(60,289)

Expenses not deductible for tax purposes

(45,278)

Tax losses not recognized as deferred
tax assets

Income tax expense

(2,119,287)

(2,234,476)

The Group is subject to Swiss income taxes and has a tax loss carry
forward of CHF212,194,219 as of December 31, 2012 (2011:
CHF201,485,556), of which CHF154,034,324 (2011: CHF136,699,141)
expire within the next five years and CHF58,159,895 (2011:
CHF64,786,415) will expire between five and seven years. Tax losses of
CHF16,310,164 expired in 2012 (2011: CHF15,054,017).

21. Retirement benefit obligations
Apart from the social security plans fixed by the law, the Group
sponsors independent pension plans. All employees are covered by
these plans, which are defined benefit plans. Retirement benefits are
based on contributions, computed as a percentage of salary, adjusted
for the age of the employee and shared approximately 46%/54%
by employee and employer. In addition to retirement benefits, the
plans provide death and long-term disability benefits to its employees.
Liabilities and assets are revised every year by an independent actuary. In
accordance with IAS 19, plan assets have been estimated at fair market
values and liabilities have been calculated according to the “projected
unit credit” method.

The Group recorded a pension benefit charge in 2012 of CHF492,469
(2011: CHF1,272,913) as part of staff costs. At December 31, 2012, the
difference between the unrecognized actuarial losses of CHF1,975,214
(2011: CHF1,869,645) and the negative status of the pension funds
of CHF2,763,829 (2011: CHF2,857,916) is recorded in non-current
liabilities.

Pension benefits

The amounts recognized in the balance sheet are determined as follows:

2012

2011

Operating lease contracts are renewable on normal business terms and
provide for annual rent increases based on the Swiss consumer price index.

Present value of funded obligations

(9,277,580)

(8,892,019)

Fair value of plan assets

6,513,751

6,034,103

Funded status

Unrecognized net losses

Accrued pension costs

(2,763,829)

(2,857,916)

1,975,214

(788,615)

1,869,645

(988,271)

Addex Therapeutics Annual Report 2012 | CoNSoLIDATED FINANCIAL STATEMENTS

The amounts recognized in the statements of income are as follows:

Current service cost

Interest cost

Expected return on plan assets

Employees’ contributions

Amortization of unrecognized losses

Curtailment gain

2012

2011

1,340,391

1,973,843

172,138

(189,371)

(586,388)

40,491

(284,792)

275,326

(286,720)

(757,816)

68,280

Total included in staff costs (note 19)

492,469

1,272,913

The movement in the liability recognized in the balance sheet is as follows:

2012

2011

Liability at beginning of year

(988,271)

(592,477)

Total expense charged in the statement
of income

Contributions paid

Liability at end of year

(492,469)

(1,272,913)

692,125

877,119

(788,615)

(988,271)

The movement in the defined benefit obligations at the beginning of
the year is as follows:

The movement in the unrecognized net losses at the beginning of the
year is as follows:

2012

2011

Unrecognized losses at beginning of year 1,869,645

2,251,401

Amortization

Change in actuarial assumptions

Actuarial losses / (gains)

Plan assets actuarial losses

Curtailment

(40,491)

(90,798)

553,126

105,620

(421,888)

(68,280)

331,071

(800,543)

155,996

—

Unrecognized losses at end of year

1,975,214

1,869,645

The actual return on plan assets is a gain of CHF83,751 in 2012 (2011:
CHF130,724).

The principal actuarial assumptions used were as follows:

Discount rate

Expected return on plan assets

Future salary increases

Future pension increases

Turnover, on average

2012

2.15%

n/a

1.50%

1.00%

12.50%

2011

2.50%

4.00%

1.50%

1.00%

5.00%

Defined benefit obligation
at beginning of year

Service cost

Interest cost

Change in assumptions

Actuarial (losses) / gains

Benefit payments

Curtailment

2012

2011

(8,892,019)

(10,011,872)

(1,340,391)

(1,973,843)

The expected return on plan assets is determined by considering the
returns experienced by Swisscanto Asset Management over the last
15 years.

(172,138)

(275,326)

Mortality rate

90,798

(553,126)

(417,200)

2,006,496

(331,071)

800,543

2,899,550

Assumptions regarding future mortality experience are set based on
advice, published statistics and experience.

The average life expectancy in years of a pensioner retiring at age of
65 (male) or 64 (female) on the balance sheet date are as follows:

Defined benefit obligations
at end of year

(9,277,580)

(8,892,019)

The movements in the fair value of plan assets during the year are as
follows:

Fair value of plan assets
at beginning of year

Expected return on plan assets

Employees’ contributions

Company contribution

2012

2011

6,034,103

7,167,994

189,371

586,388

692,125

286,720

757,816

877,119

Plan assets actuarial losses

(105,620)

(155,996)

Male

Female

2012

18.93

22.29

2011

18.93

22.29

The estimated Group contributions to pension plans for the financial
year 2013 amount to CHF692,000.

The categories of plan assets and their corresponding return are as
follow:

417,200

(2,899,550)

(1,299,816)

Cash

Bonds

6,513,751

6,034,103

Alternative investments

Real estates and mortgage

Total

Cash

Bonds

Real estates and mortgage

Alternative investments

Total

December 31, 2012

Allocation in %

Expected return

2.1%

83.3%

1.8%

11.3%

1.5%

100.0%

2.0%

3.0%

6.5%

4.0%

3.2%

December 31, 2011

Allocation in %

Expected return

2.3%

54.1%

1.5%

36.3%

5.8%

100.0%

2.0%

3.5%

6.8%

4.5%

3.9%

Benefit payments

Curtailment

Fair value of plan assets
at end of year

Addex Therapeutics Annual Report 2012 | CoNSoLIDATED FINANCIAL STATEMENTS

The following table shows a five year summary reflecting the funding of defined benefit pensions and the impact of historical deviations
between expected and actual return on plan assets and actuarial adjustments on plan liabilities.

Present value of defined benefit obligation

(9,277,580)

(8,892,019)

(10,011,872)

(9,325,540)

(6,755,694)

Fair value of plan assets

Deficit in the plan

Unrecognized actuarial (losses) / gains on plan liabilities.

Actuarial losses on plan assets

6,513,751

6,034,103

7,167,994

7,070,072

5,206,129

(2,763,829)

(2,857,916)

(2,843,878)

(2,255,468)

(1,549,565)

(553,126)

(105,620)

800,543

(155,996)

774,015

(85,787)

(89,765)

(77,615)

(316,716)

(69,407)

2012

2011

2010

2009

2008

22. Finance income and costs

Interest income

Unrealized foreign exchange loss

Finance result, net

2012

22,662

(31,075)

(8,413)

25. Related party transactions
Related parties include members of the Board of Directors and the
Executive Management of the Group.

2011

72,199

(239,368)

The following transactions were carried out with related parties:

(167,169)

Key management compensation

23. Loss per share
Basic and diluted earnings per share is calculated by dividing the profit
attributable to equity holders of the Company by the weighted average
number of common shares in issue during the year excluding common
shares purchased by the Group and held as treasury shares.

Salaries and other short-term
employee benefits

Post-employment benefits

Share-based compensation

2012

2011

3,189,017

3,485,229

232,099

251,185

297,887

471,524

3,672,301

4,254,640

Loss attributable to equity holders
of the Company

Weighted average number of
shares in issue

2012

2011

27,018,827

31,141,068

Loans to related parties – Executive Management

7,911,935

7,430,957

Exits from the Executive Management

At January 1

Basic and diluted loss per share

(3.41)

(4.19)

The Company has one category of dilutive potential shares as at
December 31, 2012 and December 31, 2011: equity sharing certificates.
As of December 31, 2012 and December 31, 2011, equity sharing
certificates have been ignored in the calculation of the loss per share,
as they would be anti-dilutive.

24. Commitments and contingencies
Operating lease commitments

Within 1 year

2012

2,136,311

Later than 1 year and no later than 5 years 5,045,346

Later than 5 years

2011

2,382,959

4,306,404

Total operating lease commitments

7,181,657

6,689,363

Operating lease commitments consist mainly of rental contracts for
laboratories, offices and related spaces at Plan-les-Ouates and Archamps
sites. As at December 31, 2012 and 2011, there are no commitments
over 5 years and commitments related to the site of Archamps are
recognized in the liabilities for CHF55,252 (2011: CHF237,143) as
provision for restructuring.

Capital commitments

As at December 31, 2012 and 2011, the Group has no capital
expenditure contracted but not yet incurred.

Contingencies

As part of the ordinary course of business, the Group is subject to
contingent liabilities in respect of certain litigation. In the opinion of
management, none of the outstanding litigation will have a significant
adverse effect on the Group’s financial position (see note 4.1).

Loans advanced during the year

Loans written-off during the year

Loans reimbursed during the year

At December 31

2012

775,267

(80,646)

82,737

(15,951)

(22,747)

738,660

2011

407,211

(96,501)

464,557

775,267

In 2012, in connection with the granting of equity sharing certificates,
the Group has made loans of CHF128,654 (2011: CHF647,980) to its
employees, of which CHF82,737 (2011: CHF464,557) were made to
Executive Managers, to finance the tax and social charges consequences
of the grant of ESCs. The loans accrue interest at 0.2% per year and the
loan principal and accrued interest are repayable from the first capital
gains realised from the exercise of the subscription rights attached to
the ESCs. Should no capital gains be realized over the 5 year term of
the ESCs then the loans are forgiven. CHF175,455 of the loans made to
related parties were impaired as at December 31, 2012.

26. Events after the balance sheet date
On February 7, 2013, the Group announced the implementation of a
restructuring plan that will reduce the headcount by upto 70% which
represents terminating approximately 40 full time equivalents. The cost
of the restructuring is estimated between CHF1.7 and CHF3.1 million.
The restructuring will be implemented on February 27 and will run
through to August 2013. The aim of the restructuring is in line with the
Company’s new strategy to focus resources on its clinical pipeline.

There has been no other material event after the balance sheet date.

Addex Therapeutics Annual Report 2012 | CoNSoLIDATED FINANCIAL STATEMENTS

27. Non-Executive Directors and Executive Management
compensation disclosures in accordance with Swiss law
The Group’s consolidated financial statements have been prepared in
accordance with IFRS. This note has been prepared in accordance with
the requirements of the Swiss law for companies, the Swiss Code of
Obligations, and therefore differs in certain significant respects from
compensation disclosures in note 25 (related party transactions), mainly
due to different expense recognition rules being applied.

Loans and other payments to Non-Executive Directors

No loans were granted to current or former Non-Executive Directors
during 2012 and 2011. No such loans were outstanding as of
December 31, 2012 and 2011. During 2011, CHF31,909 of services
were purchased from a member of the Board. In 2012, no payments (or
waivers of claims) other than those set out in the compensation table
were made to current or former Non-Executive Directors or to “persons
closely linked” to them.

Non-Executive Director Compensation

General principles

Based on a proposal made by the Compensation Committee, the Board
of Directors determines the compensation of Non-Executive Directors.
They receive an annual fee based on the responsibilities of each Director,
of which half is paid based on attendance at meetings, and an annual
committee fee for each of the board standing committees of which they
are a member. Non-Executive Directors are also eligible to participate in
the Company’s equity incentive plans.

Compensation to Non-Executive Directors in 2012 (1)

Name of Non-Executive
director (7)

André J. Mueller (3)

Andrew Galazka (6)

Raymond Hill (5)

Vincent Lawton (4)

Hoyoung Huh

Antoine Papiernik (2)

Oleg Nodelman (2)

Total

Base cash
compensation

variable cash
attendance

30,000

11,000

27,500

25,000

23,333

22,500

3,332

15,000

Total
2012

52,500

14,332

42,500

40,000

38,333

116,833

70,832

187,665

1. Compensation does not include reimbursement for travel and other necessary business
expenses incurred in the performance of their services as these are not considered to be
compensation.

2. Non-Executive Directors who serve on the Board of Directors in their capacity as

representatives of their respective venture capital investment firms receive no compensation
for their services.

3. Non-Executive Chairman of the Board of Directors.
4. Vice Chairman of the Board of Directors and Chairman of the Audit Committee.
5. Chairman of the Compensation Committee.
6. Chairman of the Nomination Committee and Non-Executive Director until 9 May 2012.
7. All Non-Executive Directors are members of the Board of Directors.

Compensation to Non-Executive Directors in 2011 (1)

Name of Non-Executive Director (8)

Base cash
compensation

variable cash
attendance

Executive Management
interim fees (9)

Equity sharing
certificates (3)

Total
2011

André J. Mueller (4)

Andrew Galazka (7)

Raymond Hill (6)

Vincent Lawton (5)

Beat E. Lüthi

Hoyoung Huh

Antoine Papiernik (2)

Oleg Nodelman (2)

Total

30,000

25,000

25,833

25,000

10,000

13,333

22,500

15,000

6,000

15,000

30,000

3,000

12,000

70,500

129,166

88,500

115,500

82,500

43,000

52,833

110,500

16,000

28,333

333,166

1. Compensation does not include reimbursement for travel and other necessary business
expenses incurred in the performance of their services as these are not considered to be
compensation.

2. Non-Executive Directors who serve on the Board of Directors in their capacity as representatives
of their respective venture capital investment firms receive no compensation for their services.

3. No equity sharing certificates were granted to Non-Executive Directors during 2011.
4. Non-Executive Chairman of the Board of Directors.

5. Vice Chairman of the Board of Directors and Chairman of the Audit Committee.
6. Chairman of the Compensation Committee.
7. Chairman of the Nomination Committee.
8. All Non-Executive Directors are members of the Board of Directors.
9. In 2011, a special committee of the board was created to oversee the transition of the Chief
Executive Officer position. A total amount of CHF115,500 was charged to the Company
with respect to the activities of this special committee.

Addex Therapeutics Annual Report 2012 | CoNSoLIDATED FINANCIAL STATEMENTS

Executive Management Compensation

Loans and other payments to Executive Management

General principles

The Chief Executive Officer provides the Compensation Committee
with an evaluation of the individual performance of the members
of the Executive Management as well as an evaluation of their
respective function. The Compensation Committee considers both
the recommendation of the Chief Executive Officer and the overall
performance of the Group including short and long term goals and
achievements. Based on a proposal made by the Compensation
Committee, the Board determines the compensation of the Executive
Management. The members of Executive Management are eligible to
participate in the Company’s equity incentive plans.

Compensation to Executive Management in 2012 (1)

In 2012, in connection with the granting of equity sharing certificates,
the Group made loans of CHF128,654 (2011: CHF647,980) to its
employees, of which CHF82,737 was to members of the Executive
Management (2011: CHF315,412 to Bharatt Chowrira and CHF149,145
to other members of the Executive Management), to finance the tax
and social charges consequences of the grant of ESCs. The loan accrues
interest at 0.2% per year and the loan principal and accrued interest
are repayable from the first capital gains realised from the exercise of
the subscription rights attached to the ESCs. Should no capital gains be
realized over the 5 year term of the ESCs then the loans are forgiven.

Executive Management (2)

Bharatt Chowrira (4)

Other Executive Management

Total

Base cash
compensation

variable
cash bonus

475,368

2,220,879

2,696,247

61,875

226,711

288,586

Equity sharing
certificates
(number) (3)

Equity sharing
certificates
(value) (3)

12,750

Total
2012

537,243

2,460,340

2,997,583

1. Compensation does not include reimbursement for travel and other necessary business
expenses incurred in the performance of their services as these are not considered to be
compensation.

2. The Executive Management includes the Chief Executive Officer and senior members of

management.

Compensation to Executive Management in 2011 (1)

3. 85 equity sharing certificates were granted to Executive Management during 2012, reported

at fair value at date of grant (with a weighted average fair value of CHF150 per ESC).

4. President and Chief Executive Officer ; Member of the Board of Directors from 9 May 2012.

Executive Management (2)

Bharatt Chowrira (4)

Vincent Mutel (5)

Other Executive Management

Total

Base cash
compensation

variable
cash bonus

Equity sharing
certificates
(number) (3)

Equity sharing
certificates
(value) (3)

208,052

480,375

2,011,189

2,699,616

37,500

390,000

427,500

320

147

467

60,800

119,120

179,920

Total
2011

306,352

480,375

2,520,309

3,307,036

1. Compensation does not include reimbursement for travel and other necessary business
expenses incurred in the performance of their services as these are not considered to be
compensation.

2. The Executive Management includes the Chief Executive Officer and senior members of

3. 467 equity sharing certificates were granted to Executive Management during 2011,

reported at fair value at date of grant (with a weighted average faire value of CHF385 per ESC).

4. Chief Executive Officer from August 15, 2011.
5. Chief Executive Officer up to June 2, 2011 and Vice Chairman of the Board of Directors up

management.

to August, 11, 2011.

Addex Therapeutics Annual Report 2012 | CoNSoLIDATED FINANCIAL STATEMENTS

ownership of Addex Pharmaceuticals shares, share options and subscription rights by Non-Executive Directors and members of
Executive Management

The total number of shares and shares’ subscription rights owned by Non-Executive Directors and members of the Executive Management at
December 31, 2012 is shown in the following table.

Name of Director or Executive
(number of shares or subscription rights)

Non-Executive Director

2012 Equity
sharing certificates
granted

vested
shares and ESCs’
subscription rights

Unvested
shares and ESCs’
subscription rights

Total shares and
ESCs’ subscription
rights owned

André J. Mueller

Raymond Hill

Vincent Lawton

Hoyoung Huh

Antoine Papiernik

Oleg Nodelman

Executive Management

Bharatt Chowrira

Tim Dyer

Charlotte Keywood

Graham Dixon

Sonia Poli

Jean-Philippe Rocher

Robert Lütjens

Chris Maggos

Total

80,751

3,750

4,250

37,500

127,481

57,394

42,975

68,974

54,348

19,856

497,279

3,375

2,250

282,500

69,875

16,500

80,000

23,875

26,250

28,125

25,000

84,126

6,000

6,500

320,000

197,356

73,894

80,000

66,850

95,224

82,473

44,856

560,000

1,057,279

The total number of shares and shares’ subscription rights owned by Non-Executive Directors and members of the Executive Management at
December 31, 2011 is shown in the following table.

Name of Director or Executive
(number of shares or subscription rights)

Non-Executive Director

2011 Equity
sharing certificates
granted

vested
shares and ESCs’
subscription rights

Unvested
shares and ESCs’
subscription rights

Total shares and
ESCs’ subscription
rights owned

André J. Mueller

Andrew Galazka

Raymond Hill

Vincent Lawton

Hoyoung Huh

Antoine Papiernik

Oleg Nodelman

Executive Management

Bharatt Chowrira

Tim Dyer

Charlotte Keywood

Sonia Poli

Laurent Galibert

Jean-Philippe Rocher

Robert Lütjens

Chris Maggos

Tatiana Pont Carteret

Total

320

78,501

9,765

2,250

138,033

38,250

30,750

15,750

60,750

42,125

11,250

8,625

5,625

3,750

320,000

88,125

47,500

36,250

40,000

43,125

33,750

21,375

84,126

13,515

6,000

320,000

226,158

85,750

67,000

52,000

100,750

85,250

45,000

30,000

467

438,299

683,250

1,121,549

28. Risk assessment disclosure required by Swiss law
The Chief Executive Officer and Chief Financial Officer coordinate
and align the risk management processes, and report to the Board
and the Audit Committee on a regular basis on risk assessment and
risk management. The organization and the corporate processes have
been designed and implemented to identify and mitigate risks at an
early stage. Organizationally, the responsibility for risk assessment and

management is allocated to the Chief Executive Officer and members
of the Executive Management and specialized corporate functions such
as Group Finance and the Group Safety Committee. Group Finance
provides support and controls the effectiveness of the risk management
processes. Financial risk management is described in more detail in note
3 to the Group’s consolidated financial statements.

Addex Therapeutics Annual Report 2012 | CoNSoLIDATED FINANCIAL STATEMENTS

Report of the statutory auditor to the General Meeting of Addex Therapeutics Ltd
Plan-les-Ouates

Report of the statutory auditor on the consolidated financial statements
As statutory auditor, we have audited the accompanying consolidated financial statements of Addex Therapeutics Ltd, which comprise the balance
sheet, statements of income, statements of comprehensive income, statements of changes in equity, statements of cash flows and notes, for the year
ended 31 December 2012.

Board of Directors’ Responsibility

The Board of Directors is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the
International Financial Reporting Standards (IFRS) and the requirements of Swiss law. This responsibility includes designing, implementing and
maintaining an internal control system relevant to the preparation of consolidated financial statements that are free from material misstatement,
whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making
accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with
Swiss law and Swiss Auditing Standards as well as the International Standards on Auditing. Those standards require that we plan and perform the
audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The
procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s
preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the
appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements for the year ended 31 December 2012 give a true and fair view of the financial position, the
results of operations and the cash flows in accordance with the International Financial Reporting Standards (IFRS) and comply with Swiss law.

Emphasis of matter

We draw attention to note 4.1 to the consolidated financial statements, paragraph “Uncertainties and ability to continue operations”, where
disclosures by management are made regarding the fact that the Group’s ability to continue operations depends among others on its ability to raise
additional financial resources to support future research activity and enter into collaborations with partners in the pharmaceutical industry. These
conditions indicate the existence of a material uncertainty that may cast significant doubt about the Group’s ability to continue as a going concern.
Our opinion is not qualified in respect of this matter.

Report on other legal requirements
We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and
article 11 AOA) and that there are no circumstances incompatible with our independence.

In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists which has
been designed for the preparation of consolidated financial statements according to the instructions of the Board of Directors.

We recommend that the consolidated financial statements submitted to you be approved.

PricewaterhouseCoopers SA

Michael Foley
Audit expert
Auditor in charge

Guillaume Debout
Audit expert

Geneva, 8 February 2013

Addex Therapeutics Annual Report 2012 | FINANCIAL STATEMENTS

Statutory Financial Statements of Addex Therapeutics Ltd as at December 31, 2012

Balance Sheets as at December 31, 2012 and December 31, 2011

Notes

December 31, 2012

December 31, 2011

Amounts in Swiss francs

assets

Current assets

Cash and cash equivalents

Other receivables

Third parties

Accrued income

Total current assets

Non-current assets

Investments in Group companies

Other non-current assets

Loans to Group companies

Total non-current assets

Total assets

LIABILITIES AND ShAREhoLDERS’ EQUITY

Current liabilities

Trade payables

Other payables: Third parties

Accruals

Total current liabilities

Shareholders’ equity

Share capital

General reserve from capital contribution

- Thereof reserves from capital contributions

- Thereof reserves from retained earnings

Treasury shares reserve

Non-voting equity securities*

Accumulated deficit

Total shareholders’ equity

Total liabilities and shareholders’ equity

*p.m. = pro memoria. Non-voting equity securities have no nominal value.

Statements of Income for the years ended December 31, 2012 and 2011

Amounts in Swiss francs

operating expenses

Professional fees

Other operating expenses

Provision for Group companies

Taxes

Total operating expenses

Interest income

Net loss before taxes

Income tax expense

Net loss for the year

The accompanying notes form an integral part of these financial statements.

6,068,965

10,832,452

2,195

21,715

6,092,875

1,246

29,106

10,862,804

11,858,100

11,858,102

17,950,977

45,642

55,640

280,654

381,936

9,002,964

64,435,469

161,607,712

(97,172,243)

489,531

p.m.

(56,358,923)

17,569,041

17,950,977

24,851,740

24,851,742

35,714,546

331,533

95,103

155,147

581,783

7,835,878

88,561,948

153,094,039

(64,532,091)

250,844

p.m.

(61,515,907)

35,132,763

35,714,546

2012

2011

1,075,712

445,791

25,872,861

102,556

27,496,920

(13,752)

27,483,168

227,458

641,268

27,847,012

196,386

28,912,124

(36,369)

28,875,755

Notes

Addex Therapeutics Annual Report 2012 | FINANCIAL STATEMENTS

Notes to the Financial Statements for the years ended December 31, 2012 and 2011 (amounts in Swiss francs)

1. General
Addex Therapeutics Ltd, formerly Addex Pharmaceuticals Ltd, was founded on February 19, 2007.

2. Guarantees, other indemnities and assets pledged in favor of third parties
As of December 31, 2012 and December 31, 2011, there were no guarantees, other indemnities or assets pledged in favor of third parties.

3. Pledges on assets to secure own liabilities
As of December 31, 2012 and December 31, 2011, there were no assets pledged to secure own liabilities.

4. Lease commitments not recorded in the balance sheet
As of December 31, 2012 and December 31, 2011, there were no lease commitments not recorded in the balance sheet.

5. Amounts due to pension funds
As of December 31, 2012 and December 31, 2011, there were no amounts due to pension funds.

6. Significant investments
Addex Therapeutics Ltd as a holding company for the Addex Therapeutics Group owns:

Company

Business

Capital

Interest in capital in %

Addex Pharma SA, Plan-les-Ouates, Switzerland

Research & development

Addex Pharmaceuticals France SAS, Archamps, France

Research & development

CHF3,987,492

EUR37,000

100%

As at December 31, 2012 and 2011, the Company has provided for its investments in Group companies as follows:

Investment in Addex Pharma SA

Provision for investment in Addex Pharma SA

Investment in Addex Pharmaceuticals France SAS

December 31, 2012

December 31, 2011

3,987,492

(3,987,491)

3,987,492

(3,987,491)

7. Other non-current assets – Loans to Group companies
As at December 31, 2011 and 2010, the Company has provided for its loan to Addex Pharma SA as follows:

Loan to Addex Pharma SA

Provision for loan to Addex Pharma SA

December 31, 2012

December 31, 2011

150,789,674

(138,931,574)

11,858,100

137,910,453

(113,058,713)

24,851,740

The loan to Addex Pharma SA is subordinated to the claims of other creditors of the subsidiary up to CHF138,931,574.

8. Equity

General reserve, from…
...retained

Share
capital

...capital
contribution

earnings shares reserve

Treasury Accumulated
deficit

Total

January 1, 2011

Issue of shares, capital increase

6,464,809

140,507,743

1,371,069

12,586,413

Offset accumulated deficit with general reserve

Transfer to treasury shares reserve

Net loss of the year

December 31, 2011

(64,532,091)

(117)

250,727

(97,172,243)

50,051,036

117

13,957,482

64,532,091

(28,875,755)

Issue of shares, capital increase

1,156,712

8,721,238

Issue of shares, ESCs exercise

10,374

31,122

9,877,950

41,496

7,835,878

153,094,039

(64,532,091)

250,844

(61,515,907)

35,132,763

Offset accumulated deficit with general reserve

Transfer to treasury shares reserve

Net loss of the year

December 31, 2012

(32,640,152)

(238,687)

32,640,152

238,687

(27,483,168)

9,002,964

161,607,712

(97,172,243)

489,531

(56,358,923)

17,569,041

Addex Therapeutics Annual Report 2012 | FINANCIAL STATEMENTS

On October 12, 2012, the Group issued 1,156,712 new shares at CHF1 from the authorized capital. 918,025 new shares were used in a private
placement for CHF10.50 per share and 238,687 new shares were recognized held as treasury shares. Gross proceeds of CHF9,639,263 from the
private placement have been recorded in share capital for CHF918,025 and in general reserve from capital contributions for CHF8,721,238.

During 2012, 10,374 subscription rights attached to equity sharing certificates were exercised and 10,374 shares were issued from the conditional
capital. CHF10,374 and CHF31,122 were recognized in share capital and general reserve from capital contributions, respectively.

At December 31, 2012, the total outstanding share capital is CHF9,002,964 (2011: CHF7,835,878), consisting of 9,002,964 shares (2011: 7,835,878
shares). All shares have a nominal value of CHF1. The authorized capital and conditional capital as at December 31, 2012 and 2011 are as follows:

Authorized capital

Conditional capital

December 31, 2012

December 31, 2011

2,761,227

3,720,872

2,931,246

3,331,246

9. Treasury share reserve
This reserve corresponds to the purchase price of shares in Addex Pharmaceuticals Ltd held by Group companies. The table shows movements in the
number of shares and the treasury share reserve:

Balance at January 1, 2011

Purchases

Balance at December 31, 2011

Purchases

Balance at December 31, 2012

Number of
registered shares

Price
in ChF

Total purchase
price in ChF

130,629

117

130,746

238,687

369,433

1.00

250,727

117

250,844

238,687

489,531

% of share
capital

2.02%

1.67%

4.10%

10. Significant shareholders
According to the information available to the Board of Directors the following shareholders held shares entitling them to more than 3% of the
total voting rights:

December 31, 2012

December 31, 2011

BVF Partners L.P.*

Sofinnova Capital IV FCPR

TVM V Life Science Ventures

Visium Asset Management, L.P.

The Swiss Helvetia Fund

SROne Ltd

Number
of shares

2,439,184

806,648

690,525

488,114

262,474

253,253

Interest in
capital in %

27.09%

8.96%

7.67%

5.42%

2.92%

2.81%

Number
of shares

2,350,242

806,648

705,726

351,155

253,253

Interest in
capital in %

29.99%

10.29%

9.01%

4.48%

3.23%

*Addex Therapeutics Ltd shares were held by several related entities.

11. Non-voting equity securities
Refer to note 15 of the consolidated financial statements.

12. Non-Executive Directors and Executive Management
compensation disclosures in accordance with Swiss law
Refer to note 27 of the consolidated financial statements.

13. Risk assessment
Refer to note 28 of the consolidated financial statements.

14. Uncertainties and ability to continue operations
The Company’s ability to continue operations is highly dependent on
the Group’s ability to continue as a going concern. The Group is a
development stage enterprise and is exposed to all the risks inherent
in establishing a business. Inherent in the Group’s business are various
risks and uncertainties, including the substantial uncertainty that current
projects will succeed. The Group’s success may depend in part upon its
ability to (i) establish and maintain a strong patent position and protection,
(ii) enter into collaborations with partners in the pharmaceutical industry,
(iii) acquire and retain key personnel, and (iv) acquire additional capital
to support its operations. As at December 31, 2012, there is significant
uncertainty with respect to the Group going concern. After considering
the Group’s cash position in light of current financial plans and financial
commitments, the Board of Directors believes the Group and therefore

the Company will be able to meet all of its obligations for a further 12
months as they fall due and, hence, the financial statements have been
prepared on a going concern basis. The Group is currently engaged
in a number of activities to ensure that it can continue its operations,
including monetizing its assets, raising additional capital, pursuing
strategic alternatives and evaluating restructuring options. Regarding
restructuring, the Board can align the cash outflows of the Company for
2013 to the currently available cash resources by focusing activities around
products in the current clinical pipeline. The outcome of these activities is
inherently uncertain and had the Board assessed differently the ability of
the Group to execute on its current financial plans and the ability of the
Company to meet all of its obligations for a further 12 months then the
Company would have presented the consolidated financial statements
on a liquidation basis. Had the financial statements been prepared on a
liquidation basis then certain commitments and contingencies would have
been recorded on the balance sheet and certain assets would have been
written down to their recoverable amounts.

Proposal of the Board of Directors for appropriation of loss
carried forward

The Board of Directors proposes to transfer CHF238,687 from the
general reserve from capital contribution to the treasury shares reserve,
to carry forward the net loss for the year 2012 of CHF27,483,168 and to
offset the accumulated deficit of CHF28,875,755 and the net loss carried
forward for the year 2012 of CHF27,483,168 with the general reserve
from capital contribution for a total CHF56,358,923.

Addex Therapeutics Annual Report 2012 | FINANCIAL STATEMENTS

Report of the statutory auditor to the General Meeting of Addex Therapeutics Ltd
Plan-les-Ouates

Report of the statutory auditor on the financial statements
As statutory auditor, we have audited the financial statements of Addex Therapeutics Ltd, which comprise the balance sheet, income statement and
notes, for the year ended 31 December 2012.

Board of Directors’ Responsibility

The Board of Directors is responsible for the preparation of the financial statements in accordance with the requirements of Swiss law and the
company’s articles of incorporation. This responsibility includes designing, implementing and maintaining an internal control system relevant to
the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further
responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Swiss law
and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial
statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures
selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due
to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation of the financial
statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the
reasonableness of accounting estimates made, as well as evaluating the overall presentation of the financial statements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements for the year ended 31 December 2012 comply with Swiss law and the company’s articles of incorporation.

Emphasis of matter

We draw attention to note 14 to the financial statements, paragraph “Uncertainties and ability to continue operations”, where disclosures by
management are made regarding the fact that the Group’s ability to continue operations depends among others on its ability to raise additional
financial resources to support future research activity and enter into collaborations with partners in the pharmaceutical industry.

These conditions indicate the existence of a material uncertainty that may cast significant doubt about the Group’s ability to continue as a going
concern. Our opinion is not qualified in respect of this matter.

In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists which has
been designed for the preparation of financial statements according to the instructions of the Board of Directors.

We further confirm that the proposal of the Board of Directors to set off the accumulated deficit with the legal reserves complies with Swiss law and
the company’s articles of incorporation. We recommend that the financial statements submitted to you be approved.

Furthermore we draw to your attention that the accumulated deficit exceeds one half of the share capital and legal reserves (Article 725 paragraph 1
of the Swiss Code of Obligations).

PricewaterhouseCoopers SA

Michael Foley
Audit expert
Auditor in charge

Guillaume Debout
Audit expert

Geneva, 8 February 2013

Forward-looking
statements

These materials contain forward-looking statements that can be identified by terminology such
as “not approvable”, “continue”, “believes”, “believe”, “will”, “remained open to exploring”,
“would”, “could”, or similar expressions, or by express or implied discussions regarding Addex
Therapeutics, formerly known as, Addex Pharmaceuticals, its business, the potential approval of
its products by regulatory authorities, or regarding potential future revenues from such products.
Such forward-looking statements reflect the current views of Addex Therapeutics regarding future
events, future economic performance or prospects, and, by their very nature, involve inherent
risks and uncertainties, both general and specific, whether known or unknown, and/or any
other factor that may materially differ from the plans, objectives, expectations, estimates and
intentions expressed or implied in such forward-looking statements. Such may in particular cause
actual results with allosteric modulators of mGlu2, mGlu4, mGlu5, GABA-BR or other therapeutic
targets to be materially different from any future results, performance or achievements expressed
or implied by such statements. There can be no guarantee that allosteric modulators of mGlu2,
mGlu4, mGlu5, GABA-BR or other therapeutics targets will be approved for sale in any market or
by any regulatory authority. Nor can there be any guarantee that allosteric modulators of mGlu2,
mGlu4, mGlu5, GABA-BR or other therapeutic targets will achieve any particular levels of revenue
(if any) in the future. In particular, management’s expectations regarding allosteric modulators
of mGlu2, mGlu4, mGlu5, GABA-BR or other therapeutic targets could be affected by, among
other things, unexpected actions by our partners, unexpected regulatory actions or delays or
government regulation generally; unexpected clinical trial results, including unexpected new
clinical data and unexpected additional analysis of existing clinical data; competition in general;
government, industry and general public pricing pressures; the company’s ability to obtain or
maintain patent or other proprietary intellectual property protection. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those anticipated, believed, estimated or expected. Addex Therapeutics
is providing the information in these materials as of this date and does not undertake any
obligation to update any forward-looking statements contained in these materials as a result of
new information, future events or otherwise, except as may be required by applicable laws.

Design: North Creative, Geneva, Switzerland. Print: Rosseels Printing Co, Lausanne, Switzerland.

For more information about
Addex please contact:

addex therapeutics
12 Chemin des Aulx
1228 Plan-les-Ouates, Geneva
Switzerland

Investor & Media Relations
Tel: +41 22 884 15 55
Fax: +41 22 884 15 56
investor.relations@addextherapeutics.com
media.relations@addextherapeutics.com

Share Registry
SharecommServices AG
Tel: +41 44 809 58 58
Fax: +41 44 809 58 59

General Information
Tel: +41 22 884 15 55
Fax: +41 22 884 15 56
info@addextherapeutics.com

Addex on the Internet
www.addextherapeutics.com

www.addextherapeutics.com
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