Allosteric Modulators for
Human Health
Annual Report 2017
Page 1 of 55
Addex Therapeutics Annual Report 2017
Contents
3
4
6
16
20
46
Letter to Shareholders
Financial Review
Corporate Governance Report
Compensation Report
Consolidated Financial Statements
Statutory Financial Statements
Key Facts / Addex Therapeutics
Focus:
Disease area:
Lead programs:
Oral small molecule allosteric modulation-based drug discovery and
development against diseases with high unmet medical needs.
Rare diseases with orphan drug designation potential
Central Nervous System (CNS)
Dipraglurant for the treatment of Parkinson’s disease levodopa-
induced dyskinesia (PD-LID);
Dipraglurant for the treatment of dystonia;
ADX71149 for epilepsy and undisclosed CNS disorders (licensed to
Janssen Pharmaceuticals Inc.); and
ADX71441 for the treatment of addiction (licensed to Indivior PLC);
Total full time equivalent employees and
consultants as of December 31, 2017:
8
Stock symbol / exchange:
ADXN (ISIN:CH0029850754) / SIX Swiss Exchange
Shares outstanding as of December 31st,
2017:
15,384,988
Cash as of December 31, 2017:
CHF2.6 million
Headquarters:
Geneva, Switzerland
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Addex Therapeutics Annual Report 2017
Letter to Shareholders
Dear Shareholders,
During 2017, our significant efforts in business development and investor communications resulted in the conclusion of an important
partnership with Indivior PLC and a transformational CHF40 million financing announced in the first quarter of 2018. These two
significant achievements have firmly put us back on track to deliver on the promise of our exciting portfolio of allosteric modulator
drug candidates.
The ongoing support from The Michael J. Fox Foundation for Parkinson’s Research (MJFF) during 2017 has enabled us to continue
to make progress in preparing dipraglurant for the start of registration studies in levodopa-induced dyskinesia (LID) associated with
Parkinson’s disease (PD-LID). In addition, we continued to make progress in evaluating the potential of dipraglurant for the
treatment of dystonia. The recently announced financing now provides us with the funding to advance dipraglurant into registration
studies for PD-LID and complete a proof of concept study in dystonia, both of which we expect to start by the end of 2018.
We also made significant progress in advancing our gamma-aminobutyric acid subtype B receptor (“GABA B”) positive allosteric
modulator (“PAM”) program, ADX71441. We published important data demonstrating the effectiveness of ADX71441 in preclinical
models of alcohol use disorder and pain, and secured a USD5.3 million grant from the US National Institute of Drug Abuse (“NIDA”)
to finance the progression of ADX71441 into clinical development. On January 3, 2018, we announced a partnership with Indivior
PLC, the world leader in addiction therapies, for GABA B PAM, including the global development and commercialization of
ADX71441 with an initial focus on the treatment of addiction. Under the terms of the agreement, Addex received USD5.0 million
upfront, USD4.0 million of committed research funding over two years, USD330 million of potential development, regulatory and
commercialization milestones, and tiered royalties up to double-digit. Addex retains the right to select compounds from the GABA B
PAM research collaboration for certain indications outside addiction, including the rare disease, Charcot-Marie-Tooth type 1a
neuropathy (CMT1A).
During the year, we continued to make progress in advancing our discovery programs, including our tyrosine kinase type B (TrkB)
PAM program for which we received a grant of USD0.8 million from MJFF to fund early lead optimization activities. Our ongoing,
Swiss Government funded collaborations, with Universities of Lausanne and Geneva, made good progress in advancing our
understanding of
/ mGluR4 (neurodegeneration) and TrkB
(neurodegeneration) programs.
for our mGluR7 (psychiatry)
the mechanisms of action
We also continued to develop important strategic alliances with industry partners, patient advocacy groups, academic institutions
and governmental organizations to advance development of our promising portfolio of allosteric modulator drug candidates.
2018 will be an exciting year for Addex as we rebuild the team to execute on our plans to start the first registration trial with
dipraglurant for PD-LID and the proof of concept in focal cervical dystonia. We will also strengthen the team in discovery as we
execute on our GABAB PAM partnership with Indivior PLC, deploy resources to advance our preclinical programs to their next
important value creating milestones and strengthen our leading position in allosteric modulation drug discovery. We are committed
to building significant value for our shareholders and believe the recent financing now provides us with the financial resources
necessary deliver on the promise of our portfolio of exciting allosteric modulator drug candidates. We will continue to evaluate
strategic options for our portfolio of drug candidates and advance their development for the benefit of patients.
Finally, we would like to acknowledge and thank our employees and collaboration partners for their dedication, loyalty and
perseverance. We would also like to thank our shareholders for their much valued support.
Vincent Lawton
Chairman of the Board
Tim Dyer
Chief Executive Officer
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Addex Therapeutics Annual Report 2017
Financial Review
Overview
The following review and discussion of the financial results for 2017 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.
We are a development-stage biopharmaceutical company focused on building a sustainable pharmaceutical business around our
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.
During 2017, our financial results are driven primarily by activities related to the development of dipraglurant for PD-LID and
dystonia; ADX71441 for addiction and our TrkB PAM program for neurodegeneration. In addition, we were engaged in a number of
business development activities as well as activities related to securing resources to advance our portfolio, including entering into
collaborations with patient advocacy groups, academic institutions and governmental organizations to characterize our portfolio of
drug candidates and access expertise to complement our internal resources. At December 31, 2017, our headcount was 8 FTEs
compared to 7 FTEs at December 31, 2016, and our average headcount was stable at 8 FTEs in 2017, compared to 6 FTEs in
2016. In addition to our headcount, we engaged a number of consultants and service providers to complement our internal
resources.
Research and development expenditure increased slightly to CHF2.6 million and general and administrative expenses remained
stable at CHF1.1 million. CHF0.5 million has been recognized as income in the year and our net loss increased to CHF3.3 million.
We ended the year with a cash position of CHF2.6 million.
Results of operations
The following table presents our consolidated results of operations for the fiscal years 2017 and 2016:
For the years
ended December 31
Amounts in millions of Swiss francs
Income…………………………………...
Research and development expenses..
General and administrative expenses...
Total operating costs………………….
Operating loss…………………………..
Finance costs, net……………………….
Net loss for the year…………………...
2017
0.5
(2.6)
(1.1)
(3.7)
(3.2)
(0.1)
(3.3)
2016
0.4
(2.4)
(1.1)
(3.5)
(3.1)
(0.0)
(3.1)
Income
Income was CHF0.5 million in 2017 compared to CHF0.4 million in 2016. In 2017 income comprised CHF0.5 million of grants from
The Michel J. Fox Foundation for Parkinson’s Research to cover certain clinical activities related to dipraglurant development in
Parkinson’s disease levodopa-induced dyskinesia and discovery activities related to our TrkB PAM program.
Research and development expenses
R&D expenses increased by 8% to CHF2.6 million in 2017, compared to CHF2.4 million in 2016, mainly due to an increase in the
number of staff and consultants deployed on the preparation of dipraglurant for registration studies in PD-LID and outsourced
research costs on our Trk B PAM program. R&D expenses consist primarily of costs associated with research, preclinical and
clinical testing and related staff costs. They also include 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 remained stable at CHF1.1 million in 2017 compared to 2016. 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.
Finance costs, net
The finance result, net in 2017 of CHF45 thousand is related primarily to exchange differences.
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Addex Therapeutics Annual Report 2017│Financial Review
Net loss for the year
The net loss for the 2017 financial year was CHF3.3 million compared to CHF3.1 million for 2016 primarily due to the cost of
operations and slight increase in R&D expenses. Basic and diluted loss per share decreased to 0.25 for 2017, compared to
CHF0.28 for 2016 primarily due to the increase in the outstanding issued share capital in May 2017.
Balance sheet & cash flows
Cash and cash equivalents increased by 83% to CHF2.6 million at December 31, 2017, compared to CHF1.4 million at December
31, 2016. This increase of CHF1.2 million is mainly due to the gross proceeds of CHF3.5 million from the sale of treasury shares
partially offset by the cash used in operations of CHF2.2 million.
The investment in property, plant and equipment was limited during the 2017 financial year. The net book value of property, plant
and equipment decreased by 84% to CHF2,751 at December 31, 2017 compared to CHF17,303 at December 31, 2016, primarily
due to the annual depreciation charge.
Total shareholders’ equity has increased to CHF1.3 million at December 31, 2017 compared to CHF0.2 million at December 31,
2016, mainly due to the proceeds from the issue of new shares partially offset by the net loss of the year.
Post balance sheet event
On March 28, 2018, the Company increased its share capital by issuing 13,037,577 new shares with a nominal value of CHF1 each
at an issue price of CHF3.13 per share. Of these new shares, 12,917,129 were placed with investors raising CHF40.4 million of
gross proceeds and the remaining 120,448 new shares were recorded as treasury shares, bringing the total outstanding issued
share capital to 28,564,031. Each new share received a 7 year warrant to purchase 0.45 of a share at a price of CHF3.43.
On January 2, 2018, the group signed a licencing and collaboration agreement with Indivior PLC for the global development and
commercialization of ADX71441 for the treatment of addiction. An upfront payment of USD5.0 million has been received in January
2018.
Shares and shareholders’ information
At December 31, 2017, the Company had 15,384,988 (2016: 13,454,553) outstanding issued shares and a free float of
approximately 100%. Of the outstanding issued shares at December 31, 2017, 1,964,973 shares were held in treasury (at
December 31, 2016: 1,891,006 shares). As part of the May 2017 capital increase, 1,930,435 shares were acquired by the Group
and recorded as treasury shares at CHF1. During 2017, the Group sold 1,856,468 treasury shares and recorded net proceeds of
CHF3,380,747 in equity. The closing share price and market capitalization increased to CHF2.29 and CHF35.2 million at December
31, 2017, compared to CHF1.84 and CHF24.8 million at December 31, 2016, respectively.
2017 outlook
As a result of the capital increase completed on March 28, 2018 raising CHF40 million of gross proceeds and the partnership
entered into with Indivior PLC on 2 January 2018, we have the financial resources to execute on advancing our portfolio of allosteric
modulator drug candidates to their next important value inflection points. In particular, we will advance dipraglurant for PD-LID and
dystonia, and our partner, Indivior is expected to advance ADX71441 into phase 1. We will also advance our discovery programs
and continue to invest in our allosteric modulator technology platform. While we will strengthen our team as we add resources
across the organization continue, we will continue to pursue collaborations with industry, patient advocacy groups, academic
institutions and governmental organizations to drive forward our portfolio of allosteric modulator drug candidates.
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Addex Therapeutics Annual Report 2017
Corporate Governance Report
General information
Addex Therapeutics Ltd’s articles of association (the “Articles”), organizational rules (the “Organizational Rules”) and policies
provide the basis for the principles of Corporate Governance. This report has been prepared in accordance with the SIX Swiss
Exchange Directive on Information Related to Corporate Governance effective as of October 1, 2014.
Group structure
Description of Addex’ operational group structure
Addex Therapeutics Ltd (“Addex” or the “Company”; CHE-113.514.094) is the holding and finance company of the Group. Addex
Pharma SA (CHE-109.561.624), based in 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, is a 100% subsidiary of Addex Pharmaceuticals Ltd. Addex Pharmaceuticals France SAS
has a share capital of EUR37,000 divided into 37,000 registered shares with a nominal value of EUR1 each.
Listed company
Addex Therapeutics Ltd has its registered office c/o Addex Pharma SA, Chemin des Aulx 12, P.O. Box 68, CH-1228 Plan-les-
Ouates, Geneva, Switzerland. Its shares have been listed on the SIX Swiss Exchange (SIX) 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. On December 31, 2017, the market capitalization of Addex was CHF35,231,653.
Significant shareholders
As far as can be ascertained from the information available, the following shareholders own 3% or more of the Company’s share
capital as at December 31, 2017 based on published notifications to the SIX:
Shareholder
Addex Pharma SA3
12.77%
Herculis Partners Aries Fund, Herculis Partners Taurus Fund4
3.79%
1 This table presents the shares held by the shareholders listed therein. The derivative holdings held by such shareholders are not included.
2 Based on the share capital registered in the Commercial Register as of December 31, 2017 (i.e. CHF 15,384,988, divided into 15,384,988 registered shares).
3 Addex Pharma SA, Chemin des Aulx 12, CH-1228 Plan-les-Ouates, Switzerland; the beneficial owner is Addex Therapeutics Ltd, Chemin des Aulx 12, CH-1228 Plan-les-Ouates,
Switzerland.
4 Herculis Partners Aries Fund, Austrasse 9, 9490 Vaduz, LIE and Herculis Partners Taurus Fund, Austrasse 9,9490 Vaduz, LIE; the beneficial owner is IMF Independent Fund
Management AG Austrasse 9, 9490 Vaduz, LIE.
Shares held1 % of voting rights2 % of capital2
12.77%
1,964,973
3.79%
582,695
For a comprehensive list of notifications of shareholdings received during 2017 pursuant to article 120 of the Financial Market
Infrastructure Act
(https://www.six-exchange-
regulation.com/en/home/publications/significant-shareholders.html).
implementing ordinances,
the SIX website
(FMIA) and
refer
its
to
Refer to Post Balance Sheet Events section for impact of capital increase of March 28, 2018.
Cross-shareholdings
There are no cross-shareholdings in terms of capital shareholdings or voting rights in excess of 5%.
Shareholder structure
There were 2,304 shareholders registered in the share register on December 31, 2017. The distribution of shareholdings is divided
as follows:
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
1,000,001 to 10,000,000
Number of registered shareholders on December 31, 2017
281
975
929
114
4
1
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Addex Therapeutics Annual Report 2017│Corporate Governance Report
The shareholder base on December 31, 2017 was constituted as follows:
Shareholder structure according to category of investors
(weighted by number of shares)
Private persons
Institutional shareholders
Not registered
43.55%
21.63%
34.81%
Shareholder structure by country
(weighted by number of shares)
United States
Switzerland
France
Germany
Other
Not registered
0.10%
59.56%
0.11%
0.08%
5.33%
34.81%
Capital structure
As of December 31, 2017, the share capital amounted to CHF15,384,988 consisting of 15,384,988 issued shares with a nominal
value of CHF1 per share. As of December 31, 2017, the Company, indirectly, held 1,964,973 of its own shares. These shares are
recorded as treasury shares.
Authorized share capital
As of December 31, 2017 and according to the Articles, the Board of Directors (Board) is authorized, at any time until June 22, 2019
to increase the share capital in an amount of CHF7,692,494 through the issuance of 7,692,494 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
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 set forth in 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 CHF3,500,000
through the issuance of a maximum of 3,500,000 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, directors and/or
consultants 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 CHF4,192,494 through the issuance of a
maximum of 4,192,494 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 to shareholders of the company and/or in connection with the issue of bonds, similar
obligations or other financial instruments by the Company or another group company. In the case of such grants of option and/or
conversion rights, the advanced subscription 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.
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Addex Therapeutics Annual Report 2017│Corporate Governance Report
The Board is authorized to restrict or exclude the advanced subscription rights of shareholders (1) if the debt or other financial
instruments and/or conversion rights or warrants are issued 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 and/or
conversion rights or warrants 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 or (3) if such debt or other financial
instruments and/or conversion rights or warrants are issued for raising capital in a fast and flexible manner, which would not be
achieved without the exclusion of the advanced subscription rights of the existing shareholders. If the advance subscription rights
are excluded by the Board, the following hall 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..
Changes in capital
On May 29, 2017, the Group increased its share capital by CHF1,930,435 (1,930,435 registered shares with nominal value of CHF1
per share) out of authorized share capital. The 1,930,435 new shares were subscribed by the Company’s 100% owned subsidiary,
Addex Pharma SA at CHF1 and recorded as treasury shares.
For further information on changes in capital in 2017 and 2016, including changes in reserves, refer to the consolidated statements
of changes in equity as well as note 12 of the consolidated 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 (bons
de jouissance / Genussscheine). Equity sharing certificates are available for granting to employees and/or directors and/or
consultants of the Company or any Group company 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 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 34 of the Articles. The Company has no participation certificates (bons de
participation / Partizipationsscheine). .
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 affected 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.
Article 5 of the 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, 2017, the Company has no convertible or exchangeable bonds or loans outstanding. For information on equity
incentive plans for Non-Executive Directors, Executive Management and employees, refer to note 13 of the consolidated financial
statements included in this annual report.
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Addex Therapeutics Annual Report 2017│Corporate Governance 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, followed by a short description of each member’s business experience, education and activities:
Name
Vincent Lawton
Raymond Hill
Tim Dyer
Roger Mills
Year of birth
1949
1945
1968
1957
Nationality
UK
UK
Swiss/UK
US/UK
First elected
2009
2015
2015
2017
Elected until
2018
2018
2018
2018
Board
Chairman
Member
Member
Member
Vincent Lawton
Chairman of the Board of Directors
Professor Lawton 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 center of clinical research. He served on the board of the UK regulatory
authority (MHRA) from 2008 to 2015. He is a Senior Strategy Advisor for Imperial College Department of Medicine, University of
London and serves as a consultant to a number of leading healthcare organizations. He studied Psychology at the University of
London and holds an undergraduate degree and PhD.
Raymond Hill
Member of the Board of Directors
Professor Hill was previously a member of the Board of Directors from the Annual General Meetings of 2008 until 2012. He is
currently Visiting Professor of Pharmacology at Imperial College in London, and Non-Executive Director of Avilex (DMK),
Asceneuron (CH) and Orexo AB (SE). Prior to his retirement, he was Executive Director, Licensing and External Research, Europe
(2002 - 2008) at Merck/MSD, Executive Director, Pharmacology (1990-2002) at the Merck Neuroscience Research Centre and had
oversight responsibility for Neuroscience research at the Banyu Research Labs in Tsukuba, Japan (1997-2002). At Merck, he
chaired a number of discovery project teams including those responsible for the marketed products Maxalt® and Emend®. Dr. Hill
received his academic training (BPharm PhD) at the University of London. He was a lecturer in Pharmacology at the University of
Bristol School of Medicine from 1974 to 1983 and supervisor in Pharmacology at Downing College, University of Cambridge from
1983 to 1988. He joined the pharmaceutical industry in 1983 as Head of Biology and founder member of the Park Davis Research
Unit at Cambridge. In 1988, he joined SK&F (UK) as Group Director, Pharmacology and in 1990 moved to Merck. He is a past
Council Member of the UK Academy of Medical Sciences and President Emeritus, British Pharmacological Society. He is Visiting
Professor at the University of Bristol and a member of the UK Government Advisory Council on Misuse of Drugs.
Tim Dyer
Member of the Board of Directors and Chief Executive Officer
Since co-founding Addex in 2002, Mr Dyer has played a pivotal role in building the Addex Group, raising CHF280 million of capital,
including Addex IPO and negotiating licensing agreements with pharmaceutical industry partners that generated more than CHF50
million in cash inflows. Prior to founding 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 two 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 served as a member of the Swiss government innovation promotion agency coaching team from 2011 to 2016. Mr
Dyer also serves on the advisory board of the École polytechnique fédérale de Lausanne Management of Technology MBA program.
He is a UK Chartered Accountant and holds a BSc (Hons) in Biochemistry and Pharmacology from the University of Southampton, UK.
Roger Mills
Member of the Board of Directors and Chief Medical Officer
Dr. Mills, who joined Addex in 2016, brings more than 25 years of biopharmaceutical industry experience at both large global
pharmaceutical companies and smaller biotechnology companies, including Acadia Pharmaceuticals, Pfizer, Gilead Sciences, Abbott
Laboratories and Wellcome, across a spectrum of disease areas. His extensive track record includes managing drug development
programs from Investigational New Drug Application preparation through to post-marketing and OTC products, including NUPLAZID™
for the treatment of Parkinson’s Disease Psychosis, as well as regulatory affairs and business development activities. Most recently,
Dr. Mills was with Acadia Pharmaceuticals for nine years, serving as Executive Vice President, Development and Chief Medical
Officer. In this role, he oversaw the largest ever international Phase III program in Parkinson’s Disease Psychosis, and led the
Company’s New Drug Application submission to the US Food and Drug Administration (FDA) for NUPLAZID, which was subsequently
approved and remains the first and only medication approved by the FDA in this indication. Dr. Mills currently serves as a Visiting
Professor at the Centre for Age Related Diseases, Institute of Psychiatry, Psychology and Neuroscience, King’s College London. He
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Addex Therapeutics Annual Report 2017│Corporate Governance Report
received his medical degree from Imperial College, Charing Cross Hospital Medical School, London, United Kingdom. Dr. Mills is co-
author of more than 50 research publications and patents.
Other activities and vested interests
The Articles provide certain restrictions to the number of mandates that members of the Board of Directors may have in the
supreme governing bodies of legal entities registered in the Swiss commercial register or similar foreign register as follows: 1) No
member of the Board of Directors may hold more than fifteen board of director mandates with no more than four mandates in listed
entities; 2) Mandates in companies controlled by Addex or which control Addex are not subject to restrictions; 3) Mandates that are
held by order and on behalf of Addex or companies under Addex control are restricted to ten; and 4) mandates in associations,
charitable organizations, family trusts and foundations relating to post-retirement benefits and other not-for-profit organizations are
restricted to twenty-five. Multiple mandates in different legal entities which are under common control or same beneficial ownership
are deemed to be one mandate.
Apart from the information given above, none of the members of the Board of Directors has had other activities or holds any
positions 1) in governing and supervisory bodies of important Swiss and foreign organizations, institutions and foundations under
private and public law; 2) of permanent management and consultancy functions for important Swiss and foreign interest groups; or
3) of official government functions and political posts.
Elections and terms of office
The Articles provide for a Board consisting of between one and eleven members. The Company currently has four members of the
Board. In accordance with the Swiss Ordinance Against Excessive Compensation in Listed Stock Companies of November 20,
2013 (the "Compensation Ordinance"), members of the Board including the Chairman are appointed and removed exclusively by
shareholders’ resolution for a term of one year until completion of the next annual general meeting of shareholders.
Changes in the board of directors
Roger Mills has been elected as a member of the board.
Internal organization and areas of responsibility
The Articles and Organizational Rules define the Company’s internal organization and areas of responsibility of the Board,
Chairman, Chief Executive Officer ("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, who regularly
reports to the Chairman on the meetings of the Executive Management and all important matters of the Group.
Committees of the board of directors
The Board has no standing committees.
Working methods of the board of directors
In 2017, the Board held five meetings with average duration of one day. The majority of meetings were held at the Company’s
offices with full attendance at all meetings. In addition to formal Board meetings, the Board holds additional ad hoc meetings or
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Addex Therapeutics Annual Report 2017│Corporate Governance Report
telephone conferences to discuss specific matters. The CEO and Chief Medical Officer (“CMO”) are 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.
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 10.
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 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 held two
meetings with the chairman during 2017. 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.
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:
Name
Tim Dyer
Roger Mills
Robert Lütjens
Year of Birth
1968
1957
1968
Position
Chief Executive Officer
Chief Medical Officer
Head of Discovery
Nationality
Swiss / British
USA / British
Swiss
Tim Dyer
Chief Executive Officer – Refer to page 9
Roger Mills
Chief Medical Officer – Refer to page 9
Robert Lütjens
Head of Discovery
Dr Lütjens rejoined Addex in May 2015 as Head of Discovery to lead the preclinical portfolio and allosteric modulator discovery
activities. Dr Lütjens previously worked at Addex from its inception in 2002 until 2013, where he was a member of the executive
management responsible for the Biology department. While at Addex, he established the biology capabilities and built the
company’s small molecule allosteric modulator biology platform. He played a pivotal role in all of Addex’s small molecule allosteric
modulator programs, including research collaborations with Merck & co. and Janssen Pharmaceuticals Inc. The latter partnership
has led to the successful progression of the first mGluR2 positive allosteric modulator into man. Prior to joining Addex, Dr Lütjens
completed a postdoctoral fellowship in the Department of Neuropharmacology at the Scripps Research Institute, in La Jolla, CA,
where he focused on understanding molecular changes involved in addiction disorders. Dr Lütjens obtained his degrees in Biology
from the University of Geneva, his master’s at the Swiss Institute for Experimental Cancer Research and his Ph.D. thesis at the
Glaxo Institute for Molecular Biology in Geneva and the Institute for Cellular Biology and Morphology in Lausanne. Dr. Lütjens is co-
author of over 20 peer-reviewed publications and co-inventor on patents covering screening methods or chemical compounds
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Addex Therapeutics Annual Report 2017│Corporate Governance Report
Management contracts
There are no management contracts between Addex and third parties, except for the contract with TMD Advisory Ltd, a company
owned and managed by Mr. Dyer with registered office in Gland (Canton of Vaud), Switzerland, that has been mandated to provide
CEO / CFO services to the Addex Group. The remuneration for the services performed by TMD Advisory Ltd is disclosed in the
Compensation Report of the Company.
Other vested activities and vested interests
Apart from the information given above, none of the Executive Management has had other activities or holds any positions of 1) in
governing and supervisory bodies of important Swiss and foreign organizations, institutions and foundations under private and
public law; 2) permanent management and consultancy functions for important Swiss and foreign interest groups; or 3) official
government functions and political posts.
Changes in executive management
There is no change in executive management.
Compensation, loans and shareholdings
Information about content and method of determining compensation and shareholder programs of the members of the Board of
Directors and Executive Management can be found in the Compensation Report of the Company. Information about shareholdings
of the members of the Board of Directors and Executive Management can be found in note 12 of the statutory financial statements
of the Company.
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, subject further the restrictions on transferability set forth in the Articles. No exceptions from these
restrictions were granted in 2017. A shareholder may be represented by his legal representative, the independent proxy or by a duly
authorized person who does not need to be a 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 Articles do not impose any restrictions on the voting
rights of shareholders. Specifically, there is no 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 8 above and
“Registration in the share register” on this page 13 below.
Resolutions of shareholders’ meetings generally require the approval of the absolute majority of the votes represented at the
shareholders meeting (more than 50% of the share votes represented at such meeting). Such resolutions include amendments to
the Articles, elections of the members of the Board and statutory and group auditors, election of the chairman of the Board and of
the members of the Compensation Committee, election of the independent proxy, approval of the annual financial statements,
setting the annual dividend, approval of the compensation of the Board and management pursuant to the Articles, 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 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 exclusion 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.
Independent proxy
The Articles provide the basis for election of the independent proxy. The Shareholders’ Meeting of June 22, 2017, elected Robert P.
Briner as the independent proxy.
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,
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Addex Therapeutics Annual Report 2017│Corporate Governance Report
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 shall be determined and communicated prior to the end of May 2018. Addex has not enacted any rules on
the granting of exceptions in relation to these deadlines. No exceptions were granted in 2017, and the Board does not anticipate
granting any exceptions related to the shareholders’ meeting to be held in 2018. For further information on registration in the share
register, please refer to section “Limitations on transferability of shares and nominee registration” on page 8.
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 (whether exercisable or not), to proceed with a public tender offer to
acquire 100% of the listed equity securities of the company (opting-out provision pursuant to Article art. 125 para. 3 of the Swiss
Federal Act on Financial Market Infrastructures and Market Conduct in Securities and Derivatives ("FMIA")) or which would
increase such threshold to 49% of the voting rights (opting-up provision pursuant to Article art. 135 para. 1 FMIA). As of December
31, 2017, the 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 tender 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.
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 2016 is Mr. Yves Cerutti.
Audit fees
In 2017, PricewaterhouseCoopers SA and its affiliates charged the Group audit fees in the amount of CHF90,000.
Additional fees
In 2017, PricewaterhouseCoopers SA and its affiliates charged the Group no additional fees.
Control instruments of the auditors
The Audit Committee was disbanded on June 27, 2014 and since this date the Chairman of the Board of Directors, Vincent Lawton
assumes the task of supervising the auditors. The Chairman 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
Chairman of the Board of Directors 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 2017, the Chairman of the Board met with the auditors two times to discuss the results of their 2016 year-end audit, the financial
situation of the Group and the scope of the 2017 audit. In 2018, the Chairman of the Board met with the auditors to discuss the
results of their 2017 year-end audit and the financial situation of the Group.
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 April of the following year, and the Interim Report, usually published no later than in
September, 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
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Addex Therapeutics Annual Report 2017│Corporate Governance Report
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 will be informed in compliance with the requirements of the SIX Swiss Exchange. The
Group’s investor relations department
investors’ queries under
IR@addextherapeutics.com or via post at Addex Therapeutics Ltd., Investor Relations, C/O Addex Pharma SA, Chemin des Mines
9, CH-1202 Geneva, Switzerland. Additional inquiries may also be made by phone at +41 22 884 1555.
to shareholders’ or potential
is available to respond
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.
Post balance sheet events
Extraordinary general meeting and capital Increase
On March 16, 2018 the Company’s extraordinary general meeting (the "EGM") approved an ordinary capital increase and certain
modifications to the articles of association. On March 28, 2018, the Company increased its share capital by issuing 13,037,577 new
shares with a nominal value of CHF1 each at an issue price of CHF3.13 per share. Of these new shares, 12,917,129 were placed
with investors raising CHF40.4 million of gross proceeds and the remaining 120,448 new shares were recorded as treasury shares,
bringing the total outstanding issued share capital to 28,564,031. Each new share received a 7 year warrant to purchase 0.45 of a
share at a price of CHF3.43.
The impact of the EGM and the capital increase on information reported in the corporate governance report at December 31, 2017
is detailed below:
Significant shareholders
As at March 28, 2018, the following shareholders owned 3% or more of the Company’s share capital based on published
notifications to the SIX:
Shareholder
Addex Pharma SA3
Growth Equity Opportunities Fund IV, LLC4
New Leaf Biopharma Opportunities I, L.P.5
CDK Associates, LLC6
CS (CH) Small Cap Switzerland Equity Fund7
1 This table presents the shares held by the shareholders listed therein. The derivative holdings held by such shareholders are not included.
2 Based on the share capital registered in the Commercial Register as of March 28, 2018 (i.e. CHF 28,564,031, divided into 28,564,031 registered shares).
3 The beneficial owner is Addex Therapeutics Ltd, Chemin des Aulx 12, CH-1228 Plan-les-Ouates, Switzerland.
4 The beneficial owner is New Enterprise Associates 15 L.P., Timonium MD 21093, USA.
5 The beneficial owner is New Leaf Venture Management III LLC, 1209 Orange Street, c/o Corporation Trust Company/Center, DE 19801 Wilmington, USA.
6 The beneficial owner is Bruce Kovner, c/o CDK Associates. LLC, Princeton, 08540 New Jersey, USA.
7 The licensee and person that can exercise the voting rights at their own discretion is Credit Suisse Asset Management (Schweiz) AG, Kalandergasse 4, 8045 Zurich, Switzerland.
Number of shares1
2,124,111
4,568,690
1,597,444
1,597,444
1,627,985
% of voting rights2
7.44%
15.99%
5.59%
5.59%
5.70%
% of capital2
7.44%
15.99%
5.59%
5.59%
5.70%
Conditional share capital
On March 16, 2018, the EGM resolved to amend, without increasing, the allocation of the conditional share capital and accordingly
to amend article 3c of the Articles (i) by reducing the Company's conditional share capital under article 3c A) of the Articles by
CHF1,674,404 from CHF3,358,534 (taking account of the 141,466 registered shares of the Company issued out of the Company's
conditional share capital which have been registered in the commercial register on March 28, 2018) to CHF1,684,130 and (ii) by
increasing the Company's conditional share capital under article 3c B) of the Articles by CHF1,674,404 from CHF4,192,494 to
CHF5,866,898. As a result, the conditional share capital for the issuance of registered shares upon exercise of the subscription
rights attached to equity sharing certificates (bons de jouissance / Genussscheine) has been reduced to CHF1,684,130 and the
conditional share capital for the issuance of registered shares upon exercise of any options or other conversion rights granted in
connection with an issuance of bonds, similar obligations or other financial instruments has been increased to CHF5,866,898.
Duty to make an offer
On March 16, 2018, the EGM resolved a selective opting-out limited to a 5-year period of the mandatory offer rules of article 135
FMIA based on article 125 para. 3 FMIA by adopting a new article 39 of the Articles (the "Opting-out") in order to facilitate the
financing of the Company by two lead investors, i.e. Growth Equity Opportunities Fund IV, LLC and New Leaf Biopharma
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Addex Therapeutics Annual Report 2017│Corporate Governance Report
Opportunities I, L.P., and to provide legal certainty in connection with the possible legal consequences under Swiss takeover law of
these investors' acquisition of newly issued registered shares of the Company for an amount of around CHF 20 million in March
2018. As a result of the Opting-out, neither Growth Equity Opportunities Fund IV, LLC, New Leaf Biopharma Opportunities I, L.P.
nor their respective affiliates would have a duty to make a mandatory offer for a period until March 21, 2023 in case any of them
would acquire (either alone or acting in concert pursuant to article 135 FIMA) 33 1/3 % or more of the outstanding voting rights of
the Company. The Company's shareholders would be deprived of their right to tender their shares in a mandatory offer triggered by
a change of control over the Company caused by Growth Equity Opportunities Fund IV, LLC and/or New Leaf Biopharma
Opportunities I, L.P. and/or their respective affiliates until March 21, 2023 pursuant to article 135 FMIA.
Page 15 of 55
Addex Therapeutics Annual Report 2017
Compensation Report
Overview
This Compensation Report provides the information required by the federal Ordinance against excessive compensation in listed
companies ("Compensation Ordinance") (effective as of January 1, 2014). It also includes information required by section 5 of the
Annex to the Directive on Information relating to Corporate Governance of the SIX Swiss Exchange (effective date October 1, 2014)
and the Swiss Code of Best Practice for Corporate Governance (status August 28, 2014).
Addex' Articles organization rules and policies provided the basis for the principles of compensation.
Review and approval process
The Board of Directors reviews compensation of its members and members of the Executive Management annually in accordance
with the Company’s Compensation Policy. In its review process the Board of Directors considers compensation packages of other
companies in the biotech and pharmaceutical industry in Switzerland and Europe that are comparable to Addex with respect to size
or business model, the professional experience and areas of responsibility of the respective members. The Board of Directors may
also consult relevant compensation surveys and bench marking reports. Based on its review, the Board of Directors submits two
proposals for approval at the shareholders meeting: (i) the maximum aggregate amount of fixed and variable compensation for the
Board of Directors for the prospective period from one ordinary general meeting of shareholders to the following ordinary general
meeting of shareholders; and (ii) the maximum aggregate amount of fixed and variable compensation for the Executive
Management for the period from January 1 to December 31 of the next financial year. Approval of these proposals requires an
absolute majority (more than 50% of the share votes represented at the shareholders meeting).
Compensation elements for the Board of Directors and Executive Management
Board of Directors
The compensation of the member of the Board of Directors consists of fixed and variable elements. The fixed element comprises a
fixed annual monetary compensation per board term from one general meeting of shareholders to the next. The variable element
comprises a monetary compensation based on board meeting attendance and equity incentive units (share options and equity
sharing certificates). Social security contributions of the Company are accrued on the fixed and variable elements. Board member
social security contributions are accrued on the fair value of equity incentive units. Equity incentive units are granted based on the
discretion of the Board of Directors. In addition, the Company reimburses members of the Board of Directors for out-of-pocket
expenses incurred in relation to their services on an on-going basis upon presentation of the corresponding receipts. The most
recent review of compensation for members of the Board of Directors took place on December 12, 2017. For further information on
the compensation for members of the Board of Directors, please refer to the section “Compensation of the Board of Directors in
2017" on page 17.
Executive Management
The compensation of members of the Executive Management consists of fixed and variable elements. The fixed element may
include a base salary or a cash retainer paid under a consulting contract. The variable element may include performance-related
cash or share based bonuses, consulting fees based on chargeable hours and equity incentive units (equity sharing certificates and
stock options). Company contributions to pension plans, death and invalidity insurances and social security contributions are
accrued on all fixed and variable element compensation that relates to an employment relationship. Both company and employee
social security contributions are accrued for all shares or equity incentive unit compensation. The amount of the fixed element
depends on the position, responsibilities, experience and skills, and takes into account individual performance. The fixed element is
reviewed at the end of each year by the Board of Directors. Any changes in the fixed elements are made effective in January of the
following year. The variable elements are based on individual and company performance. The potential variable cash bonus is
determined in the employment contract and in general is a percentage of the base salary. Where the Executive Manager has been
engaged under a consulting contract, the variable element is based on the time spent at the contractually defined rate of
remuneration. At the beginning of each year the Board of Directors decides, on the total amount of variable element including the
amount of cash and equity incentive units to be granted for the previous year based on the achievement of Company goals. Equity
incentive units are granted based on the discretion of the Board. Variable cash compensation paid to Executive Managers in 2017
relates to consulting fees.
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Addex Therapeutics Annual Report 2017│Compensation Report
Equity incentive plans
The purpose of the Company’s share purchase, share option and equity sharing certificate programs (refer to note 15 of the
consolidated financial statements) is to provide members of the Board of Directors, Executive Management, employees and certain
consultants with an opportunity to benefit from the potential appreciation in the value of the Company’s shares, thus providing an
increased incentive for participants to contribute to the future success and prosperity of the Company, enhancing the value of the
shares for the benefit of the shareholders of the Company and increasing the ability of the Company to attract and retain individuals
of exceptional skill. In addition, these plans provide the company with a mechanism to engage services for non-cash consideration.
The grant of any share option or equity sharing certificate is at the discretion of the Board of Directors. Key factors considered by
the Board of Directors in making grants of share options or equity sharing certificates are the amount of shareholder approved
conditional capital, the benchmarking with other companies as well as individual performance. The strike price is determined by the
Board of Directors and is primarily based on the closing price of the Company’s shares on the SIX Swiss Exchange on the grant
date. The transfer of treasury shares under the share purchase plan to settle consulting services are based on predefined terms of
the consulting contract.
Indirect benefits
The Company may contribute to the pension plan and maintains certain insurance for death and invalidity for the members of the
Executive Management. New entrants may be eligible for reimbursement of relocation costs, compensation for lost benefits or stock
granted by a previous employer, international school for children or language courses for a limited time period. No Indirect benefits
have been paid to Executive Management in 2017.
The Company has not granted any loans, credits or guarantees to members of the Board of Directors or of the Executive
Management in 2017.
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Addex Therapeutics Annual Report 2017│Compensation Report
Compensation for the financial year under review (audited)
Measurement basis for compensation
The measurement basis for each component of compensation is described below:
Cash compensation, cash variable compensation and share purchase plan: accruals basis;
Equity incentive units: total fair value as determined at the date award calculated in accordance with the valuation methodology
of IFRS 2; and
Employers’ social security: accrual basis except for equity incentive units which is based on the notional amount based on fair
value at grant date.
Compensation of the Board of Directors in 2017 and 2016
2017
Fixed
Variable compensation
CHF
Vincent Lawton……...……………………
Raymond Hill……………………………..
Tim Dyer………………………………….
Roger Mills……………………………….
Total……………………………………….
cash
compensation
25,858
15,341
-
-
41,199
cash
attendance
25,858
15,341
-
-
41,199
number of
equity
incentive
units(1)
163,850
100,310
-
-
264,160
value of
equity
incentive
units(1)
173,081
105,961
-
-
279,042
Total
2017
224,797
136,643
-
-
361,440
(1) Equity incentive units include share options granted under the Company’s share option plan (refer to note 13 of the consolidated financial statements).
2016(1)
Fixed
Variable compensation
CHF
Vincent Lawton……...……………………
Raymond Hill……………………………..
Tim Dyer………………………………….
Total……………………………………….
cash
compensation
-
-
-
-
cash
attendance
-
-
-
-
number of
equity
incentive
units(2)
39,238
23,543
-
62,781
value of
equity
incentive
units(2)
62,189
37,314
-
99,503
Total
2016
62,189
37,314
-
99,503
(1) On February 1, 2017, members of the Board of Directors waived their 2016 board fees totaling CHF80,000. On February 28, 2017, members of the Board of Directors were granted a total of
62,781 options at a strike price of CHF1 per share. The compensation report reflects this post balance sheet event which has not been adjusted in the consolidated financial statements.
(2) Equity incentive units include share options granted under the Company’s share option plan (refer to note 13 of the consolidated financial statements).
Compensation to the Executive Management in 2017 and 2016
2017
CHF
Total Executive Management(1)….…..
Fixed
cash
compensation
49,554
Variable compensation
Cash(3)
704,496
number of
shares(2)
1,440,287
value of
shares(2)
1,661,158
Total
2017
2,415,208
(1)
(2)
(3)
The highest paid member of Executive Management in 2017 was the CEO, Tim Dyer, who received CHF384,000 of variable cash compensation and 1,099,956 equity incentive units. The
value of equity incentive units including accrued social charges amounted to CHF1,220,733.
Equity incentive units include shares awarded for consulting services under the share purchase plan and options, Equity Sharing Certificates granted under the Company’s share option plan.
Executive managers have been engaged under consulting contracts which include hourly and daily rates with a monthly cap.
2016(1)
CHF
Total Executive Management(2)……...
Fixed
cash
compensation
-
Variable compensation
Cash(4)
444,234
number of
shares(3)
280,132
value of
shares(3)
485,507
Total
2016
929,741
(1) On February 1, 2017, Tim Dyer waived CHF192,000 of consulting fees and on February 28, 2017 was granted 229,480 options at a strike price of CHF1 per share. The compensation report
reflects this post balance sheet event which has not been adjusted in the consolidated financial statements.
(2) The highest paid member of Executive Management in 2016 was the CEO, Tim Dyer, who received CHF192,000 of variable cash compensation, 272,744 equity incentive units. The value of
equity incentive units including accrued social charges amounted to CHF473,273.
(3) Equity incentive units include shares awarded for consulting services under the share purchase plan and options granted under the Company’s share option plan.
(4) Executive managers have been engaged under consulting contracts which include hourly and daily rates with a monthly cap.
Page 18 of 55
Addex Therapeutics Annual Report 2017│Compensation Report
Report of the statutory auditor to the General Meeting of Addex Therapeutics Ltd
We have audited the accompanying compensation report of Addex Therapeutics Ltd for the year ended December 31,
2017.
Board of Directors’ responsibility
The Board of Directors is responsible for the preparation and overall fair presentation of the compensation report in
accordance with Swiss law and the Ordinance against Excessive Compensation in Stock Exchange Listed Companies
(Ordinance). The Board of Directors is also responsible for designing the compensation system and defining individual
compensation packages.
Auditor’s responsibility
Our responsibility is to express an opinion on the accompanying compensation report. We conducted our audit in
accordance with Swiss Auditing Standards. Those standards require that we comply with ethical requirements and
plan and perform the audit to obtain reasonable assurance about whether the compensation report complies with
Swiss law and articles 14–16 of the Ordinance.
An audit involves performing procedures to obtain audit evidence on the disclosures made in the compensation report
with regard to compensation, loans and credits in accordance with articles 14–16 of the Ordinance. The procedures
selected depend on the auditor’s judgment, including the assessment of the risks of material misstatements in the
compensation report, whether due to fraud or error. This audit also includes evaluating the reasonableness of the
methods applied to value components of remuneration, as well as assessing the overall presentation of the
compensation report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Opinion
In our opinion, the compensation report of Addex Therapeutics Ltd for the year ended December 31, 2017 complies
with Swiss law and articles 14–16 of the Ordinance.
PricewaterhouseCoopers SA
Yves Cerutti
Audit expert
Auditor in charge
Adrien Benoit
Geneva, April 27, 2018
Enclosure:
Compensation report 2017
Page 19 of 55
Addex Therapeutics Annual Report 2017
Consolidated Financial Statements of Addex
Therapeutics Ltd as at December 31, 2017
Page 20 of 55
Addex Therapeutics Annual Report 2017 │Consolidated Financial Statements
Consolidated Balance Sheets
as at December 31, 2017 and December 31, 2016
ASSETS
Current assets
Cash and cash equivalents (excluding bank overdrafts)……………......
Other current assets………….………………………………………….….
Total current assets………………………………………………………..
Non-current assets
Property, plant and equipment……………………………………………..
Non-current financial assets………………………………………………..
Total non-current assets………………………………………………….
Total assets………………………………………….................................
LIABILITIES AND EQUITY
Current liabilities
Payables and accruals………………………………………………………
Deferred income……………………………………………………………..
Total current liabilities…………………………………………………….
Non-current liabilities
Employment benefits obligations………………………………………….
Total non-current liabilities……………………….................................
Equity
Share capital…………………………………………………………………
Share premium………………………………………………………………
Other reserves……………………………………………………………….
Accumulated deficit………………………………………………………….
Total equity………………………………………………..........................
Notes
December 31,
2017
December 31,
2016
Amounts in Swiss francs
7
8
9
10
11
15
19
12
2,590,539
462,805
3,053,344
2,751
7,087
9,838
1,416,364
242,158
1,658,522
17,303
7,102
24,405
3,063,182
1,682,927
1,037,769
439,022
1,476,791
243,864
243,864
1,249,900
-
1,249,900
214,435
214,435
13,420,015
264,797,104
7,547,295
(284,421,887)
1,342,527
11,563,547
263,038,639
6,757,887
(281,141,481)
218,592
Total liabilities and equity………………………………........................
3,063,182
1,682,927
The accompanying notes form an integral part of these consolidated financial statements.
Page 21 of 55
Addex Therapeutics Annual Report 2017 │Consolidated Financial Statements
Consolidated Statements of Profit or Loss
for the years ended December 31, 2017 and 2016
Notes
2017
2016
Amounts in Swiss francs
Income
Research grants…………...………………………………….……………..
Other income…………………………………………………………………
Total income………………………………………………………………...
Operating costs
Research and development...…………………………………….............
General and administration….……………………………………………...
Total operating costs……………………………………........................
Operating loss……………………………………………………..............
Finance income………………………………………………………………
Finance costs………...…..……………………….....................................
Finance costs, net…………………………………….............................
Net loss before tax…………………………………….............................
Income tax expense…………………..……...……………………………..
Net loss for the year...…………………………………………................
Basic and diluted loss per share for loss attributable to the
ordinary equity holders of the Company, expressed in Swiss
franc ………………………………………………………………………….
15
16
20
18
21
464,916
34,978
499,894
285,091
126,653
411,744
(2,628,901)
(1,106,049)
(3,734,950)
(2,461,414)
(1,079,927)
(3,541,341)
(3,235,056)
(3,129,597)
-
(45,350)
(45,350)
(3,280,406)
(3,280,406)
27
(19,816)
(19,789)
(3,149,386)
-
(3,149,386)
(0.25)
(0.28)
The accompanying notes form an integral part of these consolidated financial statements.
Page 22 of 55
Addex Therapeutics Annual Report 2017 │Consolidated Financial Statements
Consolidated Statements of Comprehensive Income
for the years ended December 31, 2017 and 2016
Notes
2017
2016
Amounts in Swiss francs
Net loss for the year…………...………………………………….……….
(3,280,406)
(3,149,386)
Other comprehensive income / (cost)
Items that will never be reclassified to the statement of income :
Remeasurements of post-employment benefit obligations…………..
Items that may or may not be classified subsequently to the statement
of income :
Exchange difference on translation of foreign operations differences..
Other comprehensive income / (cost) for the year, net of tax …...
19
(9,909)
(871)
(10,780)
8,731
(107)
8,624
Total comprehensive income for the year…………………………….
(3,291,186)
(3,140,762)
The accompanying notes form an integral part of these consolidated financial statements.
Page 23 of 55
Addex Therapeutics Annual Report 2017 │Consolidated Financial Statements
Consolidated Statements of Changes in Equity
for the years ended December 31, 2017 and 2016
Amounts in Swiss francs
Notes
Share
capital
Share
premium
Other
reserves
Accumulated
deficit
Total
11,025,489
262,078,103
6,552,733
(277,992,095)
1,664,230
-
-
-
12
1,754,941
-
-
-
-
-
(25,354)
-
-
12
1,930,435
-
-
-
-
(25,573)
-
(3,149,386)
(3,149,386)
-
8,624
(3,149,386)
(3,140,762)
-
-
-
-
1,754,941
(25,354)
(230,993)
196,530
-
(3,280,406)
(3,280,406)
(10,780)
(10,780)
(10,780)
(3,280,406)
(3,291,186)
-
-
-
-
1,930,435
(25,573)
1,710,071
800,188
8,624
8,624
-
-
-
-
-
-
Balance at
January 1, 2016……………
Net loss for the
year…………………………..
Other comprehensive income /
(cost) for the year………….…
Total comprehensive
loss for the year………...…
Issue of
common shares……………
Cost of share capital Issuance
capital increase…………....
Net movement in treasury
Value of share-based
services.....………………….
Balance at
January 1, 2017……………
Net loss for the
year………………………..…
Other comprehensive
Income /(cost) for the year...
Total comprehensive
loss for the year………...…
Issue of
common shares………….…
Cost of share capital Issuance
capital increase……………..
Net movement in treasury
Value of share-based
services.....………………….
Balance at
December 31, 2017………..
shares……….......................
12
(73,967)
1,784,038
-
-
800,188
13,420,015
264,797,104
7,547,295
(284,421,887)
1,342,527
shares……….......................
12
(1,216,883)
985,890
-
-
196,530
11,563,547
263,038,639
6,757,887
(281,141,481)
218,592
The accompanying notes form an integral part of these consolidated financial statements.
Page 24 of 55
Addex Therapeutics Annual Report 2017 │Consolidated Financial Statements
Consolidated Statements of Cash Flows
for the years ended December 31, 2017 and 2016
Notes
2017
2016
Amounts in Swiss francs
Net loss for the year...…………………………………………...…………...
Adjustments for:
Depreciation and amortization……………………..............................
(Gain) / loss on disposal of fixed assets…………………………….…
Value of share-based services..………………………………………..
Pension costs…………………………................................................
Finance costs, net…………………….………………………………….
Net changes in working capital………………………………………………
Net cash used in operating activities….…………………………………
Cash flows from investing activities
Proceeds from sale of property, plant and equipment….….……………...
Payment for purchase of property, plant and equipment….….…………..
Interest received……………………………………………..………………..
Net cash (used in)/from investing activities………………………...….
Cash flows from financing activities
Proceeds from sales of treasury shares……………………………………
Costs paid on issue of shares……………………………………………..…
Interest paid……………………………………………………………………
Net cash from financing activities………………...…............................
Decrease/(increase) 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………..........................
9
13
19
20
9
20
12
20
7
7
(3,280,406)
(3,149,386)
15,249
-
800,188
19,520
45,350
265,147
(2,134,952)
-
(697)
-
(697)
3,380,747
(25,573)
(171)
3,355,003
25,761
(9,681)
197,347
27,504
19,789
194,279
(2,694,387)
9,681
(11,221)
27
(1,513)
1,523,948
(25,397)
(6,924)
1,491,627
1,219,354
(1,204,273)
1,416,364
(45,179)
2,633,601
(12,964)
2,590,539
1,416,364
The accompanying notes form an integral part of these consolidated financial statements.
Page 25 of 55
Addex Therapeutics Annual Report 2017 │Consolidated Financial Statements
Notes to the Consolidated Financial Statements
for the years ended December 31, 2017 and 2016
(Amounts in Swiss francs)
1. General information
Addex Therapeutics Ltd (the Company), formerly Addex Pharmaceuticals Ltd, and its subsidiaries (together, the Group) are a
drug 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) secure additional capital to support its operations. The Board of Directors (Board) believes the Group will
be able to meet all of its obligations for the further 12 months as they fall due and, hence, the consolidated financial statements
have been prepared on a going concern basis. Further analysis is disclosed in note 4.1.
These consolidated financial statements have been approved by the Board of Directors on April 27, 2018. They are subject to
approval by the shareholders prior to the June 20, 2018.
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.
2.1 Basis of preparation
The consolidated financial statements of Addex Therapeutics Ltd have been prepared in accordance with International Financial
Reporting Standards (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, 2016. The following new standards, amendments to
standards and interpretations which are mandatory for the financial periods beginning on January 1, 2017 did not have any
material impact on the consolidated financial statements:
IAS 7, statement of cash flow (effective from January 2017). This standard has been applied for the first time for the annual
reporting period commencing 1 January 2017 and has no impact on the consolidated financial statements.
The following new standards, amendments to standards and interpretations which have been published but are not yet effective
and have not been early adopted by the Group:
IFRS 15, Revenue from contracts with customers (effective from January 1, 2018). The Group will apply this standard from
January 1, 2018;
IFRS 16, Leases (effective for annual periods beginning on or after January 1, 2019). The Group will apply this standard
from January 1, 2019 and ;
IFRS 9, Financial instruments (effective from January 1, 2018). The Group will apply this standard from January 1, 2018.
At this stage, the Group does not expect any significant impact from new or revised standards listed above.
Page 26 of 55
Addex Therapeutics Annual Report 2017 │Consolidated Financial Statements│Notes
2.2 Consolidation
Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has
rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the
entity. 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.
2.3 Segment reporting
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.
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:
Leasehold improvements
Computer equipment
Laboratory equipment
Furniture and fixtures
Chemical library
(over life of lease)
3 years
4 years
5 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.
Page 27 of 55
Addex Therapeutics Annual Report 2017 │Consolidated Financial Statements│Notes
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 depreciation or 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). Prior impairment of non-financial assets other than goodwill is
reviewed for possible reversal 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 loans
or 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 non-current assets in
the balance sheet (see note 8 and 10).
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 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, 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.
Page 28 of 55
Addex Therapeutics Annual Report 2017 │Consolidated Financial Statements│Notes
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.
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.
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. Actuarial gains and losses arising
from experience adjustments and changes in actuarial assumptions are recognized immediately in other comprehensive income
and past-service costs are recognized immediately in the statement of income.
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. 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.
Share-based compensation
The Group operates an equity sharing certificates’ equity incentive plan, a share option plan and a share purchase plan: The fair
value of the services received in exchange for the grant or transfer of equity incentive units 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 equity incentive unit
granted or transferred. 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 incentive units that are expected to vest.
At each balance sheet date, the Group revises its estimates for the number of equity incentive units 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.
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share
premium when the equity incentive units 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.
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.
Page 29 of 55
Addex Therapeutics Annual Report 2017 │Consolidated Financial Statements│Notes
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
it is technically feasible to complete the intangible asset so that it will be available for use or sale;
Research and development costs are expensed as incurred. Costs incurred on development projects are recognized as
intangible assets when the following criteria are fulfilled:
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).
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 2017, a 10% increase or decrease in the EUR/CHF
exchange rate would have resulted in a CHF11,144 (2016: CHF4’761) increase or decrease in net income and shareholders’
equity as at December 31, 2017, a 10% increase or decrease in the GBP/CHF exchange rate would have resulted in a CHF3’791
(2016: CHF5’747) increase or decrease in net income and shareholders’ equity as at December 31, 2017 and a 10% increase or
decrease in the USD/CHF exchange rate would have resulted in a CHF86,326 (2016: CHF32,894) increase or decrease in net
income and shareholders’ equity as at December 31, 2017. 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.
Page 30 of 55
Addex Therapeutics Annual Report 2017 │Consolidated Financial Statements│Notes
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 in note 1 under “general information”, the consolidated financial statements have been prepared on a going
concern basis after considering the group cash position in the light of current financial plans and financial commitments.
Income taxes
As disclosed in note 18 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.
Page 31 of 55
Addex Therapeutics Annual Report 2017 │Consolidated Financial Statements│Notes
Commitments and contingencies
In assessing the need for provisions for legal cases, estimates and judgments 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.
Share-based compensation
The Group recognizes an expense for share-based compensation based on the valuation of equity incentive units using binomial
and Black-Scholes valuation models. A number of assumptions are made in these models. 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 amounts recognized. Had these assumptions been modified within
their feasible ranges and the Group calculated the share-based compensation based on the higher and lower values of these
ranges, share-based compensation expense in 2017 would have been CHF711,856 or CHF911,946, respectively (2016:
CHF143,486 or CHF237,882, respectively). This is compared to the amount recognized as an expense in 2017 of CHF800,188
(2016: CHF197,347). Additional information is disclosed in note 13.
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 19.
4.2 Critical judgments in applying the accounting policies
Development supplies
At December 31, 2017, 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 to improve 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, 2017 and 2016 is derived from the business of developing drugs
for human health. Income was earned from grants, 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 research and development grants and other income.
Analysis of income by nature is detailed as follows:
Research & development grants………………………...……….
Research services and other collaborative arrangements…….
Sales of fixed assets and stocks of consumables.........……….
Other service income……………………………………………...
Total income…..……………………………………………..……
Analysis of income by major customer is detailed as follows:
The Michael J. Fox Foundation (USA)……………….….……...
Pierre Fabre Pharmaceuticals (France)…………………..........
Multiple customers……………………….………………………..
Total income…………………..…………………………..………
2017
2016
464,916
-
-
34,978
499,894
285,091
80,676
11,781
34,196
411,744
2017
2016
464,916
-
34,978
499,894
285,091
80,676
45,977
411,744
For more detail, refer to note 14, “License and collaboration agreements” and note 15 “Income”.
Page 32 of 55
Addex Therapeutics Annual Report 2017 │Consolidated Financial Statements│Notes
The geographical analysis of assets is as follows:
Switzerland………………...………………………........
Current………………………………………………...
Non-current…………………………………………...
Europe………………...……………………...……….....
Current………………………………………………...
Non-current…………………………………………...
Total assets…….…………………..………………......
December 31, 2017
December 31, 2016
3,130,264
3,120,847
9,417
6,741
6,320
421
3,137,005
1,675,171
1,651,152
24,019
7,756
7,370
386
1,682,927
The geographical analysis of operating costs is as follows:
Switzerland…………….………………………..............
Europe…………………………………...…………........
Total operating costs (note 16) ………………….....
2017
2016
3,719,191
15,759
3,734,950
3,530,650
10,691
3,541,341
There was capital expenditure of CHF697 in 2017 and CHF11,221 in 2016.
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 (excluding bank overdrafts)
December 31, 2017
December 31, 2016
Cash at bank and on hand……………………............
Total cash and cash equivalents………………......
2,590,539
2,590,539
1,416,364
1,416,364
In 2017, the effective interest rate on cash and cash equivalents was 0.0% (2016: 0.0%).
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
December 31, 2017
December 31, 2016
P-1 / A-1………...………………………………..……...
Cash on hand……………………………………………
Total cash and cash equivalents……………….......
2,590,415
124
2,590,539
1,416,195
169
1,416,364
External credit ratings of counterparties were obtained from Moody’s (P-1) or Standard & Poor’s (A-1), respectively.
8. Other current assets
Receivables……………………………………….……
Prepayments…………………………………………...
Total other current assets……………………..…...
303,882
158,923
462,805
220,723
21,435
242,158
December 31, 2017
December 31, 2016
Page 33 of 55
Addex Therapeutics Annual Report 2017 │Consolidated Financial Statements│Notes
9. Property, plant and equipment
Year ended December 31, 2016
Opening net book amount……………..
Disposals…………………………………
Depreciation charge…….………………
Closing net book amount…………….
At December 31, 2016
Cost…………………........……………...
Accumulated depreciation……………..
Net book value…………………………
Year ended December 31, 2017
Opening net book amount……………..
Additions…………………………………
Depreciation charge…….………………
Closing net book amount…………….
At December 31, 2017
Cost…………………........……………...
Accumulated depreciation……………..
Net book value…………………………
Equipment
Furniture &
fixtures
Chemical
Library
49
11,221
(1,927)
9,343
437
-
(437)
-
31,357
-
(23,397)
7,960
Total
31,843
11,221
(25,761)
17,303
1,584,654
(1,575,311)
9,343
7,564
(7,564)
-
1,207,165
(1,199,205)
7,960
2,799,383
(2,782,080)
17,303
9,343
697
(7,576)
2,464
-
-
-
-
7,960
-
(7,673)
287
17,303
697
(15,249)
2,751
1,585,351
(1,582,887)
2,464
7,564
(7,564)
-
1,207,165
(1,206,878)
287
2,800,080
(2,797,329)
2,751
The Group recorded a depreciation charge in 2017 of CHF11,541 (2016: CHF23,381) as part of research and development
expenses and CHF3,708 (2016: CHF2,380) as part of general and administration expenses.
10. Non-current financial assets
Security rental deposit...…………………………......
Total non-current financial assets…………..……
7,087
7,087
7,102
7,102
December 31, 2017
December 31, 2016
11. Payables and accruals
Trade payables…………………………...…………..
Social security and other taxes……………………...
Accrued expenses…………………………………....
Total payables and accruals……………………….
All payables mature within 3 months.
12. Share capital
December 31, 2017
December 31, 2016
383,211
10,979
643,579
1,037,769
669,678
7,240
572,982
1,249,900
Common
shares
Number of shares
Treasury
shares
Balance at January 1, 2016…………………….
Issue of shares – capital increase……………….
Sale of treasury shares…………………………..
Balance at December 31, 2016………………...
Issue of shares – capital increase……………....
Sale of treasury shares…………………………...
Balance at December 31, 2017………………...
11,699,612
1,754,941
-
13,454,553
1,930,435
-
15,384,988
(674,123)
(1,754,941)
538,058
(1,891,006)
(1,930,435)
1,856,468
(1,964,973)
Total
11,025,489
-
538,058
11,563,547
-
1,856,468
13,420,015
At December 31, 2017, the total outstanding share capital is CHF15,384,988 (December 31, 2016: CHF13,454,553), consisting of
15,384,988 shares (December 31, 2016: 13,454,553). All shares have a nominal value of CHF1.
Page 34 of 55
Addex Therapeutics Annual Report 2017 │Consolidated Financial Statements│Notes
On May 29, 2017, the Group increased its share capital by CHF1,930,435 (1,930,435 registered shares with nominal value of
CHF1 per share) out of authorized share capital. The 1,930,435 new shares were subscribed by the Company’s 100% owned
subsidiary, Addex Pharma SA at CHF1 and recorded as treasury shares.
For the fiscal year ended December, 31 2017, the group sold 1,856,468 treasury shares (2016 : 538,058) for gross proceeds of
CHF3,380,747 (2016: CHF1,523,948) and 132,096 treasury shares (2016: 43,264) to purchase services from consultants
including 66,727 shares for Roger Mills, 47,706 shares for Tim Dyer.
On May 27, 2016, the Group increased its share capital by CHF1,754,941 (1,754,941 registered shares with nominal value of
CHF1 per share) out of authorized share capital. The 1,754,941 new shares were subscribed by the Company’s 100% owned
subsidiary, Addex Pharma SA at CHF1 and recorded as treasury shares.
13. Share-based compensation
The total share-based compensation expense recognized in the statement of income for equity incentive units granted to
directors, executives, employees, consultants and investors has been recorded under the following headings:
Research and development………………...…………
General and administration…….……………………...
Total share-based compensation..…………………
511,789
288,399
800,188
66,055
131,292
197,347
2017
2016
Analysis of share-based compensation by equity incentive plan is detailed as follows:
Equity sharing certificate plan……………...…………
Share purchase plan……..…….……………………...
Share option plans……………………………………..
Total share-based compensation..…………………
28,588
34,821
736,779
800,188
54,652
13,563
129,132
197,347
2017
2016
Equity Sharing Certificate Equity Incentive Plan
On June 1, 2010, the Company established an equity incentive plan based on equity sharing certificates (ESCs) 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. ESCs granted
are subject to certain vesting conditions which are defined in each grant agreement. The holder of vested ESCs has the right to
subscribe to shares at the subscription price if the underlying share price has reached the floor price. The floor and subscription
price are defined by the Board of Directors. 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.
Movements in the number of subscription rights attached to the ESCs outstanding are as follows:
At January 1………………………………………………………..
Granted……………………………………………………………..
Forfeited……………………………………………………...........
Expired……………………………………………………………..
Exercised…………………………………………………………..
At December 31…………………………………………….........
2017
354,433
108,000
-
(78,500)
(108,000)
275,933
2016
586,587
-
-
(221,758)
(10,396)
354,433
At December 31, 2017, of the outstanding 275,933 subscription rights (2016: 354,433) attached to the ESCs, 128,533
were exercisable (2016: 309,837).
Page 35 of 55
Addex Therapeutics Annual Report 2017 │Consolidated Financial Statements│Notes
The outstanding subscription rights as at December 31, 2017 and 2016 have the following expiry dates, subscription prices and
floor prices:
At December 31, 2017 Subscription prices / floor prices (CHF)
Expiry date
1.00 / 2.30
2.00 / 2.30
5.00 /10.00 7.00 / 14.00
Total
2018……………………………...
-
2019……………………………...
151,600
2020……………………………...
6,000
2027……………………………...
-
Total subscription rights…….
157,600
-
-
-
108,000
108,000
8,000
2,333
10,333
-
-
-
-
-
-
151,600
6,000
108,000
8,000
2,333
275,933
At December 31, 2016 Subscription prices / floor prices (CHF)
Expiry date
1.00 / 2.30 5.00 / 10.00
6.50 / 13.00 7.00 / 14.00
Total
2017……………………………...
108,000
78,500
-
186,500
2018……………………………...
-
8,000
2019……………………………...
151,600
2020……………………………...
6,000
-
-
-
-
-
2,333
10,333
-
-
151,600
6,000
Total subscription rights…….
265,600
8,000
78,500
2,333
354,433
Share option plans
The Company established a share option plan to provide incentives to directors, executives, employees and consultants of the
Group.
On December 23, 2017 the Group granted 1,609,022 options at an exercise price of CHF2. Options vest over 4 year and expired
in 2027. On December 31, 2016 the Group granted 175,000 options at an exercise price of CHF 2. Options vest over 4 years and
expired in 2021.
Movements in the number of options outstanding are as follows:
At January 1…………………………………………………….
Granted…………………………………………………………..
Exercised………………………………………………………..
Forfeited…………………………………………………………
At December 31……………………………...........................
2017
779,813
1,901,283
-
(20,000)
2,661,096
2016
630,107
175,000
(4,981)
(20,313)
779,813
At December 31, 2017, of the outstanding 2,661,096 share options (2016: 779,813), 773,489 were exercisable (2016: 344,543).
The outstanding share options as at December 31, 2017 have the following expiry dates:
At December 31, 2017
Expiry date
2019…………………………
2020……………………...…
2021…………………………
2027…………………………
Total…………………………
1.00
-
-
-
2.00
475,126
49,687
105,000
292,261
292,261
1,689,022
2,318,835
Exercises prices (CHF)
2.08
-
-
50,000
-
50,000
Total
475,126
49,687
155,000
1,981,283
2,661,096
Page 36 of 55
Addex Therapeutics Annual Report 2017 │Consolidated Financial Statements│Notes
At December 31, 2016 Exercises prices (CHF)
Expiry date
2.00
2.08
2019…………………………
2020……………………...…
2021…………………………
Total…………………………
475,126
49,687
125,000
649,813
-
-
50,000
50,000
5.00
80,000
-
-
80,000
Total
555,126
49,687
175,000
779,813
The weighted average fair value of share options granted during 2017 determined using a Black-Scholes model was CHF1.08
(2016: CHF0.78). The significant inputs to the model were:
Weighted average share price per share at the grant date…………..
Weighted average strike price per share……………………...……….
Weighted average volatility / volatility…………………………………..
Dividend yield……………………………………………………………..
Weighted average annual risk free rate / annual risk-free rate………
Share purchase plan
2017
2016
CHF 2.27
CHF 1.85
43%
-
0.13%
CHF 2.08
CHF 2.08
43%
-
0.0%
The Group established a share purchase plan under which services are settled for shares. Under the plan directors, executives,
employees and consultants may receive fully paid ordinary shares from the Group’s treasury share reserve for services rendered.
During 2017, 132,096 shares (2016: 43,264 shares) were transferred to settle CHF 261,332 (2016: CHF 109,563) of consulting
fees (2016: CHF 109,563).
14. 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. No
amounts have been recognised under this agreement in 2017 and 2016.
15. Income
For the fiscal year ended December, 31 2017, the Group received CHF 903,938 of grants from The Michael J. Fox Foundation
for Parkinson’s Research (MJFF). Of this amount, CHF 464,916 has been recognized as income and CHF439,022 has been
recorded in deferred income. The grants were received in instalments and recognized as income over the period necessary to
match it against the specific research costs it was intended to cover.
16. Operating costs
Staff costs (note 17)…………………………………........
Depreciation and amortization……………………….......
External research and development costs………….......
Laboratory consumables…………………...……………..
Patent costs……………………………………………..….
Professional fees……………………………………..……
Operating leases……………………………………..…….
Other operating costs…………………………….............
Total operating costs……………………………….……
2017
2016
751,277
15,249
841,308
29,764
180,125
1,347,913
96,889
472,425
3,734,950
587,198
25,761
819,330
17,329
480,843
855,509
79,639
675,732
3,541,341
Operating lease contracts are renewable on normal business terms and provide for annual rent increases based on the Swiss
consumer price index.
Page 37 of 55
Addex Therapeutics Annual Report 2017 │Consolidated Financial Statements│Notes
17. Staff costs
Wages and salaries.…………………………………..…
Social charges and insurances….…………...………...
Value of share-based services (note 13)………......….
Pension costs – defined benefit plans (note 19)….…..
Other employee costs……………………………..…….
Total staff cost (note 16)………………...…….……....
18. Taxes
Loss before tax……………………………………........
Tax calculated at a tax rate of 7.8% (2015: 7.8%)…..
Effect of different tax rates in other countries………..
Expenses charged against equity……………………..
Expenses not deductible for tax purposes……………
Total tax losses not recognized as deferred tax asset
Income tax expense…………………………….……..
2017
2016
541,523
59,749
83,459
63,157
3,389
751,277
437,891
49,616
39,297
63,020
(2,626)
587,198
December 31, 2017
December 31, 2016
3,280,406
255,872
(1,229)
(1,995)
(62,415)
(190,233)
-
3,149,386
245,652
(616)
(1,348)
(17,538)
(226,150)
-
The Group is subject to Swiss income taxes and has a tax loss carry forward of CHF 157,631,912 as of December 31, 2017
(2016: CHF187,037,322), of which CHF77,895,747 (2016: CHF106,995,092) expire within the next five years and
CHF79,736,135 (2016: 80,042,030) will expire between five and seven years. Tax losses of CHF 32,639,886 expired in 2017
(2016: CHF 41,506,471).
19. 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. Assets are held in the insurance company. In accordance with IAS 19 (revised), 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 2017 of CHF 63,117 (2016: CHF63,020) as part of staff costs.
Employment benefit obligations
The amounts recognized in the balance sheet are determined as follows:
Defined benefit obligation………..…………...………..
Fair value of plan assets…………………….…………
Funded status………………………………..………….
2017
2016
(3,607,276)
3,363,412
(243,864)
(2,152,878)
1,938,443
(214,435)
The amounts recognized in the statements of income are as follows:
Current service cost……………….……………………
Interest cost………………………..………...………….
Interest income…………………..……………….….....
Company pension income / (cost) (note 17)……...
2017
2016
(61,375)
(22,865)
21,083
(63,157)
(61,356)
(17,740)
16,076
(63,020)
Page 38 of 55
Addex Therapeutics Annual Report 2017 │Consolidated Financial Statements│Notes
The movement in the defined benefit obligations at the beginning of the year is as follows:
2017
2016
Defined benefit obligation at beginning of year.....….
Service cost…………………………………....….....…
Interest cost………………………………...………..….
Employee contribution………………………….………
Actuarial gain / (loss) arising from changes in
financial assumptions.………………………………
Actuarial gain / (loss) arising from changes in
demographic assumptions…………………………
Actuarial gain / (loss) on experience adjustment……
Benefits paid / (deposited)…………….……..………..
Defined benefit obligations at end of year………..
(2,152,878)
(61,375)
(22,825)
(38,920)
(65,563)
-
45,513
(1,311,188)
(3,607,276)
(2,234,012)
(61,356)
(17,740)
(32,501)
2,564
60,261
4,173
125,733
(2,152,878)
The movements in the fair value of plan assets during the year are as follows:
Fair value of plan assets at beginning of year…….....
Interest income……………………………………….....
Employees’ contributions……..……………………......
Company contribution…………..………………………
Plan assets (losses) / gains……..……………………..
Benefits (paid) / deposited…………….……..………...
Fair value of plan assets at end of year……………
The principal actuarial assumptions used were as follows:
2017
2016
1,938,443
21,083
38,920
43,637
10,141
1,311,188
3,363,412
2,038,350
16,076
32,501
35,516
(58,267)
(125,733)
1,938,443
Discount rate………………………...…………….........
Mortality tables………………..…………………………
0.80%
BVG2015 GT
0.80%
BVG2015 GT
December 31, 2017
December 31, 2016
The discount rate and the life expectancy were identified as significant actuarial assumptions for the Swiss pension plan. The
following impacts on the defined benefit obligation are to be expected:
-
0.25% increase or decrease in the discount rate would lead to an increase of 5.30% (2016 : 4.30%) or a decrease of 4.90%
(2016: 4.20%) in the defined benefit obligation of the Swiss pension plan ;
+/-1 year in the life expectancy would lead to an increase of 1.78% (2016 : 1.82%) or a decrease of 1.82% (2016 : 1.86%) in
the defined benefit obligation of the Swiss pension plan.
-
The estimated Group contributions to pension plans for the financial year 2018 amounts to CHF43,271. The following table
shows the funding of the defined benefit pensions and actuarial adjustments on plan liabilities:
Present value of defined benefit obligation……………
Fair value of plan assets………………………………...
Deficit in the plan……………………………………….
Experience adjustment…………………………………..
Actuarial (losses) / gains on plan assets…………..…..
2017
(3,607,276)
3,363,412
(243,864)
(20,050)
10,141
2016
(2,152,878)
1,938,443
(214,435)
66,998
(58,267)
The following table shows the estimated benefit payments for the next ten years where the number of employees remains
constant :
2018………………….........................
2019….........….........….........….........
2020….........….........….........….........
2021….........….........….........….........
2022….........….........….........….........
2023-2027….........….........….........…
89’988
90’371
90’763
91’711
91’625
466,507
Page 39 of 55
Addex Therapeutics Annual Report 2017 │Consolidated Financial Statements│Notes
20. Finance costs, net
Finance costs……………………………..……….........
Finance income…………………………………………
Foreign exchange (losses) / gains……………………
Finance costs, net...………...………………………...
21. Loss per share
2017
2016
(171)
-
(45,179)
(45,350)
(6,924)
27
(12,892)
(19,789)
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.
Loss attributable to equity holders of the Company...
Weighted average number of shares in issue……….
Basic and diluted loss per share……………………
2017
2016
(3,280,406)
12,941,439
(0.25)
(3,149,386)
11,412,301
(0.28)
The Company has one category of dilutive potential shares as at December 31, 2017 and December 31, 2016: equity sharing
certificates (ESCs) and share options. As of December 31, 2017 and December 31, 2016, equity sharing certificates and share
options have been ignored in the calculation of the loss per share, as they would be antidilutive.
22. Commitments and contingencies
Operating lease commitments
Within 1 year……………………………………………..
Total operating lease commitments………………..
11,135
11,135
9,861
9,861
2017
2016
Operating lease commitments consist mainly of rental contracts for laboratories, offices and related spaces used by Addex
Pharma SA. There are no commitments over 5 years.
Capital commitments
As at December 31, 2017 and 2016, the Group has no contracted capital expenditure.
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).
23. Related party transactions
Related parties include members of the Board of Directors and the Executive Management of the Group. The following
transactions were carried out with related parties:
Key management compensation
2017
2016
Salaries and other short-term employee benefits…...
Consulting fees………………………………………….
Share-based compensation….………………………..
133,180
737,685
595,835
1,466,700
83,627
636,234
157,049
876,910
Consulting fees relate to amounts paid to Roger Mills, Sonia Poli and Tim Dyer who have delivered their services to the Group
under consulting contracts. Tim Dyer services are delivered through TMD Advisory Ltd, a company owned and managed by Mr.
Dyer, which has been mandated to provide CEO / CFO services to the Addex Group. The Group invoiced CHF34,978 of
consulting services to TMD Advisory Ltd during the year which have been recorded in other income.
Page 40 of 55
Addex Therapeutics Annual Report 2017 │Consolidated Financial Statements│Notes
24. Events after the balance sheet date
On March 28, 2018, the Company increased its share capital by issuing 13,037,577 new shares with a nominal value of CHF1
each at an issue price of CHF3.13 per share. Of these new shares, 12,917,129 were placed with investors raising CHF40.4
million of gross proceeds and the remaining 120,448 new shares were recorded as treasury shares, bringing the total outstanding
issued share capital to 28,564,031. Each new share received a 7 year warrant to purchase 0.45 of a share at a price of CHF3.43.
On January 2, 2018, the group entered into a licensing and collaboration agreement with Indivior PLC for the global development
and commercialization of ADX71441 with an initial focus on the treatment of addiction. Under the terms of the agreement, Addex
will receive USD5.0 million upfront, USD4.0 million of committed research funding over two years, $330 million of potential
development, regulatory and commercialization milestones and tiered royalties up to double-digit. Addex retains the right to
select compounds from the research collaboration for certain indications outside addiction, including Charcot-Marie-Tooth type 1a
neuropathy (CMT1A). The upfront payment of USD5.0 million has been received in January 2018.
25. Risk assessment disclosure required by Swiss law
The Chief Executive Officer coordinates and aligns the risk management processes, and reports to the Board 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. 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.
Page 41 of 55
Addex Therapeutics Annual Report 2017 │Consolidated Financial Statements
Report of the statutory auditor to the General Meeting of Addex Therapeutics Ltd
Report on the audit of the consolidated financial statements
Opinion
We have audited the consolidated financial statements of Addex Therapeutics Ltd and its subsidiaries (the Group),
which comprise the consolidated balance sheet as at December 31, 2017 and the consolidated statement of profit and
loss, consolidated statement of comprehensive income, consolidated statement of changes in equity and
consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements,
including a summary of significant accounting policies.
In our opinion, the consolidated financial statements (pages 19 to 40) give a true and fair view of the consolidated
financial position of the Group as at December 31, 2017 and its consolidated financial performance and its
consolidated cash flows for the year then ended in accordance with the International Financial Reporting Standards
(IFRS) and comply with Swiss law.
Basis for opinion
We conducted our audit in accordance with Swiss law, International Standards on Auditing (ISAs) and Swiss
Auditing Standards. Our responsibilities under those provisions and standards are further described in the
“Auditor’s responsibilities for the audit of the consolidated financial statements” section of our report.
We are independent of the Group in accordance with the provisions of Swiss law and the requirements of the Swiss
audit profession, as well as the IESBA Code of Ethics for Professional Accountants, and we have fulfilled our other
ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our opinion.
Our audit approach
Overview
Overall Group materiality: CHF 35'000
We concluded full scope audit work at two reporting units in
Switzerland. Our audit scope addressed 100% of the Group’s total
expenses.
As key audit matters the following areas of focus have been
identified:
Risk of fraud in related party transactions
Audit scope
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the
consolidated financial statements as a whole, taking into account the structure of the Group, the accounting
processes and controls, and the industry in which the Group operates.
Page 42 of 55
Addex Therapeutics Annual Report 2017 │Statutory Financial Statements
We designed our audit by determining materiality and assessing the risks of material misstatement in the
consolidated financial statements. In particular, we considered where subjective judgements were made; for
example, in respect of significant accounting estimates that involved making assumptions and considering future
events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of
internal controls, including among other matters consideration of whether there was evidence of bias that
represented a risk of material misstatement due to fraud.
The audit procedures addressed 100% of the expenses incurred by the company and all of the work was performed
by ourselves without recourse to either other PwC offices or other professional service firms.
Materiality
The scope of our audit was influenced by our application of materiality. Our audit opinion aims to provide
reasonable assurance that the consolidated financial statements are free from material misstatement. Misstatements
may arise due to fraud or error. They are considered material, if individually or in aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the
overall Group materiality for the consolidated financial statements as a whole as set out in the table below. These,
together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and
extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate, on the
consolidated financial statements as a whole.
Overall Group materiality
CHF 37'000
How we determined it
1% of total expenses (rounded)
Rationale for the materiality
benchmark applied
We chose total expenses as the benchmark because, in our view, it is
the benchmark against which the financial performance of the
Group is most commonly measured in its current research and
development phase, and is a generally accepted benchmark.
We agreed with the Board of Directors that we would report to them misstatements above CHF 3’700 identified during our
audit as well as any misstatements below that amount which, in our view, warranted reporting for qualitative reasons.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
consolidated financial statements of the current period. These matters were addressed in the context of our audit of
the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
Risk of fraud in related party transactions
Key audit matter
Although a risk of fraud exists in any business
environment, the company’s lean management
structure heightens the risk of fraud. In addition
related party transactions, which comprise
consulting fees and other arrangements with key
management, are significant and material to the
financial statements. The combination of these
factors resulted in our conclusion that fraud risk
in related party transactions should be considered
a key audit matter. The principal source of risk is
asset misappropriation, particularly involving
related parties which may overcharge for services
rendered to the Group or undercharge for services
received from the Group.
How our audit addressed the key audit matter
We obtained evidence regarding related party
relationships and transactions disclosed in note
23. In particular, we inspected significant
contracts with related parties. We understood the
purpose, specific terms and conditions or amounts
of the transactions with related parties. We
reviewed approval by the Board of Directors and
we evaluated if the transactions are properly
accounted for and disclosed. Based on the work
performed, we concluded that transactions are
properly authorized, accounted for and disclosed.
Page 43 of 55
Addex Therapeutics Annual Report 2017 │Statutory Financial Statements
Other information in the annual report
The Board of Directors is responsible for the other information in the annual report. The other information
comprises all information included in the annual report, but does not include the consolidated financial statements,
the stand-alone financial statements and the remuneration report of Addex Therapeutics Ltd and our auditor’s
reports thereon.
Our opinion on the consolidated financial statements does not cover the other information in the annual report and
we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information in the annual report and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be
materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Board of Directors for the consolidated financial statements
The Board of Directors is responsible for the preparation of the consolidated financial statements that give a true
and fair view in accordance with IFRS and the provisions of Swiss law, and for such internal control as the Board of
Directors determines is necessary to enable the preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the Board of Directors either intends to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Swiss law, ISAs and Swiss Auditing Standards will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
As part of an audit in accordance with Swiss law, ISAs and Swiss Auditing Standards, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made.
Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or
conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the
disclosures, and whether the consolidated financial statements represent the underlying transactions and events
in a manner that achieves fair presentation.
Page 44 of 55
Addex Therapeutics Annual Report 2017 │Statutory Financial Statements
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the consolidated financial statements. We are responsible for
the direction, supervision and performance of the Group audit. We remain solely responsible for our audit
opinion.
We communicate with the Board of Directors or its relevant committee regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide the Board of Directors or its relevant committee with a statement that we have complied with
relevant ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Board of Directors or its relevant committee, we determine those matters
that were of most significance in the audit of the consolidated financial statements of the current period and are
therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes
public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not
be communicated in our report because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
Report on other legal and regulatory requirements
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
Yves Cerutti
Adrien Benoit
Audit expert
Auditor in charge
Geneva, April 27, 2018
Page 45 of 55
Addex Therapeutics Annual Report 2017
Statutory Financial Statements of Addex
Therapeutics Ltd as at December 31, 2017
Page 46 of 55
Addex Therapeutics Annual Report 2017 │Statutory Financial Statements
Balance Sheets
as at December 31, 2017 and December 31, 2016
Notes
31.12 2017
31.12. 2016
Amounts in Swiss francs
ASSETS
Current assets
Cash and cash equivalents (excluding bank overdrafts)
Other receivables
Third parties………………………………………..….
Related parties………………………………………...
Accrued income and prepayments……………………….
Total current assets………………………………………
Non-current assets
Investments in Group companies……………...……...….
Other non-current assets
Loans to Group companies…………………………
Total non-current assets…………………….…………..
6
7
247,639
109,203
108,000
8,497
473,339
424,280
8
-
424,288
2
2
3,376,827
3,376,829
2,449,845
2,449,847
Total assets………………………………………..……....
3,850,168
2,874,135
LIABILITIES AND EQUITY
Current liabilities
Trade payables…...…………………………………..…....
Other payables:
Third parties……………….………………….……...
Accruals……….………………………………….…………
Total current liabilities……………………………..…….
Equity
Share capital……………………………………..…………
Share premium……………………………………..………
Treasury shares reserve…………………………………..
Non-voting equity securities (*)……………..…………….
Accumulated deficit………………………………………...
Total equity………………….……………………………..
9
11
8
66,576
-
178,410
244,986
15,384,988
261,172
2,019,877
p.m
(14,060,855)
3,605,182
110,927
6,024
248,128
365,079
13,454,553
327,982
1,953,067
p.m.
(13,226,546)
2,509,056
Total liabilities and equity………...….…………………
3,850,168
2,874,135
(*) p.m. = pro memoria. Non-voting equity securities have no nominal value.
The accompanying notes form an integral part of these financial statements.
Page 47 of 55
Addex Therapeutics Annual Report 2017 │Statutory Financial Statements
Statements of Income
for the years ended December 31, 2017 and 2016
2017
2016
Amounts in Swiss francs
Operating costs
Professional fees…………………………………...…............
Other operating costs………………………………………….
Provision for loans to Group companies……...…………......
Reversal of prior year provision……………………………….
Taxes…………………………………………………………….
(242,965)
(151,582)
(413,363)
-
50,477
(216,835)
(218,531)
(1,289,864)
-
(132,617)
Total operating costs…………………………………………
(757,433)
(1,857,847)
Interest income…….……………………………………………
Interest expenses……………………………………………….
Extraordinary non-recurring expenses…………………….…
-
(88)
(76,788)
27
(6,924)
-
Net loss before taxes…………………………………………
(834,309)
(1,864,744)
Income tax expense…………………..……...……………......
-
-
Net loss for the year…………………………………………..
(834,309)
(1,864,744)
The accompanying notes form an integral part of these financial statements.
Page 48 of 55
Addex Therapeutics Annual Report 2017│Statutory Financial Statements
Notes to the Financial Statements for the years
ended December 31, 2017 and 2016
(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, 2017 and December 31, 2016, 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, 2017 and December 31, 2016, there were no assets pledged to secure own liabilities.
4. Lease commitments not recorded in the balance sheet
As of December 31, 2017 and December 31, 2016, there were no lease commitments not recorded in the balance sheet.
5. Amounts due to pension funds
As of December 31, 2017 and December 31, 2016, 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
Addex Pharma SA,
Plan-les-Ouates, Switzerland
Addex Pharmaceuticals France SAS,
Archamps, France
Business
Capital
Research & development
CHF3,987,492
Research & development
€37,000
Interest in
capital in %
100%
100%
As at December 31, 2017 and 2016, 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, 2017
December 31, 2016
3,987,492
(3,987,491)
1
2
3,987,492
(3,987,491)
1
2
7. Other non-current assets – Loans to Group companies
As at December 31, 2017 and 2016, 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, 2017
December 31, 2016
163,488,649
(160,111,822)
3,376,827
162,148,305
(159,698,460)
2,449,845
The loan to Addex Pharma SA is subordinated to the claims of other creditors of the subsidiary up to CHF162,131,699.
Page 49 of 55
Addex Therapeutics Annual Report 2017 │Statutory Financial Statements │Notes
8. Equity
Share
capital
General reserve, from…
…retained
earnings
…capital
contribution
Treasury
shares
reserve
Accumulated
deficit
Total
January 01, 2016……………
Issue of shares, capital
11,699,612
165,252,964
(163,708,099)
736,184
(11,361,802)
2,618,859
increase…………………..
1,754,941
-
-
-
-
1,754,941
Transfer to treasury shares
reserve…………………....
Net loss of the year………….
December 31, 2016…………
Issue of shares, capital
increase…………………..
Transfer to treasury shares
reserve……………………
Net loss of the year………….
December 31, 2017…………
-
-
13,454,553
(1,216,883)
-
164,036,081
-
-
(163,708,099)
1,216,883
-
1,953,067
-
(1,864,744)
(13,226,546)
1,930,435
-
-
(66,810)
-
-
-
66,810
-
-
-
(1,864,744)
2,509,056
1,930,435
-
15,384,988
- -
163,969,271
-
(163,708,099)
-
2,019,877
(834,309)
(14,060,855)
(834,309)
3,605,182
On May 29, 2017, the Group increased its share capital by CHF1,930,435 (1,930,435 registered shares with nominal value of
CHF1 per share) out of authorized share capital. The 1,930,435 new shares were subscribed by the Company’s 100% owned
subsidiary, Addex Pharma SA at CHF1 and recorded as treasury shares.
On May 27, 2016, the Group increased its share capital by CHF1,754,941 (1,754,941 registered shares with nominal value of
CHF1 per share) out of authorized share capital. The 1,754,941 new shares were subscribed by the Company’s 100% owned
subsidiary, Addex Pharma SA at CHF1 and recorded as treasury shares.
At December 31, 2017, the total outstanding share capital is CHF15,384,988 (December 31, 2016: CHF13,454,553), consisting of
15,384,988 shares (December 31, 2016: 13,454,553). All shares have a nominal value of CHF1. The authorized capital and
conditional capital as at December 31, 2017 and 2016 are as follows:
Authorized capital……………………………………….
Conditional capital………………………………………
7,692,494
7,692,494
6,727,276
6,727,276
December 31, 2017
December 31, 2016
9. Treasury share reserve
This reserve relates to the purchase price of shares in Addex Therapeutics Ltd held by Group companies. The table shows
movements in the number of shares and the treasury share reserve:
Balance at January 1, 2016
Net purchases………………...…
Balance at December 31, 2016
Net purchases………………...…
Balance at December 31, 2017
Number of registered
shares
674,123
1,216,883
1,891,006
73,967
1,964,973
% of share
capital
5.76%
14.05%
12.77%
Treasury shares
reserves
736,184
1,216,883
1,953,067
66,810
2,019,877
10. Significant shareholders
According to the information available, based on published notifications to the SIX, the following shareholders own 3% or more of
the company’s share capital :
Addex Pharma SA1……….……..
IFM Independent Fund
Management AG2…………….....
December 31, 2017
December 31, 2016
Number of
shares
Interest in
capital in %
Number of
shares
Interest in
capital in %
1,964,973
12.77%
1,891,006
14.05%
582,695
3.79%
582,695
4.98%
1 Addex Pharma SA, Chemin des Aulx, CH-1228 Plan-Les-Ouates
2 Addex Therapeutics Ltd shares were held by several related entities
Page 50 of 55
Addex Therapeutics Annual Report 2017 │Statutory Financial Statements │Notes
11. Non-voting equity securities
Refer to note 13 of the consolidated financial statements.
12. Board of Directors and Executive Management shareholdings and equity incentive unites
As of December 31, 2017 and 2016, members of the Board of Directors and Executive Management held the following shares in
the Company:
Vincent Lawton, Chairman……………………….
Roger Mills, Chief Medical Officer………………
Tim Dyer, Chief Executive Officer……………….
2017
Number of
Shares
500
66,727
370,882
2016
Number of
Shares
500
7,388
215,176
As of December 31, 2017, members of the Board of Directors and Executive Management held the following equity incentive units
in the Company:
Vincent Lawton, Chairman…………………..…
Raymond Hill……..…………………………..….
Tim Dyer, Chief Executive Office…………...….
Roger Mills, Chief Medical Officer……………..
Number of
vested equity
incentive units
107,698
34,119
541,233
12,500
Number of
unvested equity
incentive units
195,390
115,734
1,140,497
152,122
Total number of
equity incentive
units
303,088
149,853
1,681,730
164,622
As of December 31, 2016, members of the Board of Directors and Executive Management held the following equity incentive units
in the Company:
Number of
vested equity
incentive units
50,000
8,625
358,000
1,042
Number of
unvested equity
incentive units
50,000
22,375
150,000
48,958
Total number of
equity incentive
units
100,000
31,000
508,000
50,000
Vincent Lawton, Chairman…………………..…
Raymond Hill……..…………………………..….
Tim Dyer, Chief Executive Office…………...….
Roger Mills, Chief Medical Officer……………..
13. Events after the balance sheet date
On March 28, 2018, the Company increased its share capital by issuing 13,037,577 new shares with a nominal value of CHF1 each
at an issue price of CHF3.13 per share. Of these new shares, 12,917,129 were placed with investors raising CHF40.4 million of
gross proceeds and the remaining 120,448 new shares were recorded as treasury shares, bringing the total outstanding issued
share capital to 28,564,031. Each new share received a 7 year warrant to purchase 0.45 of a share at a price of CHF3.43.
Proposal of the Board of Directors for appropriation of loss carried forward
The Board of Directors proposes to transfer the net loss of CHF834,309 into accumulated deficits.
Page 51 of 55
Addex Therapeutics Annual Report 2017│Statutory Financial Statements
Report of the statutory auditor to the General Meeting of Addex Therapeutics Ltd
Report on the audit of the financial statements
Opinion
We have audited the financial statements of Addex Therapeutics Ltd, which comprise the balance sheet as at
December 31, 2017, statement of income and notes for the year then ended, including a summary of significant
accounting policies.
In our opinion, the financial statements (pages 45 to 50) as at December 31, 2017 comply with Swiss law and the
company’s articles of incorporation.
Basis for opinion
We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Our responsibilities under
those provisions and standards are further described in the “Auditor’s responsibilities for the audit of the financial
statements” section of our report.
We are independent of the entity in accordance with the provisions of Swiss law and the requirements of the Swiss
audit profession and we have fulfilled our other ethical responsibilities in accordance with these requirements. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our audit approach
Overview
Overall materiality: CHF 28'000
We tailored the scope of our audit in order to perform sufficient
work to enable us to provide an opinion on the financial statements
as a whole, taking into account the structure of the entity, the
accounting processes and controls, and the industry in which the
entity operates.
As key audit matter the following area of focus has been identified:
Risk of fraud in related party transactions
Audit scope
We designed our audit by determining materiality and assessing the risks of material misstatement in the financial
statements. In particular, we considered where subjective judgements were made; for example, in respect of
significant accounting estimates that involved making assumptions and considering future events that are inherently
uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including
among other matters consideration of whether there was evidence of bias that represented a risk of material
misstatement due to fraud.
Materiality
The scope of our audit was influenced by our application of materiality. Our audit opinion aims to provide reasonable
assurance that the financial statements are free from material misstatement. Misstatements may arise due to fraud
or error. They are considered material, if individually or in aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of the financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the
overall materiality for the financial statements as a whole as set out in the table below. These, together with
qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our
audit procedures and to evaluate the effect of misstatements, both individually and in aggregate, on the financial
statements as a whole.
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Addex Therapeutics Annual Report 2017 │Statutory Financial Statements
Overall materiality
CHF 28'000
How we determined it
1% of total assets
Rationale for the materiality
benchmark applied
We chose total assets as the benchmark because, in our view, it is the
benchmark against which the financial performance of the entity is
most commonly measured in its holding activity, and is a generally
accepted benchmark.
We agreed with the Board of Directors that we would report to them misstatements above CHF 2'800 identified
during our audit as well as any misstatements below that amount which, in our view, warranted reporting for
qualitative reasons.
Report on key audit matters based on the circular 1/2015 of the Federal Audit Oversight Authority
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the current period. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these
matters.
Risk of fraud in related party transactions
Key audit matter
Although a risk of fraud exists in any business
environment, the company’s lean management
structure heightens the risk of fraud. In addition
related party transactions, which comprise
consulting fees and other arrangements with key
management, are significant and material to the
financial statements. The combination of these
factors resulted in our conclusion that fraud risk
in related party transactions should be considered
as a key audit matter. The principal source of risk
is asset misappropriation, particularly involving
related parties which may overcharge for services
rendered to the entity or undercharge for services
received from the entity.
How our audit addressed the key audit matter
We obtained evidence regarding related party
relationships and transactions disclosed in note
12. In particular, we inspected significant
contracts with related parties. We understood the
purpose, specific terms and conditions or amounts
of the transactions with related parties. We
reviewed approval by the Board of Directors and
we evaluated if the transactions are properly
accounted for and disclosed. Based on the work
performed, we concluded that transactions are
properly authorized, accounted for and disclosed.
Responsibilities of the Board of Directors for the financial statements
The Board of Directors is responsible for the preparation of the financial statements in accordance with the
provisions of Swiss law and the company’s articles of incorporation, and for such internal control as the Board of
Directors determines is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of Directors is responsible for assessing the entity’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless the Board of Directors either intends to liquidate the entity or to cease operations, or has
no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
Swiss law and Swiss Auditing Standards will always detect a material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Swiss law and Swiss Auditing Standards, we exercise professional judgment
and maintain professional scepticism throughout the audit. We also:
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Addex Therapeutics Annual Report 2017 │Statutory Financial Statements
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit 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.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made.
Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the entity’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the entity
to cease to continue as a going concern.
We communicate with the Board of Directors or its relevant committee regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide the Board of Directors or its relevant committee with a statement that we have complied with
relevant ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Board of Directors or its relevant committee, we determine those matters
that were of most significance in the audit of the financial statements of the current period and are therefore the key
audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure
about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated
in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
Report on other legal and regulatory requirements
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.
Further, we draw attention to the fact that half of the share capital and the legal reserves is no longer
covered (article 725 para. 1 CO).
We recommend that the financial statements submitted to you be approved.
Yves Cerutti
Adrien Benoit
Audit expert
Auditor in charge
Geneva, April 27, 2018
PricewaterhouseCoopers SA
Page 54 of 55
Addex Therapeutics Annual Report 2017
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,
mGlu7, 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, mGlu7,
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, mGlu7, 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, mGlu7, 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.
For more information about the Addex Therapeutics Ltd Group please contact:
Addex Therapeutics
C/O Addex Pharma SA
Chemin des Mines 9
1202 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
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