Celyad SA Annual Report 2016

FY2016 Annual Report · Celyad SA

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AN NUAL RE PO RT 2 016

Bringing
breakthrough
pioneering
therapies to
patients with
life-threatening
diseases

www.celyad.com

CELYAD A NNUA L RE PORT 2016

Table of contents

Letter of the Chairman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 04

Letter of the CEO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 06

Our Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 08

Key figures 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 09

2016 Key milestones . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Cancer: a collection of more than 200 different individual diseases . . . . . . . . . . . . . 12

Key facts & figures about cancer worldwide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Celyad’s lead oncology drug candidate:
the CAR-T NKR-2 cellular immunotherapy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

CAR-T NKR-2: a safe immunotherapy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Reaching the effective dose-level of CAR-T NKR-2 cells
with the THINK study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

A robust immuno-oncology pipeline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Our partners in immuno-oncology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Celyad’s intellectual property portfolio immunotherapy . . . . . . . . . . . . . . . . . . . . . . . 26

Cardiology: How to best prepare for CHART-2? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Cardiology: partners & IP portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Making the Impossible Possible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Celyad’s Key HR facts & figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Celyad’s team is all about passion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Corporate governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Our senior leadership team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Information for shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Finance / Analyst coverage & contacts & glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Letter of
the Chairman

Michel Lussier
— CHAIRMAN OF THE BOARD

Dear Shareholders,

2016 has been transformational for your company which, in only a year, has

positioned itself as a serious international player in the CAR-T field, one of the

most promising approaches for cancer treatment.

Beginning of 2015, we felt important to diversify our clinical portfolio, building

on our core expertise in cell therapy to explore new therapeutic areas for major

unmet medical needs, such as cancer.

Celyad thus started to scout in the US, searching for the hidden gem that would

allow the company to make a difference in the immuno-oncology field. We acquired

a technology invented by Prof. Charles Sentman at Dartmouth College, a CAR-T

therapy based on a unique construct using the NKG2D receptor. This is now a

breakthrough asset for the company and a major promise for the patients.

While having a fully integrated know-how and equipment, highly skilled people,

a very disruptive technology and a strong intellectual property, we needed then

to raise sufficient financial resources to undertake rapidly our clinical program

and build our presence in the USA, the CAR-T homeland. And that is exactly what

we did. In 18 months, we raised more than $130 million, introduced Celyad on

NASDAQ, we have opened an office and built a seasoned team in the Boston area,

we have launched and successfully completed a Phase Ia trial and we have signed

strategic collaborations with world-class academic and industrial partners. Last

but not the least, we have initiated the THINK Phase I trial, taking a global lead in

CAR-T for solid tumors.

CELYAD • ANNUAL REPORT 2016“We made the right decisions at the right time,
moving on to the next chapter of our company
history. 2017 will be a very exciting year for
Celyad, which is now running one of the largest
CAR-T clinical trial worldwide...”

During spring 2016, we decided to focus going forward on

We are very confident that our immuno-oncology product

the development of our immuno-oncology platform and to

candidates will bring groundbreaking treatment options to

find a strategic partner to further develop and commercialize
C-Cure® .

cancer patients and we are looking forward to our clinical

data to reflect on the company value, rewarding the hard

work of our team but also the trust and support that you,

Our CHART-1 Phase III European trial has been saluted

Dear Shareholders, have shown for all these years.

Michel Lussier,

Chairman of the Board

by leaders in the field as a significant milestone in the

understanding of the heart failure disease and also in the

identification of a well-defined patient population that could
benefit from C-Cure®. Based on the key learning of this study,
the US pivotal trial CHART-2 will incorporate optimized

dosing regimens as well as a new FDA-agreed primary

endpoint. This new Phase III study is ready to be initiated

and Celyad is actively looking for partners to further develop
and commercialize C-Cure®, one of the most advanced
reparative cell therapy for heart failure worldwide.

Yes, we have faced ups and downs – which company doesn’t?

– but most importantly, we made the right decisions at the

right time, moving on to the next chapter of our company

history .

2017 will be a very exciting year for Celyad, which is now

running one of the largest CAR-T clinical trials worldwide,

targeting more indications than any of its competitors ever

did so far.

CELYAD • ANNUAL REPORT 2016Letter of
the CEO

Christian Homsy
— CHIEF EXECUTIVE OFFICER

Dear Shareholders,

2016 has been a year in which our CAR-T portfolio matured, where we have increased

our expertise in the field of immuno-oncology, and in which we transitioned from

being focused on cardiology to being one of the most promising companies in the

field of CAR-T cells.

The portfolio acquired beginning of 2015 from Dartmouth College’s Prof. Charles

Sentman, is one of the most elegant approaches to targeting cancers using CAR-T

cells as Prof. Sentman combines the breadth of innate immunity with the potency

of T cell mediated activity.

As many great ideas, the concept is simple, but its power has far reaching

implications: One single product candidate, potentially targeting 80% of all

cancers, an approach that can be compared to checkpoint inhibitors.

Even in challenging animal models, our pre-clinical testing yielded remarkable

antitumor activity with the

long-term survival of treated animals despite

aggressive hematological and solid tumor cancers. This work has uncovered

multiple modes of actions in those models, from direct cytotoxicity to adaptive

immunity including anti-neoangiogenesis, and immune system modulation.

Our Target Product Profile (TPP) is unique. We can highlight two differentiating

attributes amongst many others: First, instead of injecting cells that proliferate

CELYAD • ANNUAL REPORT 2016“We are also the only company that has both a lower risk
autologous approach, and a higher reward allogeneic
development. Should allogeneic yield results similar to what
we are seeing in autologous, Celyad will then have an approach
to target large indications more cost effectively. Should
autologous prevail, we have incredibly creative solutions
that reduce the cost of goods to levels unseen before.”

in the patient in an uncontrolled way, and attempting to deal

with the consequences by inserting control mechanisms, we

prefer to use a known pre-defined dose, injected multiple

times to provide sufficient persistence. Second, instead of

severely lymphodepleting the patients, we use and leverage

the patient’s own immune system.

We are also the only company that has both a lower risk

autologous approach, and a higher reward allogeneic

development. Should allogeneic yield results similar to what

we will be seeing in autologous, Celyad will then have an

approach to target large indications more cost effectively.

Should autologous prevail, we have

incredibly creative

solutions that reduce the cost of goods to levels unseen

before.

On the intellectual property side, our space is clean with

no competing technologies. In the allogeneic CAR-T field,

we hold a patent that, until now, and despite having been

challenged at numerous occasions, grant us broad and

robust position in this field.

Our allogeneic technology was vetted by a partnership with

one of the pioneers of immuno-oncology, the Japanese

company ONO Pharmaceuticals, which is at the forefront of

checkpoint inhibitors invention.

We have completed a Phase Ia trial in Acute Myeloid Leukemia

(AML) and Multiple Myeloma (MM) at the Dana Farber Cancer

Institute. Top line data were reported last November at ASH.

In all doses tested, no targeting of healthy tissues occurred.

Despite the low doses tested, some patients unexpectedly

showed first clinical responses, targeting AML and MM makes

us pioneers in these two very severe malignancies.

To conclude the year, we initiated the THINK trial where we

are testing our CAR-T NKR-2 in 7 different indications (two

hematological cancers, AML and MM, and five solid tumors),

in up to 112 patients, making it one of the largest and most

comprehensive Phase I programs in the industry!

I would

like to conclude by thanking first the Celyad

employees, who managed to re-orient themselves and

demonstrated their capacity to adapt. Perseverance is what

differentiates good teams from great teams. I am honored to

serve them as their CEO. I would also like to thank you, our

shareholders, that, despite the challenges faced in 2016 have

maintained their confidence in your company and its team.

The road to breakthrough therapies is made of bumps, but,

for the sake of our patients, we will prevail.

Christian Homsy,

Chief Executive Officer of Celyad

CELYAD • ANNUAL REPORT 2016Our
Mission

Bringing breakthrough pioneering
therapies to patients with life-
threatening diseases.

Celyad is a clinical-stage biopharmaceutical company, focused on
the development of specialized cell-based therapies. We are using
our expertise in cell engineering to translate landmark technologies
into drug candidates aimed at treating severe diseases with signifi-
cant unmet needs.

C E LYA D • A N N UA L R E P O R T 2 016

Key figures
2016

Celyad was founded in 2007
and is based in Mont-Saint-
Guibert, Belgium, and Boston,
Massachusetts

stock listings on Euronext
Brussels, Paris and NASDAQ

technological platforms in
immuno-oncology (autologous
& allogeneic)

study assets in pre-clinical and
clinical development (CAR-T
NKR-2, CAR-T NKR-3 and
CAR-T B7H6)

Phase I trial completed in
the US for our CAR-T NKR-2
immuno-oncology program in
patients with AML and MM. No
safety issue reported

cancer indications covered
by our ongoing multinational
Phase I THINK trial (bladder,
colorectal, pancreas, breast,
ovarian, AML, MM)

CHART-1

international collaborations

with Dartmouth College (USA),
Institut Curie (France) and ONO
Pharmaceutical Co., Ltd (Japan)

the European Phase III clinical trial evaluating the
efficacy of C-Cure®, our lead cardiology candidate, has
been completed. Celyad is now looking for a partner to
further develop and commercialize the product

C E LYA D • A N N UA L R E P O R T 2 016

2016
Key milestones

2016

DECEM BE R - Positive data from the CAR-T NKR-2 Phase I
trial presented at 2016 ASH Annual Meeting. Data presented
demonstrated the drug to be safe and well tolerated in the
highest dose level tested (3x107) as well as showing early
clinical activity signals, including prolonged survival in both
Acute Myeloid Leukemia (AML) and Multiple Myeloma (MM)
patients.

NOVEM BE R - Approval from the Belgian Regulatory
Authorities to initiate the CAR-T NKR-2 THINK trial in
Belgium. THINK (THerapeutic Immunotherapy with NKR-2)
is a multinational open-label Phase I study to assess the
safety and clinical activity of multiple administrations of
autologous NKR-2 T-cells
in seven, refractory cancers
including five solid tumors (colorectal, ovarian, bladder,
triple-negative breast and pancreatic cancers) and two
hematological tumors (acute myeloid leukemia and multiple
myeloma).

SE PTEM BE R - Completion of the first CAR-T NKR-2
Phase I trial with successful safety follow-up of the fourth
dose level. No safety issues or toxicities were reported after
the 21-day safety follow-up of the last patient enrolled at
the fourth dose level in its Phase I clinical trial evaluating the
safety and feasibility of its NKR-2 T-cell therapy - in Acute
Myeloid Leukemia and Multiple Myeloma patients.

J U LY - Signature of an exclusive licensing agreement
with leading Japanese immuno-oncology company, ONO
Pharmaceutical Co. Ltd. (TSE: 4528), for the development
and commercialization of Celyad’s allogeneic CAR-T NKR-2
immunotherapy in Japan, Korea and Taiwan. Celyad also
grants to ONO an exclusive option to license its autologous
NKR-2 T cell product in the above ONO territories. Total deal
value of up to 31.325 JPY B (€282 million or $311.5 million)
plus double digit royalties on net sales in ONO territories.

J U N E - CHART-1 9-month data release. Results for the
CHART-1 European Phase III clinical trial evaluating C-Cure®
cell therapy did not show statistical significant difference on
the primary endpoint, therefore failing to meet its primary
endpoint; however, a positive trend was seen across all
treatment groups, and the primary endpoint was met
(p=0.015) for a subset representing 60% of the population
of the CHART-1 study [baseline End Diastolic Volume (EDV)
segmentation].

Strengthening of the Senior Leadership Team with the
appointment of Dr. David Gilham as Vice-President of
Research & Development. Dr. Gilham brings over 20 years
of expertise in the field of CAR-T cells engineering and will
head the implementation of Celyad’s R&D strategy for our
programs in immuno-oncology.

Strengthening of the Senior Leadership Team with the
appointment of Philippe Dechamps as Chief Legal Officer
who brings over 20 years of expertise in Corporate Affairs as
well as extensive experience in negotiating contracts in the
pharma industry.

APRI L - Appointment of leading international immuno-
oncology experts to Clinical Advisory Board including: Dr.
Hinrich Abken (Center for Molecular Medicine Cologne),
Dr. Scott Antonia (Moffitt Cancer Center and Research
Institute), Dr. Marco Davila (Moffitt Cancer Center, University

CELYAD • ANNUAL REPORT 20162017 events

JAN UARY - Registration of first metastatic colorectal and
pancreatic cancer patients in the CAR-T NKR-2 THINK trial
in Belgium.

On January 6th, 2017, the USPTO decided to uphold
Celyad’s U.S. Patent No. 9,181,527, relating to allogeneic
human primary T-cells that are engineered to be TCR-
deficient and express a CAR. Celyad’s U.S. patent (No.
9,181,527), and more precisely claim 1 of the said patent,
was challenged by an anonymous third party through an
Ex Parte Re-examination procedure. The request for Ex
Parte Re-examination was filed on February 10th, 2016 and
an order granting Ex Parte Re-examination of claim 1 was
issued by the USPTO on March 24th, 2016. The final decision
of this Ex Parte procedure that was issued on January 6th
2017 is not subject to appeal and upholds the validity of the
patent.

MARCH - Approval from FDA (Food and Drug Adminis-
tration) to start the THINK trial in the U.S. Two clinical sites,
the Rosewell Park (NY) and University of Pittsburgh Medical
Center – UPMC (PA) approved and are ready to enroll patients.

of South Florida), Dr. Stéphane Depil (Léon Bérard Cancer
Center), Dr. Marc Ernstoff (Jacobs School of Medicine
and Biomedical Sciences at the University
in Buffalo),
Dr. Sebastian Kobold (Ludwig-Maximilians University of
Munich), Dr. Daniel Olive (Marseille Cancer Research Center,
Institut Paoli Calmettes), Dr. Charles Sentman (Geisel
School of Medicine at Dartmouth) and Dr. Jeffrey S. Weber
(Laura and Isaac Perlmutter Cancer Center at the NYU
Langone Medical Center).

MARCH - Strategic collaboration agreement with Institut
immuno-oncology
Curie for the development of the
Institut Curie
program. The partnership will build on
first-in-class expertise and state of the art translational,
preclinical and clinical know-how in cancer biology and
immunology, and Celyad well recognized cell therapy and
cell manufacturing capabilities.

The US Patent and Trade Office (USPTO) grants Celyad
with the first US patent (N° 9,273,283), covering a method
of producing allogeneic primary human T cells that are
engineered to be T-Cell Receptor (TCR)-deficient and
express a Chimeric Antigen Receptor (CAR). This new patent
strengthens Celyad’s coverage for its proprietary CAR-T
cells by adding broadly protecting methods for making
these modified allogeneic T cells, and providing them as
medicines. The resulting products may benefit patients with
various human disease conditions and particularly cancers.

CELYAD • ANNUAL REPORT 2016Cancer: a collection of more than
200 different individual diseases

Cancer is a term that is used to describe a series of more than

The critical factor for patients is that, while cancer cells

200 different but related diseases. Cancer is a disease that is

– which are abnormal cells - should die, they survive and

caused by mutations in the cell DNA. The occurrence of cancer

multiply without control to form tumors.

is multifactorial and can be caused by genetic predispositions,
exposure to specific environmental hazards, or lifestyle.

Cancer cells are abnormal cells that have overcome the

barriers that prevent cells from undergoing uncontrolled

growth.

The

immune system can recognize and eliminate such

abnormal cells but, occasionally, these cells may develop

methods that enable them to escape the immune system.

Once cancer cells have defeated our natural

immune

defenses, they can grow and divide unchecked, spreading into

healthy tissues and eventually driving the premature death of

the patient.

As a tumor grows, some cancer cells can break away from
where they first formed and spread to different parts of
the body, forming distant tumors (a process that is called
metastasis) thereby impacting upon the normal function of

affected tissues.

Despite significant efforts to improve the ability to detect
tumors early in their development, cancer remains one of
the leading causes of death worldwide.

C E LYA D • A N N UA L R E P O R T 2 016

Watch Celyad’s video “What is
cancer?”: http://www.celyad.com/
video/what-is-cancer

Key facts & figures
about cancer worldwide1

70%

About 14 million new cancer cases
were diagnosed in 2012, worldwide2

The number of new cases is expected
to increase by approximately 70%

over the next two decades

8.8 million deaths globally were due
to cancer in 2015 (nearly 1 in 6 deaths)

In 2015, the most common causes of
cancer death are cancers of1:

Lung (1.69 million)
Liver (788,000)
Colorectal (774,000)
Stomach (754,00)
Breast (571,000)

1. Source: http://www.who.int/mediacentre/factsheets/fs297/en/ - February 2017
2. Reference: Ferlay J, Soerjomataram I, Ervik M, Dikshit R, Eser S, Mathers C et al. GLOBOCAN 2012 v1.0, Cancer Incidence and Mortality Worldwide: IARC

CancerBase No. 11, Lyon, France: International Agency for Research on Cancer; 2013.

CELYAD • ANNUAL REPORT 2016
Current main therapeutic options for
cancer treatment

Currently, there are three main treatment options that are
used for patients with cancer3 :

• Surgery
completely removed. However, for most patients, it is not

is potentially curative when a tumor can be

possible to take the entire tumor out because of infiltration of

adjacent tissues, or because the tumor has spread beyond the

initial organ. Debulking surgery is sometimes used to reduce

the quantity of tumor to relieve specific symptoms but is not

curative. Surgery may be used along with other treatments

such as radiation or chemotherapy to reduce tumor bulk

before surgery or to reduce the danger of tumor cells escaping

• Radiotherapy (also called radiation, irradiation or x-ray
therapy) uses high-energy particles or waves to destroy

cancer cells. Radiotherapy can be used alone or with other

treatments .

In most instances, chemotherapy or radiotherapy
leads
to tumor regression although most patients eventually
relapse. The genetic instability of the tumor enables it to
undergo ‘selection’ during the treatment process, generally
resulting in a relapsing tumor that has increased resistance
to the therapy used to treat it initially. Thus, options for
patients that relapse after first or second line therapy become

to the rest of the body during the surgical process.

increasingly limited.

• Chemotherapy is used to kill cancer cells that are growing
more rapidly than normal cells of the body. Chemotherapy

is used either after surgery (“adjuvant setting”) or to treat

Against this background, the concept of leveraging the
immune system to fight cancer or immunotherapy, has
emerged. Greater scientific insight into the immune system

cancers that have metastasized to other parts of the body.

and the further understanding of the interaction of the

Typically, combinations of agents are given to enhance the

effectiveness of the therapy while combinations with other

immune system with tumor have, in some instances, led to
reports of spectacular clinical success .

treatments (such as surgery) are common.

3. Source: https://www.cancer.org/treatment/treatments-and-side-effects/treatment-types.html - February 2017

C E LYA D • A N N UA L R E P O R T 2 016

Cancer immunotherapy
Reactivating the immune-system to
detect and destroy cancer cells with
chimeric antigen receptor (CAR) T-cells

Immunotherapy is based on the premise that our immune

system could recognize and destroy abnormal cells such

as cancer cells. However, in some instances, the cancer

cells develop mechanisms that allow them to evade the

detection of our immune defenses. Immuno-oncology is the

field studying the restoration and activation of the immune

system’s ability to detect and destroy cancers.

There are three main types of immunotherapy that are
currently being developed:

Inhibitors: Tumors employ systems to
• Checkpoint
effectively stop immune cell activity or putting “brakes”
upon the immune system. These systems have been called

‘checkpoints’. Releasing these breaks by using a ‘checkpoint
inhibitor’ provides an opportunity to restore the function
of the immune cells and drive an anti-tumor immune
response .

• Cancer vaccines: focus upon inducing a specific immune
response against the tumor. This approach intends to
trigger an immune response against specific molecules
expressed by the cancer cells in a manner similar to
vaccination preventing infections.

Watch Celyad’s video: “How does the
immune system fight cancer?”:
http://celyad.com/video/fight-cancer

• CAR-T cell therapy: A specific type of white blood cell called
the T lymphocytes are genetically modified to allow them
to better recognize and destroy cancer cells and are then
injected into the patient. This approach is called “CAR-T
cell” therapy, standing for Chimeric Antigen Receptor

T-cells.

CAR T-cells were born from the idea of arming T-cells with

specific fragments of antibodies to target specifically

antigens that are present on tumor cells. After just 20
years of development, the CAR-T cell concept has yielded
some impressive clinical data with reports of complete
remission of advanced chemo-resistant B cell leukemia (a
type of blood cancer) in patients receiving CD19 CAR-T cells.

Whilst these early clinical studies are driving major interest in

CD19 CAR-T cell therapy, this approach is mostly restricted to

B cell malignancies.

Taking CAR-T cell therapy beyond the B cell cancers, and
more specifically into the solid tumor setting, has proven to
be highly challenging. Tumors are highly effective at blunting
the activity of T-cells and solid tumors are particularly apt at

eliciting ‘immune suppreselsion’. Therefore, a new generation

of CAR-T therapy is needed.

CELYAD • ANNUAL REPORT 2016Celyad’s lead oncology drug candidate:
the CAR-T NKR-2 cellular immunotherapy

CAR-T NKR-2 is the lead CAR-T cell approach that is being
developed by Celyad. This technology is based upon preclinical
work carried out by Professor Charles Sentman at Dartmouth
College (USA), who demonstrated that T-cells engineered to
express the Natural Killer Receptor Group 2D (NKG2D) receptor

fused with the CD3ζ chain of the T-cell receptor complex can
drive impressive anti-tumor activity against established
tumors in mouse models.

CAR-T NKR-2 Construct

Classical CAR-T Construct

HUMAN NKG2D RECEPTOR

(NK CELLS)

α-TUMOR mAb

CAR-T NKR-2

(T-CELLS)

CAR-T cells

(T-CELLS)

NKG2D
Receptor

DAP10

Costimulatory
domain

TCR COMPLEX

(T-CELLS)

TCR COMPLEX

(T-CELLS)

TCR

CD3

scFv

NKG2D
Receptor

TCR

DAP10

Costimulatory
domain

CD3

CD3ζ

CD3

CD3ζ

scFv

Costimulatory
domain
(e.g CD28,
4-1BB, etc.)

CD3ζ

First / Second
Generation
CAR-T

CELYAD • ANNUAL REPORT 2016“CAR-T cell therapy is currently delivering spectacular clinical responses in
patients with advanced leukemia. However, to tackle solid tumors, we undoubtedly
need to invoke a broader immune response beyond that achieved by CAR-T
cells in the leukemia situation. The extensive pre-clinical studies using NKR2
suggest that these CAR-T cells can invoke a broader immune response and
strongly support the clinical testing of this therapy against solid tumors”.

DAVID GILHAM - VP RESEARCH & DEVELOPMENT

CAR-T NKR-2 cells can potentially target
80% of all cancer types

The approach aims at targeting cancer
through multiple angles

Unlike standard CARs that recognize only one target, NKG2D
binds to eight different targets (called “ligands”). Most tumors
express at least one of these NKG2D ligands underscoring
the potential of the approach to potentially target 80% of all
cancer types (both hematological and solid tumors). Professor
Sentman demonstrated the potency of CAR-T NKR-2 cell

therapy in several tumor models including ovarian, leukemia,

myeloma and melanoma.

The mechanism of action of CAR-T NKR-2
goes beyond direct cell killing:

Interestingly, Professor Sentman observed that CAR-T

in those
NKR-2 cells not only targeted tumor cells
experiments, but also targeted the blood vessels that
feed the tumor. A second important mode of action is that
CAR-T NKR-2 has also an activity on the tumor environment
by targeting the cells that drive the immune suppressor

activity protecting the tumor from the patient’s immune
system (the so-called Regulatory T-cells and MDSCs) .
Because of these combined modalities, CAR-T NKR-2 cells
induced a long-lasting adaptive immune response that
protected the animal against further challenges with the

same tumor. This multiplicity of activity by CAR-T NKR-2

is indicative of an overall approach that goes beyond that

currently described for other standard CAR-T cell therapies.

Another

key discriminator between CAR-T NKR-2

and standard CAR-T cell therapy concerns patient’s

preconditioning chemotherapy. Classical CAR-T cell

therapy requires the patient to be ‘pre-conditioned’ using

high doses of chemotherapy to eradicate the patient’s own

white immune cells prior to infusion of the CAR-T cells.

This preconditioning serves many purposes all aiming at

providing conditions where the CAR-T cells can expand

massively in the patient and mount a rapid and potent anti-

tumor response to impact upon tumor growth.

In contrast, our pre-clinical models strongly show that

such pre-conditioning does not aid our CAR-T NKR-2 cell

therapy, most likely due to the multiple modes of action

driven by these cells in leveraging the patient’s own immune

response. Consequently, in our initial clinical testing of
CAR-T NKR-2, patients receive CAR-T NKR-2 cells without
any pre-conditioning. The approach is likely to improve the
patient’s experience with our CAR-T NKR-2 therapy due to

the avoidance of the side-effects of intensive chemotherapy

from pre-conditioning, as well as enable CAR-T NKR-2 to

stimulate the patient’s immune system to drive prolonged

anti-tumor immunity .

Watch Celyad’s video:
“Celyad’s NKR-2 therapy” :
https://www.celyad.com/our-science/

immuno-oncology/for-non-scientists/

technology-developed-at-celyad

CELYAD • ANNUAL REPORT 2016CAR-T NKR-2:
a safe immunotherapy

In vivo pre-clinical data on murine and human tumor models
demonstrated the ability of CAR-T NKR-2 to recognize and

eliminate most tumor cell types over the natural life of the
animal. Although some anti-tumor activity was obtained
with a single injection of murine CAR-T NKR-2, overall
survival and complete recovery was obtained following three

sequential doses of 5x106 cells/mouse without any adverse

effect [1-4]. Pre-clinical data suggests that the estimated

effective dose for CAR-T NKR-2 is around 3x109 NKR-2 per

injection.

M U LT I P L E M Y E LO M A

OVA R I A N C A N C E R

WT (n=11)
CH(n=13)

WT(n=12)
CH(n=12)

LY M P H O M A

wNKG2D (n=12)
chNKG2D (n=12)

50257502505075100125150175200225250100Percent survivalTime50257510000Percent survivalTime10203040506070800010080604020Percent survivalTime125100755025CELYAD • ANNUAL REPORT 2016CAR-T NKR-2 Phase I safety study: a safe
immunotherapy

In humans, CAR-T NKR-2 has been tested in a Phase Ia study
carried out at the Dana Farber Cancer Institute, Boston4
(MA, USA) to evaluate single intravenous administration
of CAR-T NKR-2 cells without prior lymphodepletive pre-

conditioning chemotherapy. The study population included
acute myeloid leukemia (AML)/myelodysplastic syndrome
(MDS) patients, not in remission and for which standard
therapy options were not available, as well as relapsed or
refractory progressive multiple myeloma (MM) patients.
The dose escalation followed a classical study design with 4
cohorts of patients with a dose starting at 106 NKR-2 cells and
finishing at 3x107 NKR-2 cells. The primary objectives were
to determine the safety and feasibility of the treatment
even if the doses tested were significantly lower than the

potentially pharmacologically effective dose.

Twelve patients were enrolled up to the fourth dose-level.

There were no signs of “cytokine release syndrome” (a

potentially lethal condition that is triggered by massive

recognition of the cancer cells by the NKR-2) or “off-tumor

on-target” toxicity (the targeting of healthy tissue that may
express NKG2D ligands). No dose-limiting toxicity was
observed.

Phase Ia safety study showing
unexpected clinical benefit despite the
low doses tested

At the dose levels tested, no patient had an objective

tumor response at the 28-day evaluation mark chosen to
be the primary criteria of effectiveness. However, cases
of unexpected prolonged survival and/or improvement

in hematologic parameters were noted in both AML and
MM patients, with or without subsequent therapy, despite
aggressiveness of baseline disease. Most interestingly, at
the six months follow-ups, one AML patient treated at
the highest dose (3x107) had recovered to normal blood

counts without any subsequent alternative therapeutic

interventions.

Such signs of clinical activity were unexpected based on
the single-dose schedule and dose-level being 100 times
below the estimated pharmacological effective dose.
Interestingly, in vitro experiments demonstrated that the

NKR-2 derived from two patients’ cells evaluated in the study

(1 MM patient and 1 AML patient) specifically recognized

the tumors through a NKG2D-dependent mechanism,

suggesting a strong correlative evidence of the potential of

this therapeutic cellular approach.

4. A Phase Ia study of Chimeric Antigen Receptor Modified T-cells targeting NKG2D-Ligands in Patients with Acute Myeloid Leukemia/Advanced Myelodysplastic

Syndrome and Multiple Myeloma, NCT02203825, CM-CS1 study

CELYAD • ANNUAL REPORT 2016Reaching the effective dose-level of
CAR-T NKR-2 cells with the THINK study

The next stage of clinical development is to test, in a

Phase I trial, at doses that are closer to the potential

Pharmacologically Effective Dose, and using an injection

scheme similar to the one that yielded the most effective
results in animals. The goal of the THINK study5
to study the safety and feasibility of three injections of
higher doses (ranging from 3x108 to 3x109 CAR-T NKR-2
cells per infusion) at two weeks apart, to evaluate the human

is therefore

pharmacokinetics, modes of action and potential signs of

activity, in 7 different tumor indications.

The THINK study population includes refractory or relapsing
patients with metastatic or locally advanced colorectal
cancer (CRC), bladder cancer (urothelial carcinoma), triple-
negative breast cancer (TNBC), pancreatic cancer, ovarian
leukemia (AML)/myelodysplastic
cancer, acute myeloid
syndrome (MDS) and multiple myeloma (MM), post standard
treatment .

This open-label Phase I study contains two consecutive
segments: a Phase I dose escalation segment with one arm
in hematological tumor types and another arm in solid tumor
types, as well as an expansion segment that includes all the
7 tumor types with the specific objectives outlined above.

The Phase I dose escalation segment will be used to

determine the maximum tolerated dose of the CAR-T NKR-2
treatment on the basis of dose limiting toxicity, in each arm,
i.e., solid and hematological arms. The maximum tolerated

dose (or the highest dose of the protocol in case of no dose
limiting toxicity) for each segment will be the recommended
dose for the expansion segment of the study. This second
segment will better delineate the safety profile of the CAR-T
NKR-2 treatment and evaluate early clinical activity in each

specific tumor type, thereby allowing the design of proper

Phase II studies in one or more of the indications studied.

5. A multinational, open-label, dose escalation Phase I study to assess the safety and clinical activity of multiple administrations of NKR-2 in patients with
different metastatic tumor types, EudraCT number 2016-003312-12, NCT03018405

CELYAD • ANNUAL REPORT 2016“This strategy minimizes the number of patients
enrolled while authorizing to go for ambitious
Phase II clinical development in case of important
response in specific diseases or overall”.

FRÉDÉRIC LEHMANN – VP CLINICAL DEVELOPMENT & MEDICAL AFFAIRS

THINK - study design

Phase I dose escalation segment

Phase I expansion segment

3 3 3

3x10 8

1x10 9

3x10 9

All solid tumor types

Recommended dose

3 3 3

3x10 8

1x10 9

3x10 9

All hematological tumor types

Recommended dose

BLADDER

TNBC

CRC

OVARIAN

PANCREAS

AML/MDS

s
r
o
m
u
t
d

i
l

o
S

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c
i

g
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a
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e
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s
r
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t

CELYAD • ANNUAL REPORT 2016

A robust
immuno-oncology pipeline

1. THINK

CAR-T NKR-2 (THINK TRIAL – NCT03018405 - PHASE I / ONGOING STUDY)

Discovery

Pre-Clinical

Phase I

Phase II

Phase III

THINK (THerapeutic

Immunotherapy with NKR-2)

is a

administrations, two weeks apart, of CAR-T NKR-2 cells. The

multinational (EU/US) open-label Phase I study to assess

dose escalation part of the study will enroll up to 24 patients

the safety and clinical activity of multiple administrations of

while the extension phase could enroll 86 additional patients.

autologous CAR-T NKR-2 cells in seven refractory cancers,

Related Partners

in Belgium:

Institut Bordet, Cliniques

including five solid tumors (colorectal, ovarian, bladder,

Universitaires Saint-Luc, UZ Ghent, in the USA, Roswell Park

triple-negative breast and pancreatic cancers) and two

Cancer Institute, University of Pittsburgh Medical Center.

hematological tumors (acute myeloid leukemia and multiple

myeloma). The trial will test three dose levels adjusted to

body weight: up to 3x108, 1x109 and 3x109 CAR-T NKR-2 cells.

At each dose, the patients will receive three successive

More info: https://clinicaltrials.gov/ct2/show/

NCT03018405?term=THINK+NKR-2&rank=1

2. CM-CS1

CAR-T NKR-2 (CM-CS1 TRIAL - NCT02203825 - PHASE Ia / STUDY COMPLETED)

Discovery

Pre-Clinical

Phase I

Phase II

Phase III

CM-CS1 Study: Autologous CAR-T NKR-2 cell therapy was

follow-up for all dose level cohorts. There were no cases

evaluated clinically in cancer patients suffering from Acute

of cytokine release syndrome, cell-related neurotoxicity,

Myeloid Leukemia (AML) or Multiple Myeloma (MM), two blood

auto-immunity, or CAR-T related death. Related Partners:

related cancers, together constituting more than 50% of all

Dartmouth College – Celdara Medical – Dana Farber Cancer

blood cancers. This study (ClinicalTrials.govNCT02203825)

Institute – Institut Curie.

was completed in September 2016 at Dana Farber Cancer

Institute (Boston, MA – USA), with a successful safety

More info: https://clinicaltrials.gov/ct2/show/

NCT02203825

CELYAD • ANNUAL REPORT 20163. NKR-3

CAR-T NKR-3

Discovery

Pre-Clinical

Phase I

Phase II

Phase III

NKR-3 is a CAR-T using NKp30, a NK receptor similar to NKG2D that targets the B7H6 ligand. NKR-3 is currently being evaluated

in pre-clinical testing pursuing a development strategy that complements our antibody approach targeting B7H6.

4. B7H6

CAR-T B7H6

Discovery

Pre-Clinical

Phase I

Phase II

Phase III

B7H6 is a more canonical antibody based CAR (using an antibody and not a receptor of NK cells). B7H6 is present at high level on

several tumors and we are at an advanced stage of pre-clinical testing of this approach with the target of moving into early phase

clinical testing within the next 12 months.

Our allogeneic
immuno-
oncology
programs

CAR-T NKR-2

Discovery

Pre-Clinical

Phase I

Phase II

Phase III

This program that aims at establishing a bio-bank of allogeneic genetically modified immune-cells from healthy third-party

donors, that are cryopreserved and validated in advance of administration, will facilitate the centralizing manufacturing and

widespread distribution of CAR-T cells to multiple points-of-care in a timely manner.

CELYAD • ANNUAL REPORT 2016Our partners
in immuno-oncology

Partnerships are key to fuel our quest to invent and expand

our pipeline. We understand the creativity and challenges it

takes to translate innovation into products. Celyad is looking

to consider all opportunities with a strong scientific rationale

in the field of immune-therapy regardless of the development

ONO Pharmaceutical, an exclusive license
agreement for the development and
commercialization allogeneic NKR-2
T-cell immunotherapy

stage.

In 2016, Celyad developed two key partnerships with world-

class industrial and academic players: ONO Pharmaceuticals

(Osaka, Japan) and Institut Curie (Paris, France).

The license agreement with ONO Pharma, announced on

July 11th 2016, is a significant step for Celyad which expands

its global presence and accelerates the development of its

allogeneic NKR-2 development. Under this agreement, ONO

was granted an exclusive license for the development of

Celyad’s allogeneic NKR-2 T-cell immunotherapy in Japan,

Taiwan and Korea. Japan, Taiwan and Korea represent about

10% of the worldwide pharmaceutical market. Celyad kept

all rights on allogeneic NKR-2 for all other territories, such

as US and EU.

CELYAD • ANNUAL REPORT 2016“We seek out creative and synergistic
partnerships to grow our business, advance our
pipeline and make a difference in fighting life-
threatening diseases”.

GEORGES RAWADI, VP BUSINESS DEVELOPMENT & IP

Who is ONO Pharma?

Institut Curie: the cutting-edge science

ONO is a pioneer in the immuno-oncology field. They were

To stay at the forefront of medical sciences, Celyad is also

the first to develop anti-PD-1 (nivolumab) antibody with

expanding partnerships to leading academic and private

Medarex, which was subsequently acquired by Bristol-Myers

research institutes, with the aim of advancing developments

Squibb (BMS). ONO is the leader in cancer immuno-therapy in
Japan with the first approved checkpoint inhibitors, OPDIVO®
(nivolumab). It has a track record of commercializing Opdivo®
and shows high commitment to continue investment into

in emerging therapies. Institut Curie is a world class research

institution focusing on cancer and immunity, and positioning

translational science at the heart of its approach. Since its

foundation back in 1909 by Marie Curie (Nobel Prize in Physics

the immuno-oncology field. ONO has more than a dozen of

and Chemistry – 1903/1911) the main mission of the institute

ongoing clinical studies in Japan involving either nivolumab or

is to fight cancer.

Ipilimumab (Anti-CTLA4).

Gyo Sagara, President, Representative Director and CEO of
ONO, said: “We are very delighted to collaborate with the leading
cell therapy company, Celyad, for its distinct immunooncology

candidates. Celyad’s NKR-2 is backed by cutting-edge science

and we believe that it can be a new therapeutic option for

patients who are not cured with existing therapies.”

In March 2016 Celyad entered into a 3-year collaboration with

Institut Curie, and specifically with the Cancer and Immunity

Unit led by Prof. Sebastian Amigorena. This partnership build

on both Institut Curie’s first-in-class expertise and state-

of-the-art translational, preclinical and clinical knowhow

in cancer biology and immunology, and on Celyad’s well

recognized cell therapy and capabilities.

Sebastian Amigorena, PhD, Head of the Cancer and

Immunity Unit of the Institut Curie, said: “Our collaboration

with Celyad is particularly timely in the context of the recent

launch of the Center for Cancer Immunotherapy of Institut

Curie in autumn 2016. Celyad is well positioned to become a

global leader in cell therapies for cancer treatment and we are

looking forward to strengthening our expertise in this field.

This collaboration could lead to a real clinical benefit for cancer

patients”.

CELYAD • ANNUAL REPORT 2016Celyad’s intellectual property
portfolio in immunotherapy

Celyad has a very strong intellectual property in the CAR-T

A second patent family is entitled “NKp30 receptor targeted

cell space using Natural Killer (NK) receptor and or its ligands.

therapeutics” and describes a specific NKR CAR based on the

We are building on the success of CAR, such as CD-19, but

NKp30 receptor. It is pending in the US.

using a totally novel approach.

A third family relates to an anti-B7H6 antibody, CARs and

CAR-T cell intellectual property portfolio includes four patent

BiTE molecules containing such antibody, CAR-T cells, and

families exclusively licensed to Celyad by Dartmouth College

methods of treating cancer with the CAR-T cells. Applications

(Lebanon, NH). This includes four issued U.S. patents; six

are pending in China, Europe, Japan and the US.

pending U.S. patent applications; and 13 foreign patent

applications pending

jurisdictions

including Australia,

A fourth patent family relates to T-cell receptor-deficient

Brazil, Canada, China, Europe, Hong Kong, India, Japan,

compositions. T-cell receptor (TCR) deficient human T-cells

Mexico and Russia. These patents and patent applications

could be particularly useful to generate allogeneic CAR-T.

relate to specific chimeric antigen receptors and to T-cell

The family includes members that relate to the concept

receptordeficient T-cells, and are further detailed below.

(irrespective of the way the T-cell is made T-cell receptor

deficient), as well as members describing specific ways of

A first patent family relates to chimeric NK receptors and

making the cells TCR deficient. There are two granted US

methods for treating cancer. There are two granted US

patents (US 9,181,527 and US 9,273,283), as well as three

patents in this family (US7,994,298 and US8,252,914) and

further pending US applications and ten applications in other

a further pending US application. The scope of this patent

jurisdictions. Claim 1 of patent US9,181,527 was challenged

family includes chimeric natural killer cell receptors (NKR

by an anonymous third party in an Ex Parte Re-examination

CARs), T-cells with such receptors (NKR CAR-T cells) and

procedure, but the USPTO has in the meantime reached a

methods of treating cancer with these NKR CAR-T cells.

decision and has upheld the patent.

CELYAD • ANNUAL REPORT 2016“Allogeneic CAR-T cells are a promising avenue to broaden the scope
of application of cell based immunotherapy. We look forward to
the further development of our own allogeneic programs and also
continue to offer other parties access to this important patent to
advance the field more broadly.”

GEORGES RAWADI, VP BUSINESS DEVELOPMENT AND IP

CELYAD • ANNUAL REPORT 2016Cardiology:
How to best prepare for CHART-2?

Prof. Gerasimos Filippatos,

Immediate Past-President

of the Heart Failure Association of the European Society

of Cardiology, member of the CHART-1 dissemination

committee, said: “The CHART-1 results have identified a well-

defined group of patients with symptomatic heart failure despite

optimal therapy. Those patients are a large subset of the heart

failure population and present specific therapeutic challenges.

The outcome of CHART-1 indicate those patients could benefit

from this therapy”.

Results of CHART-1 trial have been presented at the European

Society of Cardiology in Rome as well as at the American Heart

Association and have been published in the European Heart

Journal (2016). Based on the results of CHART-1 key learnings,

a pivotal trial (CHART-2) has been designed to exclusively

enroll the patient population that will most benefit from the
C-Cure® therapy. Furthermore, CHART-2 will incorporate
better dosing regimens, more stringent medical personnel

training, and a new FDA-agreed primary endpoint based on

CHART-1 results. Today CHART-2 is approved by FDA and the

study is ready to be initiated.

The cardiopoiesis technology invented at the Mayo Clinic (US)
has been the foundation of the C-Cure® program, developed
over the last ten years, to treat ischemic heart failure.
Following the C-Cure® Phase II trial, Celyad has carried out
CHART-1, one of the largest randomized, double-blinded,

controlled, Phase III cell therapy study in heart failure. Results

released in June 2016 have indicated that the trial was neutral

with a positive trend effect. Although the primary endpoint of

the randomized trial was not met, we observed a significant

reduction in Left ventricular (LV) end diastolic volume (EDV)

(p= 0.0044) and LV end systolic volume (ESV) (p = 0.0154),

indicative of therapeutic remodeling in the heart of patients

that received the treatment. Further, a well-defined subset

of patients - representing more than 60% of the overall trial

population defined by their baseline end diastolic volume -

achieved a clinically and statistically significant benefit. This

subgroup met the primary endpoint of the trial.

The trial has been saluted by leaders in the field as a significant

milestone and validation of the potential for regenerative

medicine to hold its promise in heart failure.

Prof. Jozef Bartunek, CHART-1 principal co-investigator,

said: “This pioneering study has contributed greatly to

our understanding of heart failure disease and the place of

regenerative medicine in its management. The results seen for

a large clinically relevant number of the patients are ground-

breaking”.

CELYAD • ANNUAL REPORT 2016Cardiology:
partners & IP portfolio

Partnering opportunities

Strong IP Portfolio

The C-Cure® therapy is positioned as one of the first and most
advanced cell therapies in the heart failure market. The data

The cardiopoiesis platform and associated therapeutic

products are covered by multiple patents and patent

generated from the CHART-1 study significantly increases
C-Cure® chance of success
CHART-1 trial outcome, which has

in CHART-2. Considering

identified a sizeable

patient population with potential for positive response to
C-Cure®, Celyad is actively seeking and discussing with
various potential partners to accelerate further development
and commercialization of C-Cure®. Recently, an exclusive
mandate was given to Piper Jaffray, a recognized international

investment bank and asset management firm, to support the
company in the partnering of C-Cure® .

applications worldwide. Part of this intellectual property

portfolio is owned by the Mayo Clinic and is exclusively licensed

to Celyad, and the other part is owned and controlled by
Celyad. C-Cure® therapy is well positioned in the heart failure
market as one of the first cell therapies, and the technology is

protected by multiple proprietary components. In addition to

a robust patent portfolio, the cardiopoiesis platform is backed

by manufacturing expertise unique to Celyad.

CELYAD • ANNUAL REPORT 2016Making the Impossible Possible

Our core values lead to how we achieve
success

At Celyad, men and women are highly motivated to

deliver on our mission: bringing breakthrough pioneering

therapies to patients with life-threatening diseases. Each

team member is fully committed to contribute to the

development of best-in class immunotherapies to fight

cancer. As a company, we live our values to make them

inspiring. Altogether, our employees act with a clear sense

of quality and urgency: for the patients, every second

counts. Driven by the passion to innovate and a “make-it

happen” mindset, Celyad’s team is creatively overcoming

challenges and barriers to make the impossible possible.

CELYAD • ANNUAL REPORT 2016“As newly appointed Head of Human Resources, I am positively impressed by the
commitment and can-do attitude of our employees. Together with the Senior Leadership
Team, my priorities focus on continuously improving our organizational effectiveness
in order to build the backbone of an ambitious growing company. Furthermore,
developing our human capital and stimulating employees’ engagement continue to
be critical for our current and future success. At Celyad, I am confident we have the
talents, the expertise and commitment to successfully deliver on our Mission“.

PHILIPPE NOBELS, GLOBAL HEAD OF HUMAN RESOURCES

Celyad’s key HR
Facts & Figures

To be the next generation CAR-T Company, we need a
highly skilled team.

Composition of the Celyad team

(as of 31 December 2016):

Celyad keeps on strengthening its team to support the growth of the company
and the development of its immuno-oncology programs. In 2016, Celyad officially
set-up its presence in the U.S. with the opening of an office in Boston (MA) and the
recruitment of seasoned executives dedicated to the management and follow-up

of clinical activities with local partners.

16%

General & Administration
36%

Operations (Manufacturing/QA/QC incl.)
16%

Number of employees: 87
(as of 31 December 2016)

84% of the company staff (as of 31
December 2016) are engaged in

Clinical/Regulatory Affairs
32%

research and development activities

Research & Development

CELYAD • ANNUAL REPORT 2016Celyad’s team
is all about passion

“I joined Celyad because I wanted science to be applied to something real, a treatment

that could benefit patients. Celyad is tackling severe conditions for which there is

no cure today: if we succeed in bringing a new treatment, the impact we will have on

patients’ lives will be huge! I want to be part of it! As R&D Director, my role consists

in providing scientific and organizational leadership to the R&D team, ensuring that

high quality products are delivered on time to the patients. We are working on a

very disruptive and innovative technology that requires strong expertise but also

cutting-edge labs facilities and equipment, Celyad has it all and it is very attractive to

scientific profiles. I also enjoy the human-size of the company where all the employees

know each other well and can rely on the rest of team to overcome challenges.”

Valérie Steenwinckel
R&D Director | Joined Celyad in 2008

“Quality Control is really about the analytical validation and verification of

process in order to guarantee the product quality and safety for injection to

the patient. This task is achieved through a strong team spirit and support

across the organization from R&D, Manufacturing, Logistics, Quality Assurance

and Facilities. Altogether, we are continuously reassessing and improving our

way of working to meet the highest possible quality standards. I believe in our

technology and I am very proud to say that I work for a company that may be

about to deliver the treatment that cancer patients have been waiting for.”

Vincent Van Den Bossche
Quality Control Technician | Joined Celyad in 2011

CELYAD • ANNUAL REPORT 2016

“I joined Celyad because I was attracted by the cell therapy area and its potential to treat

patients. It is key to deliver safe and quality products to the patient and this requires

high technical skills and know-how that are very specific to the industry. As Production

Supervisor, I am responsible, together with my team, to ensure that our product

candidates are produced in the best conditions and in sufficient quantity to meet the

clinical operations’ needs. The patient is our priority, we cannot allow human errors to

jeopardize a production lot. We all know people who are affected by cancer and there

is no greatest motivation to know that our work can contribute to help those people,

improving their quality of life or hopefully save them.”

Mélanie Di Renzo

Production Supervisor | Joined Celyad in 2013

“As an immuno-oncologist, bringing a therapy to cancer patients is what I aspire to

accomplish and immuno-oncology through its CAR-T therapy holds a very exciting

promise for the treatment of cancer. Celyad’s immuno-oncology platform raised my

interest because it was offering a very innovative and disruptive approach based on CAR-T

using NK cell receptors - and not classical antibodies - to target cancer cells.

While based in Boston, my key responsibilities are to ensure that the patients who decided

to join our clinical trials are safe. I make sure that the data that are collected are accurate,

timely and reliable to further advance our technology. And, I also help with our long-term

medical strategies and processes to make them productive, efficacious and competitive.

If we succeed in our mission, this will create an unprecedented paradigm shift in the

immuno-oncology area, placing Celyad at the forefront to lead and set up new standards

US Head, Clinical Development (US based) | Joined Celyad in 2016

in the CAR-T field.”

Bikash Verma

CELYAD • ANNUAL REPORT 2016
Corporate
governance

Our Board of Directors

Our board Committee

The Board of Directors has set-up a Nomination and Re-

muneration Committee. This Committee is composed of four

non-executive directors, respectively, Chris Buyse, Hanspe-

ter Spek, Rudy Dekeyser and Michel Lussier.

The Committee is chaired by Michel Lussier. The Board also

appointed an Audit Committee. The audit committee consists

of three members, all non-executive and independent direc-

tors: Chris Buyse, Rudy Dekeyser and Chris De Jonghe. The

Committee is chaired by Chris Buyse.

The Board of Directors currently consists of nine members,

one of which is an executive director (as a member of the

Executive Management Team) and eight of which are

non-executive directors, including the chairman and four

independent directors, appointed at the Shareholders Meeting

of the company. The Board’s composition reflects a diverse and

complementary range of experience, nationalities and cultures.

Members of the Board of Directors are chosen for their skills,

their integrity and their independence of mind.

— Michel Lussier, Chairman.

— Christian Homsy (permanent representative of LSS

Consulting SPRL), Executive director.

— Chris Buyse, Independent director.

— Rudy Dekeyser, Independent director.

— Debasish Roychowdhury, Independent director.

— Hanspeter Spek, Independent director.

— Chris De Jonghe, Non-executive director.

— Serge Goblet, Non-executive director and permanent

representative of TOLEFI SA.

— TOLEFI SA.

CELYAD • ANNUAL REPORT 2016Our senior
leadership team

The Board of Directors of

the

company has established an Executive

Management Team, which is an advisory

committee to the Board of Directors,

and which therefore does not constitute

a management committee under Article

524bis of the BCC. As of end of March

2017, the Senior Leadership Team

Christian Homsy
— CHIEF EXECUTIVE OFFICER

Patrick Jeanmart
— CHIEF FINANCIAL OFFICER

consists of:

Georges Rawadi
— VP BUSINESS DEVELOPMENT &
INTELLECTUAL PROPERTY

Frédéric Lehmann
— VP CLINICAL DEVELOPMENT

Jean-Pierre Latere
— CHIEF OPERATING OFFICER

Dieter Hauwaerts
— VP OPERATIONS

& MEDICAL AFFAIRS

David Gilham
— VP RESEARCH &
DEVELOPMENT

Philippe Dechamps
— CHIEF LEGAL OFFICER

Philippe Nobels
— GLOBAL HEAD OF HUMAN

RESOURCES

CELYAD • ANNUAL REPORT 2016“Celyad has a strong cash
position to secure the funding
of all its development programs
until mid of 2019.”

Information for
shareholders

Interview with Patrick Jeanmart, Chief Financial Officer

What shall be remembered
from 2016 on a finance
view point?

In 2016, we capitalized on the accompli-

shments and the capital raises of 2015 to

support the completion of CM-CS1, the

initiation of THINK and the funding of the

preclinical development of our CAR-T NKR

platform, the foundation of our future

product pipeline in immuno-oncology.

How does the current
financial position of
Celyad looks like?

The cash position of Celyad remains ex-

tremely solid. With EUR 82 million in cash

at year end 2016, we have all the fun-

dings required to finance all our opera-

tions and our clinical development plan

until mid-2019.

What could be the 2017
catalysts?

cal development of our CAR-T NKR plat-

form, 2017 should bring us a lot of clinical

2017 financial calendar

catalysts to support our market capita-

All communications will be made

lization. We are indeed very enthusiastic

before market opening.

2017

5 MAY
General Assembly

19 MAY
Q1 2017 Business Update

29 AUGUST
Financial Results First Half Year 2017

17 NOVEMBER
Q3 2017 Business Update

regarding the outcome of THINK and

expect the confirmation of the innocuity

of our CAR-T NKR-2 lead cell therapy at

high doses. We are also hopeful for the

confirmation of the first signals of clini-

cal efficacy observed last autumn on the

last patients of CM-CS1, our first CAR-T

NKR-2 dose escalation trial run at Dana

Farber Cancer Institute in Boston, USA.

What are your priorities in
investors relation strategy
in 2017?

In 2017, we look forward to establishing

our reputation in the immuno-oncology

field by building on data generated and

enhancing our brand recognition with

investors and key opinion leaders. Our

technology is second to none, and this

provides a strong basis for reaching out

to the financial community.

Thanks to the investments made over

the past years in the preclinical and clini-

Patrick Jeanmart,

Chief Financial Officer

CELYAD • ANNUAL REPORT 2016Finance / Analyst coverage & contacts

Financial services

Analyst coverage – Europe

Broker

Analyst

Edison Group

www.edisongroup.com

John Savin

Kempen & Co

Financial services for the shares of the
company are provided by BNP Paribas
Security Services.

HEADQUARTERS

Celyad SA
Axis Business Park
Rue Edouard Belin 2
B-1435 Mont-Saint-Guibert, Belgium
T.: +32 10 39 41 00
info@celyad.com

www.kempenresearch.nl

Anastasia Karpova

Celyad Inc.

Invest Securities

www.invest-securities.com

Martial Descoutures

Seaport East 2 Seaport Lane Boston, USA,
MA 02210

Portzamparc, groupe BNP Paribas

www.portzamparc.fr

Arnaud Guerin

Degroof Petercam

www.petercam.com

Bryan Garnier

Stephanie Put

www.bryangarnier.com

Hugo Solvet

Analyst coverage – USA

Broker

Analyst

Piper Jaffray

www.piperjaffray.com

LakeStreet Capital Market

www.lakestreetcapitalmarkets.com

Bruce Jackson

Edward Tenthoff

France

T.: + 1 (857) 990-6900

INVESTOR RELATIONS

Celyad SA
Axis Business Park
Rue Edouard Belin 2
B-1435 Mont-Saint-Guibert
Belgium
investors@celyad.com

MEDIA RELATIONS

USA

Stern Investor Relations
celyad@sternir.com
T.: +1 212 362 1200

Europe

Consilium Strategic Communications
celyad@consilium-comms.com
T.: +44 20 3709 5700

New Cap
celyad@newcap.eu
T. : +33 1 44 71 94 94

Belgium

Comfi
celyad@comfi.be
T.: +32 2 290 90 91

CELYAD

Marine Lhomel
Corporate Communications Manager
info@celyad.com

CELYAD • ANNUAL REPORT 2016Glossary

Acute Myeloid Leukemia (AML)

End Diastolic Volume (EDV)

Pivotal trial

AML is a type of cancer that affects the blood
and bone marrow. It is characterized by an
overproduction of certain immature white
blood cells, called myeloblasts or leukaemic

blasts.
Allogeneic cells

Cells originating from a donor, and used in a

different patient.
Antibody1

A protein that binds specifically to a particular
substance-called its antigen. Each antibody
molecule has a unique structure that enables
it to bind specifically to its corresponding
antigen, but all antibodies have the same
overall structure and are known collectively
as immunoglobulins. Antibodies are produced
by differentiated B cells (plasma cells) in
response to infection or immunization,
and bind to and neutralize pathogens or
prepare them for uptake and destruction by

phagocytes.
Antigen1

Any molecule that can bind specifically to an
antibody or generate peptide fragments that

are recognized by a T-cell receptor.
Autologous cells

Cells injected to a patient and coming from

the same patient.
Cardiopoiesis

Process to drive stem cells towards the

cardiac lineage.
CAR T-Cell

A CAR-T cell is a T lymphocyte (a type of
white blood cells) in which a DNA construct,
coding for an antibody or a receptor, has
been introduced artificially. The result of
this engineered cell is that the T lymphocyte
express the CAR (Chimeric Antigen Receptor)
on its surface and is able to recognize a
specific target through new engrafted

receptor.
Cytokine release syndrome (CRS)2

CRS is a specific type of infusion reaction that
has been most often associated with the use
of monoclonal antibodies and T-cell-engaging
therapies. Following drug infusion, a highlevel
activation of the immune system and
engagement and proliferation of T cells can
result in increased cytokine release. Fever is a
hallmark of infusion reactions, and therefore,
many infusion reactions may mimic symptoms

of an infection .

Volume of blood in the right and/or left
ventricle at end load or filling in (diastole) or
the amount of blood in the ventricles just

before systole .
End Systolic Volume (ESV)

Volume of blood in the right and/or left
ventricle at end load or filling in (diastole) or
the amount of blood in the ventricles just

before systole.
In vivo experiments

Experiments done in animal living systems.
In vitro experiments

Experiments done in animal living systems.
Ligand

A ligand is molecule, as an antigen, hormone,

or drug, that binds to a receptor .
Lymphodepletive preconditioning

The destruction of lymphocytes and T cells,
by irradiation or chemotherapy, prior to

immunotherapy .
Multiple Myeloma (MM)

MM is a cancer of plasma cells. Plasma cells are
mature B lymphocytes, a type of white blood
cell, that help to fight infection by producing
special proteins called antibodies or
immunoglobulins. In myeloma, large numbers
of abnormal plasma cells called myeloma cells

are made in the bone marrow.
Natural Killer (NK) Cell

NK cells are lymphocytes of the innate
immune system, which can eliminate targets
directly and destroy cells (e.g upon viral

infection, or tumor cells).
CAR-T NKR-2

CAR-T-cell engineered to express the human
NK receptor, NKG2D, which is an activating
receptor that triggers cell killing through the
binding of NKG2D to any of eight naturally
occurring ligands that are known to be

overexpressed on more than 80% of tumors.
Off-tumor on-target toxicity

Toxicity induced when a CAR-T reaches its
target (antigens/ligands) that are expressed

on cells that are not tumor cells.
Open-label study3

A type of study in which both the health
providers and the patients are aware of the
drug or treatment being given.

Usually a Phase III study which presents the
data that a regulatory agency uses to decide
whether or not to approve a drug. A pivotal
study will generally be well-controlled,
randomized, of adequate size, and whenever

possible, double-blind.
T-cell

Also called T Lymphocyte, is a subcategory
of white blood cell and is part of the acquired

immune system .
TCR

TCR (T Cell Receptor) is a molecule found
on the surface of T lymphocytes that is
responsible for recognizing antigens bound
to major histocompatibility complex (MHC)

molecules .

Publication References

Immuno-Oncology

1. Barber A, Meehan KR, Sentman CL.
Treatment of multiple myeloma with
adoptively transferred chimeric NKG2D
receptor-expressing T cells. Gene Ther 2011;
18:509-516.

2. Zhang T, Barber A, Sentman CL. Chimeric
NKG2D modified T cells inhibit systemic
T-cell lymphoma growth in a manner involving
multiple cytokines and cytotoxic pathways.
Cancer Res 2007; 67:11029-11036.

3. Barber A, Rynda A, Sentman CL. Chimeric
NKG2D expressing T cells eliminate
immunosuppression and activate immunity
within the ovarian tumor microenvironment. J
Immunol 2009; 183:6939-6947.

4 . Barber A, Zhang T, Sentman CL.
Immunotherapy with Chimeric NKG2D
Receptors Leads to Long-Term Tumor-Free
Survival and Development of Host Antitumor
Immunity in Murine Ovarian Cancer. J
Immunol 2008; 180:72-78.

5. Nikiforow S MJ, Daley H, Negre H, Reder J,
Sentman CL, Lehmann FF, Snykers S, Allen R,
Galinsky I, Munshi N, Stone R, Soiffer R, Ritz
J, Baumeister S: A first-in-human Phase I trial
of NKG2D chimeric antigen receptor-T cells
in AML/MDS and multiple myeloma. In 2016
ASCO Annual Meeting. J Clin Oncol; 2016:
abstr TPS3102.

1. From Janeway’s Immunobiology, Eighth Edition.
Kenneth Murphy

2. From Asselin 2016. Future Oncol. 12(13):1609-21.

3. From NCI Dictionary of Cancer Terms

CELYAD • ANNUAL REPORT 2016
CELYAD AND THE STOCK
EXCHANGE

The Company is listed on Euronext Paris
and Brussels since July 2013 and on
Nasdaq since June 2016.

Mnemo: CYAD

ISIN:BE0974260896

PEA and PEA PME Eligibility.

Total outstanding shares: 9,313,603 (as of
31 December 2016)

MORE INFORMATION ON:

www.celyad.com

MORE INFORMATION FOR
SHAREHOLDERS ON:

www.celyad.com/investors

CONTACT:

investors@celyad.com

@CELYADSA

@CELYAD

FINANC IAL RES ULTS 201 6

Bringing
breakthrough
pioneering
therapies to
patients with
life-threatening
diseases

www.celyad.com

CELYAD • FINANCIAL RESULTS 2016FINANC IAL RES ULTS 201 6

Bringing
breakthrough
pioneering
therapies to
patients with
life-threatening
diseases

www.celyad.com

Contents

1.4.1
1.4.2

1.1
1.2
1.3
1.4

REPORT OF THE BOARD OF DIRECTORS TO THE SHAREHOLDERS FOR THE FINANCIAL YEAR
ENDING 31 DECEMBER 2016 ............................................................................................................ 6
Highlights of 2016 ......................................................................................................... 6
Significant events post balance sheet date ........................................................................... 7
Operating review .......................................................................................................... 7
Financial review of the year ending 31 December 2016 ............................................................ 8
Analysis of the consolidated statement of the comprehensive loss .................................... 8
Analysis of the consolidated statement of financial position ............................................ 9
Personnel ................................................................................................................. 10
1.5
Environment ............................................................................................................. 10
1.6
Risks and uncertainties ................................................................................................. 10
1.7
Going concern ........................................................................................................... 10
1.8
1.9
Event occurred after the end of the financial year ............................................................... 10
1.10 Events and circumstances that could have a significant impact on the future ............................... 11
1.11 Other ...................................................................................................................... 11

2.1
2.2

2.3
2.4

2.2.1.
2.2.2.
2.2.3.

2.4.1.
2.4.2.
2.4.3.

2.4.4.
2.4.5.
2.4.6.

CORPORATE GOVERNANCE ......................................................................................................... 12
General ................................................................................................................... 12
Board of Directors ...................................................................................................... 12
Composition of the Board of Directors .................................................................... 12
Committees within the Board of Directors ............................................................... 15
Meetings of the Board and the committees .............................................................. 16
Executive Management Team ......................................................................................... 17
Conflict of Interest of directors and members of the executive team and transactions with affiliated
companies ................................................................................................................ 19
General ......................................................................................................... 19
Conflicts of interest of directors ........................................................................... 19
Existing conflicts of interest of members of the Board of Directors and of the Executive
Management Team ........................................................................................... 19
Related Party Transactions ................................................................................. 22
Transactions with affiliates ................................................................................. 22
Market abuse regulations .................................................................................... 22
Corporate Governance Charter ....................................................................................... 23
Remuneration report ................................................................................................... 23
Remuneration policy ......................................................................................... 23
Director’s remuneration ..................................................................................... 24
Remuneration of the CEO ................................................................................... 24
Remuneration of the Executive Management Team .................................................... 25
Description of the principal risks associated to the activities of the Group ................................... 25
Risk Management ............................................................................................. 25
Organization and values ..................................................................................... 25
Risks analysis .................................................................................................. 26
Risks related to our financial position and need for additional capital .............................. 26
Risks related to the Company’s organization, structure and operation .............................. 39
Audit activities ................................................................................................ 41
Controls, supervision and correctives actions ............................................................ 41

2.6.1.
2.6.2.
2.6.3.
2.6.4.

2.7.1.
2.7.2.
2.7.3.
2.7.4.
2.7.4.
2.7.5.
2.7.6.

2.5
2.6

2.7

SHARES AND SHAREHOLDERS ..................................................................................................... 43
Capital increase and issuance of shares ............................................................................. 43
Changes in share capital ............................................................................................... 43
Anti-takeover provisions under Belgian laws ....................................................................... 43
Financial service ........................................................................................................ 45

3.1.
3.2
3.3
3.4

CONSOLIDATED FINANCIAL STATEMENTS ................................................................................. 46
Responsibility statement .............................................................................................. 46
Statutory auditor’s report on the consolidated accounts for the year ended 31 December 2016 .......... 47

4.1.
4.2

REPORT ON THE CONSOLIDATED ACCOUNTS – UNQUALIFIED OPINION ............................................. 47
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS ........................................................... 48
Consolidated financial statements as of 31 December 2016 and 2015 under IFRS ............................ 49

4.3

4.3.1.

4.3.2.

4.3.3.

4.3.4.

Consolidated statement of financial position ............................................................ 49

Consolidated statement of comprehensive loss ......................................................... 50

Consolidated statement of changes in equity ............................................................ 51

Consolidated statement of Cash flows .................................................................... 52

5.1

5.2

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ........................................................ 53

General information .................................................................................................... 53

Summary of significant accounting policies ......................................................................... 53

Basis of preparation .......................................................................................... 53

Consolidation .................................................................................................. 55

Foreign currency translation ................................................................................ 55

Revenue ........................................................................................................ 56

Other operating income ..................................................................................... 56

Intangible assets .............................................................................................. 57

Property, plant and equipment ............................................................................ 58

Leases .......................................................................................................... 58

Impairment of non-financial assets ........................................................................ 59

Cash and cash equivalents .................................................................................. 59

Financial assets ............................................................................................... 59

Financial liabilities ........................................................................................... 60

Provisions ...................................................................................................... 61

Taxes ........................................................................................................... 62

Earnings (loss) per share .................................................................................... 63

5.3

5.4

5.5

5.6

5.7

5.8

5.9

5.10

5.11

5.12

5.13

5.14

5.15

5.16

5.17

5.18

5.20

5.21

5.23

5.24

5.26

5.27

5.30

5.31

5.32

5.33

Risk Management ........................................................................................................ 63

Critical accounting estimates and judgments ...................................................................... 63

Operating segment information ...................................................................................... 65

Intangible assets ........................................................................................................ 66

Property, plant and equipment ....................................................................................... 68

Non current financial assets ........................................................................................... 69

Trade receivable, advances and other current assets ............................................................ 69

Short term investments ................................................................................................ 69

Cash and cash equivalents ............................................................................................. 69

Subsidiaries fully consolidated ........................................................................................ 69

Business Combinations ................................................................................................. 70

5.13.1

5.13.2

Corquest Medical, Inc. ....................................................................................... 70

Oncyte LLC .................................................................................................... 70

Share Capital ............................................................................................................ 72

Share based payments ................................................................................................. 74

Post-employment benefits ............................................................................................. 76

Advances repayable .................................................................................................... 78

Trade payables and other current liabilities ....................................................................... 80

5.19 Maturity analysis of financial liabilities ............................................................................. 80

Financial instruments .................................................................................................. 81

Deferred taxes ........................................................................................................... 83

5.22 Other reserves ........................................................................................................... 84

Revenues ................................................................................................................. 84

Research and Development expenses ................................................................................ 84

5.25 General and administrative expenses ................................................................................ 85

Depreciation and amortisation ........................................................................................ 85

Employee benefit expenses ........................................................................................... 85

5.28 Other operating income and expenses .............................................................................. 85

5.29 Operating leases ........................................................................................................ 86

Finance income and expense .......................................................................................... 86

Loss per share ........................................................................................................... 86

Contingent assets and liabilities ...................................................................................... 86

Commitments ............................................................................................................ 87

5.33.1

5.33.2

Mayo Foundation for Medical Education and Research ................................................. 87

Corquest Inc ................................................................................................... 87

5.34 Oncyte LLC-Celdara Milestones ....................................................................................... 87

5.35

Related-party transactions ............................................................................................ 88

5.35.1

5.35.2

5.35.3

Remuneration of key management ........................................................................ 88

Transactions with non-executive directors ............................................................... 88

Transactions with shareholders ............................................................................ 88

CELYAD • FINANCIAL RESULTS 2016

Contents

REPORT OF THE BOARD OF DIRECTORS TO THE SHAREHOLDERS FOR THE FINANCIAL YEAR

ENDING 31 DECEMBER 2016 ............................................................................................................ 6

Highlights of 2016 ......................................................................................................... 6

Significant events post balance sheet date ........................................................................... 7

Operating review .......................................................................................................... 7

Financial review of the year ending 31 December 2016 ............................................................ 8

1.4.1

1.4.2

Analysis of the consolidated statement of the comprehensive loss .................................... 8

Analysis of the consolidated statement of financial position ............................................ 9

Personnel ................................................................................................................. 10

Environment ............................................................................................................. 10

Risks and uncertainties ................................................................................................. 10

Going concern ........................................................................................................... 10

Event occurred after the end of the financial year ............................................................... 10

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

1.10 Events and circumstances that could have a significant impact on the future ............................... 11

1.11 Other ...................................................................................................................... 11

2.1

2.2

CORPORATE GOVERNANCE ......................................................................................................... 12

General ................................................................................................................... 12

Board of Directors ...................................................................................................... 12

2.2.1.

2.2.2.

2.2.3.

2.3

2.4

Composition of the Board of Directors .................................................................... 12

Committees within the Board of Directors ............................................................... 15

Meetings of the Board and the committees .............................................................. 16

Executive Management Team ......................................................................................... 17

Conflict of Interest of directors and members of the executive team and transactions with affiliated

companies ................................................................................................................ 19

General ......................................................................................................... 19

Conflicts of interest of directors ........................................................................... 19

Existing conflicts of interest of members of the Board of Directors and of the Executive

Management Team ........................................................................................... 19

Related Party Transactions ................................................................................. 22

Transactions with affiliates ................................................................................. 22

Market abuse regulations .................................................................................... 22

2.5

2.6

Corporate Governance Charter ....................................................................................... 23

Remuneration report ................................................................................................... 23

Remuneration policy ......................................................................................... 23

Director’s remuneration ..................................................................................... 24

Remuneration of the CEO ................................................................................... 24

Remuneration of the Executive Management Team .................................................... 25

2.7

Description of the principal risks associated to the activities of the Group ................................... 25

Risk Management ............................................................................................. 25

Organization and values ..................................................................................... 25

Risks analysis .................................................................................................. 26

Risks related to our financial position and need for additional capital .............................. 26

Risks related to the Company’s organization, structure and operation .............................. 39

Audit activities ................................................................................................ 41

Controls, supervision and correctives actions ............................................................ 41

2.4.1.

2.4.2.

2.4.3.

2.4.4.

2.4.5.

2.4.6.

2.6.1.

2.6.2.

2.6.3.

2.6.4.

2.7.1.

2.7.2.

2.7.3.

2.7.4.

2.7.5.

2.7.6.

SHARES AND SHAREHOLDERS ..................................................................................................... 43

Capital increase and issuance of shares ............................................................................. 43

Changes in share capital ............................................................................................... 43

Anti-takeover provisions under Belgian laws ....................................................................... 43

Financial service ........................................................................................................ 45

CONSOLIDATED FINANCIAL STATEMENTS ................................................................................. 46

Responsibility statement .............................................................................................. 46

Statutory auditor’s report on the consolidated accounts for the year ended 31 December 2016 .......... 47

3.1.

3.2

3.3

3.4

4.1.

4.2

REPORT ON THE CONSOLIDATED ACCOUNTS – UNQUALIFIED OPINION ............................................. 47

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS ........................................................... 48

Consolidated financial statements as of 31 December 2016 and 2015 under IFRS ............................ 49

4.3

4.3.1.
4.3.2.
4.3.3.
4.3.4.

Consolidated statement of financial position ............................................................ 49
Consolidated statement of comprehensive loss ......................................................... 50
Consolidated statement of changes in equity ............................................................ 51
Consolidated statement of Cash flows .................................................................... 52

5.1
5.2

5.3
5.4
5.5
5.6
5.7
5.8
5.9
5.10
5.11
5.12
5.13

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ........................................................ 53
General information .................................................................................................... 53
Summary of significant accounting policies ......................................................................... 53
Basis of preparation .......................................................................................... 53
Consolidation .................................................................................................. 55
Foreign currency translation ................................................................................ 55
Revenue ........................................................................................................ 56
Other operating income ..................................................................................... 56
Intangible assets .............................................................................................. 57
Property, plant and equipment ............................................................................ 58
Leases .......................................................................................................... 58
Impairment of non-financial assets ........................................................................ 59
Cash and cash equivalents .................................................................................. 59
Financial assets ............................................................................................... 59
Financial liabilities ........................................................................................... 60
Provisions ...................................................................................................... 61
Taxes ........................................................................................................... 62
Earnings (loss) per share .................................................................................... 63
Risk Management ........................................................................................................ 63
Critical accounting estimates and judgments ...................................................................... 63
Operating segment information ...................................................................................... 65
Intangible assets ........................................................................................................ 66
Property, plant and equipment ....................................................................................... 68
Non current financial assets ........................................................................................... 69
Trade receivable, advances and other current assets ............................................................ 69
Short term investments ................................................................................................ 69
Cash and cash equivalents ............................................................................................. 69
Subsidiaries fully consolidated ........................................................................................ 69
Business Combinations ................................................................................................. 70
Corquest Medical, Inc. ....................................................................................... 70
Oncyte LLC .................................................................................................... 70
Share Capital ............................................................................................................ 72
5.14
Share based payments ................................................................................................. 74
5.15
Post-employment benefits ............................................................................................. 76
5.16
Advances repayable .................................................................................................... 78
5.17
5.18
Trade payables and other current liabilities ....................................................................... 80
5.19 Maturity analysis of financial liabilities ............................................................................. 80
Financial instruments .................................................................................................. 81
5.20
Deferred taxes ........................................................................................................... 83
5.21
5.22 Other reserves ........................................................................................................... 84
Revenues ................................................................................................................. 84
5.23
5.24
Research and Development expenses ................................................................................ 84
5.25 General and administrative expenses ................................................................................ 85
Depreciation and amortisation ........................................................................................ 85
5.26
5.27
Employee benefit expenses ........................................................................................... 85
5.28 Other operating income and expenses .............................................................................. 85
5.29 Operating leases ........................................................................................................ 86
Finance income and expense .......................................................................................... 86
5.30
Loss per share ........................................................................................................... 86
5.31
Contingent assets and liabilities ...................................................................................... 86
5.32
Commitments ............................................................................................................ 87
5.33
Mayo Foundation for Medical Education and Research ................................................. 87
Corquest Inc ................................................................................................... 87
5.34 Oncyte LLC-Celdara Milestones ....................................................................................... 87
Related-party transactions ............................................................................................ 88
5.35
Remuneration of key management ........................................................................ 88
Transactions with non-executive directors ............................................................... 88
Transactions with shareholders ............................................................................ 88

5.35.1
5.35.2
5.35.3

5.33.1
5.33.2

5.13.1
5.13.2

CELYAD • FINANCIAL RESULTS 2016

5.36

5.37

Events after the balance sheet date ................................................................................. 89
New warrant plan ............................................................................................ 89
Exercise of warrants issued in May 2013 .................................................................. 89
Statutory accounts as of 31 December 2016 and 2015 according to Belgian GAAP ........................... 89
Balance Sheet ................................................................................................. 89
Income statement ............................................................................................ 90
90
Notes ........................................................................................................... 90
Summary of valuation rules ................................................................................. 94

5.36.1
5.36.2

5.37.1
5.37.2
3,000
5.37.3
5.37.4

ANNUAL FINANCIAL REPORT 2016

This Annual Financial Report contains all required information as per the Belgian Company Code.

LANGUAGE OF THE ANNUAL FINANCIAL REPORT 2016

Celyad publishes its Annual Report in French, according to Belgian law. The Company also provides an English translation. In

case of differences in interpretation, the French version will prevail.

AVAILABILITY OF THE ANNUAL FINANCIAL REPORT 2016

This document is available free of charge for the public and upon request to:

Celyad SA

Investor Relations

Rue Edouard Belin 2,

B-1435 Mont-Saint-Guibert, Belgium

Tel: +32 10 394100

E-mail: investors@celyad.com

An electronic version of this Report is available on the Company website, http://www.celyad.com/investors/regulated-information

FORWARD LOOKING STATEMENTS

In addition to historical facts or statements of current condition, this report contains forward-looking statements, including statements about the potential

safety and feasibility of CAR-T NKR-2 cell therapy and C-Cure, which reflect our current expectations and projections about future events, and involve certain

known and unknown risks, uncertainties and assumptions that could cause actual results or events to differ materially from those expressed or implied by the

forward-looking statements.

These forward-looking statements are further qualified by important factors, which could cause actual results to differ materially from those in the forward-

looking statements, including risks associated with conducting clinical trials; the risk that safety, bioactivity, feasibility and/or efficacy demonstrated in earlier

clinical or pre-clinical studies may not be replicated in subsequent studies; risk associated with the timely submission and approval of anticipated regulatory

filings; the successful initiation and completion of clinical trials, including Phase III clinical trials for C-Cure® and Phase I clinical trial for CAR-T NKR-2; risks

associated with the satisfaction of regulatory and other requirements; risks associated with the actions of regulatory bodies and other governmental

authorities; risks associated with obtaining, maintaining and protecting intellectual property, our ability to enforce our patents against infringers and defend our

patent portfolio against challenges from third parties; risks associated with competition from others developing products for similar uses; risks associated with

our ability to manage operating expenses; and risks associated with our ability to obtain additional funding to support our business activities and establish and

maintain strategic business alliances and business initiatives.

A further list and description of these risks, uncertainties and other risks can be found in the Company’s Securities and Exchange Commission filings and reports,

including in the Company’s Annual Report on Form 20-F filed with the SEC on April 8, 2016 and future filings and reports by the Company. Given these

uncertainties, the reader is advised not to place any undue reliance on such forward-looking statements. These forward-looking statements speak only as of the

date of publication of this document. The Company expressly disclaims any obligation to update any such forward-looking statements in this document to

reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based, unless

required by law or regulation.

CELYAD • FINANCIAL RESULTS 2016

5.36

Events after the balance sheet date ................................................................................. 89

New warrant plan ............................................................................................ 89

Exercise of warrants issued in May 2013 .................................................................. 89

5.37

Statutory accounts as of 31 December 2016 and 2015 according to Belgian GAAP ........................... 89

Balance Sheet ................................................................................................. 89

Income statement ............................................................................................ 90

Notes ........................................................................................................... 90

Summary of valuation rules ................................................................................. 94

5.36.1

5.36.2

5.37.1

5.37.2

3,000

5.37.3

5.37.4

ANNUAL FINANCIAL REPORT 2016

This Annual Financial Report contains all required information as per the Belgian Company Code.

LANGUAGE OF THE ANNUAL FINANCIAL REPORT 2016

Celyad publishes its Annual Report in French, according to Belgian law. The Company also provides an English translation. In
case of differences in interpretation, the French version will prevail.

AVAILABILITY OF THE ANNUAL FINANCIAL REPORT 2016

This document is available free of charge for the public and upon request to:

Celyad SA
Investor Relations
Rue Edouard Belin 2,
B-1435 Mont-Saint-Guibert, Belgium
Tel: +32 10 394100
E-mail: investors@celyad.com

An electronic version of this Report is available on the Company website, http://www.celyad.com/investors/regulated-information

FORWARD LOOKING STATEMENTS

In addition to historical facts or statements of current condition, this report contains forward-looking statements, including statements about the potential
safety and feasibility of CAR-T NKR-2 cell therapy and C-Cure, which reflect our current expectations and projections about future events, and involve certain
known and unknown risks, uncertainties and assumptions that could cause actual results or events to differ materially from those expressed or implied by the
forward-looking statements.

These forward-looking statements are further qualified by important factors, which could cause actual results to differ materially from those in the forward-
looking statements, including risks associated with conducting clinical trials; the risk that safety, bioactivity, feasibility and/or efficacy demonstrated in earlier
clinical or pre-clinical studies may not be replicated in subsequent studies; risk associated with the timely submission and approval of anticipated regulatory
filings; the successful initiation and completion of clinical trials, including Phase III clinical trials for C-Cure® and Phase I clinical trial for CAR-T NKR-2; risks
associated with the satisfaction of regulatory and other requirements; risks associated with the actions of regulatory bodies and other governmental
authorities; risks associated with obtaining, maintaining and protecting intellectual property, our ability to enforce our patents against infringers and defend our
patent portfolio against challenges from third parties; risks associated with competition from others developing products for similar uses; risks associated with
our ability to manage operating expenses; and risks associated with our ability to obtain additional funding to support our business activities and establish and
maintain strategic business alliances and business initiatives.

A further list and description of these risks, uncertainties and other risks can be found in the Company’s Securities and Exchange Commission filings and reports,
including in the Company’s Annual Report on Form 20-F filed with the SEC on April 8, 2016 and future filings and reports by the Company. Given these
uncertainties, the reader is advised not to place any undue reliance on such forward-looking statements. These forward-looking statements speak only as of the
date of publication of this document. The Company expressly disclaims any obligation to update any such forward-looking statements in this document to
reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based, unless
required by law or regulation.

CELYAD • FINANCIAL RESULTS 2016

1. REPORT OF THE BOARD OF DIRECTORS TO THE SHAREHOLDERS FOR THE

FINANCIAL YEAR ENDING 31 DECEMBER 2016

Dear Shareholders,

We are glad to present you our 2016 annual report related to Celyad consolidated financial statements as of 31 December
2016 prepared in accordance with International Financing Reporting Standards (IFRS) as endorsed by the European Union.
The companies included in the consolidated financial statements are Celyad SA, Biological Manufacturing Services SA,
Celyad Inc, Oncyte LLC and CorQuest Medical Inc.

1.1 Highlights of 2016

2016 was a challenging year for Celyad, with the implementation of the strategic move to immuno-oncology and the
digestion of the CHART-1 data in our cardiovascular program. In April 2016, the Company decided to focus all its ressources
on its immuno-oncology programs and to continue the development of C-Cure with a partner.

On an operational side, we successfully completed the CM-CS1 trial, the first clinical trial using our CAR-T NKR-2 cells in
relapse refractory patients suffering from Acute Myolid Leukemia (AML) or Multiple Myeloma (MM). No safety issues were
reported and first unexpected signs of clinical activity were observed in both AML and MM patients, despite the low doses
infused.

On a financing side, thanks to the IPO made on Nasdaq in June 2015, we have a comfortable cash position at year end 2016
with more than EUR 82 million in treasury. This should enable the Company to finance all its clinical programs and other
needs until mid 2019.

Here are the operational and financial highlights of 2016 identified by the Board:

Operational highlights

Clinical Developments in Oncology

•

In March, we substantially strengthened our allogeneic intellectual property portfolio with the granting by the
USPTO of the US PatentNo 9.273.283. This patent provides Celyad with broad protection for its proprietary
method of producing allogeneic human T-cells that are engineered to be T-Cell Receptor (TCR)-deficient and
express a Chimeric Antigen Receptor (CAR).

Still in March, we signed a strategic collaboration agreement with Institut Curie’s Immunity Cancer Unit (Paris,
France) for the development of the immuno-oncology program. The partnership will build on Institut Curie’s first-
in-class expertise and state-of-the-art translational, preclinical and clinical know-how in cancer biology and
immunology.

In July, we announced the signing of an exclusive licensing agreement with leading Japanese immuno-oncology
company, ONO Pharmaceutical Co. Ltd., for the development and commercialization of Celyad’s allogeneic CAR-T
NKR-2 immunotherapy in Japan, Korea and Taiwan. Celyad also granted to ONO an exclusive option to license its
autologous NKR-2 T cell product in the above ONO territories. Total deal value of up to 31.325 JPY B (€282 million
or $311.5 million) plus double digit royalties on net sales in ONO territories.

In September, we completed the CAR-T NKR-2 Phase I trial with successful safety follow-up of all the dose level
cohorts. No safety or toxicity issues were reported after the 21-day safety follow-up of the last patient enrolled in
the fourth dose level cohort in its Phase I clinical trial – a study evaluating the safety and feasibility of its NKR-2 T-
cell therapy in Acute Myeloid Leukemia (AML) and Multiple Myeloma (MM) patients. The Phase I trial data (presented
at the Annual Meeting of the American Society of Hematology) demonstrates the drug to be safe and well tolerated
at the highest dose level tested to date (3x107). It also shows early efficacy signals, including prolonged survival in
both AML and MM patients.

In November, the Belgian Regulatory Authorities approved the initiation of the CAR-T NKR-2 THINK trial in Belgium.
THINK (THerapeutic Immunotherapy with NKR-2) is a multinational open-label Phase Ib study aimed to assess the
safety and clinical activity of multiple administrations of autologous NKR-2 T-cells in seven refractory cancers
including five solid tumors (colorectal, ovarian, bladder, triple-negative breast and pancreatic cancers) and two
hematological tumors (acute myeloid leukemia and multiple myeloma).

Clinical Developments in Cardiology – C-Cure®

In June, we reported the CHART-1 9-month primary endpoint data release. Results for the CHART-1 European
Phase III clinical trial evaluating C-Cure® cell therapy did not met the primary endpoint. However, a statistically
significant trend was observed in a subset representing 60% of the population of the CHART-1 study (baseline End
Diastolic Volume (EDV) segmentation) for which primary endpoint was met (p=0.015)

•

Corporate and financial highlights

Corporate

bodies.

•

Finance

• Appointment of ten leading international immuno-oncology experts to the Scientific Advisory Board of the

Company, as well as senior executives and director in Belgium and in the U.S. to strengthen the Group managing

Resignation of Prof. William Wijns and Mr. Danny Wong from the Celyad’s Board of Directors.

• ONO Pharmaceutical total deal value of up to 31.325 JPY B (€282 million or $311.5 million) plus double digit royalties

on net sales in ONO territories (Japan, Korea and Taiwan).

• Cash and short term deposit of €82.6 million as of 31 December 2016.

1.2 Significant events post balance sheet date

The following significant event occurred post 31 December 2016:

• USPTO decided to uphold Celyad’s U.S. Patent No. 9.181.527, relating to allogeneic human primary T-cells that are

engineered to be TCR-deficient and express a CAR. Celyad’s U.S. patent (No. 9,181,527), and more precisely claim 1

of the said patent, was challenged by an anonymous third party through an Ex Parte Re-examination procedure. The

request for Ex Parte Re-examination was filed on February 10th, 2016 and an order granting Ex Parte Re-examination

of claim 1 was issued by the USPTO on March 24th, 2016. The final decision of this Ex Parte procedure that was

issued on January 6th, 2017 is not subject to appeal and upholds the validity of the patent.

1.3 Operating review

We are a leader in engineered cell-based therapieswith clinical programs initially targeting indications in oncology. Our lead

drug product candidate in oncology is CAR-T NKR-2, an autologous Chimeric Antigen Receptor T-lymphocyte, or CAR T-

cell, therapy using an innate occurring Natural Killer (NK) receptor that recognizes and binds ligands that are expressed in

both hematological and solid tumors.

Currently, all of our current clinical stage product candidates are autologous cell therapy treatments. In autologous

procedures, a patient’s cells are harvested, selected, reprogrammed and expanded, and then infused back into the same

patient. A benefit of autologous therapies is that autologous cells are not recognized as foreign by patients’ immune

systems, therefore not rejected by the patient’s body. We believe that we are well positioned to effectively advance

autologous cell therapy for cancer treatment based on our expertise and know-how acquired through the development of

our former cardiovascular asset, C-Cure.

Beside CAR-T NKR-2, we have two other autologous assets that are currently in preclinical development: CAR-T NKR-3 (a

CAR-T construct using the Natural Killer receptor NKp30) and CAR-T B7H6 (a specific ligand for the NK cell-activating

receptor NKp30).

We are also developing an allogeneic approach in oncology, using the US-patented technology invented at Darmouth

College and acquired from Celdara Medical. Our allogeneic platform is based on engineered TCR Inhibitory Molecules (TIMs)

allowing the T-cells of donors to persist when injected into patients. This promising platform is currently in preclinical

development and includes the same assets than our autologous clinical and preclinical programs: CAR-T NKR-2, CAR-T

NKR-3 and CAR-T B7H6.

Immuno-oncology platform

The CAR-T NKR-2 program achieved significant progress during 2016. We successfully completed our Phase I single

administration, dose-escalation trial investigating the safety and feasibility of autologous CAR-T NKR-2 cells in AML and MM

patients. No dose limiting toxicities have been reported so far and first unexpected signs of clinical activity (such as

improvement of certain blood parameters and no disease progression) were observed in both AML and MM patients, while

the dose tested was below the efficacious dose tested in murine models.

Upon this successful completion, Celyad has submitted a request to the Belgian Regulatory Authorities to initiate the CAR-T

NKR-2 THINK trial, a Phase Ib multinational, open-label, multiple-dose escalation study assessing the safety and clinical

activity of CAR-T NKR-2 cells in seven cancer indications, both solid (bladder, colorectal, ovarian, triple-negative breast,

pancreatic) and hematological (MM, AML). The Authorities approved our request and the THINK trial was initiated in Belgium,

at Institut Bordet and Cliniques Universitaires St-Luc in early January 2017. First results of this open-label study are

expected all throughout 2017.

The Company also fostered its resources to support the immuno-oncology program with the signature of strategic

collaboration agreements with first-class academic and industrial players in Europe and in Asia: Institut Curie in France and

ONO Pharmaceutical Co., Ltd., in Japan.

On the manufacturing side, the Belgian Authorities approved the production of our CAR-T NKR-2 cells in our GMP facility

(Good Manufacturing Practices) located in Mont-Saint-Guibert. For redundancy purposes, we plan to validate soon another

production facility in one of the US clinical centers participating to our THINK trial.

Cardiovascular platform

CELYAD • FINANCIAL RESULTS 2016

1. REPORT OF THE BOARD OF DIRECTORS TO THE SHAREHOLDERS FOR THE

FINANCIAL YEAR ENDING 31 DECEMBER 2016

Dear Shareholders,

We are glad to present you our 2016 annual report related to Celyad consolidated financial statements as of 31 December

2016 prepared in accordance with International Financing Reporting Standards (IFRS) as endorsed by the European Union.

The companies included in the consolidated financial statements are Celyad SA, Biological Manufacturing Services SA,

Celyad Inc, Oncyte LLC and CorQuest Medical Inc.

1.1 Highlights of 2016

2016 was a challenging year for Celyad, with the implementation of the strategic move to immuno-oncology and the

digestion of the CHART-1 data in our cardiovascular program. In April 2016, the Company decided to focus all its ressources

on its immuno-oncology programs and to continue the development of C-Cure with a partner.

On an operational side, we successfully completed the CM-CS1 trial, the first clinical trial using our CAR-T NKR-2 cells in

relapse refractory patients suffering from Acute Myolid Leukemia (AML) or Multiple Myeloma (MM). No safety issues were

reported and first unexpected signs of clinical activity were observed in both AML and MM patients, despite the low doses

On a financing side, thanks to the IPO made on Nasdaq in June 2015, we have a comfortable cash position at year end 2016

with more than EUR 82 million in treasury. This should enable the Company to finance all its clinical programs and other

Here are the operational and financial highlights of 2016 identified by the Board:

infused.

needs until mid 2019.

Operational highlights

Clinical Developments in Oncology

•

In March, we substantially strengthened our allogeneic intellectual property portfolio with the granting by the

USPTO of the US PatentNo 9.273.283. This patent provides Celyad with broad protection for its proprietary

method of producing allogeneic human T-cells that are engineered to be T-Cell Receptor (TCR)-deficient and

express a Chimeric Antigen Receptor (CAR).

Still in March, we signed a strategic collaboration agreement with Institut Curie’s Immunity Cancer Unit (Paris,

France) for the development of the immuno-oncology program. The partnership will build on Institut Curie’s first-

in-class expertise and state-of-the-art translational, preclinical and clinical know-how in cancer biology and

immunology.

In July, we announced the signing of an exclusive licensing agreement with leading Japanese immuno-oncology

company, ONO Pharmaceutical Co. Ltd., for the development and commercialization of Celyad’s allogeneic CAR-T

NKR-2 immunotherapy in Japan, Korea and Taiwan. Celyad also granted to ONO an exclusive option to license its

autologous NKR-2 T cell product in the above ONO territories. Total deal value of up to 31.325 JPY B (€282 million

or $311.5 million) plus double digit royalties on net sales in ONO territories.

In September, we completed the CAR-T NKR-2 Phase I trial with successful safety follow-up of all the dose level

cohorts. No safety or toxicity issues were reported after the 21-day safety follow-up of the last patient enrolled in

the fourth dose level cohort in its Phase I clinical trial – a study evaluating the safety and feasibility of its NKR-2 T-

cell therapy in Acute Myeloid Leukemia (AML) and Multiple Myeloma (MM) patients. The Phase I trial data (presented

at the Annual Meeting of the American Society of Hematology) demonstrates the drug to be safe and well tolerated

at the highest dose level tested to date (3x107). It also shows early efficacy signals, including prolonged survival in

both AML and MM patients.

In November, the Belgian Regulatory Authorities approved the initiation of the CAR-T NKR-2 THINK trial in Belgium.

THINK (THerapeutic Immunotherapy with NKR-2) is a multinational open-label Phase Ib study aimed to assess the

safety and clinical activity of multiple administrations of autologous NKR-2 T-cells in seven refractory cancers

including five solid tumors (colorectal, ovarian, bladder, triple-negative breast and pancreatic cancers) and two

hematological tumors (acute myeloid leukemia and multiple myeloma).

Clinical Developments in Cardiology – C-Cure®

In June, we reported the CHART-1 9-month primary endpoint data release. Results for the CHART-1 European

Phase III clinical trial evaluating C-Cure® cell therapy did not met the primary endpoint. However, a statistically

significant trend was observed in a subset representing 60% of the population of the CHART-1 study (baseline End

Diastolic Volume (EDV) segmentation) for which primary endpoint was met (p=0.015)

Corporate and financial highlights

Corporate

• Appointment of ten leading international immuno-oncology experts to the Scientific Advisory Board of the
Company, as well as senior executives and director in Belgium and in the U.S. to strengthen the Group managing
bodies.

Resignation of Prof. William Wijns and Mr. Danny Wong from the Celyad’s Board of Directors.

•

Finance

• ONO Pharmaceutical total deal value of up to 31.325 JPY B (€282 million or $311.5 million) plus double digit royalties

on net sales in ONO territories (Japan, Korea and Taiwan).

• Cash and short term deposit of €82.6 million as of 31 December 2016.

1.2 Significant events post balance sheet date

The following significant event occurred post 31 December 2016:

• USPTO decided to uphold Celyad’s U.S. Patent No. 9.181.527, relating to allogeneic human primary T-cells that are
engineered to be TCR-deficient and express a CAR. Celyad’s U.S. patent (No. 9,181,527), and more precisely claim 1
of the said patent, was challenged by an anonymous third party through an Ex Parte Re-examination procedure. The
request for Ex Parte Re-examination was filed on February 10th, 2016 and an order granting Ex Parte Re-examination
of claim 1 was issued by the USPTO on March 24th, 2016. The final decision of this Ex Parte procedure that was
issued on January 6th, 2017 is not subject to appeal and upholds the validity of the patent.

1.3 Operating review

We are a leader in engineered cell-based therapieswith clinical programs initially targeting indications in oncology. Our lead
drug product candidate in oncology is CAR-T NKR-2, an autologous Chimeric Antigen Receptor T-lymphocyte, or CAR T-
cell, therapy using an innate occurring Natural Killer (NK) receptor that recognizes and binds ligands that are expressed in
both hematological and solid tumors.

Currently, all of our current clinical stage product candidates are autologous cell therapy treatments. In autologous
procedures, a patient’s cells are harvested, selected, reprogrammed and expanded, and then infused back into the same
patient. A benefit of autologous therapies is that autologous cells are not recognized as foreign by patients’ immune
systems, therefore not rejected by the patient’s body. We believe that we are well positioned to effectively advance
autologous cell therapy for cancer treatment based on our expertise and know-how acquired through the development of
our former cardiovascular asset, C-Cure.

Beside CAR-T NKR-2, we have two other autologous assets that are currently in preclinical development: CAR-T NKR-3 (a
CAR-T construct using the Natural Killer receptor NKp30) and CAR-T B7H6 (a specific ligand for the NK cell-activating
receptor NKp30).

We are also developing an allogeneic approach in oncology, using the US-patented technology invented at Darmouth
College and acquired from Celdara Medical. Our allogeneic platform is based on engineered TCR Inhibitory Molecules (TIMs)
allowing the T-cells of donors to persist when injected into patients. This promising platform is currently in preclinical
development and includes the same assets than our autologous clinical and preclinical programs: CAR-T NKR-2, CAR-T
NKR-3 and CAR-T B7H6.
Immuno-oncology platform

The CAR-T NKR-2 program achieved significant progress during 2016. We successfully completed our Phase I single
administration, dose-escalation trial investigating the safety and feasibility of autologous CAR-T NKR-2 cells in AML and MM
patients. No dose limiting toxicities have been reported so far and first unexpected signs of clinical activity (such as
improvement of certain blood parameters and no disease progression) were observed in both AML and MM patients, while
the dose tested was below the efficacious dose tested in murine models.

Upon this successful completion, Celyad has submitted a request to the Belgian Regulatory Authorities to initiate the CAR-T
NKR-2 THINK trial, a Phase Ib multinational, open-label, multiple-dose escalation study assessing the safety and clinical
activity of CAR-T NKR-2 cells in seven cancer indications, both solid (bladder, colorectal, ovarian, triple-negative breast,
pancreatic) and hematological (MM, AML). The Authorities approved our request and the THINK trial was initiated in Belgium,
at Institut Bordet and Cliniques Universitaires St-Luc in early January 2017. First results of this open-label study are
expected all throughout 2017.

The Company also fostered its resources to support the immuno-oncology program with the signature of strategic
collaboration agreements with first-class academic and industrial players in Europe and in Asia: Institut Curie in France and
ONO Pharmaceutical Co., Ltd., in Japan.

On the manufacturing side, the Belgian Authorities approved the production of our CAR-T NKR-2 cells in our GMP facility
(Good Manufacturing Practices) located in Mont-Saint-Guibert. For redundancy purposes, we plan to validate soon another
production facility in one of the US clinical centers participating to our THINK trial.
Cardiovascular platform

CELYAD • FINANCIAL RESULTS 2016

CHART-1 trial completed

The innovative cardiopoiesis technology invented at the Mayo Clinic (US) has been the foundation of the C-Cure® product
candidate developed over the last ten years to treat ischemic heart failure. Following the C-Cure® Phase II trial, Celyad has
carried out CHART-1, the first randomized, double-blinded, controlled, Phase III cell therapy study in heart failure. Results
released in June 2016 have indicated that the trial was neutral with a positive trend effect, consistent across all parameters
tested for a substantial definable group of heart failure patients. Although the primary endpoint of the randomized trial was
not met, among the entire CHART-1 patient population, we observed a significant reduction in Left ventricular (LV) end
diastolic volume (EDV) (p= 0.0044) and LV end diastolic volume (ESV) (p = 0.0154), indicative of therapeutic remodeling in the
heart of patients that received the treatment.

Further, a well-defined subset of patients - representing more than 60% of the overall trial population defined by their Left
Ventricular End Diastolic Volume - that achieved a clinically meaningful response was identified, did meet the trial primary
endpoint of the trial with a P value of 0.015.

Based on the results of the CHART-1 trial, a US trial, or CHART-2, has been designed to exclusively enroll the subset of
patients that met the trial primary endpoint of the CHART-1 trial.

CHART-2

Furthermore, CHART-2 will incorporate efficacious dosing regimens observed in CHART-1, stringent medical personnel
training, and a new FDA-agreed primary endpoint based on CHART-1 results. Today CHART-2 is approved by FDA and the
study is ready to be initiated.

Celyad is currently seeking partners to further develop and commercialize C-Cure®. An exclusive mandate was given to Piper
Jaffray & Co. to explore strategic alternatives relating to its C-Cure® cardiovascular assets.

Strengthening of operational capabilities with additions to the team

All along 2016, we strengthened the management teams to support the Group in its ambitions to become a global leader in
specialty therapeutics and reinforce its position in oncology with the appointment of Dr. David Gilham as VP Research &
Development and Philippe Dechamps as Chief Legal Officer.
1.4 Financial review of the year ending 31 December 2016

1.4.1 Analysis of the consolidated statement of the comprehensive loss

The following table includes information relating to the Group’s statement of comprehensive income for the years ended 31
December 2016 and 2015.

(€’000)

Revenues
Cost of Sales

Gross profit

Research and Development expenses

General and administrative expenses

Other operating income

Operating Loss

Financial income

Financial expenses

Share of Loss of investment accounted for using the equity method

Loss before taxes

Income taxes

Loss for the year
Losses per share (in €) [1]
Basic and diluted

Other comprehensive lncome

Items that will not be reclassified to profit and loss

Remeasurements of post employment benefit obligations, net of

Items that may be subsequently reclassified to profit or loss

tax

Currency translation differences

Other comprehensive loss for the year, net of tax

Total comprehensive loss for the year

Total Comprehensive loss for the year attributable to Equity

Holders

For the 12 months period ended 31 December
2015
2016

8,523
(53)

8,471

(27,675)

(9,744)

3,340

(25,609)

2,204

(207)

(23,612)

(23,606)

(2.53)
(2.53)

(107)

277

170

(23,436)

3
(1)

(22,766)

(7,230)

322

(29,672)

542

(236)

252

(29,114)

(3.43)
(3.43)

485

501

(28,613)

[1]

Basic and diluted net loss per share is the same in these periods because outstanding warrants would be anti-dilutive due to our net loss in these
periods.

performance obligations nor subsequent deliverables associated to the payment. The non-refundable upfront payment was

rather received as a consideration for the sale of licence to ONO. In 2016, the total revenue generated with C-Cathez

amounted to €84,000 compared to €3,500 in 2015. There are no recurring sales generated yet by this device.

The Research and Development expenses include manufacturing, clinical, quality, IP and regulatory expenses and other

research and development expenses, which are aggregated and presented as a single line in our consolidated financial

statements.

T NKR platform.

•

Overall, the research and development expenses increased in 2016 by €4.9 million. This increase reflects our focus on

immuno-oncology as for the first year, research and development expenses of the oncology franchise exceed expenses of

the cardiology franchise. Major items explaining this increase are the Service Research Agreement with Celdara, the

expenses related to the process development and scale-up initiatives of CAR-T NKR-2 and the preclinical work on the CAR-

The key projects driving the increase of the research and development expenses in 2016 were:

The costs of running CM-CS1, THINK and CHART-1 trial, totaling €10.3 million

The preclinical studies conducted on our CAR-T NKR product candidates in bot autologous and allogeniec settings

for €4.7 million

The scale-up and automation projects of both C-Cure and CAR-T NKR-2 therapies in view of preparing for future

commercialization, totaling €4.2 million

The preclinical studies performed on the Corquest platform for €1.0 million

The remaining research and development expenses corresponded to the recurrent costs of the departments, mainly

salaries, IP filing and maintenance and depreciation.

Research and development expenses are expected to grow in the near future with the further development of the CAR-T

NKR platform.

General and administrative expenses increased by €2.5 million at €9.7 million in 2016 as compared to €7.2 million in 2015, this

increase relates primarily to the P&L impact of the share-based payments associated with the Group warrant plans granted

to new employees, members of the executive management team and directors. In 2016, the share-based payments

amounted to €2.8 million (was €0.8 million in 2015).

The Group’s current operating income is generated from government grants received from the European Commission under

the Seventh Framework Program (“FP7”) and government grants received from the Regional government in the form of

recoverable cash advances (RCAs). In 2016, the net amount of the other operating income and expenses increased by €3.0

million. This variance resulted mainly from the amounts received from RCA’s and FP7 contracts and the valuation of the

RCA’s at fair value. Funding received and notification of funding from RCA and FP7 contracts amounted to €3.1 million in

The 2016 financial income & charges cover interest received on cash deposits, currency exchange rates differences and bank

charges. Interest income on short term deposits amounted to €1.4 million end of 2016, an increase of €1.0 million compared

At year end 2016, the loss from operations before financial results and taxes (EBIT) amounted to €25.6 million versus €29.7

million in 2015. The net loss for the period was €23.6 million versus a net loss of €29.1 million for same period in 2015.

1.4.2 Analysis of the consolidated statement of financial position

The table below sets forth the balance sheet as of 31 December 2016 and 31 December 2015.

2016.

to 2015.

(€’000)

As of 31 December

2016

2015

NON-CURRENT ASSETS

Intangible assets

Property, Plant and Equipment

Other non-current assets

CURRENT ASSETS

Trade and Other Receivables

Grand receivables

Other current assets

Short term investment

Cash and cash equivalents

TOTAL ASSETS

EQUITY

Share Capital

Share premium

Other reserves

Retained loss

NON-CURRENT LIABILITIES

53,440

49,566

3,563

311

85,367

1,359

1,420

34,230

48,357

138,806

90,885

32,571

158,010

24,329

(124,026)

36,646

50,105

48,789

1,136

180

109,419

549

104

1,254

7,338

100,175

159,525

111,473

32,571

158,010

21,205

(100,313)

36,562

CELYAD • FINANCIAL RESULTS 2016

CHART-1 trial completed

The innovative cardiopoiesis technology invented at the Mayo Clinic (US) has been the foundation of the C-Cure® product

candidate developed over the last ten years to treat ischemic heart failure. Following the C-Cure® Phase II trial, Celyad has

carried out CHART-1, the first randomized, double-blinded, controlled, Phase III cell therapy study in heart failure. Results

released in June 2016 have indicated that the trial was neutral with a positive trend effect, consistent across all parameters

tested for a substantial definable group of heart failure patients. Although the primary endpoint of the randomized trial was

not met, among the entire CHART-1 patient population, we observed a significant reduction in Left ventricular (LV) end

diastolic volume (EDV) (p= 0.0044) and LV end diastolic volume (ESV) (p = 0.0154), indicative of therapeutic remodeling in the

heart of patients that received the treatment.

Further, a well-defined subset of patients - representing more than 60% of the overall trial population defined by their Left

Ventricular End Diastolic Volume - that achieved a clinically meaningful response was identified, did meet the trial primary

endpoint of the trial with a P value of 0.015.

Based on the results of the CHART-1 trial, a US trial, or CHART-2, has been designed to exclusively enroll the subset of

patients that met the trial primary endpoint of the CHART-1 trial.

CHART-2

study is ready to be initiated.

Furthermore, CHART-2 will incorporate efficacious dosing regimens observed in CHART-1, stringent medical personnel

training, and a new FDA-agreed primary endpoint based on CHART-1 results. Today CHART-2 is approved by FDA and the

Celyad is currently seeking partners to further develop and commercialize C-Cure®. An exclusive mandate was given to Piper

Jaffray & Co. to explore strategic alternatives relating to its C-Cure® cardiovascular assets.

Strengthening of operational capabilities with additions to the team

All along 2016, we strengthened the management teams to support the Group in its ambitions to become a global leader in

specialty therapeutics and reinforce its position in oncology with the appointment of Dr. David Gilham as VP Research &

Development and Philippe Dechamps as Chief Legal Officer.

1.4 Financial review of the year ending 31 December 2016

1.4.1 Analysis of the consolidated statement of the comprehensive loss

The following table includes information relating to the Group’s statement of comprehensive income for the years ended 31

December 2016 and 2015.

For the 12 months period ended 31 December

2016

2015

(€’000)

Revenues

Cost of Sales

Gross profit

Research and Development expenses

General and administrative expenses

Other operating income

Operating Loss

Financial income

Financial expenses

Loss before taxes

Income taxes

Loss for the year

Losses per share (in €) [1]

Basic and diluted

Other comprehensive lncome

Share of Loss of investment accounted for using the equity method

Items that will not be reclassified to profit and loss

Remeasurements of post employment benefit obligations, net of

Items that may be subsequently reclassified to profit or loss

tax

Currency translation differences

Other comprehensive loss for the year, net of tax

Total comprehensive loss for the year

Total Comprehensive loss for the year attributable to Equity

Holders

periods.

8,523

(53)

8,471

(27,675)

(9,744)

3,340

(25,609)

2,204

(207)

(23,612)

(23,606)

(2.53)

(107)

277

170

(23,436)

(1)

(22,766)

(7,230)

322

(29,672)

542

(236)

252

(29,114)

(3.43)

485

501

(28,613)

[1]

Basic and diluted net loss per share is the same in these periods because outstanding warrants would be anti-dilutive due to our net loss in these

Total revenues increased by €8.5 million over 2016. In August 2016, the Group has received a non-refundable upfront

payment as a result of the ONO agreement. This upfront payment has been fully recognised upon receipt as there are no

performance obligations nor subsequent deliverables associated to the payment. The non-refundable upfront payment was
rather received as a consideration for the sale of licence to ONO. In 2016, the total revenue generated with C-Cathez
amounted to €84,000 compared to €3,500 in 2015. There are no recurring sales generated yet by this device.

The Research and Development expenses include manufacturing, clinical, quality, IP and regulatory expenses and other
research and development expenses, which are aggregated and presented as a single line in our consolidated financial
statements.

Overall, the research and development expenses increased in 2016 by €4.9 million. This increase reflects our focus on
immuno-oncology as for the first year, research and development expenses of the oncology franchise exceed expenses of
the cardiology franchise. Major items explaining this increase are the Service Research Agreement with Celdara, the
expenses related to the process development and scale-up initiatives of CAR-T NKR-2 and the preclinical work on the CAR-
T NKR platform.

The key projects driving the increase of the research and development expenses in 2016 were:

•

The costs of running CM-CS1, THINK and CHART-1 trial, totaling €10.3 million

The preclinical studies conducted on our CAR-T NKR product candidates in bot autologous and allogeniec settings
for €4.7 million

The scale-up and automation projects of both C-Cure and CAR-T NKR-2 therapies in view of preparing for future
commercialization, totaling €4.2 million

The preclinical studies performed on the Corquest platform for €1.0 million

The remaining research and development expenses corresponded to the recurrent costs of the departments, mainly
salaries, IP filing and maintenance and depreciation.

Research and development expenses are expected to grow in the near future with the further development of the CAR-T
NKR platform.

General and administrative expenses increased by €2.5 million at €9.7 million in 2016 as compared to €7.2 million in 2015, this
increase relates primarily to the P&L impact of the share-based payments associated with the Group warrant plans granted
to new employees, members of the executive management team and directors. In 2016, the share-based payments
amounted to €2.8 million (was €0.8 million in 2015).

The Group’s current operating income is generated from government grants received from the European Commission under
the Seventh Framework Program (“FP7”) and government grants received from the Regional government in the form of
recoverable cash advances (RCAs). In 2016, the net amount of the other operating income and expenses increased by €3.0
million. This variance resulted mainly from the amounts received from RCA’s and FP7 contracts and the valuation of the
RCA’s at fair value. Funding received and notification of funding from RCA and FP7 contracts amounted to €3.1 million in
2016.

The 2016 financial income & charges cover interest received on cash deposits, currency exchange rates differences and bank
charges. Interest income on short term deposits amounted to €1.4 million end of 2016, an increase of €1.0 million compared
to 2015.

At year end 2016, the loss from operations before financial results and taxes (EBIT) amounted to €25.6 million versus €29.7
million in 2015. The net loss for the period was €23.6 million versus a net loss of €29.1 million for same period in 2015.

1.4.2 Analysis of the consolidated statement of financial position

The table below sets forth the balance sheet as of 31 December 2016 and 31 December 2015.

(€’000)

NON-CURRENT ASSETS
Intangible assets

Property, Plant and Equipment

Other non-current assets

CURRENT ASSETS

Trade and Other Receivables

Grand receivables

Other current assets

Short term investment

Cash and cash equivalents

TOTAL ASSETS

EQUITY

Share Capital

Share premium

Other reserves

Retained loss

NON-CURRENT LIABILITIES

As of 31 December

2016

2015

53,440
49,566

3,563

311

85,367

1,359

1,420

34,230

48,357

138,806

90,885
32,571

158,010

24,329

(124,026)

36,646

50,105
48,789

1,136

180

109,419

549

104

1,254

7,338

100,175

159,525

111,473
32,571

158,010

21,205

(100,313)

36,562

CELYAD • FINANCIAL RESULTS 2016

1.10 Events and circumstances that could have a significant impact on the future

We have not identified significant events and circumstances that could have a significant impact on the future in addition to

the potential impact of risks described in section 7 of chapter 2: "Description of the principal risks associated to the activities

of the Group".

1.11 Other

Issuance of new warrants

On 12 December 2016, the Board of Directors issued a new plan of 100,000 warrants. Warrants were and will be offered to

Group’s non-employees in several tranches. As of 31 December 2016, none of these warrants were effectively granted as

the acceptance period of the first tranche has ended on 10 February 2017. As of the date of this report, out of the warrants

offered, 30,000 warrants were accepted by the beneficiaries and 70,000 remaining warrants available for further distribution

on the date hereof.

The 100,000 warrants will be vested in equal tranches over a period of three years. The warrants become 100% vested after

the third anniversary following the grant. The warrants that are vested can only be exercised at the end of the third calendar

year following the issuance date, thus starting on 1 January 2020.

This new plan does not create any additional dilution for the shareholders as an equivalent number of warrants were

cancelled from the previous plan issued on 5 November 2015.

(€’000)

Bank loans

Finance leases

Advances repayable

Contingent liabilities

Post employment benefits

Other non-current liabilities

CURRENT LIABILITIES

Bank loans

Finance leases

Advances repayable

Trade payables

Other current liabilities

TOTAL EQUITY AND LIABILITIES

As of 31 December

2016

2015

536

381

7,330

28,179

204

11,275

207

354

1,108

8,098

1,508

138,806

427

10,484

25,529

121

11,490

248

898

8,576

1,768

159,525

There was no major transaction made in 2016, hence no major variances in the consolidated statement of financial position
of the Group. The cash position of the Group at year end 2016 amounted to €82.6 million. The net burn rate of the Group
over 2016 was €24.9 million.

The increase on the tangible assets resulted from the acquisition of Biological Manaufacturing Services SA (GMP
laboratories) and the leasehold improvements made in our new corporate offices.

There was no capital increase in 2016. On 31 December 2016, the share capital of Celyad amounted to €32.6 million
represented by 9,313,603 shares.

We have incurred a bank debt over 2016 to partially finance the leasehold improvements made in our corporate offices. The
remaining capital expenditures were mostly financed with 3-years maturity finance leases.

The increase of the non-current liabilities resulted primarly from the fair value valuation of the contingent liabilities
associated to the purchase of the CAR-T NKR platform and the RCA’s.

We do not capitalize our research and development expenses until marketing authorization. As of end of 2016, all clinical,
research and development expenses related to the development of C-Cure and CAR-T NKR-2 are accounted for as
operating expenses.
1.5 Personnel

At the end of 2016, the Group had 79 employees (FTE) and 6 senior managers under management services agreement.
1.6 Environment

All entities of the Group continue to hold the required permits by their activities and are in compliance with all applicable
environmental rules.
1.7 Risks and uncertainties

Reference is made to section 2.7 Description of the principal risks associated to the activities of the Group".
1.8 Going concern

The Group is pursuing a strategy to develop therapies to treat unmet medical needs in both cardiology and oncology.
Management has prepared detailed budgets and cash flow forecasts for the years 2017 and 2018. These forecasts reflect
the strategy of the Group and include significant expenses and cash outflows in relation to the development of selected
research programs and products candidates.

Based on its current scope of activities, the Group estimates its cash position as of 31 December 2016 (including short term
investments) is sufficient to cover its cash requirements until mid of 2019, therefore until the readout of the CAR-T NKR-2
T-cells THINK trial. After due consideration of the above, the Board of Directors determined that management has an
appropriate basis to conclude on the continuity over the next 12 months of the Group’s business and hence it is appropriate
to prepare the financial statements on a going concern basis.
1.9 Event occurred after the end of the financial year

Over the month of January 2017, a total of 207,250 warrants issued in May 2013 were exercised by some employees and
members of the management team. As a result, 207,250 new shares were issued and the capital of the Company was
increased by an amount of k€547, bringing the capital of Celyad SA to k€33,118 on February 1st 2017.

In February 2017, consultants accepted in total 20,000 warrants offered in December 2016. These warrants are part of the
100,000 warrants issued by the Board of Directors held on 12 December 2016. These warrants will be vested over 2017, 2018
and 2019 and may become exercisable as early as January 2020.

CELYAD • FINANCIAL RESULTS 2016

(€’000)

Bank loans

Finance leases

Advances repayable

Contingent liabilities

Post employment benefits

Other non-current liabilities

CURRENT LIABILITIES

Bank loans

Finance leases

Advances repayable

Trade payables

Other current liabilities

TOTAL EQUITY AND LIABILITIES

As of 31 December

2016

2015

536

381

7,330

28,179

204

11,275

207

354

1,108

8,098

1,508

138,806

427

10,484

25,529

121

11,490

248

898

8,576

1,768

159,525

There was no major transaction made in 2016, hence no major variances in the consolidated statement of financial position

of the Group. The cash position of the Group at year end 2016 amounted to €82.6 million. The net burn rate of the Group

over 2016 was €24.9 million.

The increase on the tangible assets resulted from the acquisition of Biological Manaufacturing Services SA (GMP

laboratories) and the leasehold improvements made in our new corporate offices.

There was no capital increase in 2016. On 31 December 2016, the share capital of Celyad amounted to €32.6 million

represented by 9,313,603 shares.

We have incurred a bank debt over 2016 to partially finance the leasehold improvements made in our corporate offices. The

remaining capital expenditures were mostly financed with 3-years maturity finance leases.

The increase of the non-current liabilities resulted primarly from the fair value valuation of the contingent liabilities

associated to the purchase of the CAR-T NKR platform and the RCA’s.

We do not capitalize our research and development expenses until marketing authorization. As of end of 2016, all clinical,

research and development expenses related to the development of C-Cure and CAR-T NKR-2 are accounted for as

operating expenses.

1.5 Personnel

1.6 Environment

environmental rules.

1.7 Risks and uncertainties

1.8 Going concern

At the end of 2016, the Group had 79 employees (FTE) and 6 senior managers under management services agreement.

All entities of the Group continue to hold the required permits by their activities and are in compliance with all applicable

Reference is made to section 2.7 Description of the principal risks associated to the activities of the Group".

The Group is pursuing a strategy to develop therapies to treat unmet medical needs in both cardiology and oncology.

Management has prepared detailed budgets and cash flow forecasts for the years 2017 and 2018. These forecasts reflect

the strategy of the Group and include significant expenses and cash outflows in relation to the development of selected

research programs and products candidates.

Based on its current scope of activities, the Group estimates its cash position as of 31 December 2016 (including short term

investments) is sufficient to cover its cash requirements until mid of 2019, therefore until the readout of the CAR-T NKR-2

T-cells THINK trial. After due consideration of the above, the Board of Directors determined that management has an

appropriate basis to conclude on the continuity over the next 12 months of the Group’s business and hence it is appropriate

to prepare the financial statements on a going concern basis.

1.9 Event occurred after the end of the financial year

Over the month of January 2017, a total of 207,250 warrants issued in May 2013 were exercised by some employees and

members of the management team. As a result, 207,250 new shares were issued and the capital of the Company was

increased by an amount of k€547, bringing the capital of Celyad SA to k€33,118 on February 1st 2017.

In February 2017, consultants accepted in total 20,000 warrants offered in December 2016. These warrants are part of the

100,000 warrants issued by the Board of Directors held on 12 December 2016. These warrants will be vested over 2017, 2018

and 2019 and may become exercisable as early as January 2020.

1.10 Events and circumstances that could have a significant impact on the future

We have not identified significant events and circumstances that could have a significant impact on the future in addition to
the potential impact of risks described in section 7 of chapter 2: "Description of the principal risks associated to the activities
of the Group".
1.11 Other

Issuance of new warrants

On 12 December 2016, the Board of Directors issued a new plan of 100,000 warrants. Warrants were and will be offered to
Group’s non-employees in several tranches. As of 31 December 2016, none of these warrants were effectively granted as
the acceptance period of the first tranche has ended on 10 February 2017. As of the date of this report, out of the warrants
offered, 30,000 warrants were accepted by the beneficiaries and 70,000 remaining warrants available for further distribution
on the date hereof.

The 100,000 warrants will be vested in equal tranches over a period of three years. The warrants become 100% vested after
the third anniversary following the grant. The warrants that are vested can only be exercised at the end of the third calendar
year following the issuance date, thus starting on 1 January 2020.

This new plan does not create any additional dilution for the shareholders as an equivalent number of warrants were
cancelled from the previous plan issued on 5 November 2015.

CELYAD • FINANCIAL RESULTS 2016

2. CORPORATE GOVERNANCE

2.1

General

This section summarises the rules and principles on the basis of which the corporate governance of the Company has been
organised pursuant to Belgian Company law, the Company's articles of association and the Company's corporate
governance charter approved by the Board of Directors of 17 June 2013, as amended subsequently (i) by resolution of the
Board of Directors of 12 June 2015 and (ii) by resolution of the Board of Directors of 8 December 2016.

The Company's corporate governance charter has been adopted in accordance with the Belgian Corporate Governance
Code (‘CGC’), which is available on the following website: http://www.corporategovernancecommittee.be/en/about-2009-
code/2009-belgian-code-corporate-governance. The charter is available on the Company’s website (www.celyad.com)
under Investors/Corporate Governance tab. We will present in this section an abstract of the charter.

The Board of Directors intends to comply with the provisions of the CGC, but believes that the size of the Company justifies
certain deviations. These deviations are further detailed here after.

The Company’s CGC includes the following specific chapters:

Chris Buyse

Independent

2020

Baillet Latourlei 119A,

•

Structure and organization

Shareholder structure

The Board, terms of reference

Board committees

Executive Management Team

Rules preventing market abuse – Dealing Code

• Code of Ethics and Business Conduct

2.2

Board of Directors

2.2.1. Composition of the Board of Directors

As provided by Article 521 of the Belgian Company Code, the Company is managed by a Board of Directors acting as a
collegiate body. The Board of Directors' role is to pursue the long-term success of the Company by providing
entrepreneurial leadership and enabling risks to be assessed and managed. The Board of Directors should decide on the
Company's values and strategy, its risk preference and key policies. The Board of Directors should ensure that the necessary
leadership, financial and human resources are in place for the Company to meet its objectives.

The Company has opted for a one-tier governance structure. As provided by Article 522 of the Belgian Company Code, the
Board of Directors is the ultimate decision-making body in the Company, except with respect to those areas that are
reserved by law or by the Company's articles of association to the Shareholders Meeting.

The Company's articles of association state that the number of directors of the Company, who may be natural persons or
legal entities and who need not be shareholders, must be at least 5. At least half of the members of the Board of Directors
must be non-executive directors and at least three of them must be independent directors.

A meeting of the Board of Directors is validly constituted if at least half of its members are present in person or represented
at the meeting. If this quorum is not met, a new board meeting may be convened by any director to deliberate and decide on
the matters on the agenda of the board meeting for which a quorum was not met, provided that at least two members are
present. Meetings of the Board of Directors are convened by the Chairman of the Board or the CFO or Chief Legal Officer, or
by at least two directors, whenever the interest of the Company so requires. In principle, the Board of Directors will meet at
least four times per year.

The Chairman of the Board of Directors shall have a casting vote on matters submitted to the Board of Directors in the event
of a tied vote, save if the Board of Directors is composed of two members.

At the date of this Report, the Board of Directors consists of 9 members, one of which is an executive director (as a member
of the Executive Management Team) and 8 of which are non-executive directors, including four independent directors. In
accordance with Art 96, §2 6° of the Belgian Company Code (hereafter “BCC”), it is the willingness of the Company to aim for,
in a reasonable timeframe, that a third of the Board member are of different sex, and actions were, are and will be taken in the
short future to reach that objective.

Name

Michel Lussier

Position

Term [1]

Business Address

Chairman

2020

3661 Valley Centre Dr.

Board Committee Membership

Member of the Nomination and

Remuneration Committee

LSS Consulting SPRL

represented by its permanent

representative Christian Homsy

Executive

director

William Wijns[2]

Non-executive

2016

Moorselbaan 219,

San Diego CA 92130,

USA

2020

Chaussée de Louvain 574A,

Serge Goblet

Non-executive

2020

Chaussée de Waterloo 1589D,

Rudy Dekeyser

Independent

2020

Klein Nazareth 12,

Debasish Roychowdhury

Independent

2019

79 Laconia Street

Member of the Nomination and

Remuneration Committee

Member of the Audit Committee

Member of the Nomination and

Remuneration Committee

Member of the Audit Committee

Chris De Jonghe

Non-executive

2017

Jan Davidlaan 50,

Member of the Audit Committee

Hanspeter Spek

Independent

2018

Square Latour Maubourg,

Member of the Nomination and

Remuneration Committee

Danny Wong[3]

Non-executive

2016

25/F Octa Tower, 8 Lam Chak

director

1380 Lasne,

Belgium

9300 Aalst,

Belgium

1180 Brussels,

Belgium

2930 Brasschaat,

Belgium

98401 De Pinte,

Belgium

Lexington

MA 02420

USA

2630 Aartselaar,

Belgium

75007 Paris,

France

Street,

Kowloon Bay,

Hong KKong

1180 Bruxelles,

Belgium

TOLEFI SA represented by its

Non-executive

2018

27 Drève de Carloo

permanent representative Serge

director

Goblet

[1]

[2]

[3]

William Wijns resigned on 1st April 2016.

Danny Wong resigned on 4 August 2016.

The term of the mandate of the director will expire immediately after the Annual Shareholders Meeting held in the year set forth next to the

director’s name, except Debasish Roychowdhury which mandate shall expire on 30 January 2019.

The following paragraphs contain brief biographies of each of the directors, or in case of legal entities being director, their

permanent representatives, with an indication of other relevant mandates as member of administrative, management or

supervisory bodies in other companies during the previous five years.

Michel Lussier has served as Chairman of the board of directors of the Company since 2007 and is also a co-founder of the

Company. Mr. Lussier was also the Chairman of the board of directors and co-founder of the Company’s predecessor entity,

Cardio3 SA, until 2008. Mr. Lussier founded Medpole Ltd, the North American satellite of MedPole SA, a European incubator

for medical technology start-up companies located in Belgium, and serves as the Chief Executive Officer for the group. In

this capacity, he is a managing director of Fjord Ventures, a Laguna Hills, California based medical technology accelerator /

incubator. Since May 2014, Mr. Lussier has served as the Chief Executive Officer of Metronom Health Inc, an early stage

medical device company created by Fjord Ventures, developing a continuous glucose monitoring system. Prior to that, from

2002 to 2013, he worked for Volcano Corporation, where he served in a number of positions, most recently as President,

Clinical and Scientific Affairs from 2012 to 2013, and prior to that from 2007 to 2012, Group President, Advanced Imaging

Systems, Global Clinical & Scientific Affairs and General Management of Europe, Africa and the Middle East. Mr. Lussier

obtained a Bachelor of Sciences degree in Electrical Engineering and Master’s degree in Biomedical Engineering at the

University of Montreal. He also holds an MBA from INSEAD (European Institute of Business Administration), France. In

addition to serving on our board of directors, he also serves on the boards of directors of several early stage medical devices

companies.

CELYAD • FINANCIAL RESULTS 2016

2. CORPORATE GOVERNANCE

2.1

General

This section summarises the rules and principles on the basis of which the corporate governance of the Company has been

organised pursuant to Belgian Company law, the Company's articles of association and the Company's corporate

governance charter approved by the Board of Directors of 17 June 2013, as amended subsequently (i) by resolution of the

Board of Directors of 12 June 2015 and (ii) by resolution of the Board of Directors of 8 December 2016.

The Company's corporate governance charter has been adopted in accordance with the Belgian Corporate Governance

Code (‘CGC’), which is available on the following website: http://www.corporategovernancecommittee.be/en/about-2009-

code/2009-belgian-code-corporate-governance. The charter is available on the Company’s website (www.celyad.com)

under Investors/Corporate Governance tab. We will present in this section an abstract of the charter.

The Board of Directors intends to comply with the provisions of the CGC, but believes that the size of the Company justifies

certain deviations. These deviations are further detailed here after.

The Company’s CGC includes the following specific chapters:

Structure and organization

Shareholder structure

The Board, terms of reference

Board committees

Executive Management Team

•

Rules preventing market abuse – Dealing Code

• Code of Ethics and Business Conduct

2.2

Board of Directors

2.2.1. Composition of the Board of Directors

As provided by Article 521 of the Belgian Company Code, the Company is managed by a Board of Directors acting as a

collegiate body. The Board of Directors' role is to pursue the long-term success of the Company by providing

entrepreneurial leadership and enabling risks to be assessed and managed. The Board of Directors should decide on the

Company's values and strategy, its risk preference and key policies. The Board of Directors should ensure that the necessary

leadership, financial and human resources are in place for the Company to meet its objectives.

The Company has opted for a one-tier governance structure. As provided by Article 522 of the Belgian Company Code, the

Board of Directors is the ultimate decision-making body in the Company, except with respect to those areas that are

reserved by law or by the Company's articles of association to the Shareholders Meeting.

The Company's articles of association state that the number of directors of the Company, who may be natural persons or

legal entities and who need not be shareholders, must be at least 5. At least half of the members of the Board of Directors

must be non-executive directors and at least three of them must be independent directors.

A meeting of the Board of Directors is validly constituted if at least half of its members are present in person or represented

at the meeting. If this quorum is not met, a new board meeting may be convened by any director to deliberate and decide on

the matters on the agenda of the board meeting for which a quorum was not met, provided that at least two members are

present. Meetings of the Board of Directors are convened by the Chairman of the Board or the CFO or Chief Legal Officer, or

by at least two directors, whenever the interest of the Company so requires. In principle, the Board of Directors will meet at

least four times per year.

The Chairman of the Board of Directors shall have a casting vote on matters submitted to the Board of Directors in the event

of a tied vote, save if the Board of Directors is composed of two members.

At the date of this Report, the Board of Directors consists of 9 members, one of which is an executive director (as a member

of the Executive Management Team) and 8 of which are non-executive directors, including four independent directors. In

accordance with Art 96, §2 6° of the Belgian Company Code (hereafter “BCC”), it is the willingness of the Company to aim for,

in a reasonable timeframe, that a third of the Board member are of different sex, and actions were, are and will be taken in the

short future to reach that objective.

Name

Michel Lussier

Position

Chairman

Term [1]
2020

LSS Consulting SPRL
represented by its permanent
representative Christian Homsy

Executive
director

2020

William Wijns[2]

Serge Goblet

Chris Buyse

Rudy Dekeyser

Non-executive
director

2016

Non-executive
director

2020

Independent
director

2020

Independent
director

2020

Debasish Roychowdhury

Independent
director

2019

Chris De Jonghe

Hanspeter Spek

Danny Wong[3]

Non-executive
director

2017

Independent
director

2018

Non-executive
director

2016

Business Address

Board Committee Membership

Member of the Nomination and
Remuneration Committee

Member of the Nomination and
Remuneration Committee
Member of the Audit Committee

Member of the Audit Committee

Member of the Nomination and
Remuneration Committee

3661 Valley Centre Dr.
San Diego CA 92130,
USA

Chaussée de Louvain 574A,
1380 Lasne,
Belgium

Moorselbaan 219,
9300 Aalst,
Belgium

Chaussée de Waterloo 1589D,
1180 Brussels,
Belgium

Baillet Latourlei 119A,
2930 Brasschaat,
Belgium

Klein Nazareth 12,
98401 De Pinte,
Belgium

79 Laconia Street
Lexington
MA 02420
USA

Jan Davidlaan 50,
2630 Aartselaar,
Belgium

Square Latour Maubourg,
75007 Paris,
France

25/F Octa Tower, 8 Lam Chak
Street,
Kowloon Bay,
Hong KKong

TOLEFI SA represented by its
permanent representative Serge
Goblet

Non-executive
director

2018

27 Drève de Carloo
1180 Bruxelles,
Belgium

The term of the mandate of the director will expire immediately after the Annual Shareholders Meeting held in the year set forth next to the

[1]
director’s name, except Debasish Roychowdhury which mandate shall expire on 30 January 2019.
[2]
[3]

William Wijns resigned on 1st April 2016.
Danny Wong resigned on 4 August 2016.

The following paragraphs contain brief biographies of each of the directors, or in case of legal entities being director, their
permanent representatives, with an indication of other relevant mandates as member of administrative, management or
supervisory bodies in other companies during the previous five years.

Michel Lussier has served as Chairman of the board of directors of the Company since 2007 and is also a co-founder of the
Company. Mr. Lussier was also the Chairman of the board of directors and co-founder of the Company’s predecessor entity,
Cardio3 SA, until 2008. Mr. Lussier founded Medpole Ltd, the North American satellite of MedPole SA, a European incubator
for medical technology start-up companies located in Belgium, and serves as the Chief Executive Officer for the group. In
this capacity, he is a managing director of Fjord Ventures, a Laguna Hills, California based medical technology accelerator /
incubator. Since May 2014, Mr. Lussier has served as the Chief Executive Officer of Metronom Health Inc, an early stage
medical device company created by Fjord Ventures, developing a continuous glucose monitoring system. Prior to that, from
2002 to 2013, he worked for Volcano Corporation, where he served in a number of positions, most recently as President,
Clinical and Scientific Affairs from 2012 to 2013, and prior to that from 2007 to 2012, Group President, Advanced Imaging
Systems, Global Clinical & Scientific Affairs and General Management of Europe, Africa and the Middle East. Mr. Lussier
obtained a Bachelor of Sciences degree in Electrical Engineering and Master’s degree in Biomedical Engineering at the
University of Montreal. He also holds an MBA from INSEAD (European Institute of Business Administration), France. In
addition to serving on our board of directors, he also serves on the boards of directors of several early stage medical devices
companies.

CELYAD • FINANCIAL RESULTS 2016

Christian Homsy (permanent representative of LSS consulting SPRL), has served as a member of the board of directors of
the Company since 2007 and has been Chief Executive Officer (CEO) of Celyad since its foundation. Christian Homsy
obtained his Medical Doctorate at the University of Louvain and holds an MBA from the IMD in Lausanne (Switzerland).
Christian gained his business experience in senior research and development, marketing, business development and sales
positions at Guidant Corporation, a leading medical device company active in the treatment of cardiovascular disease. He
was also founder of Guidant Institute for Therapy Development, a landmark facility for physician and health care
professionals' education that gained international recognition and praise. Before joining Celyad, Christian Homsy was
General Manager of Medpole, a European incubator dedicated to initiating the European operations for start-up companies
in the medical device or biotechnology fields. He also holds a director mandate in Medpole SA.

Serge Goblet (permanent representative of Tolefi SA) has served as a member of the board of directors of the Company
since 2008. He holds a Master Degree in Business and Consular Sciences from ICHEC, Belgium and has many years of
international experience as director in Belgian and foreign companies. He is the managing director of TOLEFI SA, a Belgian
holding company and holds director mandates in subsidiaries of TOLEFI. Serge has two voting rights at our board of
directors, one in his own name and one on behalf of TOLEFI, as a permanent representative

Chris Buyse has served as a member of the board of directors of the Company since 2008. He brings more than 25 years of
international financial expertise and experience in introducing best financial management practices. He is currently Managing
Director of FUND+, a fund that invests in innovative Belgian Life Sciences companies, Between August 2006 and June 2014,
Mr. Buyse served as the Chief Financial Officer and board member of ThromboGenics NV, a leading biotech company that is
listed on NYSE Euronext Brussels. Before joining ThromboGenics, he was the Chief Financial Officer of the Belgian biotech
company CropDesign, where he coordinated the acquisition by BASF in July 2006. Prior to joining CropDesign he was
financial manager of WorldCom/MCI Belux, a European subsidiary of one of the world’s largest telecommunication
companies and he was also the Chief Financial Officer and interim Chief Executive Officer of Keyware Technologies.
Mr. Buyse holds a master degree in applied economic sciences from the University of Antwerp and an MBA from Vlerick
School of Management in Gent. He currently serves, in his own name or as permanent representative of a management
company, as member of the board of directors of the following publicly and privately held companies: Bone Therapeutics SA,
Iteos SA, Bioxodes SA, Bio Incubator NV, Immo David NV, Pinnacle Investments SA, CreaBuild NV, Sofia BVBA, Pienter-Jan
BVBA, Life Sciences Research Partners VZW (a shareholder of the Company) and Keyware Technologies NV.

Rudy Dekeyser has served as a member of the board of directors of the Company since 2007. Since 2012 Rudy is managing
partner of the LSP Health Economics Fund, a private equity fund investing in late stage European and North American health
care companies. Prior to joining LSP, Rudy has been managing director of VIB (Flanders Institute for Biotechnology), where
he was also responsible for the intellectual property portfolio, business development and new venture activities. He obtained
a Ph.D. in molecular biology at the University Ghent. He holds non-executive director positions in Curetis AG, Sequana
Medical AG and Remynd NV, and held non-executive director positions in Devgen NV, CropDesign NV, Ablynx NV, Actogenix
NV, Pronota NV, Flandersbio VZW, Bioincubator Leuven NV and Multiplicom NV. He is a co-founder of ASTP (the European
associations of technology transfer managers) and Chairman of EMBLEM (EMBL’s business arm). Rudy has been advisor to
several seed and venture capital funds and to multiple regional and international committees on innovation.

Debasish Roychowdhury has served as a member of the board of directors of the Company since 2015. Debasish is a
medical oncologist with over 15 years of comprehensive pharmaceutical industry experience and 14 years of patient care
and academic research. In the pharmaceutical industry, Debasish held multiple positions of growing responsibility
respectively at Eli Lilly, GSK and Sanofi, with direct therapeutic area experience mostly in oncology and hematology. Based in
Boston, Massachusetts, Debasish is now using his extensive experience and global network to advise companies,
organizations, and institutions in the biomedical field.

Chris De Jonghe has served as a member of the board of directors of the Company since 2013. Chris is Head of Life Sciences
& Care at PMV (ParticipatieMaatschappij Vlaanderen). She was first Licensing manager then Business development manager
at VIB (Flanders’ Institute for Biotechnology), before joining PMV initially as Senior investment manager in January 2013.
Since August 2013 she joined the Group Management Committee, responsible for daily management at PMV. She obtained a
PhD in Biochemistry and a Bachelor degree in Laws at the University of Antwerp. She is member of the board of directors of
Agrosavfe, Confo Therapeutics, Fast Forward Pharmaceuticals, MyCartis, ViroVet, Biotech Fund Flanders, LSP V, Vesalius
Biocapital I & II and Flanders’Bio. She is a member of Flanders’Bio and IFB network.

Hanspeter Spek has served as a member of the board of directors of the Company since 2014. He started his career at

Pfizer where, over more than 10 years and after a thorough comprehensive training in commercial general management, he

held positions of increasing responsibility. Hanspeter then joined Sanofi as Marketing Director and rose through the

organization to become the Executive Vice President International in 2000. When Sanofi and Aventis merged in 2004, he

took on the responsibility of Executive Vice President Operations. In 2009, he was nominated President Global Operations.

Hanspeter retired from Sanofi in mid-2013. He has since joined Advent International, Boston, as an Operating Partner for

Healthcare and serves as Board Member of Genpact, New York.

2.2.2. Committees within the Board of Directors

2.2.2.1.

General

Without prejudice to the role, responsibilities and functioning of the Executive Management Team as set out below under

section “Executive Management Team”, the Board of Directors may set up specialised committees to analyse specific issues

and advise the Board of Directors on those issues. Such committees are advisory bodies only and the decision-making

remains the collegiate responsibility of the Board of Directors. The Board of Directors determines the terms of reference of

each committee with respect to the organisation, procedures, policies and activities of the committee.

2.2.2.2.

Audit Committee

"Large" listed companies (as defined in Article 526bis, § 3 of the Belgian Company Code) are legally obliged to establish an

audit committee within their board of directors. Although the Company does not currently qualify as a "large" company, the

board of directors has on 6 March 2015, established an audit committee. The audit committee consists of 3 members: Chris

Buyse, Rudy Dekeyser and Chris De Jonghe.

The role of the audit committee is to ensure the effectiveness of the internal control and risk management systems, the

internal audit (if any) and its effectiveness and the statutory audit of the annual and consolidated accounts, and to review and

monitor the independence of the external auditor, in particular regarding the provision of additional services to the company.

The committee reports regularly to the board of directors on the exercise of its functions. It informs the board of directors

about all areas in which action or improvement is necessary in its opinion and produces recommendations concerning the

necessary steps that need to be taken. The audit review and the reporting on that review cover the company and its

subsidiaries as a whole. The members of the audit committee are entitled to receive all information which they need for the

performance of their function, from the board of directors, executive committee and employees. Every member of the audit

committee shall exercise this right in consultation with the chairman of the audit committee.

The audit committee’s duties and responsibilities to carry out its purposes include, among others: the financial reporting,

internal controls and risk management, and the internal and external audit process. These tasks are further described in the

audit committee charter as set out in the corporate governance charter and in Article 526bis of the Belgian Company Code.

Until its establishment, in accordance with Article 562bis of the Belgian Company Code, the audit function was therefore

carried out by the entire Board of Directors.

For purposes of these tasks, Chris Buyse had been identified as the director having the necessary expertise in accounting

and audit matters. The Audit Committee holds a minimum of four meetings a year.

2.2.2.3.

Nomination and Remuneration Committee

"Large" listed companies (as defined in Article 526quater, § 4 of the Belgian Company Code) are legally obliged to establish a

remuneration committee within their board of directors. Although the Company does not currently qualify as a "large"

company, the Board of Directors has voluntarily set up a remuneration committee. As the remuneration committee also

performs the task of a nomination committee, it is called the Nomination and Remuneration Committee.

The Nomination and Remuneration Committee will consist of not less than three directors, or such greater number as

determined by the Board of Directors at any time. All members must be non-executive directors and at least a majority of its

members must be independent in accordance with Article 526ter of the Belgian Company Code.

The Nomination and Remuneration Committee must have the necessary expertise as regards the remuneration policy, and

this condition is fulfilled if at least one member has had a higher education and has had at least three years of experience in

personnel management or in the field of remunerating directors and managers.

The CEO has the right to attend the meetings of the Nomination and Remuneration Committee in an advisory and non-

voting capacity on matters other than those concerning himself. The Nomination and Remuneration Committee will elect a

chairman from amongst its members.

The role of the Nomination and Remuneration Committee is to assist the Board of Directors in all matters:

relating to the selection and recommendation of qualified candidates for membership of the Board of Directors;

relating to the nomination of the CEO;

CELYAD • FINANCIAL RESULTS 2016

Christian Homsy (permanent representative of LSS consulting SPRL), has served as a member of the board of directors of

the Company since 2007 and has been Chief Executive Officer (CEO) of Celyad since its foundation. Christian Homsy

obtained his Medical Doctorate at the University of Louvain and holds an MBA from the IMD in Lausanne (Switzerland).

Christian gained his business experience in senior research and development, marketing, business development and sales

positions at Guidant Corporation, a leading medical device company active in the treatment of cardiovascular disease. He

was also founder of Guidant Institute for Therapy Development, a landmark facility for physician and health care

professionals' education that gained international recognition and praise. Before joining Celyad, Christian Homsy was

General Manager of Medpole, a European incubator dedicated to initiating the European operations for start-up companies

in the medical device or biotechnology fields. He also holds a director mandate in Medpole SA.

Serge Goblet (permanent representative of Tolefi SA) has served as a member of the board of directors of the Company

since 2008. He holds a Master Degree in Business and Consular Sciences from ICHEC, Belgium and has many years of

international experience as director in Belgian and foreign companies. He is the managing director of TOLEFI SA, a Belgian

holding company and holds director mandates in subsidiaries of TOLEFI. Serge has two voting rights at our board of

directors, one in his own name and one on behalf of TOLEFI, as a permanent representative

Chris Buyse has served as a member of the board of directors of the Company since 2008. He brings more than 25 years of

international financial expertise and experience in introducing best financial management practices. He is currently Managing

Director of FUND+, a fund that invests in innovative Belgian Life Sciences companies, Between August 2006 and June 2014,

Mr. Buyse served as the Chief Financial Officer and board member of ThromboGenics NV, a leading biotech company that is

listed on NYSE Euronext Brussels. Before joining ThromboGenics, he was the Chief Financial Officer of the Belgian biotech

company CropDesign, where he coordinated the acquisition by BASF in July 2006. Prior to joining CropDesign he was

financial manager of WorldCom/MCI Belux, a European subsidiary of one of the world’s largest telecommunication

companies and he was also the Chief Financial Officer and interim Chief Executive Officer of Keyware Technologies.

Mr. Buyse holds a master degree in applied economic sciences from the University of Antwerp and an MBA from Vlerick

School of Management in Gent. He currently serves, in his own name or as permanent representative of a management

company, as member of the board of directors of the following publicly and privately held companies: Bone Therapeutics SA,

Iteos SA, Bioxodes SA, Bio Incubator NV, Immo David NV, Pinnacle Investments SA, CreaBuild NV, Sofia BVBA, Pienter-Jan

BVBA, Life Sciences Research Partners VZW (a shareholder of the Company) and Keyware Technologies NV.

Rudy Dekeyser has served as a member of the board of directors of the Company since 2007. Since 2012 Rudy is managing

partner of the LSP Health Economics Fund, a private equity fund investing in late stage European and North American health

care companies. Prior to joining LSP, Rudy has been managing director of VIB (Flanders Institute for Biotechnology), where

he was also responsible for the intellectual property portfolio, business development and new venture activities. He obtained

a Ph.D. in molecular biology at the University Ghent. He holds non-executive director positions in Curetis AG, Sequana

Medical AG and Remynd NV, and held non-executive director positions in Devgen NV, CropDesign NV, Ablynx NV, Actogenix

NV, Pronota NV, Flandersbio VZW, Bioincubator Leuven NV and Multiplicom NV. He is a co-founder of ASTP (the European

associations of technology transfer managers) and Chairman of EMBLEM (EMBL’s business arm). Rudy has been advisor to

several seed and venture capital funds and to multiple regional and international committees on innovation.

Debasish Roychowdhury has served as a member of the board of directors of the Company since 2015. Debasish is a

medical oncologist with over 15 years of comprehensive pharmaceutical industry experience and 14 years of patient care

and academic research. In the pharmaceutical industry, Debasish held multiple positions of growing responsibility

respectively at Eli Lilly, GSK and Sanofi, with direct therapeutic area experience mostly in oncology and hematology. Based in

Boston, Massachusetts, Debasish is now using his extensive experience and global network to advise companies,

organizations, and institutions in the biomedical field.

Chris De Jonghe has served as a member of the board of directors of the Company since 2013. Chris is Head of Life Sciences

& Care at PMV (ParticipatieMaatschappij Vlaanderen). She was first Licensing manager then Business development manager

at VIB (Flanders’ Institute for Biotechnology), before joining PMV initially as Senior investment manager in January 2013.

Since August 2013 she joined the Group Management Committee, responsible for daily management at PMV. She obtained a

PhD in Biochemistry and a Bachelor degree in Laws at the University of Antwerp. She is member of the board of directors of

Agrosavfe, Confo Therapeutics, Fast Forward Pharmaceuticals, MyCartis, ViroVet, Biotech Fund Flanders, LSP V, Vesalius

Biocapital I & II and Flanders’Bio. She is a member of Flanders’Bio and IFB network.

Hanspeter Spek has served as a member of the board of directors of the Company since 2014. He started his career at
Pfizer where, over more than 10 years and after a thorough comprehensive training in commercial general management, he
held positions of increasing responsibility. Hanspeter then joined Sanofi as Marketing Director and rose through the
organization to become the Executive Vice President International in 2000. When Sanofi and Aventis merged in 2004, he
took on the responsibility of Executive Vice President Operations. In 2009, he was nominated President Global Operations.
Hanspeter retired from Sanofi in mid-2013. He has since joined Advent International, Boston, as an Operating Partner for
Healthcare and serves as Board Member of Genpact, New York.

2.2.2. Committees within the Board of Directors

2.2.2.1.

General

Without prejudice to the role, responsibilities and functioning of the Executive Management Team as set out below under
section “Executive Management Team”, the Board of Directors may set up specialised committees to analyse specific issues
and advise the Board of Directors on those issues. Such committees are advisory bodies only and the decision-making
remains the collegiate responsibility of the Board of Directors. The Board of Directors determines the terms of reference of
each committee with respect to the organisation, procedures, policies and activities of the committee.

2.2.2.2.

Audit Committee

"Large" listed companies (as defined in Article 526bis, § 3 of the Belgian Company Code) are legally obliged to establish an
audit committee within their board of directors. Although the Company does not currently qualify as a "large" company, the
board of directors has on 6 March 2015, established an audit committee. The audit committee consists of 3 members: Chris
Buyse, Rudy Dekeyser and Chris De Jonghe.

The role of the audit committee is to ensure the effectiveness of the internal control and risk management systems, the
internal audit (if any) and its effectiveness and the statutory audit of the annual and consolidated accounts, and to review and
monitor the independence of the external auditor, in particular regarding the provision of additional services to the company.
The committee reports regularly to the board of directors on the exercise of its functions. It informs the board of directors
about all areas in which action or improvement is necessary in its opinion and produces recommendations concerning the
necessary steps that need to be taken. The audit review and the reporting on that review cover the company and its
subsidiaries as a whole. The members of the audit committee are entitled to receive all information which they need for the
performance of their function, from the board of directors, executive committee and employees. Every member of the audit
committee shall exercise this right in consultation with the chairman of the audit committee.

The audit committee’s duties and responsibilities to carry out its purposes include, among others: the financial reporting,
internal controls and risk management, and the internal and external audit process. These tasks are further described in the
audit committee charter as set out in the corporate governance charter and in Article 526bis of the Belgian Company Code.

Until its establishment, in accordance with Article 562bis of the Belgian Company Code, the audit function was therefore
carried out by the entire Board of Directors.

For purposes of these tasks, Chris Buyse had been identified as the director having the necessary expertise in accounting
and audit matters. The Audit Committee holds a minimum of four meetings a year.

2.2.2.3.

Nomination and Remuneration Committee

"Large" listed companies (as defined in Article 526quater, § 4 of the Belgian Company Code) are legally obliged to establish a
remuneration committee within their board of directors. Although the Company does not currently qualify as a "large"
company, the Board of Directors has voluntarily set up a remuneration committee. As the remuneration committee also
performs the task of a nomination committee, it is called the Nomination and Remuneration Committee.

The Nomination and Remuneration Committee will consist of not less than three directors, or such greater number as
determined by the Board of Directors at any time. All members must be non-executive directors and at least a majority of its
members must be independent in accordance with Article 526ter of the Belgian Company Code.

The Nomination and Remuneration Committee must have the necessary expertise as regards the remuneration policy, and
this condition is fulfilled if at least one member has had a higher education and has had at least three years of experience in
personnel management or in the field of remunerating directors and managers.

The CEO has the right to attend the meetings of the Nomination and Remuneration Committee in an advisory and non-
voting capacity on matters other than those concerning himself. The Nomination and Remuneration Committee will elect a
chairman from amongst its members.

The role of the Nomination and Remuneration Committee is to assist the Board of Directors in all matters:

relating to the selection and recommendation of qualified candidates for membership of the Board of Directors;
relating to the nomination of the CEO;

CELYAD • FINANCIAL RESULTS 2016

relating to the nomination of the members of the Executive Management Team, other than the CEO, upon proposal by
the CEO;
relating to the remuneration of independent directors;
relating to the remuneration of the CEO;
relating to the remuneration of the members of the Executive Management Team, other than the CEO, upon proposal
by the CEO; and
on which the Board of Directors or the Chairman of the Board of Directors requests the Nomination and Remuneration
Committee's advice.

Additionally, with regard to matters relating to remuneration, except for those areas that are reserved by law to the Board of
Directors, the Nomination and Remuneration Committee will at least have the following tasks:

preparing the remuneration report (which is to be included in the Board of Director’s corporate governance statement);
and
explaining its remuneration report at the Annual General Shareholders Meeting.

It will report to the Board of Directors on the performance of these tasks on a regular basis. These tasks are further
described in the terms of reference of the Nomination and Remuneration Committee as set out in the Company's corporate
governance charter. The Nomination and Remuneration Committee will meet at least twice per year, and whenever it deems
it necessary to carry out its duties.

The following directors are currently member of the Nomination and Remuneration Committee: Michel Lussier (Chairman),
Chris Buyse, Rudy Dekeyser and Hanspeter Spek.
2.2.3. Meetings of the Board and the committees

In 2016, the Board held 4 regular meetings and 5 meetings by telephone conference to discuss and decide on specific
matters.

Board and committee – Dates and Attendance

Board of Directors

18 Mar

20 May

30 May

27 Jun

16 Sep

9 Nov

25 Nov

08 Dec

12 Dec

M. Lussier

Present

Repres.

Present

Repres.

LSS Consulting SPRL

Present

Repres

S. Goblet

Present

Repres.

W. Wijns [1]

Exc.

N/A.

N/A

R . Dekeyser

Present

Exc.

Present

Exc.

Ch. De Jonghe

Present

Exc.

Present

Hanspeter Spek

Present

Repres.

Present

Exc.

Chris Buyse

Present

Exc.

Present

TOLEFI SA

Present

Repres.

D. Roychowdhury

Present

Exc.

Present

Exc.

Secretary from among its members).

Danny Wong [2]

Abs.

Exc.

Abs.

Exc.

N/A

TOLEFI SA

Present

Repres.

[1] William Wijns resigned from his mandate of director with effet on 1st April 2016.
[2] Danny Wong resigned from his mandate of director with effet on 4 August 2016.

Nomination and Remuneration
Committee

28 Jan

17 Mar

30 May

03 Oct

07 Dec

M. Lussier

Chris Buyse

Hanspeter Spek

Rudy Dekeyser

Present

LSS Consulting SPRL

Invited

Audit Committee

17 Mar

9 Jun

23 Aug

7 Dec

Ch. Buyse

R. Dekeyser

Ch. De Jonghe

P. Jeanmart

Present

Excused

Invited

2.3

Executive Management Team

The Executive Management Team consists of the “Chief Executive Officer” (CEO, who is the chairman of the Executive

Management team), the “Chief Financial Officer” (CFO), the “Chief Operating Officer”, the “Chief Legal Officer”, the “Vice

President Business Development & IP”, the “Vice President Clinical Development and Medical Affairs”, the “Vice President

Operations”, the “Vice President Research & Development”.

The Executive Management Team discusses and consults with the Board of Directors and advises the Board of Directors on

the day-to-day management of the Company in accordance with the Company's values, strategy, general policy and budget,

as determined by the Board of Directors.

Each member of the Executive Management Team has been made individually responsible for certain aspects of the day-to-

day management of the Company and its business (in the case of the CEO, by way of delegation by the Board of Directors; in

the case of the other member of the Executive Management Team, by way of delegation by the CEO). The further tasks for

which the Executive Management Team is responsible are described in greater detail in the terms of reference of the

Executive Management Team as set out in the Company's corporate governance charter.

The members of the Executive Management Team are appointed and may be dismissed by the Board of Directors at any

time. The Board of Directors appoints them on the basis of the recommendations of the Nomination and Remuneration

Committee, which shall also assist the Board of Directors on the remuneration policy of the members of the Executive

Management Team, and their individual remunerations.

The remuneration, duration and conditions of dismissal of Executive Management Team members will be governed by the

agreement entered into between the Company and each member of the Executive Management Team in respect of their

function within the Company.

In accordance with Shedule C, Section F, subsection 7 of the CGC, all agreements with members of the Executive

Management Team entered into on or after 1 July 2009 must refer to the criteria to be taken into account when determining

variable remuneration and will contain specific provisions relating to early termination. In principle, the Executive

Management Team meets every month. Additional meetings may be convened at any time by the Chairman of the Executive

Management Team or at the request of two of its members. The Executive Management Team will constitute a quorum

when all members have been invited and the majority of the members are present or represented at the meeting. Absent

members may grant a power of attorney to another member of the Executive Management Team. Members may attend the

meeting physically or by telephone or video conference. The absent members must be notified of the discussions in their

absence by the Chairman (or the Company Secretary, if the Executive Management Team has appointed a Company

The members of the Executive Management Team will provide the Board of Directors with information in a timely manner, if

possible in writing, on all facts and developments concerning the Company which the Board of Directors may need in order to

function as required and to properly carry out its duties. The CEO (or, in the event that the CEO is not able to attend the

Board of Directors' meeting, the CFO or, in the event that the CFO is not able to attend the Board of Directors' meeting,

another representative of the Executive Management Team) will report at every ordinary meeting of the Board of Directors

on the material deliberations of the previous meeting(s) of the Executive Management Team.

The current members of the Executive Management Team are listed in the table below.

CELYAD • FINANCIAL RESULTS 2016

the CEO;

relating to the remuneration of independent directors;

relating to the remuneration of the CEO;

relating to the remuneration of the members of the Executive Management Team, other than the CEO, upon proposal

on which the Board of Directors or the Chairman of the Board of Directors requests the Nomination and Remuneration

by the CEO; and

Committee's advice.

Additionally, with regard to matters relating to remuneration, except for those areas that are reserved by law to the Board of

Directors, the Nomination and Remuneration Committee will at least have the following tasks:

preparing the remuneration report (which is to be included in the Board of Director’s corporate governance statement);

and

explaining its remuneration report at the Annual General Shareholders Meeting.

It will report to the Board of Directors on the performance of these tasks on a regular basis. These tasks are further

described in the terms of reference of the Nomination and Remuneration Committee as set out in the Company's corporate

governance charter. The Nomination and Remuneration Committee will meet at least twice per year, and whenever it deems

it necessary to carry out its duties.

The following directors are currently member of the Nomination and Remuneration Committee: Michel Lussier (Chairman),

Chris Buyse, Rudy Dekeyser and Hanspeter Spek.

2.2.3. Meetings of the Board and the committees

matters.

Board and committee – Dates and Attendance

In 2016, the Board held 4 regular meetings and 5 meetings by telephone conference to discuss and decide on specific

Board of Directors

18 Mar

20 May

30 May

27 Jun

16 Sep

9 Nov

25 Nov

08 Dec

12 Dec

M. Lussier

Present

Repres.

Present

Repres.

LSS Consulting SPRL

Present

Repres

S. Goblet

Present

Repres.

W. Wijns [1]

Exc.

N/A.

N/A

R . Dekeyser

Present

Exc.

Present

Exc.

Ch. De Jonghe

Present

Exc.

Present

Hanspeter Spek

Present

Repres.

Present

Exc.

Chris Buyse

Present

Exc.

Present

TOLEFI SA

Present

Repres.

D. Roychowdhury

Present

Exc.

Present

Exc.

Danny Wong [2]

Abs.

Exc.

Abs.

Exc.

N/A

TOLEFI SA

Present

Repres.

[1] William Wijns resigned from his mandate of director with effet on 1st April 2016.

[2] Danny Wong resigned from his mandate of director with effet on 4 August 2016.

Nomination and Remuneration

28 Jan

17 Mar

30 May

03 Oct

07 Dec

Committee

M. Lussier

Chris Buyse

Hanspeter Spek

Rudy Dekeyser

Present

relating to the nomination of the members of the Executive Management Team, other than the CEO, upon proposal by

LSS Consulting SPRL

Invited

Audit Committee

17 Mar

9 Jun

23 Aug

7 Dec

Ch. Buyse

R. Dekeyser

Ch. De Jonghe

P. Jeanmart

Present

Excused

Invited

2.3

Executive Management Team

The Executive Management Team consists of the “Chief Executive Officer” (CEO, who is the chairman of the Executive
Management team), the “Chief Financial Officer” (CFO), the “Chief Operating Officer”, the “Chief Legal Officer”, the “Vice
President Business Development & IP”, the “Vice President Clinical Development and Medical Affairs”, the “Vice President
Operations”, the “Vice President Research & Development”.

The Executive Management Team discusses and consults with the Board of Directors and advises the Board of Directors on
the day-to-day management of the Company in accordance with the Company's values, strategy, general policy and budget,
as determined by the Board of Directors.

Each member of the Executive Management Team has been made individually responsible for certain aspects of the day-to-
day management of the Company and its business (in the case of the CEO, by way of delegation by the Board of Directors; in
the case of the other member of the Executive Management Team, by way of delegation by the CEO). The further tasks for
which the Executive Management Team is responsible are described in greater detail in the terms of reference of the
Executive Management Team as set out in the Company's corporate governance charter.

The members of the Executive Management Team are appointed and may be dismissed by the Board of Directors at any
time. The Board of Directors appoints them on the basis of the recommendations of the Nomination and Remuneration
Committee, which shall also assist the Board of Directors on the remuneration policy of the members of the Executive
Management Team, and their individual remunerations.

The remuneration, duration and conditions of dismissal of Executive Management Team members will be governed by the
agreement entered into between the Company and each member of the Executive Management Team in respect of their
function within the Company.

In accordance with Shedule C, Section F, subsection 7 of the CGC, all agreements with members of the Executive
Management Team entered into on or after 1 July 2009 must refer to the criteria to be taken into account when determining
variable remuneration and will contain specific provisions relating to early termination. In principle, the Executive
Management Team meets every month. Additional meetings may be convened at any time by the Chairman of the Executive
Management Team or at the request of two of its members. The Executive Management Team will constitute a quorum
when all members have been invited and the majority of the members are present or represented at the meeting. Absent
members may grant a power of attorney to another member of the Executive Management Team. Members may attend the
meeting physically or by telephone or video conference. The absent members must be notified of the discussions in their
absence by the Chairman (or the Company Secretary, if the Executive Management Team has appointed a Company
Secretary from among its members).

The members of the Executive Management Team will provide the Board of Directors with information in a timely manner, if
possible in writing, on all facts and developments concerning the Company which the Board of Directors may need in order to
function as required and to properly carry out its duties. The CEO (or, in the event that the CEO is not able to attend the
Board of Directors' meeting, the CFO or, in the event that the CFO is not able to attend the Board of Directors' meeting,
another representative of the Executive Management Team) will report at every ordinary meeting of the Board of Directors
on the material deliberations of the previous meeting(s) of the Executive Management Team.

The current members of the Executive Management Team are listed in the table below.

CELYAD • FINANCIAL RESULTS 2016

Name

Function

Year of birth

LSS Consulting SPRL, represented by Christian Homsy

Chief Executive Officer

PaJe SPRL, represented by Patrick Jeanmart

KNCL SPRL, represented by Jean-Pierre Latere

Chief Financial Officer

Chief Operating Officer

NandaDevi SPRL, represented by Philippe Dechamps

Chief Legal Officer

Georges Rawadi

Dieter Hauwaerts

ImXense SPRL, represented by Frederic Lehmann

David Gilham

Vice President Business Development

Vice President Operations

Vice President Clinical Development & Medical
Affairs

Vice President Research & Development

1958

1972

1975

1970

1967

1973

1964

1965

The following paragraphs contain brief biographies of each of the members of the Executive Management Team or in case of
legal entities being a member of the Executive Management Team or key manager, their permanent representatives.

Christian Homsy (representative of LSS Consulting SPRL), CEO – reference is made to section “2.2.1. Composition of the
Board of Directors”.

Patrick Jeanmart (representative of PaJe SPRL), has served as the Chief Financial Officer of the Company since September
2007. Prior to joining the Company, Mr. Jeanmart worked for IBA Group (Ion Beam Applications, Belgium) for six years where
he held a number of senior financial management positions within the corporate organization and several IBA subsidiaries
located in Belgium, Italy, UK and the U.S. Between January 2004 and 2007, he acted as Vice President of Finance of IBA
Molecular. He also holds the position of Chief Financial Officer at Medpole SA and at Biological Manufacturing Services SA.
Mr. Jeanmart obtained a Master in Economics from the University of Namur, Belgium.

Jean-Pierre Latere (representative of KNCL SPRL), has previously acted as Vice President of Regenerative Medicine and
Medical Devices franchise. Since January 2017 he serves as Chief Operating Officer in charge of program management,
manufacturing, quality, clinical operations and regulatory affairs. He leads the effort to further strengthen the organization
as Celyad grows as a leader in immuno-oncology. He started his career as a Research Associate at the Michigan State
University in the US. Following that assignment, he moved to the Johnson & Johnson group where he held various positions,
from Scientist to Senior Scientist. He then joined Celyad in 2008 as Project Manager Delivery System and left the company in
2012 in the position of Senior Director Business Development. Prior to joining Celyad, Jean-Pierre served as Beauty Care and
Healthcare Market Global Leader at Dow Corning. Jean-Pierre holds a PhD in Chemistry from the University of Liège,
Belgium.

Philippe Dechamps (representative of NandaDevi SPRL), has served as Chief Legal Officer since September 2016. Philippe
started his legal career as an associate in Brussels with the law firm Linklaters De Bandt from 1994 to 1998. He left private
practice in 1998 and until 2003, he served as an in-house counsel at Solvay Group, the Belgian pharmaceutical and chemical
company, to assist the company in its turnaround through several M&A operations in Europe, India and Far-East Asia. In
2003, he took over the position of Legal Director at Guidant, the US company formerly active in the medical devices business
before its acquisition by Boston Scientific and Abbott Laboratories in 2005. Within Abbott, Philippe took over responsibility
for the legal affairs of Abbott Vascular International outside of the United States. In 2008, Philippe joined Delhaize Group
taking responsibility for the legal and government affairs in Europe and Asia, before becoming Group General Counsel and
Secretary to the Board of Directors in 2015. In this position, he piloted the legal strategy to merge Delhaize Group with Royal
Ahold in July 2016. Philippe earned law degrees from the Université Catholique de Louvain (UCL) and Vrije Universiteit
Brussel (VUB), and a Masters of Law (LL.M) from Harvard University.

Georges Rawadi, has served as Vice President Business Development and Intellectual Property since March 2016 and prior
to that he has service as Vice President Business Development since June 2014. Prior to joining the Company, Dr. Rawadi
served as Vice President Business Development with Cellectis. He previously held business development management
positions at Galapagos, ProStrakan France and Sanofi-Aventis France, and conducted consultancy assignments in Business
Development and Alliance Management. His work included all aspects and stages of business development, driving several
projects from target identification and negotiation to closing deals. He holds a Ph.D. in Microbiology from the Pierre et Marie
Curie University (France), and a Masters in Management and Strategy in the Health Industry from the ESSEC Business
School.

Dieter Hauwaerts, has served as the Vice President Operations since November 2015. Dieter is responsible for all

development, manufacturing and supply chain activities in EU and US. Prior to joining Celyad, he worked as Director

Manufacturing for TiGenix (Belgium) where he was part of the team obtaining first approval of an ATMP in Europe, and

headed construction of a state-of-the –art commercial cell therapy facility. Before, he also held various positions in the

quality and supply chain organization of Janssen Pharmaceutica (Belgium) and conducted research on microbial genetics at

the University of Leuven. Dieter holds an MSc in chemical engineering from the University of Leuven, Belgium.

Frédéric Lehmann (representative of ImXense SPRL), has served as the Vice President Clinical Development & Medical

Affairs since July 2016 and prior to that he has served as the Vice President Immuno-Oncology since September 2015.

Frédéric is a physician by training, specialized in hematology and oncology. Frédéric has extensive experience in oncology

drug development spanning early to late phase, including clinical trial design, translational research, regulatory interactions,

and clinical risk management. He started his academic career at the Ludwig Institute for Cancer Research in Brussels,

followed by a position at the Institute Jules Bordet. He then moved to the European Organization for Research and

Treatment of Cancer (EORTC) as Medical Advisor. Dr. Lehmann began his corporate career at GlaxoSmithKline, where he led

the early worldwide clinical development program for the Company’s cancer vaccines and went on to lead the research and

development incubator for cancer immunotherapeutics.

David Gilham, has served as Vice President Research and Development since September 2016. Prior to joining the company,

David was a Reader and Group Leader within the Manchester Cancer Research Centre at the University of Manchester, UK

leading a research group of 15 scientists in the area of cellular immunotherapy. David obtained his Ph.D from the University

of Dundee in 1998 in Molecular Pharmacology under the supervision of Professor Roland Wolf, OBE. After a short post-

doctoral position at the University of Bristol, David moved to the University of Manchester with Professor Robert Hawkins to

establish translational research activity in the field of engineered cellular therapy. The group has carried out several clinical

trials of CAR T cells of which David has been Lead scientific advisor and led several European framework programs bringing

together researchers from all over Europe (ATTACK and ATTRACT programs). In 2010, along with Professor Hawkins and

other colleagues, David co-founded Cellular Therapeutics, a cell production company based in Manchester. He has published

more than 60 peer reviewed articles and further book chapters and reviews. He has also sat on many review boards and

charity grant committees and consulted for several biotechs and pharma concerning immune cell therapies.

2.4

Conflict of Interest of directors and members of the executive team and transactions with

affiliated companies

2.4.1. General

Each director and member of the Executive Management Team is encouraged to arrange his or her personal and business

affairs so as to avoid direct and indirect conflicts of interest with the Company. The Company's corporate governance

charter contains specific procedures to deal with potential conflicts.

2.4.2. Conflicts of interest of directors

Article 523 of the Belgian Company Code provides for a special procedure within the Board of Directors in the event of a

possible personal financial conflict of interest of one or more directors with one or more decisions or transactions to be

adopted by the Board of Directors. In the event of a conflict of interest, the director concerned must inform his or her fellow

directors of his or her conflict of interest before the Board of Directors deliberates and takes a decision in the matter

concerned. Furthermore, the conflicted director may not participate in the deliberation and voting by the Board of Directors

on the matter that gives rise to the potential conflict of interest. The minutes of the meeting of the Board of Directors must

contain the relevant statements made by the conflicted director, as well as a description by the Board of Directors of the

conflicting interests and the nature of the relevant decision or transaction to be adopted. The minutes must also contain a

justification by the Board of Directors for the decision or transaction adopted, and a description of the financial

consequences thereof for the company. The relevant minutes must be included in the (statutory) annual report of the Board

of Directors.

conditions.

Team

The conflicted director must notify the Statutory Auditor of the conflict. The Statutory Auditor must describe in its statutory

annual audit report the financial consequences of the decision or transaction that gave rise to the potential conflict.

This procedure does not apply to decisions or transactions in the ordinary course of business at customary market

2.4.3. Existing conflicts of interest of members of the Board of Directors and of the Executive Management

Currently, as far as the Company is aware, none of the directors nor the members of the Executive Management Team have

a conflict of interest within the meaning of Article 523 of the Belgian Company Code that has not been disclosed to the Board

of Directors. Other than potential conflicts arising in respect of compensation-related matters, the Company does not

foresee any other potential conflicts of interest in the near future.

CELYAD • FINANCIAL RESULTS 2016

Name

Function

Year of birth

LSS Consulting SPRL, represented by Christian Homsy

Chief Executive Officer

PaJe SPRL, represented by Patrick Jeanmart

KNCL SPRL, represented by Jean-Pierre Latere

Chief Financial Officer

Chief Operating Officer

NandaDevi SPRL, represented by Philippe Dechamps

Chief Legal Officer

Georges Rawadi

Dieter Hauwaerts

ImXense SPRL, represented by Frederic Lehmann

Vice President Clinical Development & Medical

David Gilham

Vice President Research & Development

Vice President Business Development

Vice President Operations

Affairs

1958

1972

1975

1970

1967

1973

1964

1965

The following paragraphs contain brief biographies of each of the members of the Executive Management Team or in case of

legal entities being a member of the Executive Management Team or key manager, their permanent representatives.

Christian Homsy (representative of LSS Consulting SPRL), CEO – reference is made to section “2.2.1. Composition of the

Board of Directors”.

Patrick Jeanmart (representative of PaJe SPRL), has served as the Chief Financial Officer of the Company since September

2007. Prior to joining the Company, Mr. Jeanmart worked for IBA Group (Ion Beam Applications, Belgium) for six years where

he held a number of senior financial management positions within the corporate organization and several IBA subsidiaries

located in Belgium, Italy, UK and the U.S. Between January 2004 and 2007, he acted as Vice President of Finance of IBA

Molecular. He also holds the position of Chief Financial Officer at Medpole SA and at Biological Manufacturing Services SA.

Mr. Jeanmart obtained a Master in Economics from the University of Namur, Belgium.

Jean-Pierre Latere (representative of KNCL SPRL), has previously acted as Vice President of Regenerative Medicine and

Medical Devices franchise. Since January 2017 he serves as Chief Operating Officer in charge of program management,

manufacturing, quality, clinical operations and regulatory affairs. He leads the effort to further strengthen the organization

as Celyad grows as a leader in immuno-oncology. He started his career as a Research Associate at the Michigan State

University in the US. Following that assignment, he moved to the Johnson & Johnson group where he held various positions,

from Scientist to Senior Scientist. He then joined Celyad in 2008 as Project Manager Delivery System and left the company in

2012 in the position of Senior Director Business Development. Prior to joining Celyad, Jean-Pierre served as Beauty Care and

Healthcare Market Global Leader at Dow Corning. Jean-Pierre holds a PhD in Chemistry from the University of Liège,

Belgium.

Philippe Dechamps (representative of NandaDevi SPRL), has served as Chief Legal Officer since September 2016. Philippe

started his legal career as an associate in Brussels with the law firm Linklaters De Bandt from 1994 to 1998. He left private

practice in 1998 and until 2003, he served as an in-house counsel at Solvay Group, the Belgian pharmaceutical and chemical

company, to assist the company in its turnaround through several M&A operations in Europe, India and Far-East Asia. In

2003, he took over the position of Legal Director at Guidant, the US company formerly active in the medical devices business

before its acquisition by Boston Scientific and Abbott Laboratories in 2005. Within Abbott, Philippe took over responsibility

for the legal affairs of Abbott Vascular International outside of the United States. In 2008, Philippe joined Delhaize Group

taking responsibility for the legal and government affairs in Europe and Asia, before becoming Group General Counsel and

Secretary to the Board of Directors in 2015. In this position, he piloted the legal strategy to merge Delhaize Group with Royal

Ahold in July 2016. Philippe earned law degrees from the Université Catholique de Louvain (UCL) and Vrije Universiteit

Brussel (VUB), and a Masters of Law (LL.M) from Harvard University.

Georges Rawadi, has served as Vice President Business Development and Intellectual Property since March 2016 and prior

to that he has service as Vice President Business Development since June 2014. Prior to joining the Company, Dr. Rawadi

served as Vice President Business Development with Cellectis. He previously held business development management

positions at Galapagos, ProStrakan France and Sanofi-Aventis France, and conducted consultancy assignments in Business

Development and Alliance Management. His work included all aspects and stages of business development, driving several

projects from target identification and negotiation to closing deals. He holds a Ph.D. in Microbiology from the Pierre et Marie

Curie University (France), and a Masters in Management and Strategy in the Health Industry from the ESSEC Business

School.

Dieter Hauwaerts, has served as the Vice President Operations since November 2015. Dieter is responsible for all
development, manufacturing and supply chain activities in EU and US. Prior to joining Celyad, he worked as Director
Manufacturing for TiGenix (Belgium) where he was part of the team obtaining first approval of an ATMP in Europe, and
headed construction of a state-of-the –art commercial cell therapy facility. Before, he also held various positions in the
quality and supply chain organization of Janssen Pharmaceutica (Belgium) and conducted research on microbial genetics at
the University of Leuven. Dieter holds an MSc in chemical engineering from the University of Leuven, Belgium.

Frédéric Lehmann (representative of ImXense SPRL), has served as the Vice President Clinical Development & Medical
Affairs since July 2016 and prior to that he has served as the Vice President Immuno-Oncology since September 2015.
Frédéric is a physician by training, specialized in hematology and oncology. Frédéric has extensive experience in oncology
drug development spanning early to late phase, including clinical trial design, translational research, regulatory interactions,
and clinical risk management. He started his academic career at the Ludwig Institute for Cancer Research in Brussels,
followed by a position at the Institute Jules Bordet. He then moved to the European Organization for Research and
Treatment of Cancer (EORTC) as Medical Advisor. Dr. Lehmann began his corporate career at GlaxoSmithKline, where he led
the early worldwide clinical development program for the Company’s cancer vaccines and went on to lead the research and
development incubator for cancer immunotherapeutics.

David Gilham, has served as Vice President Research and Development since September 2016. Prior to joining the company,
David was a Reader and Group Leader within the Manchester Cancer Research Centre at the University of Manchester, UK
leading a research group of 15 scientists in the area of cellular immunotherapy. David obtained his Ph.D from the University
of Dundee in 1998 in Molecular Pharmacology under the supervision of Professor Roland Wolf, OBE. After a short post-
doctoral position at the University of Bristol, David moved to the University of Manchester with Professor Robert Hawkins to
establish translational research activity in the field of engineered cellular therapy. The group has carried out several clinical
trials of CAR T cells of which David has been Lead scientific advisor and led several European framework programs bringing
together researchers from all over Europe (ATTACK and ATTRACT programs). In 2010, along with Professor Hawkins and
other colleagues, David co-founded Cellular Therapeutics, a cell production company based in Manchester. He has published
more than 60 peer reviewed articles and further book chapters and reviews. He has also sat on many review boards and
charity grant committees and consulted for several biotechs and pharma concerning immune cell therapies.

2.4

Conflict of Interest of directors and members of the executive team and transactions with
affiliated companies

2.4.1. General

Each director and member of the Executive Management Team is encouraged to arrange his or her personal and business
affairs so as to avoid direct and indirect conflicts of interest with the Company. The Company's corporate governance
charter contains specific procedures to deal with potential conflicts.
2.4.2. Conflicts of interest of directors

Article 523 of the Belgian Company Code provides for a special procedure within the Board of Directors in the event of a
possible personal financial conflict of interest of one or more directors with one or more decisions or transactions to be
adopted by the Board of Directors. In the event of a conflict of interest, the director concerned must inform his or her fellow
directors of his or her conflict of interest before the Board of Directors deliberates and takes a decision in the matter
concerned. Furthermore, the conflicted director may not participate in the deliberation and voting by the Board of Directors
on the matter that gives rise to the potential conflict of interest. The minutes of the meeting of the Board of Directors must
contain the relevant statements made by the conflicted director, as well as a description by the Board of Directors of the
conflicting interests and the nature of the relevant decision or transaction to be adopted. The minutes must also contain a
justification by the Board of Directors for the decision or transaction adopted, and a description of the financial
consequences thereof for the company. The relevant minutes must be included in the (statutory) annual report of the Board
of Directors.

The conflicted director must notify the Statutory Auditor of the conflict. The Statutory Auditor must describe in its statutory
annual audit report the financial consequences of the decision or transaction that gave rise to the potential conflict.

This procedure does not apply to decisions or transactions in the ordinary course of business at customary market
conditions.
2.4.3. Existing conflicts of interest of members of the Board of Directors and of the Executive Management

Team

Currently, as far as the Company is aware, none of the directors nor the members of the Executive Management Team have
a conflict of interest within the meaning of Article 523 of the Belgian Company Code that has not been disclosed to the Board
of Directors. Other than potential conflicts arising in respect of compensation-related matters, the Company does not
foresee any other potential conflicts of interest in the near future.

CELYAD • FINANCIAL RESULTS 2016

In 2016, certain members of the Board declared a conflict of interest. The following declarations were made in that respect:
Extract from the minute of the Board of Directors of 20 May 2016 related to the acquisition of the company Biological
Manufacturing Services :

Agenda

Deliberation and approval of the draft share purchase agreement (the SPA) between the Company and the shareholders of
Biological Manufacturing Services SA, a limited liability company ("société anonyme") incorporated under the laws of Belgium, with
registered office at Axisparc, Rue Edouard Belin 12, 1435 Mont-Saint-Guibert, Belgium, and registered with the Crossroads Bank
for Enterprises ("Banque-Carrefour des Entreprises") under number 0885.826.566 (LER Walloon Brabant) (BMS), who are listed in
Schedule 1 to the SPA (the BMS Shareholders), pursuant to which the Company will acquire the entire share capital in BMS from
the BMS Shareholders.

INTRODUCTION BY THE CHAIRMAN

The Chairman referred to the board of directors held on 18 March 2016, during which he explained that BMS had been set up in
2009 in order to lease the property required for the GMP labs, to fit them out and to sublease them to the Company. A significant
number of the Company’s shareholders and the Company’s directors are also shareholders in BMS. The Company has now the
opportunity to purchase all of the shares in BMS.

During the board of directors held on 18 March 2016, the board of directors decided, on a voluntary basis, to appoint a committee
of three independent directors consisting of the following three independent directors:

• Chris Buyse;

•

Rudy Dekeyser; and

• Hanspeter Spek.

CONFLICT OF INTERESTS PROCEDURE

Declaration by the Conflicted Directors

The following directors, in their capacity as directors of the Company, declared that they have a potential conflict of interests in
the sense of Article 523 of the Belgian Company Code (the BCC) in relation with the approval of the SPA:

•

Serge Goblet;

Tolefi SA, represented by its permanent representative Serge Goblet;

debts) of EUR 44,677.17 (the Debts).

• Michel Lussier; and

•

LSS Consulting SPRL, represented by its permanent representative Christian Homsy

(each a Conflicted Director and together the Conflicted Directors).

This potential conflict of interests consists of the fact that under the SPA, the Company will pay a purchase price to each of the
Conflicted Directors in their capacity as BMS Shareholders, in exchange for the shares each of them holds in BMS. Under the SPA,
the Conflicted Directors will therefore act directly as counterparties of the Company.

Nature and description of the decision to be taken

Business Days of the Completion Date.

The directors are invited to approve the SPA between the Company and the BMS Shareholders pursuant to which the Company
will acquire the entire share capital in BMS from the BMS Shareholders.

Actions to be taken

•

In accordance with Article 523 of the BCC, the statutory auditor of the Company will be informed of the abovementioned
potential conflict of interests;

the board of directors will include these minutes in its annual report relating to the annual accounts of the Company as
per 31 December 2016; and

the Conflicted Directors will neither participate in the deliberation nor vote on the items included in the agenda of the
present meeting of the board of directors.

RELATED PARTY TRANSACTIONS PROCEDURE

Declaration by the Chairman

The procedure provided by Article 524 of the BCC applies to any decision or any transaction in execution of a decision of a listed
company, which concerns (i) relations between the listed company and an affiliated company (except subsidiaries of the listed
company) or (ii) relations between a subsidiary of the listed company and a company affiliated to the subsidiary (but not a
subsidiary of the subsidiary).

In this case, in the framework of the transaction contemplated under the SPA (the Transaction), Article 524 of the BCC does not
apply, since the Company has no controlling shareholder and neither BMS nor any of its shareholders are therefore an affiliate of
the Company. However, considering the fact that the largest shareholder of the Company, TOLEFI SA, is also the largest

shareholder of BMS, the board of directors decided, on a voluntary basis, to apply a similar procedure as the procedure set out in

Article 524 of BCC, to the exception of obtaining a special report from our statutory auditor.

The Board hence appointed, during its meeting held on 18 March 2016, a committee consisting of the following three independent

Committee of independent directors

Composition

directors:

• Chris Buyse;

•

Rudy Dekeyser; and

• Hanspeter Spek,

attached to these minutes as Schedule 2.

RESOLUTIONS

Opinion

•

to assess the proposed Transaction and to report to the Board.

The committee, after consultation with an independent expert, has submitted a positive written opinion to the Board, which is

After deliberation, the Board directors (minus the Conflicted Directors) unanimously adopted the following resolutions:

Acknowledgment that the procedure set out in Articles 523 of the BCC have been complied with.

Acknowledgement of the opinion of the committee of independent directors on the Transaction.

Acknowledgement of the financial consequences of the SPA for the Company and acknowledgement that the approval

of the SPA is justified and in the interest of the Company, for the following reasons:

Under the SPA, the Company will pay a purchase price (the Purchase Price) to each of the Conflicted Directors in their capacity as

BMS Shareholders, in exchange for the shares each of them holds in BMS.

The Purchase Price is based on the financial statements of the Company as per 30 April 2016. The following balance sheets

captions are used to determine the Purchase Price: the available cash position of EUR 577,314.95 (the Available Cash), account

receivables and accrued expenses of EUR 89,510.27 (the Receivables), and account payables and other debts (excluding financial

If after the date on which the sale and purchase of the entire share capital in BMS is completed (the Completion Date), it appears

the available cash position on the Completion Date differed from the Available Cash and Receivables by more than EUR 50,000,

the Purchase Price will be adjusted accordingly.

If after the Completion Date, it appears the debts position on the Completion Date differed from the Debts by more than EUR

25,000, the Purchase Price will be adjusted accordingly.

The difference between the Purchase Price and the Purchase Price adjusted in accordance with the above provisions, if any, will be

paid by the BMS Shareholders to the Company or by the Company to the BMS Shareholders, as the case may be, within ten (10)

The terms and conditions under and subject to which the SPA is being entered into are reasonably in line with current market

practice for such sales and purchases of shares. Furthermore, the Purchase Price will be adjusted in accordance with the actual

cash and debt positions on the Completion Date. Therefore, the financial consequences for the Company in relation to the

conclusion of the SPA are limited.

Approval of the SPA and of the Transaction.

power of subdelegation, in order to:

A special power-of-attorney is granted to each director (except the Conflicted Directors), each acting individually and with the

execute the SPA in the name and on behalf of the Company as well as any other document related thereto; and

in general, do all that is necessary or useful for the implementation of these resolutions.

•

Closing

All points on the agenda having been addressed, the Chairman closed the meeting at 4:15 pm

CELYAD • FINANCIAL RESULTS 2016

In 2016, certain members of the Board declared a conflict of interest. The following declarations were made in that respect:

Extract from the minute of the Board of Directors of 20 May 2016 related to the acquisition of the company Biological

shareholder of BMS, the board of directors decided, on a voluntary basis, to apply a similar procedure as the procedure set out in
Article 524 of BCC, to the exception of obtaining a special report from our statutory auditor.

Manufacturing Services :

Agenda

Deliberation and approval of the draft share purchase agreement (the SPA) between the Company and the shareholders of

Biological Manufacturing Services SA, a limited liability company ("société anonyme") incorporated under the laws of Belgium, with

registered office at Axisparc, Rue Edouard Belin 12, 1435 Mont-Saint-Guibert, Belgium, and registered with the Crossroads Bank

for Enterprises ("Banque-Carrefour des Entreprises") under number 0885.826.566 (LER Walloon Brabant) (BMS), who are listed in

Schedule 1 to the SPA (the BMS Shareholders), pursuant to which the Company will acquire the entire share capital in BMS from

the BMS Shareholders.

INTRODUCTION BY THE CHAIRMAN

The Chairman referred to the board of directors held on 18 March 2016, during which he explained that BMS had been set up in

2009 in order to lease the property required for the GMP labs, to fit them out and to sublease them to the Company. A significant

number of the Company’s shareholders and the Company’s directors are also shareholders in BMS. The Company has now the

opportunity to purchase all of the shares in BMS.

Committee of independent directors

Composition

The Board hence appointed, during its meeting held on 18 March 2016, a committee consisting of the following three independent
directors:

• Chris Buyse;

•

Rudy Dekeyser; and

• Hanspeter Spek,

to assess the proposed Transaction and to report to the Board.

Opinion

The committee, after consultation with an independent expert, has submitted a positive written opinion to the Board, which is
attached to these minutes as Schedule 2.

During the board of directors held on 18 March 2016, the board of directors decided, on a voluntary basis, to appoint a committee

of three independent directors consisting of the following three independent directors:

RESOLUTIONS

• Chris Buyse;

•

Rudy Dekeyser; and

• Hanspeter Spek.

CONFLICT OF INTERESTS PROCEDURE

Declaration by the Conflicted Directors

•

The following directors, in their capacity as directors of the Company, declared that they have a potential conflict of interests in

the sense of Article 523 of the Belgian Company Code (the BCC) in relation with the approval of the SPA:

Serge Goblet;

• Michel Lussier; and

Tolefi SA, represented by its permanent representative Serge Goblet;

LSS Consulting SPRL, represented by its permanent representative Christian Homsy

(each a Conflicted Director and together the Conflicted Directors).

This potential conflict of interests consists of the fact that under the SPA, the Company will pay a purchase price to each of the

Conflicted Directors in their capacity as BMS Shareholders, in exchange for the shares each of them holds in BMS. Under the SPA,

the Conflicted Directors will therefore act directly as counterparties of the Company.

Nature and description of the decision to be taken

The directors are invited to approve the SPA between the Company and the BMS Shareholders pursuant to which the Company

will acquire the entire share capital in BMS from the BMS Shareholders.

Actions to be taken

potential conflict of interests;

per 31 December 2016; and

present meeting of the board of directors.

RELATED PARTY TRANSACTIONS PROCEDURE

Declaration by the Chairman

the Conflicted Directors will neither participate in the deliberation nor vote on the items included in the agenda of the

The procedure provided by Article 524 of the BCC applies to any decision or any transaction in execution of a decision of a listed

company, which concerns (i) relations between the listed company and an affiliated company (except subsidiaries of the listed

company) or (ii) relations between a subsidiary of the listed company and a company affiliated to the subsidiary (but not a

subsidiary of the subsidiary).

In this case, in the framework of the transaction contemplated under the SPA (the Transaction), Article 524 of the BCC does not

apply, since the Company has no controlling shareholder and neither BMS nor any of its shareholders are therefore an affiliate of

the Company. However, considering the fact that the largest shareholder of the Company, TOLEFI SA, is also the largest

After deliberation, the Board directors (minus the Conflicted Directors) unanimously adopted the following resolutions:

•

Acknowledgment that the procedure set out in Articles 523 of the BCC have been complied with.

Acknowledgement of the opinion of the committee of independent directors on the Transaction.

Acknowledgement of the financial consequences of the SPA for the Company and acknowledgement that the approval
of the SPA is justified and in the interest of the Company, for the following reasons:

Under the SPA, the Company will pay a purchase price (the Purchase Price) to each of the Conflicted Directors in their capacity as
BMS Shareholders, in exchange for the shares each of them holds in BMS.

The Purchase Price is based on the financial statements of the Company as per 30 April 2016. The following balance sheets
captions are used to determine the Purchase Price: the available cash position of EUR 577,314.95 (the Available Cash), account
receivables and accrued expenses of EUR 89,510.27 (the Receivables), and account payables and other debts (excluding financial
debts) of EUR 44,677.17 (the Debts).

If after the date on which the sale and purchase of the entire share capital in BMS is completed (the Completion Date), it appears
the available cash position on the Completion Date differed from the Available Cash and Receivables by more than EUR 50,000,
the Purchase Price will be adjusted accordingly.

If after the Completion Date, it appears the debts position on the Completion Date differed from the Debts by more than EUR
25,000, the Purchase Price will be adjusted accordingly.

The difference between the Purchase Price and the Purchase Price adjusted in accordance with the above provisions, if any, will be
paid by the BMS Shareholders to the Company or by the Company to the BMS Shareholders, as the case may be, within ten (10)
Business Days of the Completion Date.

The terms and conditions under and subject to which the SPA is being entered into are reasonably in line with current market
practice for such sales and purchases of shares. Furthermore, the Purchase Price will be adjusted in accordance with the actual
cash and debt positions on the Completion Date. Therefore, the financial consequences for the Company in relation to the
conclusion of the SPA are limited.

In accordance with Article 523 of the BCC, the statutory auditor of the Company will be informed of the abovementioned

Approval of the SPA and of the Transaction.

the board of directors will include these minutes in its annual report relating to the annual accounts of the Company as

A special power-of-attorney is granted to each director (except the Conflicted Directors), each acting individually and with the
power of subdelegation, in order to:

execute the SPA in the name and on behalf of the Company as well as any other document related thereto; and

in general, do all that is necessary or useful for the implementation of these resolutions.

•

Closing

All points on the agenda having been addressed, the Chairman closed the meeting at 4:15 pm

CELYAD • FINANCIAL RESULTS 2016

2.4.4. Related Party Transactions

Service Agreement with Biological Manufacturing Services SA

In April 2011, the Company entered into an agreement for the provision of services for production of cardiac cells with
Biological Manufacturing Services SA, or BMS, a service provider in the biotechnology sector that operates clean rooms on
its site located at Rue Edouard Belin 12, 1435 Mont-Saint-Guibert, Belgium. Under this agreement, BMS provides the
Company with support, services and provision of assets for the production our products, including making clean rooms
available to the Company for its exclusive use. TOLEFI SA, of which Serge Goblet is the managing director, owns 50% of
BMS. Patrick Jeanmart, the company’s Chief Financial Officer, also holds the position of CFO at BMS.

This service agreement was terminated on 30 April 2016. The total annual services fee paid by us to BMS was €299,000 in
2015 and €98,984 in 2016.
2.4.5. Transactions with affiliates

Article 524 of the Belgian Company Code provides for a special procedure that applies to intra-group or related party
transactions with affiliates. The procedure will apply to decisions or transactions between the Company and affiliates of the
Company that are not a subsidiary of the Company. It will also apply to decisions or transactions between any of the
Company’s subsidiaries and such subsidiaries’ affiliates that are not a subsidiary of the Company.

Prior to any such decision or transaction, the Board of Directors of the Company must appoint a special committee
consisting of three independent directors, assisted by one or more independent experts. This committee must assess the
business advantages and disadvantages of the decision or transaction for the Company. It must quantify the financial
consequences thereof and must determine whether or not the decision or transaction causes a disadvantage to the
Company that is manifestly illegitimate in view of the Company’s policy. If the committee determines that the decision or
transaction is not manifestly illegitimate, but is of the opinion that it will prejudice the Company, it must clarify which
advantages are taken into account in the decision or transaction to compensate the disadvantages. All these elements must
be set out in the committee’s advice. The Board of Directors must then take a decision, taking into account the opinion of
the committee. Any deviation from the committee’s advice must be explained. Directors who have a conflict of interest are
not entitled to participate in the deliberation and vote. The committee’s advice and the decision of the Board of Directors
must be communicated to the Company’s Statutory Auditor, who must render a separate opinion. The conclusion of the
committee, an excerpt from the minutes of the Board of Directors and the opinion by the Statutory Auditor must be included
in the (statutory) annual report of the Board of Directors.

The procedure does not apply to decisions or transactions in the ordinary course of business at customary market
conditions, and transactions or decisions with a value of less than 1% of the consolidated net assets of the Company.
2.4.6. Market abuse regulations

On 17 June 2013, the Board of the Company defined specific rules to prevent the illegal use of inside information by board
members, shareholders, managers and employees or the appearance of such use (“the Market Abuse Policy”). The Market
Abuse Policy has been amended by (i) resolution of the Board of Directors on 12 June 2015 and (ii) by resolution of the Board
of Directors on 8 December 2016.

These prohibitive provisions and the monitoring of compliance with them are primarily intended to protect the market. To
ensure that the law is respected and to uphold the reputation of the Company, it is therefore necessary to take a number of
preventive measures in the form of a code of conduct.

The Rules apply to all Insiders. An Insider can be given access to inside information within the scope of the normal
performance of his or her duties. The insider has the strict obligation to treat this information confidentially and is not
allowed to trade financial instruments of the Company to which this inside information relates.

In accordance with art 25bis §1 of the law of 2 August 2002, the Company has established a list of persons in the Company
who, based on an employment or service agreement, have contracted with the Company and have during the course of their
duties access to inside information directly or indirectly. This list is updated regularly and remains at the disposal of the FSMA
for a period of 5 years.

2.5

Corporate Governance Charter

The Company's Board of Directors intends to comply with the CGC, but believes that the following deviations from its

provisions are justified in view of the Company's particular situation:

Schedule C, Section F, subsection 7 of the CGC: the non-executive directors receive fixed remuneration in

consideration of their membership of the Board of Directors and their attendance at committee meetings of which they

are members. In principle, they will not receive any performance related remuneration, nor will any options or warrants

be granted to them in their capacity as a director. However, since July 2013, on the advice of the Nomination and

Remuneration Committee, the Company has granted 55,000 warrants to non-executive directors, as in the board of

directors’ reasonable opinion, granting warrants provides additional possibilities to attract or retain competent non-

executive directors and to offer them an attractive additional remuneration without the consequence that this

additional remuneration weighs on our financial results. Furthermore, the grant of warrants is a commonly used method

in the sector in which we operate. Without this possibility, the Company would be subject to a considerable

disadvantage compared to competitors who do offer warrants to their non-executive directors. The board of directors

is of the opinion that the grant of options or warrants has no negative impact on the functioning of the non-executive

directors.

In accordance with the CGC, the Board of Directors of the Company will review its corporate governance charter from time

to time and make such changes as it deems necessary and appropriate. The charter, together with the Company’s articles of

association, is available on the Company's website (www.celyad.com) and could be obtained free of charge at the registered

office of the Company. The CGC has been updated by resolution of the Board of Directors on 8 December 2016.

2.6

Remuneration report

2.6.1. Remuneration policy

The remuneration of the members of the Executive Management Team is determined by the Board of Directors based on

recommendations made by the Nomination and Remuneration Committee, further to a recommendation made by the CEO

to the Nomination and Remuneration Committee (except where his own remuneration is concerned).

The remuneration of the members of the Executive Management Team is designed to hire, retain and motivate high quality

executive managers. The remuneration of the members of the Executive Management Team currently consists of the

following elements:

each member of the Executive Management Team is entitled to a basic fixed compensation designed to fit

responsibilities, relevant experience and competences, in line with market rates for equivalent positions;

the Company pays each member of the Executive Management Team a variable compensation, dependent on specified

individual, team and/or Company objectives which, in accordance with Article 520bis of the Belgian Company Code, are

pre-determined in an explicit decision by the Board of Directors. Such variable compensation is based on the Company’s

performance and the individual performance of the Manager. The performance criteria are set and approved by the

Board at the beginning of each calendar year.

each member of the Executive Management Team currently participates in, and/or in the future may be offered the

possibility to participate in, a stock based incentive scheme, in accordance with the recommendations set by the

Nomination and Remuneration Committee, after the recommendation by the CEO to such committee (except in

respect of his own remuneration) and after (in respect of future stock based incentive schemes) prior shareholder

approval of the scheme itself by way of a resolution at the annual shareholders' meeting;

each member of the Executive Management Team is entitled to a number of fringe benefits (to the exception, however,

of those managers engaged on the basis of service agreements), which may include participating in a defined

contribution pension or retirement scheme, disability insurance and life insurance, a company car, and/or a lump-sum

expense allowance according to general Company policy.

In accordance with Schedule C, Section F, subsection 7 of the CGC, any contractual arrangement entered into on or after 1

July 2009 regarding the remuneration of the CEO, any other member of the Executive Management Team, should specify

that the amount of severance pay awarded in the event of early termination does not exceed 12 months' base and variable

remuneration. Any such agreement (entered into on or after 1 July 2009) should also specify that the severance package

does not take into account the variable remuneration and be limited to 12 months' base remuneration in the event that the

departing CEO or any other member of the Executive Management Team did not meet the performance criteria referred to

in the agreement.

The Nomination and Remuneration Committee recommends the level of remuneration for non-executive directors, subject

to approval by the Board of Directors and, subsequently, by the Shareholders Meeting.

The Nomination and Remuneration Committee benchmarks directors' compensation against peer companies to ensure that

it is competitive. Remuneration is linked to the time committed to the Board of Directors and its various committees.

On the advice of the Nomination and Remuneration Committee, the Board of Directors may propose to the Shareholders

Meeting to grant options or warrants in order to attract or retain non-executive directors with the most relevant skills,

knowledge and expertise. Insofar as this grant of options or warrants comprises variable remuneration under Article 554 of

the Belgian Company Code, this remuneration shall be submitted for approval to the next annual general shareholders

meeting.

CELYAD • FINANCIAL RESULTS 2016

2.4.4. Related Party Transactions

Service Agreement with Biological Manufacturing Services SA

In April 2011, the Company entered into an agreement for the provision of services for production of cardiac cells with

Biological Manufacturing Services SA, or BMS, a service provider in the biotechnology sector that operates clean rooms on

its site located at Rue Edouard Belin 12, 1435 Mont-Saint-Guibert, Belgium. Under this agreement, BMS provides the

Company with support, services and provision of assets for the production our products, including making clean rooms

available to the Company for its exclusive use. TOLEFI SA, of which Serge Goblet is the managing director, owns 50% of

BMS. Patrick Jeanmart, the company’s Chief Financial Officer, also holds the position of CFO at BMS.

This service agreement was terminated on 30 April 2016. The total annual services fee paid by us to BMS was €299,000 in

2015 and €98,984 in 2016.

2.4.5. Transactions with affiliates

Article 524 of the Belgian Company Code provides for a special procedure that applies to intra-group or related party

transactions with affiliates. The procedure will apply to decisions or transactions between the Company and affiliates of the

Company that are not a subsidiary of the Company. It will also apply to decisions or transactions between any of the

Company’s subsidiaries and such subsidiaries’ affiliates that are not a subsidiary of the Company.

Prior to any such decision or transaction, the Board of Directors of the Company must appoint a special committee

consisting of three independent directors, assisted by one or more independent experts. This committee must assess the

business advantages and disadvantages of the decision or transaction for the Company. It must quantify the financial

consequences thereof and must determine whether or not the decision or transaction causes a disadvantage to the

Company that is manifestly illegitimate in view of the Company’s policy. If the committee determines that the decision or

transaction is not manifestly illegitimate, but is of the opinion that it will prejudice the Company, it must clarify which

advantages are taken into account in the decision or transaction to compensate the disadvantages. All these elements must

be set out in the committee’s advice. The Board of Directors must then take a decision, taking into account the opinion of

the committee. Any deviation from the committee’s advice must be explained. Directors who have a conflict of interest are

not entitled to participate in the deliberation and vote. The committee’s advice and the decision of the Board of Directors

must be communicated to the Company’s Statutory Auditor, who must render a separate opinion. The conclusion of the

committee, an excerpt from the minutes of the Board of Directors and the opinion by the Statutory Auditor must be included

in the (statutory) annual report of the Board of Directors.

The procedure does not apply to decisions or transactions in the ordinary course of business at customary market

conditions, and transactions or decisions with a value of less than 1% of the consolidated net assets of the Company.

2.4.6. Market abuse regulations

On 17 June 2013, the Board of the Company defined specific rules to prevent the illegal use of inside information by board

members, shareholders, managers and employees or the appearance of such use (“the Market Abuse Policy”). The Market

Abuse Policy has been amended by (i) resolution of the Board of Directors on 12 June 2015 and (ii) by resolution of the Board

of Directors on 8 December 2016.

These prohibitive provisions and the monitoring of compliance with them are primarily intended to protect the market. To

ensure that the law is respected and to uphold the reputation of the Company, it is therefore necessary to take a number of

preventive measures in the form of a code of conduct.

The Rules apply to all Insiders. An Insider can be given access to inside information within the scope of the normal

performance of his or her duties. The insider has the strict obligation to treat this information confidentially and is not

allowed to trade financial instruments of the Company to which this inside information relates.

In accordance with art 25bis §1 of the law of 2 August 2002, the Company has established a list of persons in the Company

who, based on an employment or service agreement, have contracted with the Company and have during the course of their

duties access to inside information directly or indirectly. This list is updated regularly and remains at the disposal of the FSMA

for a period of 5 years.

2.5

Corporate Governance Charter

The Company's Board of Directors intends to comply with the CGC, but believes that the following deviations from its
provisions are justified in view of the Company's particular situation:

Schedule C, Section F, subsection 7 of the CGC: the non-executive directors receive fixed remuneration in
consideration of their membership of the Board of Directors and their attendance at committee meetings of which they
are members. In principle, they will not receive any performance related remuneration, nor will any options or warrants
be granted to them in their capacity as a director. However, since July 2013, on the advice of the Nomination and
Remuneration Committee, the Company has granted 55,000 warrants to non-executive directors, as in the board of
directors’ reasonable opinion, granting warrants provides additional possibilities to attract or retain competent non-
executive directors and to offer them an attractive additional remuneration without the consequence that this
additional remuneration weighs on our financial results. Furthermore, the grant of warrants is a commonly used method
in the sector in which we operate. Without this possibility, the Company would be subject to a considerable
disadvantage compared to competitors who do offer warrants to their non-executive directors. The board of directors
is of the opinion that the grant of options or warrants has no negative impact on the functioning of the non-executive
directors.

In accordance with the CGC, the Board of Directors of the Company will review its corporate governance charter from time
to time and make such changes as it deems necessary and appropriate. The charter, together with the Company’s articles of
association, is available on the Company's website (www.celyad.com) and could be obtained free of charge at the registered
office of the Company. The CGC has been updated by resolution of the Board of Directors on 8 December 2016.
2.6

Remuneration report

2.6.1. Remuneration policy

The remuneration of the members of the Executive Management Team is determined by the Board of Directors based on
recommendations made by the Nomination and Remuneration Committee, further to a recommendation made by the CEO
to the Nomination and Remuneration Committee (except where his own remuneration is concerned).

The remuneration of the members of the Executive Management Team is designed to hire, retain and motivate high quality
executive managers. The remuneration of the members of the Executive Management Team currently consists of the
following elements:

each member of the Executive Management Team is entitled to a basic fixed compensation designed to fit
responsibilities, relevant experience and competences, in line with market rates for equivalent positions;
the Company pays each member of the Executive Management Team a variable compensation, dependent on specified
individual, team and/or Company objectives which, in accordance with Article 520bis of the Belgian Company Code, are
pre-determined in an explicit decision by the Board of Directors. Such variable compensation is based on the Company’s
performance and the individual performance of the Manager. The performance criteria are set and approved by the
Board at the beginning of each calendar year.
each member of the Executive Management Team currently participates in, and/or in the future may be offered the
possibility to participate in, a stock based incentive scheme, in accordance with the recommendations set by the
Nomination and Remuneration Committee, after the recommendation by the CEO to such committee (except in
respect of his own remuneration) and after (in respect of future stock based incentive schemes) prior shareholder
approval of the scheme itself by way of a resolution at the annual shareholders' meeting;
each member of the Executive Management Team is entitled to a number of fringe benefits (to the exception, however,
of those managers engaged on the basis of service agreements), which may include participating in a defined
contribution pension or retirement scheme, disability insurance and life insurance, a company car, and/or a lump-sum
expense allowance according to general Company policy.

In accordance with Schedule C, Section F, subsection 7 of the CGC, any contractual arrangement entered into on or after 1
July 2009 regarding the remuneration of the CEO, any other member of the Executive Management Team, should specify
that the amount of severance pay awarded in the event of early termination does not exceed 12 months' base and variable
remuneration. Any such agreement (entered into on or after 1 July 2009) should also specify that the severance package
does not take into account the variable remuneration and be limited to 12 months' base remuneration in the event that the
departing CEO or any other member of the Executive Management Team did not meet the performance criteria referred to
in the agreement.

The Nomination and Remuneration Committee recommends the level of remuneration for non-executive directors, subject
to approval by the Board of Directors and, subsequently, by the Shareholders Meeting.

The Nomination and Remuneration Committee benchmarks directors' compensation against peer companies to ensure that
it is competitive. Remuneration is linked to the time committed to the Board of Directors and its various committees.

On the advice of the Nomination and Remuneration Committee, the Board of Directors may propose to the Shareholders
Meeting to grant options or warrants in order to attract or retain non-executive directors with the most relevant skills,
knowledge and expertise. Insofar as this grant of options or warrants comprises variable remuneration under Article 554 of
the Belgian Company Code, this remuneration shall be submitted for approval to the next annual general shareholders
meeting.

CELYAD • FINANCIAL RESULTS 2016

Without prejudice to the powers granted by law to the Shareholders Meeting, the Board of Directors sets and, from time to
time, revises the rules and the level of compensation for directors carrying out a special mandate or sitting on one of the
committees and the rules for the reimbursement of directors' business-related out-of-pocket expenses. The remuneration
of directors will be disclosed to the Company's shareholders in accordance with applicable laws and regulations.

The directors' mandate may be terminated "ad nutum" (at any time) without any form of compensation.

Additionally, any agreement, entered into or extended as from 3 May 2010, between the Company and a non-executive
director, which would provide for a variable remuneration, is subject to the same approval requirements as the ones
applicable to the granting to Leading Persons of a severance package exceeding 12 or, as the case may be, 18 months.

The Company does not envisage to amend the principles driving its remuneration policy in the near future and in particular in
the coming two financial years.
2.6.2. Director’s remuneration

The non-executive directors receive fixed remuneration in consideration for their membership of the Board of Directors and
their attendance at the committee meetings of which they are members.

On 5 November 2015, the Extraordinary Shareholders Meeting approved a remuneration and compensation scheme for the
chairman, the independent directors and non-executive directors. This scheme is applicable as from November 2015. The
remuneration package is made up of a fixed annual fee of €40,000 for the chairman and €30,000 for the other independent
directors. The fee is supplemented with a fixed annual fee of €10,000 for membership of each committee of the Board of
Directors, to be increased by €5,000 in case the relevant director chairs the Nomination and Remuneration Committee or
the Audit Committee.

On 9 May 2016, the Extraordinary Shareholders meeting approved a new remuneration and compensation scheme for the
non-executive directors. The remuneration package is made up of fixed annual fee of €10,000 for non-executive directors,
supplemented by a fxed annual fee of €10,000 for the Chairman. The annual fee is supplemented by a €5,000 fee for any non-
executive directors covering the participation to the four ordinary board of directors’ meetings. Any participation to an
extraordinary board of directors’ meetings gives right to a supplemental fee of €5,000 EUR. This remuneration package is
also supplemented with a fixed annual fee of €15,000 for membership of each committee of the Board of Directors, to be
increased by €5,000 in case the relevant director chairs the Nomination and Remuneration Committee or the Audit
Committee. Finally, an extraordinary fee of €3,000 is granted to non-executive directors in case of appointment of such
directors, on request of the CEO and with prior approval of the Board of directors, for specific missions requiring the
presence of the concerned director. This scheme is applicable directly after the General Meeting of Shareholders of 9 May
2016. The remuneration granted to directors during year 2016 is the consequence of both applications of (i) remuneration
and compensation scheme adopted in November 2015 and (ii) the new plan adopted in May 2016. Apart from the above
remuneration for non-executive directors, all directors are entitled to company warrants and a reimbursement of out-of-
pocket expenses actually incurred as a result of participation in meetings of the Board of Directors.

As of 31 December 2016, there are no loans outstanding from the Company to any member of the Board of Directors.

There are no employment or service agreements that provide for notice periods or indemnities between the Company and
members of the Board of Directors who are not a member of the Executive Management Team.

On an individual basis, the following amounts have been paid over the course of 2016:

Name

Michel Lussier

Debasish Roychowdhury

Rudy Dekeyser

Chris Buyse

Hanspeter Spek

Serge Goblet

Total

Fees earned (€)

78,750

41,250

68,750

73,750

55,000

37,500

355,000

2.6.3. Remuneration of the CEO

In accordance with Article 96, §3 of the Belgian Company Code, this remuneration report includes the amount of the
remuneration of, and any other benefits granted to, the Company’s CEO, on a broken-down basis. In the financial year 2016
Celyad paid 562k€ of remuneration in respect of the CEO, Mr Christian Homsy. This includes:

•
•

a fixed remuneration of €426k;
a variable component of €136k.

The CEO participates in different warrant plans set in place by the Company and approved by its shareholders:

•

under Warrant plan of May 2010: 200 warrants at an exercise price of €22.44 per share vested over a period of 3
years;
under Warrant plan of January 2013: 80,000 warrants at an exercise price of €4.52 per share vested over a
period of 1 years. These warrants were exercised in 2014;

•

under Warrant plan of May 2013: 112,000 warrants at an exercise price of €2.64 per share vested over a period

• Under Warrant plan of November 2015: 40,000 warrants at an exercise price of €34.65 per share vested over a

of 3 years.

period of 3 years

The CEO was not granted warrants in 2016, neither exercised Company warrants in 2016.

2.6.4. Remuneration of the Executive Management Team

In addition to the CEO, the composition of the Executive Management Team as of 31 December 2016 is:

PaJe SPRL, represented by Patrick Jeanmart, CFO

• Georges Rawadi, Vice President Business Development & IP

• Dieter Hauwaerts, Vice President Operations

ImXense, represented by Frédéric Lehmann, Vice President Clinical Development & Medical Affairs

• NandaDevi SPRL, represented by Philippe Dechamps, Chief Legal Officer

• David Gilham, Vice President Research & Development

KNCL SPRL, representend by Jean-Pierre Latere, Chief Operating Officer.

The CFO, the Chief Legal Officer, the Chief Operating Officer, the Vice President Clinical Development & Medical Affairs are

engaged on the basis of a service agreement, all of which can be terminated at any time, subject to certain pre-agreed notice

periods, which may, at the discretion of the Company, be replaced by a corresponding compensatory payment. The Vice

President Business Development and IP, the Vice President Research & Development and the Vice President Operations are

engaged on the basis of employment agreements.

The total fees paid or due to the members of the Executive Management Team (excluding the CEO) was €2.4 million in 2016

(full company costs but excluding VAT and stock based compensation) as further detailed in sections of the notes to the

financial statements.

This includes:

•

a fixed remuneration of €2,007k;

a variable component of €358k.

Out of the fixed compensation, the amounts paid by the Group on behalf of the members of the EMT for a group insurance

and other advantages in kind amounted to €137k.

Over the course of 2016, EMT accepted 180,000 warrants offered from the November 2015 warrant plan. Out of the 170,000

warrants, 40,000 lapsed with the departure of the manager. In December 2016, 20,000 warrants were offered to members of

the EMT and accepted in February 2017.

As of 31 December 2016, the EMT holds 310,725 warrants. The exercise prices vary from 2.64€ to 39.22€. Vesting schemes

2.7

Description of the principal risks associated to the activities of the Group

are over 1 and 3 years.

2.7.1. Risk Management

Risk management is embedded in our strategy and is of crucial importance for achieving the objectives set by the Board of

Directors. The Board is responsible for the assessing the risks associated with the activities of the company and for the

evaluation of the internal audit systems. The Board relies partially on the Executive Management Team (EMT) to perform this

assessment.

The internal audit systems play a central role in managing the risks and the activities of the Company. To safeguard the

proper implementation and execution of the strategies defined by the Board, the Company set-up internal risk management

and control systems. The internal audit system is based on the following pillars:

the Company’s organization and values and the legal environment surrounding the activities of the Company;

•

risk analysis;

audit activities performed by Quality Assurance and Finance departments;

controls, supervision and corrective actions and measures.

The purpose of these systems is to manage in an effective and efficient manner the significant risks to which the Company is

exposed. There are designed to ensure:

the careful monitoring of the effectiveness of our short term and long term strategy;

the Company’s sustainability by a constant evaluation of the Company performance (operations and cash).

2.7.2. Organization and values

The Company’s organization and values as well as the legal environment surrounding the activities of the Company

constitute the basis of all the internal audit components. It is determined by a composition of formal and informal rules on

which the functioning of the Company relies.

The organization encompasses the following elements:

CELYAD • FINANCIAL RESULTS 2016

•

PaJe SPRL, represented by Patrick Jeanmart, CFO

KNCL SPRL, representend by Jean-Pierre Latere, Chief Operating Officer.

ImXense, represented by Frédéric Lehmann, Vice President Clinical Development & Medical Affairs

• Under Warrant plan of November 2015: 40,000 warrants at an exercise price of €34.65 per share vested over a

under Warrant plan of May 2013: 112,000 warrants at an exercise price of €2.64 per share vested over a period
of 3 years.

•
• Georges Rawadi, Vice President Business Development & IP
• Dieter Hauwaerts, Vice President Operations
•
• NandaDevi SPRL, represented by Philippe Dechamps, Chief Legal Officer
• David Gilham, Vice President Research & Development
•

period of 3 years

The CEO was not granted warrants in 2016, neither exercised Company warrants in 2016.
2.6.4. Remuneration of the Executive Management Team

In addition to the CEO, the composition of the Executive Management Team as of 31 December 2016 is:

Without prejudice to the powers granted by law to the Shareholders Meeting, the Board of Directors sets and, from time to

time, revises the rules and the level of compensation for directors carrying out a special mandate or sitting on one of the

committees and the rules for the reimbursement of directors' business-related out-of-pocket expenses. The remuneration

of directors will be disclosed to the Company's shareholders in accordance with applicable laws and regulations.

The directors' mandate may be terminated "ad nutum" (at any time) without any form of compensation.

Additionally, any agreement, entered into or extended as from 3 May 2010, between the Company and a non-executive

director, which would provide for a variable remuneration, is subject to the same approval requirements as the ones

applicable to the granting to Leading Persons of a severance package exceeding 12 or, as the case may be, 18 months.

The Company does not envisage to amend the principles driving its remuneration policy in the near future and in particular in

the coming two financial years.

2.6.2. Director’s remuneration

The non-executive directors receive fixed remuneration in consideration for their membership of the Board of Directors and

their attendance at the committee meetings of which they are members.

On 5 November 2015, the Extraordinary Shareholders Meeting approved a remuneration and compensation scheme for the

chairman, the independent directors and non-executive directors. This scheme is applicable as from November 2015. The

remuneration package is made up of a fixed annual fee of €40,000 for the chairman and €30,000 for the other independent

directors. The fee is supplemented with a fixed annual fee of €10,000 for membership of each committee of the Board of

Directors, to be increased by €5,000 in case the relevant director chairs the Nomination and Remuneration Committee or

the Audit Committee.

On 9 May 2016, the Extraordinary Shareholders meeting approved a new remuneration and compensation scheme for the

non-executive directors. The remuneration package is made up of fixed annual fee of €10,000 for non-executive directors,

supplemented by a fxed annual fee of €10,000 for the Chairman. The annual fee is supplemented by a €5,000 fee for any non-

executive directors covering the participation to the four ordinary board of directors’ meetings. Any participation to an

extraordinary board of directors’ meetings gives right to a supplemental fee of €5,000 EUR. This remuneration package is

also supplemented with a fixed annual fee of €15,000 for membership of each committee of the Board of Directors, to be

increased by €5,000 in case the relevant director chairs the Nomination and Remuneration Committee or the Audit

Committee. Finally, an extraordinary fee of €3,000 is granted to non-executive directors in case of appointment of such

directors, on request of the CEO and with prior approval of the Board of directors, for specific missions requiring the

presence of the concerned director. This scheme is applicable directly after the General Meeting of Shareholders of 9 May

2016. The remuneration granted to directors during year 2016 is the consequence of both applications of (i) remuneration

and compensation scheme adopted in November 2015 and (ii) the new plan adopted in May 2016. Apart from the above

remuneration for non-executive directors, all directors are entitled to company warrants and a reimbursement of out-of-

pocket expenses actually incurred as a result of participation in meetings of the Board of Directors.

As of 31 December 2016, there are no loans outstanding from the Company to any member of the Board of Directors.

There are no employment or service agreements that provide for notice periods or indemnities between the Company and

members of the Board of Directors who are not a member of the Executive Management Team.

On an individual basis, the following amounts have been paid over the course of 2016:

Name

Michel Lussier

Debasish Roychowdhury

Rudy Dekeyser

Chris Buyse

Hanspeter Spek

Serge Goblet

Total

Fees earned (€)

78,750

41,250

68,750

73,750

55,000

37,500

355,000

2.6.3. Remuneration of the CEO

In accordance with Article 96, §3 of the Belgian Company Code, this remuneration report includes the amount of the

remuneration of, and any other benefits granted to, the Company’s CEO, on a broken-down basis. In the financial year 2016

Celyad paid 562k€ of remuneration in respect of the CEO, Mr Christian Homsy. This includes:

a fixed remuneration of €426k;

a variable component of €136k.

•

years;

The CEO participates in different warrant plans set in place by the Company and approved by its shareholders:

under Warrant plan of May 2010: 200 warrants at an exercise price of €22.44 per share vested over a period of 3

The CFO, the Chief Legal Officer, the Chief Operating Officer, the Vice President Clinical Development & Medical Affairs are
engaged on the basis of a service agreement, all of which can be terminated at any time, subject to certain pre-agreed notice
periods, which may, at the discretion of the Company, be replaced by a corresponding compensatory payment. The Vice
President Business Development and IP, the Vice President Research & Development and the Vice President Operations are
engaged on the basis of employment agreements.

The total fees paid or due to the members of the Executive Management Team (excluding the CEO) was €2.4 million in 2016
(full company costs but excluding VAT and stock based compensation) as further detailed in sections of the notes to the
financial statements.

This includes:

•
•

a fixed remuneration of €2,007k;
a variable component of €358k.

Out of the fixed compensation, the amounts paid by the Group on behalf of the members of the EMT for a group insurance
and other advantages in kind amounted to €137k.

Over the course of 2016, EMT accepted 180,000 warrants offered from the November 2015 warrant plan. Out of the 170,000
warrants, 40,000 lapsed with the departure of the manager. In December 2016, 20,000 warrants were offered to members of
the EMT and accepted in February 2017.

As of 31 December 2016, the EMT holds 310,725 warrants. The exercise prices vary from 2.64€ to 39.22€. Vesting schemes
are over 1 and 3 years.
2.7

Description of the principal risks associated to the activities of the Group

2.7.1. Risk Management

Risk management is embedded in our strategy and is of crucial importance for achieving the objectives set by the Board of
Directors. The Board is responsible for the assessing the risks associated with the activities of the company and for the
evaluation of the internal audit systems. The Board relies partially on the Executive Management Team (EMT) to perform this
assessment.

The internal audit systems play a central role in managing the risks and the activities of the Company. To safeguard the
proper implementation and execution of the strategies defined by the Board, the Company set-up internal risk management
and control systems. The internal audit system is based on the following pillars:

•
•
•
•

the Company’s organization and values and the legal environment surrounding the activities of the Company;
risk analysis;
audit activities performed by Quality Assurance and Finance departments;
controls, supervision and corrective actions and measures.

The purpose of these systems is to manage in an effective and efficient manner the significant risks to which the Company is
exposed. There are designed to ensure:

the careful monitoring of the effectiveness of our short term and long term strategy;
the Company’s sustainability by a constant evaluation of the Company performance (operations and cash).

2.7.2. Organization and values

The Company’s organization and values as well as the legal environment surrounding the activities of the Company
constitute the basis of all the internal audit components. It is determined by a composition of formal and informal rules on
which the functioning of the Company relies.

under Warrant plan of January 2013: 80,000 warrants at an exercise price of €4.52 per share vested over a

period of 1 years. These warrants were exercised in 2014;

The organization encompasses the following elements:

CELYAD • FINANCIAL RESULTS 2016

•

• Company’s value: “We Care, We Cure” is our creed, not only for our patients, but also for our employees.
Passion, pro-activity, open-minded, commitment, trust and integrity are the essential traits of character of
our all employees.
Employees and consultants: All our employees and consultants are required to manage the Company means
with due diligence, integrity and to act with the necessary common sense.
Board of Directors, including the Remuneration and Nomination Committee and the Audit Committee. See
section 5 for further information on the functioning of the Board and its Committees
Independent non-executive directors: Celyad is supported by several independent directors. Their expertise
and experience contribute to the Company’s effective management.

• Chief Executive Officer, in charge of the day-to-day management, supported by the other member of the

•

Executive Management Team.
The team: so far, the Company has been able to attract and retain motivated and dedicated qualified
employees.
Internal set of procedures: The Company set up a SOP manual which regulate all regulated activities within the
Company.
External environment: The Company operates in a highly regulated environment (GMP, GCP, etc). Compliance
with all these external rules and guidelines is of critical importance to the Company.

The evaluation of the Company’s organization, values and compliance with legal environment is made regularly for the
supervising bodies.
2.7.3. Risks analysis

The Board of Directors decides on the Company’s strategy, risk appetite and its main policy lines. It is the task of the Board of
Directors to strive for long-term success by procuring proper risk assessment and management. The Executive
Management Team is responsible for the development of systems that identify, evaluate and monitor risks.

Celyad divides its objectives into four categories:

•
•
•
•

strategic;
operational;
financing;
compliance with the rules and legislations and internal instructions.

Once the objectives are set by the Board, these are transferred to all departments, services and staff member within the
Company. Regular assessments within the different services and department are made along the year to ensure that these
objectives are followed. At year end, the EMT perform an overall performance appraisal and initiate a performance review
amongst the different departments and services of the Company.

Risk identification consists of examining the factors that could influence the objectives put forward in each category. Internal
or external factors may influence the realization of these objectives.

•

internal factors: they are closely related to the internal organization and could have several causes (change in
the group structure, staff, ERP system);
external factors: they can be the result of changes in the economic climate, regulations or competition.

Besides the common risks associated to all industrial companies, the EMT has identified the following specific risk factors
which are described here after.
2.7.4. Risks related to our financial position and need for additional capital

Celyad has incurred net losses in each period since our inception and anticipate that we will continue to
incur net losses in the future.

The Company is not profitable and has incurred losses in each period since its inception. For the years ended 31 December
2016 and 2015, the Company incurred a loss for the year of €23.6 million and €29.1 million, respectively. As of 31 December
2016, the Company had a retained loss of €124.0 million. The Company expects these losses to increase as it continues to
incur significant research and development and other expenses related to its ongoing operations, continues to advance its
drug product candidates through pre-clinical studies and clinical trials, seek regulatory approvals for its drug product
candidates, scale-up manufacturing capabilities and hire additional personnel to support the development of its drug
product candidates and to enhance our operational, financial and information management systems.

Even if the Company succeeds in commercializing one or more of its drug product candidates, it will continue to incur losses
for the foreseeable future relating to its substantial research and development expenditures to develop its technologies.
The Company anticipates that its expenses will increase substantially if and as the Company:

•
•
•

•
•

continues its research, pre-clinical and clinical development of its drug product candidates;
expands the scope of therapeutic indications of its current clinical studies for its drug product candidates;
initiates additional pre-clinical studies or additional clinical trials of existing drug product candidates or new
drug product candidates;
further develops the manufacturing process for its drug product candidates;
changes or adds additional manufacturers or suppliers;

•

studies;

seeks regulatory and marketing approvals for its drug product candidates that successfully complete clinical

establishes a sales, marketing and distribution infrastructure to commercialize any products for which the

Company may obtain marketing approval, in the European Union and the United States;

• makes milestone or other payments under any in-license agreements; and

• maintains, protects and expands its intellectual property portfolio.

The Company may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may

adversely affect our business. The size of its future net losses will depend, in part, on the rate of future growth of its

expenses and its ability to generate revenue.

Its prior losses and expected future losses have had and will continue to have an adverse effect on its stockholders’ equity

and working capital. Further, the net losses the Company incurs may fluctuate significantly from quarter to quarter and year

to year, such that a period to period comparison of its results of operations may not be a good indication of its future

The Company may need substantial additional funding, which may not be available on acceptable terms

performance.

when needed, if at all.

The Company’s operations have required substantial amounts of cash since inception. The Company expects to continue to

spend substantial amounts to continue the clinical development of its drug product candidates, including its ongoing and

planned clinical trials for C-Cure, NKR-T and any future drug product candidates. If approved, the Company will require

significant additional amounts in order to launch and commercialize our drug product candidates.

As of 31 December 2016, the Company had €48.4 million in cash and €34.2 million in short term investments. The Company

believes that such proceeds will be sufficient to fund its operations for at least the next 24 months. However, changing

circumstances may cause it to increase its spending significantly faster than it currently anticipates, and the Company may

need to spend more money than currently expected because of circumstances beyond its control. The Company may

require additional capital for the further development and commercialization of its drug product candidates and may need to

raise additional funds sooner if the Company chooses to expand more rapidly than it presently anticipates.

The Company’s ability to raise additional funds will depend on financial, economic and market conditions and other factors,

over which it may have no or limited control, and the Company cannot guarantee that additional funds will be available to it

when necessary on commercially acceptable terms, if at all. If the necessary funds are not available, the Company may need

to seek funds through collaborations and licensing arrangements, which may require it to reduce or relinquish significant

rights to its research programmes and product candidates, to grant licences on its technologies to partners or third parties

or enter into new collaboration agreements, the terms could be less favourable to the Company than those it might have

obtained in a different context. If adequate funds are not available on commercially acceptable terms when needed, the

Company may be forced to delay, reduce or terminate the development or commercialisation of all or part of its research

programmes or product candidates or it may be unable to take advantage of future business opportunities.

Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require

us to relinquish rights to our drug product candidates or technologies.

The Company may seek additional funding through a combination of equity offerings, debt financings, collaborations and/or

licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt

securities, the shareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect

your rights as a shareholder. The incurrence of indebtedness and/or the issuance of certain equity securities could result in

increased fixed payment obligations and could also result in certain additional restrictive covenants, such as limitations on

our ability to incur additional debt and/or issue additional equity, limitations on our ability to acquire or license intellectual

property rights and other operating restrictions that could adversely impact our ability to conduct our business. In addition,

issuance of additional equity securities, or the possibility of such issuance, may cause the market price of the Shares to

decline. In the event that we enter into collaborations and/or licensing arrangements in order to raise capital, we may be

required to accept unfavorable terms, including relinquishing or licensing to a third party on unfavorable terms our rights to

technologies or drug product candidates that we otherwise would seek to develop or commercialize ourselves or potentially

reserve for future potential arrangements when we might be able to achieve more favorable terms.

2.7.3.2.

Risk related to product development, regulatory approval and commercialization

The Company may encounter substantial delays in its clinical trials or may fail to demonstrate safety and efficacy to the

satisfaction of applicable regulatory authorities.

Before obtaining regulatory approval or marketing authorization from regulatory authorities for the sale of our drug product

candidates, if at all, we must conduct extensive clinical trials to demonstrate the safety and efficacy of the drug product

candidates in humans. Clinical testing is expensive, time-consuming and uncertain as to outcome. We cannot guarantee that

any clinical trials will be conducted as planned or completed on schedule, if at all. A failure of one or more clinical trials can

occur at any stage of testing. Events that may prevent successful or timely completion of clinical development include:

•

delays in raising, or inability to raise, sufficient capital to fund the planned clinical trials;

delays in reaching a consensus with regulatory agencies on trial design;

identifying, recruiting and training suitable clinical investigators;

CELYAD • FINANCIAL RESULTS 2016

• Company’s value: “We Care, We Cure” is our creed, not only for our patients, but also for our employees.

Passion, pro-activity, open-minded, commitment, trust and integrity are the essential traits of character of

our all employees.

Employees and consultants: All our employees and consultants are required to manage the Company means

with due diligence, integrity and to act with the necessary common sense.

Board of Directors, including the Remuneration and Nomination Committee and the Audit Committee. See

section 5 for further information on the functioning of the Board and its Committees

Independent non-executive directors: Celyad is supported by several independent directors. Their expertise

and experience contribute to the Company’s effective management.

• Chief Executive Officer, in charge of the day-to-day management, supported by the other member of the

Executive Management Team.

The team: so far, the Company has been able to attract and retain motivated and dedicated qualified

Internal set of procedures: The Company set up a SOP manual which regulate all regulated activities within the

External environment: The Company operates in a highly regulated environment (GMP, GCP, etc). Compliance

with all these external rules and guidelines is of critical importance to the Company.

The evaluation of the Company’s organization, values and compliance with legal environment is made regularly for the

employees.

Company.

supervising bodies.

2.7.3. Risks analysis

The Board of Directors decides on the Company’s strategy, risk appetite and its main policy lines. It is the task of the Board of

Directors to strive for long-term success by procuring proper risk assessment and management. The Executive

Management Team is responsible for the development of systems that identify, evaluate and monitor risks.

Celyad divides its objectives into four categories:

strategic;

operational;

financing;

compliance with the rules and legislations and internal instructions.

Once the objectives are set by the Board, these are transferred to all departments, services and staff member within the

Company. Regular assessments within the different services and department are made along the year to ensure that these

objectives are followed. At year end, the EMT perform an overall performance appraisal and initiate a performance review

amongst the different departments and services of the Company.

Risk identification consists of examining the factors that could influence the objectives put forward in each category. Internal

or external factors may influence the realization of these objectives.

internal factors: they are closely related to the internal organization and could have several causes (change in

the group structure, staff, ERP system);

external factors: they can be the result of changes in the economic climate, regulations or competition.

Besides the common risks associated to all industrial companies, the EMT has identified the following specific risk factors

which are described here after.

2.7.4. Risks related to our financial position and need for additional capital

Celyad has incurred net losses in each period since our inception and anticipate that we will continue to

incur net losses in the future.

The Company is not profitable and has incurred losses in each period since its inception. For the years ended 31 December

2016 and 2015, the Company incurred a loss for the year of €23.6 million and €29.1 million, respectively. As of 31 December

2016, the Company had a retained loss of €124.0 million. The Company expects these losses to increase as it continues to

incur significant research and development and other expenses related to its ongoing operations, continues to advance its

drug product candidates through pre-clinical studies and clinical trials, seek regulatory approvals for its drug product

candidates, scale-up manufacturing capabilities and hire additional personnel to support the development of its drug

product candidates and to enhance our operational, financial and information management systems.

Even if the Company succeeds in commercializing one or more of its drug product candidates, it will continue to incur losses

for the foreseeable future relating to its substantial research and development expenditures to develop its technologies.

The Company anticipates that its expenses will increase substantially if and as the Company:

continues its research, pre-clinical and clinical development of its drug product candidates;

expands the scope of therapeutic indications of its current clinical studies for its drug product candidates;

initiates additional pre-clinical studies or additional clinical trials of existing drug product candidates or new

drug product candidates;

further develops the manufacturing process for its drug product candidates;

changes or adds additional manufacturers or suppliers;

•

seeks regulatory and marketing approvals for its drug product candidates that successfully complete clinical
studies;
establishes a sales, marketing and distribution infrastructure to commercialize any products for which the
Company may obtain marketing approval, in the European Union and the United States;

• makes milestone or other payments under any in-license agreements; and
• maintains, protects and expands its intellectual property portfolio.

The Company may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may
adversely affect our business. The size of its future net losses will depend, in part, on the rate of future growth of its
expenses and its ability to generate revenue.

Its prior losses and expected future losses have had and will continue to have an adverse effect on its stockholders’ equity
and working capital. Further, the net losses the Company incurs may fluctuate significantly from quarter to quarter and year
to year, such that a period to period comparison of its results of operations may not be a good indication of its future
performance.

The Company may need substantial additional funding, which may not be available on acceptable terms
when needed, if at all.

The Company’s operations have required substantial amounts of cash since inception. The Company expects to continue to
spend substantial amounts to continue the clinical development of its drug product candidates, including its ongoing and
planned clinical trials for C-Cure, NKR-T and any future drug product candidates. If approved, the Company will require
significant additional amounts in order to launch and commercialize our drug product candidates.

As of 31 December 2016, the Company had €48.4 million in cash and €34.2 million in short term investments. The Company
believes that such proceeds will be sufficient to fund its operations for at least the next 24 months. However, changing
circumstances may cause it to increase its spending significantly faster than it currently anticipates, and the Company may
need to spend more money than currently expected because of circumstances beyond its control. The Company may
require additional capital for the further development and commercialization of its drug product candidates and may need to
raise additional funds sooner if the Company chooses to expand more rapidly than it presently anticipates.

The Company’s ability to raise additional funds will depend on financial, economic and market conditions and other factors,
over which it may have no or limited control, and the Company cannot guarantee that additional funds will be available to it
when necessary on commercially acceptable terms, if at all. If the necessary funds are not available, the Company may need
to seek funds through collaborations and licensing arrangements, which may require it to reduce or relinquish significant
rights to its research programmes and product candidates, to grant licences on its technologies to partners or third parties
or enter into new collaboration agreements, the terms could be less favourable to the Company than those it might have
obtained in a different context. If adequate funds are not available on commercially acceptable terms when needed, the
Company may be forced to delay, reduce or terminate the development or commercialisation of all or part of its research
programmes or product candidates or it may be unable to take advantage of future business opportunities.

Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require
us to relinquish rights to our drug product candidates or technologies.

The Company may seek additional funding through a combination of equity offerings, debt financings, collaborations and/or
licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt
securities, the shareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect
your rights as a shareholder. The incurrence of indebtedness and/or the issuance of certain equity securities could result in
increased fixed payment obligations and could also result in certain additional restrictive covenants, such as limitations on
our ability to incur additional debt and/or issue additional equity, limitations on our ability to acquire or license intellectual
property rights and other operating restrictions that could adversely impact our ability to conduct our business. In addition,
issuance of additional equity securities, or the possibility of such issuance, may cause the market price of the Shares to
decline. In the event that we enter into collaborations and/or licensing arrangements in order to raise capital, we may be
required to accept unfavorable terms, including relinquishing or licensing to a third party on unfavorable terms our rights to
technologies or drug product candidates that we otherwise would seek to develop or commercialize ourselves or potentially
reserve for future potential arrangements when we might be able to achieve more favorable terms.

2.7.3.2.

Risk related to product development, regulatory approval and commercialization

The Company may encounter substantial delays in its clinical trials or may fail to demonstrate safety and efficacy to the
satisfaction of applicable regulatory authorities.

Before obtaining regulatory approval or marketing authorization from regulatory authorities for the sale of our drug product
candidates, if at all, we must conduct extensive clinical trials to demonstrate the safety and efficacy of the drug product
candidates in humans. Clinical testing is expensive, time-consuming and uncertain as to outcome. We cannot guarantee that
any clinical trials will be conducted as planned or completed on schedule, if at all. A failure of one or more clinical trials can
occur at any stage of testing. Events that may prevent successful or timely completion of clinical development include:

•
•
•

delays in raising, or inability to raise, sufficient capital to fund the planned clinical trials;
delays in reaching a consensus with regulatory agencies on trial design;
identifying, recruiting and training suitable clinical investigators;

CELYAD • FINANCIAL RESULTS 2016

•

•
•
•
•
•

•
•

•

•
•
•
•

•

delays in reaching agreement on acceptable terms with prospective clinical research organizations, or CROs,
and clinical trial sites;
delays in obtaining required Investigational Review Board, or IRB, approval at each clinical trial site;
delays in recruiting suitable patients to participate in our clinical trials;
delays due to changing standard of care for the diseases we are studying;
adding new clinical trial sites;
imposition of a clinical hold by regulatory agencies, after an inspection of our clinical trial operations or trial
sites;
failure by our CROs, other third parties or us to adhere to clinical trial requirements;
catastrophic loss of drug product candidates due to shipping delays or delays in customs in connection with
delivery to foreign countries for use in clinical trials;
failure to perform in accordance with the FDA’s good clinical practices, or GCPs, or applicable regulatory
guidelines in other countries;
delays in the testing, validation, manufacturing and delivery of our drug product candidates to the clinical sites;
delays in having patients complete participation in a trial or return for post-treatment follow-up;
clinical trial sites or patients dropping out of a trial;
occurrence of serious adverse events associated with the drug product candidate that are viewed to outweigh
its potential benefits; or
changes in regulatory requirements and guidance that require amending or submitting new clinical protocols.

Any inability to successfully complete pre-clinical and clinical development could result in additional costs to us or impair our
ability to generate revenues from product sales, regulatory and commercialization milestones and royalties. Clinical trial
delays could also shorten any periods during which we may have the exclusive right to commercialize our drug product
candidates or allow our competitors to bring products to market before we do, which could impair our ability to successfully
commercialize our drug product candidates and may harm our business and results of operations.

If the results of our clinical trials are inconclusive or if there are safety concerns or adverse events associated with our drug
product candidates, we may:

•
•
•
•
•

•

•
•
•

be delayed in obtaining marketing approval for our drug product candidates, if at all;
obtain approval for indications or patient populations that are not as broad as intended or desired;
obtain approval with labeling that includes significant use or distribution restrictions or safety warnings;
be subject to changes in the way the product is administered;
be required to perform additional clinical trials to support approval or be subject to additional post-marketing
testing requirements;
have regulatory authorities withdraw their approval of the product or impose restrictions on its distribution in
the form of a risk evaluation and mitigations strategy, or REMS, plan;
be subject to the addition of labeling statements, such as warnings or contraindications;
be sued; or
experience damage to our reputation.

Our drug product candidates could potentially cause other adverse events that have not yet been predicted. As described
above, any of these events could prevent us from achieving or maintaining market acceptance of our drug product
candidates and impair our ability to commercialize our products if they are ultimately approved by applicable regulatory
authorities.

The Company’s drug product candidates may cause undesirable side effects or have other properties that could halt
their clinical development, prevent their regulatory approval, limit their commercial potential, or result in significant
negative consequences.

As with most biological drug products, use of our drug product candidates could be associated with side effects or adverse
events which can vary in severity from minor reactions to death and in frequency from infrequent to prevalent. Undesirable
side effects or unacceptable toxicities caused by our drug product candidates could cause us or regulatory authorities to
interrupt, delay, or halt clinical trials. The FDA, EMA, or comparable foreign regulatory authorities could delay or deny
approval of our drug product candidates for any or all targeted indications and negative side effects could result in a more
restrictive label for any product that is approved. Side effects such as toxicity or other safety issues associated with the use
of our drug product candidates could also require us or our collaborators to perform additional studies or halt development
or sale of these drug product candidates.

Treatment-related side effects could also affect patient recruitment or the ability of enrolled subjects to complete the trial,
or could result in potential product liability claims. In addition, these side effects may not be appropriately or timely
recognized or managed by the treating medical staff. Any of these occurrences may materially and adversely harm our
business, financial condition and prospects.

Additionally, if one or more of our drug product candidates receives marketing approval, and we or others later identify
undesirable side effects caused by such products,
long-term follow-up observation period
recommended or required for patients who receive treatment using our products, a number of potentially significant
negative consequences could result, including:

including during any

•

regulatory authorities may withdraw approvals of such product;

•

regulatory authorities may require additional warnings on the label;

• we may be required to create a REMS plan which could include a medication guide outlining the risks of such

side effects for distribution to patients, a communication plan for healthcare providers, and/or other elements

to assure safe use;

• we could be sued and held liable for harm caused to patients; and

our reputation may suffer.

Any of the foregoing could prevent us from achieving or maintaining market acceptance of the particular drug product

candidate, if approved, and could significantly harm our business, results of operations, and prospects.

If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or

otherwise adversely affected.

The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to

enroll a sufficient number of patients who remain in the trial until its conclusion. We may experience difficulties in patient

enrollment in our clinical trials for a variety of reasons, including:

the size and nature of the patient population;

the patient eligibility criteria defined in the protocol;

the size of the study population required for analysis of the trial’s primary endpoints;

the proximity of patients to trial sites;

the design of the trial;

our ability to recruit clinical trial investigators with the appropriate competencies and experience;

competing clinical trials for similar therapies;

clinicians’ and patients’ perceptions as to the potential advantages and side effects of the drug product

candidate being studied in relation to other available therapies, including any new drugs or treatments that

may be approved for the indications we are investigating;

our ability to obtain and maintain patient consents; and

the risk that patients enrolled in clinical trials will not complete a clinical trial.

In addition, our clinical trials will compete with other clinical trials for drug product candidates that are in the same

therapeutic areas as our drug product candidates, and this competition will reduce the number and types of patients

available to us, because some patients who might have opted to enroll in our trials may instead opt to enroll in a trial being

conducted by one of our competitors. Because the number of qualified clinical investigators is limited, we expect to conduct

some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of

patients who are available for our clinical trials at such clinical trial sites. Moreover, because our drug product candidates

represent a departure from more commonly used methods for ischemic HF and cancer treatment, potential patients and

their doctors may be inclined to use conventional therapies, rather than enroll patients in our clinical trials.

Even if we are able to enroll a sufficient number of patients in our clinical trials, delays in patient enrollment may result in

increased costs or may affect the timing or outcome of our clinical trials, which could prevent completion of these trials and

adversely affect our ability to advance the development of our drug product candidates.

Clinical development is a lengthy and expensive process with an uncertain outcome, and results of earlier studies and

trials as well as data from any interim analysis of ongoing clinical trials may not be predictive of future trial results.

Clinical failure can occur at any stage of clinical development.

Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur

at any time during the clinical trial process. Although drug product candidates may demonstrate promising results in early

clinical (human) trials and pre-clinical (animal) studies, they may not prove to be effective in subsequent clinical trials. For

example, testing on animals may occur under different conditions than testing in humans and therefore the results of animal

studies may not accurately predict human experience. Likewise, early clinical trials may not be predictive of eventual safety

or effectiveness results in larger-scale pivotal clinical trials. The results of pre-clinical studies and previous clinical trials as

well as data from any interim analysis of ongoing clinical trials of our drug product candidates, as well as studies and trials of

other products with similar mechanisms of action to our drug product candidates, may not be predictive of the results of

ongoing or future clinical trials. Drug product candidates in later stages of clinical trials may fail to show the desired safety

and efficacy traits despite having progressed through pre-clinical studies and earlier clinical trials. In addition to the safety

and efficacy traits of any drug product candidate, clinical trial failures may result from a multitude of factors including flaws in

trial design, dose selection, placebo effect and patient enrollment criteria. Based upon negative or inconclusive results, we or

our collaborators may decide, or regulators may require us, to conduct additional clinical trials or pre-clinical studies. In

addition, data obtained from trials and studies are susceptible to varying interpretations, and regulators may not interpret

our data as favorably as we do, which may delay, limit or prevent regulatory approval.

The regulatory approval processes of the FDA, EMA and other comparable regulatory authorities is lengthy, time-

consuming, and inherently unpredictable, and we may experience significant delays in the clinical development and

regulatory approval, if any, of our drug product candidates.

The research, testing, manufacturing, labeling, approval, selling, import, export, marketing, and distribution of drug

products, including biologics, are subject to extensive regulation by the FDA, EMA and other comparable regulatory

authorities. We are not permitted to market any biological drug product in the United States until we receive a Biologics

License Application, or BLA, from the FDA or a marketing authorization application, or MAA, from the EMA. We have not

CELYAD • FINANCIAL RESULTS 2016

•

delays in reaching agreement on acceptable terms with prospective clinical research organizations, or CROs,

and clinical trial sites;

delays in obtaining required Investigational Review Board, or IRB, approval at each clinical trial site;

delays in recruiting suitable patients to participate in our clinical trials;

delays due to changing standard of care for the diseases we are studying;

adding new clinical trial sites;

imposition of a clinical hold by regulatory agencies, after an inspection of our clinical trial operations or trial

sites;

failure by our CROs, other third parties or us to adhere to clinical trial requirements;

catastrophic loss of drug product candidates due to shipping delays or delays in customs in connection with

delivery to foreign countries for use in clinical trials;

failure to perform in accordance with the FDA’s good clinical practices, or GCPs, or applicable regulatory

guidelines in other countries;

delays in the testing, validation, manufacturing and delivery of our drug product candidates to the clinical sites;

delays in having patients complete participation in a trial or return for post-treatment follow-up;

clinical trial sites or patients dropping out of a trial;

occurrence of serious adverse events associated with the drug product candidate that are viewed to outweigh

its potential benefits; or

changes in regulatory requirements and guidance that require amending or submitting new clinical protocols.

Any inability to successfully complete pre-clinical and clinical development could result in additional costs to us or impair our

ability to generate revenues from product sales, regulatory and commercialization milestones and royalties. Clinical trial

delays could also shorten any periods during which we may have the exclusive right to commercialize our drug product

candidates or allow our competitors to bring products to market before we do, which could impair our ability to successfully

commercialize our drug product candidates and may harm our business and results of operations.

If the results of our clinical trials are inconclusive or if there are safety concerns or adverse events associated with our drug

product candidates, we may:

be delayed in obtaining marketing approval for our drug product candidates, if at all;

obtain approval for indications or patient populations that are not as broad as intended or desired;

obtain approval with labeling that includes significant use or distribution restrictions or safety warnings;

be subject to changes in the way the product is administered;

be required to perform additional clinical trials to support approval or be subject to additional post-marketing

testing requirements;

have regulatory authorities withdraw their approval of the product or impose restrictions on its distribution in

the form of a risk evaluation and mitigations strategy, or REMS, plan;

be subject to the addition of labeling statements, such as warnings or contraindications;

be sued; or

experience damage to our reputation.

Our drug product candidates could potentially cause other adverse events that have not yet been predicted. As described

above, any of these events could prevent us from achieving or maintaining market acceptance of our drug product

candidates and impair our ability to commercialize our products if they are ultimately approved by applicable regulatory

authorities.

negative consequences.

The Company’s drug product candidates may cause undesirable side effects or have other properties that could halt

their clinical development, prevent their regulatory approval, limit their commercial potential, or result in significant

As with most biological drug products, use of our drug product candidates could be associated with side effects or adverse

events which can vary in severity from minor reactions to death and in frequency from infrequent to prevalent. Undesirable

side effects or unacceptable toxicities caused by our drug product candidates could cause us or regulatory authorities to

interrupt, delay, or halt clinical trials. The FDA, EMA, or comparable foreign regulatory authorities could delay or deny

approval of our drug product candidates for any or all targeted indications and negative side effects could result in a more

restrictive label for any product that is approved. Side effects such as toxicity or other safety issues associated with the use

of our drug product candidates could also require us or our collaborators to perform additional studies or halt development

or sale of these drug product candidates.

Treatment-related side effects could also affect patient recruitment or the ability of enrolled subjects to complete the trial,

or could result in potential product liability claims. In addition, these side effects may not be appropriately or timely

recognized or managed by the treating medical staff. Any of these occurrences may materially and adversely harm our

business, financial condition and prospects.

Additionally, if one or more of our drug product candidates receives marketing approval, and we or others later identify

undesirable side effects caused by such products,

including during any

long-term follow-up observation period

recommended or required for patients who receive treatment using our products, a number of potentially significant

negative consequences could result, including:

•

regulatory authorities may withdraw approvals of such product;

regulatory authorities may require additional warnings on the label;

•
• we may be required to create a REMS plan which could include a medication guide outlining the risks of such
side effects for distribution to patients, a communication plan for healthcare providers, and/or other elements
to assure safe use;

• we could be sued and held liable for harm caused to patients; and
•

our reputation may suffer.

Any of the foregoing could prevent us from achieving or maintaining market acceptance of the particular drug product
candidate, if approved, and could significantly harm our business, results of operations, and prospects.

If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or
otherwise adversely affected.

The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to
enroll a sufficient number of patients who remain in the trial until its conclusion. We may experience difficulties in patient
enrollment in our clinical trials for a variety of reasons, including:

•
•
•
•
•
•
•
•

•
•

the size and nature of the patient population;
the patient eligibility criteria defined in the protocol;
the size of the study population required for analysis of the trial’s primary endpoints;
the proximity of patients to trial sites;
the design of the trial;
our ability to recruit clinical trial investigators with the appropriate competencies and experience;
competing clinical trials for similar therapies;
clinicians’ and patients’ perceptions as to the potential advantages and side effects of the drug product
candidate being studied in relation to other available therapies, including any new drugs or treatments that
may be approved for the indications we are investigating;
our ability to obtain and maintain patient consents; and
the risk that patients enrolled in clinical trials will not complete a clinical trial.

In addition, our clinical trials will compete with other clinical trials for drug product candidates that are in the same
therapeutic areas as our drug product candidates, and this competition will reduce the number and types of patients
available to us, because some patients who might have opted to enroll in our trials may instead opt to enroll in a trial being
conducted by one of our competitors. Because the number of qualified clinical investigators is limited, we expect to conduct
some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of
patients who are available for our clinical trials at such clinical trial sites. Moreover, because our drug product candidates
represent a departure from more commonly used methods for ischemic HF and cancer treatment, potential patients and
their doctors may be inclined to use conventional therapies, rather than enroll patients in our clinical trials.

Even if we are able to enroll a sufficient number of patients in our clinical trials, delays in patient enrollment may result in
increased costs or may affect the timing or outcome of our clinical trials, which could prevent completion of these trials and
adversely affect our ability to advance the development of our drug product candidates.

Clinical development is a lengthy and expensive process with an uncertain outcome, and results of earlier studies and
trials as well as data from any interim analysis of ongoing clinical trials may not be predictive of future trial results.
Clinical failure can occur at any stage of clinical development.

Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur
at any time during the clinical trial process. Although drug product candidates may demonstrate promising results in early
clinical (human) trials and pre-clinical (animal) studies, they may not prove to be effective in subsequent clinical trials. For
example, testing on animals may occur under different conditions than testing in humans and therefore the results of animal
studies may not accurately predict human experience. Likewise, early clinical trials may not be predictive of eventual safety
or effectiveness results in larger-scale pivotal clinical trials. The results of pre-clinical studies and previous clinical trials as
well as data from any interim analysis of ongoing clinical trials of our drug product candidates, as well as studies and trials of
other products with similar mechanisms of action to our drug product candidates, may not be predictive of the results of
ongoing or future clinical trials. Drug product candidates in later stages of clinical trials may fail to show the desired safety
and efficacy traits despite having progressed through pre-clinical studies and earlier clinical trials. In addition to the safety
and efficacy traits of any drug product candidate, clinical trial failures may result from a multitude of factors including flaws in
trial design, dose selection, placebo effect and patient enrollment criteria. Based upon negative or inconclusive results, we or
our collaborators may decide, or regulators may require us, to conduct additional clinical trials or pre-clinical studies. In
addition, data obtained from trials and studies are susceptible to varying interpretations, and regulators may not interpret
our data as favorably as we do, which may delay, limit or prevent regulatory approval.

The regulatory approval processes of the FDA, EMA and other comparable regulatory authorities is lengthy, time-
consuming, and inherently unpredictable, and we may experience significant delays in the clinical development and
regulatory approval, if any, of our drug product candidates.

The research, testing, manufacturing, labeling, approval, selling, import, export, marketing, and distribution of drug
products, including biologics, are subject to extensive regulation by the FDA, EMA and other comparable regulatory
authorities. We are not permitted to market any biological drug product in the United States until we receive a Biologics
License Application, or BLA, from the FDA or a marketing authorization application, or MAA, from the EMA. We have not

CELYAD • FINANCIAL RESULTS 2016

previously submitted a BLA to the FDA, MAA to the EMA, or similar approval filings to comparable foreign authorities. A BLA
must include extensive pre-clinical and clinical data and supporting information to establish that the drug product candidate
is safe, pure, and potent for each desired indication. The BLA must also include significant information regarding the
chemistry, manufacturing, and controls for the product, and the manufacturing facilities must complete a successful pre-
license inspection. We expect the nature of our drug product candidates to create further challenges in obtaining regulatory
approval. For example, the FDA and EMA have limited experience with commercial development of genetically modified T-
cell therapies for cancer. The FDA may also require a panel of experts, referred to as an Advisory Committee, to deliberate
on the adequacy of the safety and efficacy data to support licensure. The opinion of the Advisory Committee, although not
binding, may have a significant impact on our ability to obtain licensure of the drug product candidates based on the
completed clinical trials. Accordingly, the regulatory approval pathway for our drug product candidates may be uncertain,
complex, expensive, and lengthy, and approval may not be obtained.

Obtaining and maintaining regulatory approval of our drug product candidates in one jurisdiction does not mean that we
will be successful in obtaining regulatory approval of our drug product candidates in other jurisdictions.

If we obtain and maintain regulatory approval of our drug product candidates in one jurisdiction, such approval does not
guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction, but a failure or delay in
obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. For
example, even if the FDA or EMA grants marketing approval of a drug product candidate, comparable regulatory authorities
in foreign jurisdictions must also approve the manufacturing, marketing and promotion of the drug product candidate in
those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review
periods different from those in the European Union or in the United States, including additional pre-clinical studies or clinical
trials as clinical trials conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In
many jurisdictions, a drug product candidate must be approved for reimbursement before it can be approved for sale in that
jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval.

Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant
delays, difficulties and costs for us and could delay or prevent the introduction of our products in certain countries. If we fail
to comply with the regulatory requirements in international markets and/or to receive applicable marketing approvals, our
target market will be reduced and our ability to realize the full market potential of our drug product candidates will be
harmed.

Even if we obtain regulatory approval of our drug product candidates, the products may not gain market acceptance
among physicians, patients, hospitals and others in the medical community.

Our autologous engineered-cell therapies may not become broadly accepted by physicians, patients, hospitals, and others in
the medical community. Numerous factors will influence whether our drug product candidates are accepted in the market,
including:

•
•
•
•
•
•
•
•
•

•

the clinical indications for which our drug product candidates are approved;
physicians, hospitals, and patients considering our drug product candidates as a safe and effective treatment;
the potential and perceived advantages of our drug product candidates over alternative treatments;
the prevalence and severity of any side effects;
product labeling or product insert requirements of the FDA, EMA, or other regulatory authorities;
limitations or warnings contained in the labeling approved by the FDA or EMA;
the timing of market introduction of our drug product candidates as well as competitive products;
the cost of treatment in relation to alternative treatments;
the availability of adequate coverage, reimbursement and pricing by third-party payors and government
authorities;
the willingness of patients to pay out-of-pocket in the absence of coverage by third-party payors and
government authorities;
relative convenience and ease of administration, including as compared to alternative treatments and
competitive therapies; and
the effectiveness of our sales and marketing efforts.

In addition, although we are not utilizing embryonic stem cells in our drug product candidates, adverse publicity due to the
ethical and social controversies surrounding the therapeutic use of such technologies, and reported side effects from any
clinical trials using these technologies or the failure of such trials to demonstrate that these therapies are safe and effective
may limit market acceptance our drug product candidates due to the perceived similarity between our drug product
candidates and these other therapies. If our drug product candidates are approved but fail to achieve market acceptance
among physicians, patients, hospitals, or others in the medical community, we will not be able to generate significant
revenue.

Even if our products achieve market acceptance, we may not be able to maintain that market acceptance over time if new
products or technologies are introduced that are more favorably received than our products, are more cost effective or
render our products obsolete.

Our drug product candidates are biologics, which are complex to manufacture, and we may encounter
difficulties
in production, particularly with respect to process development or scaling-out of our
manufacturing capabilities. If we or any of our third-party manufacturers encounter such difficulties, our
ability to provide supply of our drug product candidates for clinical trials or our products for patients, if

approved, could be delayed or stopped, or we may be unable to maintain a commercially viable cost

structure.

Our drug product candidates are biologics and the process of manufacturing our products is complex, highly-regulated and

subject to multiple risks. The manufacture of our drug product candidates involves complex processes, including harvesting

cells from patients, selecting and expanding certain cell types, engineering or reprogramming the cells in a certain manner to

create either cardiopoietic cells or CAR T-cells, expanding the cell population to obtain the desired dose, and ultimately

infusing the cells back into a patient’s body. As a result of the complexities, the cost to manufacture our drug product

candidates, is higher than traditional small molecule chemical compounds, and the manufacturing process is less reliable and

is more difficult to reproduce. Our manufacturing process is susceptible to product loss or failure due to logistical issues

associated with the collection of blood cells, or starting material, from the patient, shipping such material to the

manufacturing site, shipping the final product back to the patient, and infusing the patient with the product, manufacturing

issues associated with the differences

in patient starting materials,

interruptions

in the manufacturing process,

contamination, equipment or reagent failure, improper installation or operation of equipment, vendor or operator error,

inconsistency in cell growth, and variability in product characteristics. Even minor deviations from normal manufacturing

processes could result in reduced production yields, product defects, and other supply disruptions. Because some of our

drug product candidates are manufactured for each particular patient, we are required to maintain a chain of identity with

respect to materials as they move from the patient to the manufacturing facility, through the manufacturing process, and

back to the patient. Maintaining such a chain of identity is difficult and complex, and failure to do so could result in adverse

patient outcomes, loss of product, or regulatory action including withdrawal of our products from the market. Further, as

drug product candidates are developed through pre-clinical to

late stage clinical trials towards approval and

commercialization, it is common that various aspects of the development program, such as manufacturing methods, are

altered along the way in an effort to optimize processes and results. Such changes carry the risk that they will not achieve

these intended objectives, and any of these changes could cause our drug product candidates to perform differently and

affect the results of ongoing clinical trials or other future clinical trials.

Although we are working, or will be working, to develop commercially viable processes for the manufacture of our drug

product candidates, doing so is a difficult and uncertain task, and there are risks associated with scaling to the level required

for later-stage clinical trials and commercialization, including, among others, cost overruns, potential problems with process

scale-out, process reproducibility, stability issues, lot consistency, and timely availability of reagents or raw materials. We

may ultimately be unable to reduce the cost of goods for our drug product candidates to levels that will allow for an attractive

return on investment if and when those drug product candidates are commercialized.

In addition, the manufacturing process that we develop for our drug product candidates is subject to regulatory authorities’

approval process, and we will need to make sure that we or our contract manufacturers, or CMOs, if any, are able to meet all

regulatory authorities requirements on an ongoing basis. If we or our CMOs are unable to reliably produce drug product

candidates to specifications acceptable to the regulatory authorities, we may not obtain or maintain the approvals we need

to commercialize such drug product candidates. Even if we obtain regulatory approval for any of our drug product

candidates, there is no assurance that either we or our CMOs will be able to manufacture the approved product to

specifications acceptable to the regulatory authorities, to produce it in sufficient quantities to meet the requirements for the

potential launch of the product, or to meet potential future demand. Any of these challenges could have an adverse effect on

our business, financial condition, results of operations and growth prospects.

Nearly all aspects of the Company’s activities are subject to substantial regulation. No assurance can be

given that any of the Company’s product candidates will fulfil regulatory compliance. Failure to comply

with such regulations could result in delays, suspension, refusals, fines and withdrawal of approvals.

The international pharmaceutical and medical technology industry is highly regulated by government bodies (hereinafter the

“Competent Authorities”) that impose substantial requirements covering nearly all aspects of the Company’s activities

notably on research and development, manufacturing, pre-clinical tests, clinical trials, labelling, marketing, sales, storage,

record keeping, promotion and pricing of its research programmes and product candidates. Compliance with standards laid

down by local Competent Authorities is required in each country where the Company, or any of its partners or licensees,

conducts said activities in whole or in part. The Competent Authorities notably include the European Medicine Agency

(“EMA”) in the European Union and the Food and Drug Administration (“FDA”) in the United States.

There can be no assurance that product candidates of the Company will fulfil the criteria required to obtain necessary

regulatory clearance to access the market. Also, at this time, the Company cannot guarantee or know the exact nature,

precise timing and detailed costs of the efforts that will be necessary to complete the remainder of the development of its

research programmes and products candidates.

The specific regulations and laws, as well as the time required to obtain Competent Authorities approvals, may vary from

country to country, but the general regulatory procedures are similar in the European Union and the United States of

America. Each Competent Authority may impose its own requirements, may discontinue an approval, may refuse to grant

approval, or may require additional data before granting approval, notwithstanding that approval may have been granted by

one or more other Competent Authorities. Competent Authority approval may be delayed, limited or denied for a number of

reasons, most of which are beyond the Company’s control. Such reasons include the production process or site not meeting

the applicable requirements for the manufacture of regulated products, or the products not meeting applicable

requirements for safety or efficacy during the clinical development stage or after marketing. No assurance can be given that

clinical trials will be approved by Competent Authorities or that products will be approved for marketing by Competent

Authorities in any pre-determined indication or intended use. Competent Authorities may disagree with the Company's

interpretation of data submitted for their review. Even after obtaining approval for clinical trials or marketing, products will

CELYAD • FINANCIAL RESULTS 2016

previously submitted a BLA to the FDA, MAA to the EMA, or similar approval filings to comparable foreign authorities. A BLA

must include extensive pre-clinical and clinical data and supporting information to establish that the drug product candidate

is safe, pure, and potent for each desired indication. The BLA must also include significant information regarding the

chemistry, manufacturing, and controls for the product, and the manufacturing facilities must complete a successful pre-

license inspection. We expect the nature of our drug product candidates to create further challenges in obtaining regulatory

approval. For example, the FDA and EMA have limited experience with commercial development of genetically modified T-

cell therapies for cancer. The FDA may also require a panel of experts, referred to as an Advisory Committee, to deliberate

on the adequacy of the safety and efficacy data to support licensure. The opinion of the Advisory Committee, although not

binding, may have a significant impact on our ability to obtain licensure of the drug product candidates based on the

completed clinical trials. Accordingly, the regulatory approval pathway for our drug product candidates may be uncertain,

complex, expensive, and lengthy, and approval may not be obtained.

Obtaining and maintaining regulatory approval of our drug product candidates in one jurisdiction does not mean that we

will be successful in obtaining regulatory approval of our drug product candidates in other jurisdictions.

If we obtain and maintain regulatory approval of our drug product candidates in one jurisdiction, such approval does not

guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction, but a failure or delay in

obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. For

example, even if the FDA or EMA grants marketing approval of a drug product candidate, comparable regulatory authorities

in foreign jurisdictions must also approve the manufacturing, marketing and promotion of the drug product candidate in

those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review

periods different from those in the European Union or in the United States, including additional pre-clinical studies or clinical

trials as clinical trials conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In

many jurisdictions, a drug product candidate must be approved for reimbursement before it can be approved for sale in that

jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval.

Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant

delays, difficulties and costs for us and could delay or prevent the introduction of our products in certain countries. If we fail

to comply with the regulatory requirements in international markets and/or to receive applicable marketing approvals, our

target market will be reduced and our ability to realize the full market potential of our drug product candidates will be

Even if we obtain regulatory approval of our drug product candidates, the products may not gain market acceptance

among physicians, patients, hospitals and others in the medical community.

Our autologous engineered-cell therapies may not become broadly accepted by physicians, patients, hospitals, and others in

the medical community. Numerous factors will influence whether our drug product candidates are accepted in the market,

the clinical indications for which our drug product candidates are approved;

physicians, hospitals, and patients considering our drug product candidates as a safe and effective treatment;

the potential and perceived advantages of our drug product candidates over alternative treatments;

the prevalence and severity of any side effects;

product labeling or product insert requirements of the FDA, EMA, or other regulatory authorities;

limitations or warnings contained in the labeling approved by the FDA or EMA;

the timing of market introduction of our drug product candidates as well as competitive products;

the cost of treatment in relation to alternative treatments;

the availability of adequate coverage, reimbursement and pricing by third-party payors and government

the willingness of patients to pay out-of-pocket in the absence of coverage by third-party payors and

authorities;

government authorities;

relative convenience and ease of administration, including as compared to alternative treatments and

competitive therapies; and

the effectiveness of our sales and marketing efforts.

In addition, although we are not utilizing embryonic stem cells in our drug product candidates, adverse publicity due to the

ethical and social controversies surrounding the therapeutic use of such technologies, and reported side effects from any

clinical trials using these technologies or the failure of such trials to demonstrate that these therapies are safe and effective

may limit market acceptance our drug product candidates due to the perceived similarity between our drug product

candidates and these other therapies. If our drug product candidates are approved but fail to achieve market acceptance

among physicians, patients, hospitals, or others in the medical community, we will not be able to generate significant

revenue.

render our products obsolete.

Even if our products achieve market acceptance, we may not be able to maintain that market acceptance over time if new

products or technologies are introduced that are more favorably received than our products, are more cost effective or

Our drug product candidates are biologics, which are complex to manufacture, and we may encounter

difficulties

in production, particularly with respect to process development or scaling-out of our

manufacturing capabilities. If we or any of our third-party manufacturers encounter such difficulties, our

ability to provide supply of our drug product candidates for clinical trials or our products for patients, if

harmed.

including:

•

approved, could be delayed or stopped, or we may be unable to maintain a commercially viable cost
structure.

Our drug product candidates are biologics and the process of manufacturing our products is complex, highly-regulated and
subject to multiple risks. The manufacture of our drug product candidates involves complex processes, including harvesting
cells from patients, selecting and expanding certain cell types, engineering or reprogramming the cells in a certain manner to
create either cardiopoietic cells or CAR T-cells, expanding the cell population to obtain the desired dose, and ultimately
infusing the cells back into a patient’s body. As a result of the complexities, the cost to manufacture our drug product
candidates, is higher than traditional small molecule chemical compounds, and the manufacturing process is less reliable and
is more difficult to reproduce. Our manufacturing process is susceptible to product loss or failure due to logistical issues
associated with the collection of blood cells, or starting material, from the patient, shipping such material to the
manufacturing site, shipping the final product back to the patient, and infusing the patient with the product, manufacturing
issues associated with the differences
in the manufacturing process,
contamination, equipment or reagent failure, improper installation or operation of equipment, vendor or operator error,
inconsistency in cell growth, and variability in product characteristics. Even minor deviations from normal manufacturing
processes could result in reduced production yields, product defects, and other supply disruptions. Because some of our
drug product candidates are manufactured for each particular patient, we are required to maintain a chain of identity with
respect to materials as they move from the patient to the manufacturing facility, through the manufacturing process, and
back to the patient. Maintaining such a chain of identity is difficult and complex, and failure to do so could result in adverse
patient outcomes, loss of product, or regulatory action including withdrawal of our products from the market. Further, as
drug product candidates are developed through pre-clinical to
late stage clinical trials towards approval and
commercialization, it is common that various aspects of the development program, such as manufacturing methods, are
altered along the way in an effort to optimize processes and results. Such changes carry the risk that they will not achieve
these intended objectives, and any of these changes could cause our drug product candidates to perform differently and
affect the results of ongoing clinical trials or other future clinical trials.

in patient starting materials,

interruptions

Although we are working, or will be working, to develop commercially viable processes for the manufacture of our drug
product candidates, doing so is a difficult and uncertain task, and there are risks associated with scaling to the level required
for later-stage clinical trials and commercialization, including, among others, cost overruns, potential problems with process
scale-out, process reproducibility, stability issues, lot consistency, and timely availability of reagents or raw materials. We
may ultimately be unable to reduce the cost of goods for our drug product candidates to levels that will allow for an attractive
return on investment if and when those drug product candidates are commercialized.

In addition, the manufacturing process that we develop for our drug product candidates is subject to regulatory authorities’
approval process, and we will need to make sure that we or our contract manufacturers, or CMOs, if any, are able to meet all
regulatory authorities requirements on an ongoing basis. If we or our CMOs are unable to reliably produce drug product
candidates to specifications acceptable to the regulatory authorities, we may not obtain or maintain the approvals we need
to commercialize such drug product candidates. Even if we obtain regulatory approval for any of our drug product
candidates, there is no assurance that either we or our CMOs will be able to manufacture the approved product to
specifications acceptable to the regulatory authorities, to produce it in sufficient quantities to meet the requirements for the
potential launch of the product, or to meet potential future demand. Any of these challenges could have an adverse effect on
our business, financial condition, results of operations and growth prospects.

Nearly all aspects of the Company’s activities are subject to substantial regulation. No assurance can be
given that any of the Company’s product candidates will fulfil regulatory compliance. Failure to comply
with such regulations could result in delays, suspension, refusals, fines and withdrawal of approvals.

The international pharmaceutical and medical technology industry is highly regulated by government bodies (hereinafter the
“Competent Authorities”) that impose substantial requirements covering nearly all aspects of the Company’s activities
notably on research and development, manufacturing, pre-clinical tests, clinical trials, labelling, marketing, sales, storage,
record keeping, promotion and pricing of its research programmes and product candidates. Compliance with standards laid
down by local Competent Authorities is required in each country where the Company, or any of its partners or licensees,
conducts said activities in whole or in part. The Competent Authorities notably include the European Medicine Agency
(“EMA”) in the European Union and the Food and Drug Administration (“FDA”) in the United States.

There can be no assurance that product candidates of the Company will fulfil the criteria required to obtain necessary
regulatory clearance to access the market. Also, at this time, the Company cannot guarantee or know the exact nature,
precise timing and detailed costs of the efforts that will be necessary to complete the remainder of the development of its
research programmes and products candidates.

The specific regulations and laws, as well as the time required to obtain Competent Authorities approvals, may vary from
country to country, but the general regulatory procedures are similar in the European Union and the United States of
America. Each Competent Authority may impose its own requirements, may discontinue an approval, may refuse to grant
approval, or may require additional data before granting approval, notwithstanding that approval may have been granted by
one or more other Competent Authorities. Competent Authority approval may be delayed, limited or denied for a number of
reasons, most of which are beyond the Company’s control. Such reasons include the production process or site not meeting
the applicable requirements for the manufacture of regulated products, or the products not meeting applicable
requirements for safety or efficacy during the clinical development stage or after marketing. No assurance can be given that
clinical trials will be approved by Competent Authorities or that products will be approved for marketing by Competent
Authorities in any pre-determined indication or intended use. Competent Authorities may disagree with the Company's
interpretation of data submitted for their review. Even after obtaining approval for clinical trials or marketing, products will

CELYAD • FINANCIAL RESULTS 2016

be subject to ongoing regulation and evaluation of their benefit/safety or risk/performance ratio; a negative evaluation of
the benefit/safety or risk/performance ratio could result in a potential use restriction and/or withdrawal of approval for one
or more products. At any time Competent Authorities may require discontinuation or holding of clinical trials or require
additional data prior to completing their review or may issue restricted authorisation or authorise products for clinical trials
or marketing for narrower indications than requested or require further data or studies be conducted and submitted for their
review. There can be no guarantee that such additional data or studies, if required, will corroborate earlier data.

Research programmes and product candidates of the Company must undergo rigorous pre-clinical tests
and clinical trials, the start, timing of completion, number and results of which are uncertain and could
substantially delay or prevent the products from reaching the market.

Pre-clinical tests and clinical trials are expensive and time-consuming and their results are uncertain. The Company, its
collaborative partners or other third parties may not successfully complete the pre-clinical tests and clinical trials of the
research programmes and product candidates. Failure to do so may delay or prevent the commercialisation of products. The
Company cannot guarantee that its research programmes and product candidates will demonstrate sufficient safety or
efficacy or performance in its pre-clinical tests and clinical trials to obtain marketing authorisation in any given territory or at
all, and the results from earlier pre-clinical tests and clinical trials may not accurately predict the results of later-stage pre-
clinical tests and clinical trials. At any stage of development, based on a review of available pre-clinical and clinical data, the
estimated costs of continued development, market assessments and other factors, the development of any of the
Company's research programmes and product candidates may be suspended or discontinued.

Clinical trials can be delayed for a variety of reasons, including, but not limited to, delays in obtaining regulatory approval to
commence a trial, in reaching agreement on acceptable terms with prospective contract research organisations (CROs) and
contract manufacturing organisations (CMOs) and clinical trial sites, in obtaining ethics committee approval, in recruiting
suitable patients to participate in a trial, in having patients complete a trial or return for follow-up, in adding new sites or in
obtaining sufficient supplies of clinical trial materials or clinical sites dropping out of a trial and in the availability to the
Company of appropriate clinical trial insurances. Such delays could result in increased costs and delay or jeopardise the
Company's ability to obtain regulatory approval and commence product sales as currently contemplated. Many factors
affect patient enrolment, including, but not limited to, the size and nature of the patient population, the proximity of patients
to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, competing clinical trials, clinicians' and
patients' perceptions as to the potential advantages of the product being studied in relation to other available therapies,
including any new products that may be approved for the indications the Company is investigating and whether the clinical
trial design involves comparison to placebo or standard of care. If the Company experiences lower than expected enrolment
in the trials, the trials may not be completed as envisaged or may become more expensive to complete. The Company and its
collaborative partners are, or may become subject to, numerous ongoing regulatory obligations, such as data protection,
environmental, health and safety laws and restrictions on the experimental use of animals and/or human beings. The costs of
compliance with applicable regulations, requirements or guidelines could be substantial, and failure to comply could result in
sanctions, including fines, injunctions, civil penalties, denial of applications for marketing authorisation of its products,
delays, suspension or withdrawal of approvals, licence revocation, seizures or recalls of products, operating restrictions and
criminal prosecutions, any of which could significantly increase the Company's or its collaborative partners' costs or delay
the development and commercialisation of its product candidates.

The Company may face significant competition and technological change which could limit or eliminate the
market opportunity for its product candidates.

The market for pharmaceutical products is highly competitive. The Company’s competitors include many established
pharmaceutical, biotechnology, universities and other research or commercial institutions, many of which have substantially
greater financial, research and development resources than the Company. The fields in which the Company operates are
characterised by rapid technological change and innovation. There can be no assurance that competitors of the Company
are not currently developing, or will not in the future develop technologies and products that are equally or more effective
and/or are more economical as any current or future technology or product of the Company. Competing products may gain
faster or greater market acceptance than the Company’s products and medical advances or rapid technological
development by competitors may result in the Company’s product candidates becoming non-competitive or obsolete
before the Company is able to recover its research and development and commercialisation expenses. If the Company or its
product candidates do not compete effectively, it may have a material adverse effect on the Company’s business.

The future commercial success of the Company's product candidates will depend on the degree of market
acceptance of its products among physicians, patients, healthcare payers and the medical community.

The Company’s product candidates are at varying stages of development and the Company may never have a product that is
commercially successful. Celyad has to date no product authorised for marketing yet. Due to the inherent risk in the
development of pharmaceutical and medical device products, it is probable that not all of the product candidates in Celyad’
portfolio will successfully complete development and be marketed.

The Company does not expect to be able to market any of its products for a number of years. Furthermore, when available
on the market physicians may not prescribe the Company's products, which would prevent the Company from generating
significant revenues or becoming profitable. Market acceptance of the Company's future products by physicians, patients
and healthcare payers will depend on a number of factors, many of which are beyond the Company's control, including, but
not limited to:

•

The wording of the product label;

•

• Acceptance by physicians, patients and healthcare payers of each product as safe, effective and cost-

effective;

products;

Relative convenience, ease of use, ease of administration and other perceived advantages over alternative

Prevalence and severity of adverse events;

leaflet, package labeling or instructions for use;

Limitations, precautions or warnings listed in the summary of product characteristics, patient information

The cost of treatment with the Company’s products in relation to alternative treatments;

The extent to which products are approved for inclusion and reimbursed on formularies of hospitals and

managed care organizations;

• Whether products are designated in the label and/or under physician treatment guidelines and/or under

reimbursement guidelines as a first-line therapy, or as a second-line, or third-line or last-line therapy.

The price setting, the availability and level of adequate reimbursement by third parties, such as insurance

companies, governmental and other healthcare payers is uncertain and may impede on the Company’s

ability to generate sufficient operating margins to offset operating expenses.

The Company’s commercial performance will depend in part on the conditions for setting the sales price of its products by

the relevant public commissions and bodies and the conditions of their reimbursement by the health agencies or insurance

companies in the countries where the Company intends to market its products. The current context of healthcare cost

control and economic and financial crisis that most countries are currently facing, coupled with the increase in health care

budgets caused by the aging population creates extra pressure on health care spending in most if not all countries.

Consequently, pressure on sales prices and reimbursement levels is intensifying owing in particular to;

Price controls imposed by many states;

The increasing reimbursement limitations of some products under budgetary policies;

The heightened difficulty in obtaining and maintaining a satisfactory reimbursement rate for medicines.

Obtaining adequate pricing decisions that would generate return on the investment incurred for the development of the

product candidates developed by the Company is therefore uncertain. The Company’s ability to manage its expenses and

cost structure to adapt to increased pricing pressure is untested and uncertain.

All of these factors will have a direct impact on the Company’s ability to make profits on the products in question. The

partial/no reimbursement policy of medicines could have a material adverse effect on the business, prospects, financial

situation, earnings and growth of the Company.

Changes in regulatory approval policies or enactment of additional regulatory approval requirements may

delay or prevent the product candidates from being marketed.

The regulatory clearance process is expensive and time consuming and the timing of marketing is difficult to predict. Once

marketed, products may be subject to post-authorisation safety studies or other pharmaco-vigilance or device vigilance

activities or may be subject to limitations on their uses or may be withdrawn from the market for various reasons, including if

they are shown to be unsafe or ineffective, or when used in a larger population that may be different from the trial population

studied prior to market introduction of the product.

The Company's product candidates may become subject to changes in the regulatory framework or market conditions.

Regulatory guidelines may change during the course of product development and review process, making the chosen

development strategy suboptimal. Market conditions may change resulting in the emergence of new competitors or new

treatment guidelines which may require alterations in the development strategy. These factors may result in significant

delays, increased trial costs, significant changes in commercial assumptions or failure of the products to obtain marketing

authorisation.

The Company is subject to inspection and shall be subject to market surveillance by the FDA, EMA and

other Competent Authorities for compliance with regulations that prohibit the promotion of the

Company’s products for a purpose or indication other than those for which approval has been granted.

While a product manufacturer may not promote a product for such “off label” use, doctors are allowed, in the exercise of

their professional judgment in the practice of medicine, to use a product in ways not approved by Competent Authorities.

Off-label marketing regulations are subject to varying evolving interpretations.

Post-approval manufacturing and marketing of Company’s products may show different safety and efficacy profiles to those

demonstrated in the data on which approval to test or market said products was based. Such circumstances could lead to

the withdrawal or suspension of approval, which could have a material adverse effect on the Company's business, financial

condition, operating results or cash flows. In addition, Competent Authorities may not approve the labelling claims or

advertisements that are necessary or desirable for the successful commercialisation of the Company's products.

Competent Authorities have broad enforcement power, and a failure by the Company or its collaboration partners to comply

with applicable regulatory requirements can, among other things, result in recalls or seizures of products, operating and

production restrictions, withdrawals of previously approved marketing applications, total or partial suspension of regulatory

approvals, refusal to approve pending applications, warning letters, injunctions, penalties, fines, civil proceedings, criminal

prosecutions and imprisonment.

CELYAD • FINANCIAL RESULTS 2016

be subject to ongoing regulation and evaluation of their benefit/safety or risk/performance ratio; a negative evaluation of

the benefit/safety or risk/performance ratio could result in a potential use restriction and/or withdrawal of approval for one

or more products. At any time Competent Authorities may require discontinuation or holding of clinical trials or require

additional data prior to completing their review or may issue restricted authorisation or authorise products for clinical trials

or marketing for narrower indications than requested or require further data or studies be conducted and submitted for their

review. There can be no guarantee that such additional data or studies, if required, will corroborate earlier data.

Research programmes and product candidates of the Company must undergo rigorous pre-clinical tests

and clinical trials, the start, timing of completion, number and results of which are uncertain and could

substantially delay or prevent the products from reaching the market.

Pre-clinical tests and clinical trials are expensive and time-consuming and their results are uncertain. The Company, its

collaborative partners or other third parties may not successfully complete the pre-clinical tests and clinical trials of the

research programmes and product candidates. Failure to do so may delay or prevent the commercialisation of products. The

Company cannot guarantee that its research programmes and product candidates will demonstrate sufficient safety or

efficacy or performance in its pre-clinical tests and clinical trials to obtain marketing authorisation in any given territory or at

all, and the results from earlier pre-clinical tests and clinical trials may not accurately predict the results of later-stage pre-

clinical tests and clinical trials. At any stage of development, based on a review of available pre-clinical and clinical data, the

estimated costs of continued development, market assessments and other factors, the development of any of the

Company's research programmes and product candidates may be suspended or discontinued.

Clinical trials can be delayed for a variety of reasons, including, but not limited to, delays in obtaining regulatory approval to

commence a trial, in reaching agreement on acceptable terms with prospective contract research organisations (CROs) and

contract manufacturing organisations (CMOs) and clinical trial sites, in obtaining ethics committee approval, in recruiting

suitable patients to participate in a trial, in having patients complete a trial or return for follow-up, in adding new sites or in

obtaining sufficient supplies of clinical trial materials or clinical sites dropping out of a trial and in the availability to the

Company of appropriate clinical trial insurances. Such delays could result in increased costs and delay or jeopardise the

Company's ability to obtain regulatory approval and commence product sales as currently contemplated. Many factors

affect patient enrolment, including, but not limited to, the size and nature of the patient population, the proximity of patients

to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, competing clinical trials, clinicians' and

patients' perceptions as to the potential advantages of the product being studied in relation to other available therapies,

including any new products that may be approved for the indications the Company is investigating and whether the clinical

trial design involves comparison to placebo or standard of care. If the Company experiences lower than expected enrolment

in the trials, the trials may not be completed as envisaged or may become more expensive to complete. The Company and its

collaborative partners are, or may become subject to, numerous ongoing regulatory obligations, such as data protection,

environmental, health and safety laws and restrictions on the experimental use of animals and/or human beings. The costs of

compliance with applicable regulations, requirements or guidelines could be substantial, and failure to comply could result in

sanctions, including fines, injunctions, civil penalties, denial of applications for marketing authorisation of its products,

delays, suspension or withdrawal of approvals, licence revocation, seizures or recalls of products, operating restrictions and

criminal prosecutions, any of which could significantly increase the Company's or its collaborative partners' costs or delay

the development and commercialisation of its product candidates.

The Company may face significant competition and technological change which could limit or eliminate the

market opportunity for its product candidates.

The market for pharmaceutical products is highly competitive. The Company’s competitors include many established

pharmaceutical, biotechnology, universities and other research or commercial institutions, many of which have substantially

greater financial, research and development resources than the Company. The fields in which the Company operates are

characterised by rapid technological change and innovation. There can be no assurance that competitors of the Company

are not currently developing, or will not in the future develop technologies and products that are equally or more effective

and/or are more economical as any current or future technology or product of the Company. Competing products may gain

faster or greater market acceptance than the Company’s products and medical advances or rapid technological

development by competitors may result in the Company’s product candidates becoming non-competitive or obsolete

before the Company is able to recover its research and development and commercialisation expenses. If the Company or its

product candidates do not compete effectively, it may have a material adverse effect on the Company’s business.

The future commercial success of the Company's product candidates will depend on the degree of market

acceptance of its products among physicians, patients, healthcare payers and the medical community.

The Company’s product candidates are at varying stages of development and the Company may never have a product that is

commercially successful. Celyad has to date no product authorised for marketing yet. Due to the inherent risk in the

development of pharmaceutical and medical device products, it is probable that not all of the product candidates in Celyad’

portfolio will successfully complete development and be marketed.

The Company does not expect to be able to market any of its products for a number of years. Furthermore, when available

on the market physicians may not prescribe the Company's products, which would prevent the Company from generating

significant revenues or becoming profitable. Market acceptance of the Company's future products by physicians, patients

and healthcare payers will depend on a number of factors, many of which are beyond the Company's control, including, but

not limited to:

•

The wording of the product label;

• Acceptance by physicians, patients and healthcare payers of each product as safe, effective and cost-

•

•
•

effective;
Relative convenience, ease of use, ease of administration and other perceived advantages over alternative
products;
Prevalence and severity of adverse events;
Limitations, precautions or warnings listed in the summary of product characteristics, patient information
leaflet, package labeling or instructions for use;
The cost of treatment with the Company’s products in relation to alternative treatments;
The extent to which products are approved for inclusion and reimbursed on formularies of hospitals and
managed care organizations;

• Whether products are designated in the label and/or under physician treatment guidelines and/or under

reimbursement guidelines as a first-line therapy, or as a second-line, or third-line or last-line therapy.

The price setting, the availability and level of adequate reimbursement by third parties, such as insurance
companies, governmental and other healthcare payers is uncertain and may impede on the Company’s
ability to generate sufficient operating margins to offset operating expenses.

The Company’s commercial performance will depend in part on the conditions for setting the sales price of its products by
the relevant public commissions and bodies and the conditions of their reimbursement by the health agencies or insurance
companies in the countries where the Company intends to market its products. The current context of healthcare cost
control and economic and financial crisis that most countries are currently facing, coupled with the increase in health care
budgets caused by the aging population creates extra pressure on health care spending in most if not all countries.
Consequently, pressure on sales prices and reimbursement levels is intensifying owing in particular to;

•
•
•

Price controls imposed by many states;
The increasing reimbursement limitations of some products under budgetary policies;
The heightened difficulty in obtaining and maintaining a satisfactory reimbursement rate for medicines.

Obtaining adequate pricing decisions that would generate return on the investment incurred for the development of the
product candidates developed by the Company is therefore uncertain. The Company’s ability to manage its expenses and
cost structure to adapt to increased pricing pressure is untested and uncertain.

All of these factors will have a direct impact on the Company’s ability to make profits on the products in question. The
partial/no reimbursement policy of medicines could have a material adverse effect on the business, prospects, financial
situation, earnings and growth of the Company.

Changes in regulatory approval policies or enactment of additional regulatory approval requirements may
delay or prevent the product candidates from being marketed.

The regulatory clearance process is expensive and time consuming and the timing of marketing is difficult to predict. Once
marketed, products may be subject to post-authorisation safety studies or other pharmaco-vigilance or device vigilance
activities or may be subject to limitations on their uses or may be withdrawn from the market for various reasons, including if
they are shown to be unsafe or ineffective, or when used in a larger population that may be different from the trial population
studied prior to market introduction of the product.

The Company's product candidates may become subject to changes in the regulatory framework or market conditions.
Regulatory guidelines may change during the course of product development and review process, making the chosen
development strategy suboptimal. Market conditions may change resulting in the emergence of new competitors or new
treatment guidelines which may require alterations in the development strategy. These factors may result in significant
delays, increased trial costs, significant changes in commercial assumptions or failure of the products to obtain marketing
authorisation.

The Company is subject to inspection and shall be subject to market surveillance by the FDA, EMA and
other Competent Authorities for compliance with regulations that prohibit the promotion of the
Company’s products for a purpose or indication other than those for which approval has been granted.

While a product manufacturer may not promote a product for such “off label” use, doctors are allowed, in the exercise of
their professional judgment in the practice of medicine, to use a product in ways not approved by Competent Authorities.
Off-label marketing regulations are subject to varying evolving interpretations.

Post-approval manufacturing and marketing of Company’s products may show different safety and efficacy profiles to those
demonstrated in the data on which approval to test or market said products was based. Such circumstances could lead to
the withdrawal or suspension of approval, which could have a material adverse effect on the Company's business, financial
condition, operating results or cash flows. In addition, Competent Authorities may not approve the labelling claims or
advertisements that are necessary or desirable for the successful commercialisation of the Company's products.

Competent Authorities have broad enforcement power, and a failure by the Company or its collaboration partners to comply
with applicable regulatory requirements can, among other things, result in recalls or seizures of products, operating and
production restrictions, withdrawals of previously approved marketing applications, total or partial suspension of regulatory
approvals, refusal to approve pending applications, warning letters, injunctions, penalties, fines, civil proceedings, criminal
prosecutions and imprisonment.

CELYAD • FINANCIAL RESULTS 2016

2.7.3.3.

Risks related to our reliance on third parties

The Company has obtained and will obtain significant funding from the Walloon and Flemish Regions. The
terms of the agreements signed with the Regions may hamper the Company to partner part or all its
products and restrict the Company's ability to determine the location of its premises.

The Company contracted over the past year numerous funding agreements with the Walloon Region to partially finance all of
its research and development programs. Under the terms of the agreements, the Company would need to obtain the
consent of the Walloon Region for any out-licensing agreement or sale to a third party of any or all of its products,
prototypes or installations which may reduce the Company’s ability to partner or sell part or all of its products.

Furthermore, when the research and development programs partially financed by the Company enter in “exploitation
phase”, the Company has to start reimbursing the funding received. The Company may not be able to reimburse such
funding under the terms of the agreements or such reimbursement may jeopardize the funding of its clinical and scientific
activities.

The Company has committed (i) to start, within three years as from the completion of its IPO, the establishment of a
significant operational site located in the Flemish region of Belgium, which site must become the Company's major effective
commercial production site within six years as from the completion of its IPO and (ii) to maintain its headquarters and
registered office in the Walloon Region and all existing activities of the Company including but not limited to production for
clinical use, clinical, R&D, sales, marketing and administration will continue to be performed and developed in the Walloon
Region, which restricts the Company's ability to determine the most convenient or cost-effective location of its premises.

The above commitments are binding contractual undertakings of the Company. If the Company would not respect its
contractual undertakings, the Company could be held liable for breach of contract.

The Company relies and will continue to rely on collaborative partners regarding the development of its
research programmes and product candidates.

The Company is and expects to continue to be dependent on collaborations with partners relating to the development and
commercialisation of its existing and future research programmes and product candidates. The Company had, has and will
continue to have discussions on potential partnering opportunities with various pharmaceutical and medical device
companies. If the Company fails to enter into or maintain collaborative agreements on reasonable terms or at all, the
Company's ability to develop its existing or future research programmes and product candidates could be delayed, the
commercial potential of its products could change and its costs of development and commercialisation could increase.

The Company's dependence on collaborative partners subjects it to a number of risks, including, but not limited to, the
following:

•

the Company may not be able to control the amount or timing of resources that collaborative partners devote
to the Company's research programs and product candidates;
the Company may be required to relinquish significant rights, including intellectual property, marketing and
distribution rights;
the Company relies on the information and data received from third parties regarding its research programs
and product candidates and will not have control of the process conducted by the third party in gathering and
composing such data and information. The Company may not have formal or appropriate guarantees from its
contract parties with respect to the quality and the completeness of such data;
a collaborative partner may develop a competing product either by itself or in collaboration with others,
including one or more of the Company's competitors;
the Company's collaborative partners' willingness or ability to complete their obligations under the Company's
collaboration arrangements may be adversely affected by business combinations or significant changes in a
collaborative partner’s business strategy; and/or
the Company may experience delays in, or increases in the costs of, the development of the Company's
research programs and product candidates due to the termination or expiration of collaborative research and
development arrangements.

The Company relies on third parties to conduct, supervise and monitor its clinical trials. If these third
parties do not successfully carry out their contractual duties or meet expected deadlines, the Company
may not be able to obtain regulatory approval for or commercialize its drug product candidates and its
business could be substantially harmed.

The Company relies on clinical research organizations, or CROs, and clinical trial sites to ensure its clinical trials are
conducted properly and on time. While the Company will have agreements governing their activities, the Company will have
limited influence over their actual performance. The Company will control only certain aspects of our CROs’ activities.
Nevertheless, the Company will be responsible for ensuring that each of its clinical trials is conducted in accordance with the
applicable protocol, legal, regulatory and scientific standards, and its reliance on the CROs does not relieve the Company of
its regulatory responsibilities.

The Company and its CROs are required to comply with the FDA’s GCPs for conducting, recording and reporting the results
of clinical trials to assure that the data and reported results are credible and accurate and that the rights, integrity and
confidentiality of clinical trial participants are protected. The FDA, the Competent Authorities of the Member States of the
EEA, and comparable foreign regulatory authorities, enforce these GCPs through periodic inspections of trial sponsors,
principal investigators and clinical trial sites. If the Company or its CROs fail to comply with applicable GCPs, the clinical data

generated in its future clinical trials may be deemed unreliable and the FDA, the EMA, or other foreign regulatory authorities

may require the Company to perform additional clinical trials before approving any marketing applications. Upon inspection,

the FDA may determine that its clinical trials did not comply with GCPs. In addition, its future clinical trials will require a

sufficient number of test subjects to evaluate the safety and effectiveness of its drug product candidates. Accordingly, if its

CROs fail to comply with these regulations or fail to recruit a sufficient number of patients, the Company may be required to

repeat such clinical trials, which would delay the regulatory approval process.

Its CROs are not the Company’s employees, and the Company is therefore unable to directly monitor whether or not they

devote sufficient time and resources to its clinical and pre-clinical programs. These CROs may also have relationships with

other commercial entities, including its competitors, for whom they may also be conducting clinical trials or other product

development activities that could harm the Company’s competitive position. If its CROs do not successfully carry out their

contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain

is compromised due to the failure to adhere to the Company’s clinical protocols or regulatory requirements, or for any other

reasons, the Company’s clinical trials may be extended, delayed or terminated, and the Company may not be able to obtain

regulatory approval for, or successfully commercialize, its drug product candidates. If any such event were to occur, the

Company’s financial results and the commercial prospects for its drug product candidates would be harmed, its costs could

increase, and its ability to generate revenues could be delayed.

If any of the Company’s relationships with these third-party CROs terminate, the Company may not be able to enter into

arrangements with alternative CROs or to do so on commercially reasonable terms. Further, switching or adding additional

CROs involves additional costs and requires management time and focus. In addition, there is a natural transition period

when a new CRO commences work. As a result, delays occur, which could materially impact its ability to meet its desired

clinical development timelines. Though the Company carefully manages our relationships with our CROs, there can be no

assurance that the Company will not encounter challenges or delays in the future or that these delays or challenges will not

have a material adverse impact on its business, financial condition and prospects.

Cell- based therapies rely on the availability of specialty raw materials, which may not be available to the

Company on acceptable terms or at all.

Engineered-cell therapies require many specialty raw materials, some of which are manufactured by small companies with

limited resources and experience to support a commercial product. The suppliers may be ill-equipped to support the

Company’s needs, especially in non-routine circumstances like an FDA inspection or medical crisis, such as widespread

contamination. The Company also does not have contracts with many of these suppliers, and may not be able to contract

with them on acceptable terms or at all. Accordingly, the Company may experience delays in receiving key raw materials to

support clinical or commercial manufacturing.

In addition, some raw materials are currently available from a single supplier, or a small number of suppliers. The Company

cannot be sure that these suppliers will remain in business, or that they will not be purchased by one of its competitors or

another Company that is not interested in continuing to produce these materials for our intended purpose.

2.7.3.4.

Risk related to the Company’s intellectual property

The Company’s patents and other intellectual property rights portfolio is relatively young and may not

adequately protect its research programmes and product candidates, which may impede the Company’s

ability to compete effectively.

The Company’s success will depend in part on the ability of the Company to obtain, maintain and enforce its patents and

other intellectual property rights. The Company’s research programmes and product candidates are covered by several

patent application families, which are either licensed to the Company or owned by the Company. Out of the numerous

patent applications filed by the Company, only two national patents have been granted in Belgium and three national patents

have been granted in the US, while the other patient applications are still pending. The Company cannot guarantee that it will

be in a position in the future to develop new patentable inventions or that the Company or its licensors will be able to obtain

or maintain these patent rights against patent offices and other third-party challenges to their validity, scope and/or

enforceability. The Company cannot guarantee that it is or has been the first to conceive an invention and to file a patent or a

patent application, notably given the fact that patent applications are not published in most countries before an 18-months

period from the date of the filing. Moreover, the Company may have no or limited control over the effectiveness of its

licensors in preventing the misappropriation of their patents and intellectual property. Because patent law in the

biopharmaceutical industry is highly uncertain, there can be no assurance that the technologies used in the Company’s

research programmes and product candidates are patentable, that patents will be granted to the Company or its licensors

under pending or future applications, or that patents will be of sufficient breadth to provide adequate and commercially

meaningful protection against competitors with similar technologies or products, or that patents granted to the Company or

its licensors will not be successfully challenged, circumvented, invalidated or rendered unenforceable by third parties, hence

enabling competitors to circumvent or use them and depriving the Company from the protection it may expect against

competitors. If the Company or its licensors do not obtain patents in respect of their technologies or if the patents of the

Company or its licensors are invalidated (for example, as a result of the discovery of prior art), third parties may use the

technologies without payment to the Company. A third party’s ability to use unpatented technologies is enhanced by the

fact that the published patent application contains a detailed description of the relevant technology.

The Company cannot guarantee that third parties, contract parties or employees will not claim ownership rights over the

patents or other intellectual property rights owned or held by the Company.

CELYAD • FINANCIAL RESULTS 2016

2.7.3.3.

Risks related to our reliance on third parties

The Company has obtained and will obtain significant funding from the Walloon and Flemish Regions. The

terms of the agreements signed with the Regions may hamper the Company to partner part or all its

products and restrict the Company's ability to determine the location of its premises.

The Company contracted over the past year numerous funding agreements with the Walloon Region to partially finance all of

its research and development programs. Under the terms of the agreements, the Company would need to obtain the

consent of the Walloon Region for any out-licensing agreement or sale to a third party of any or all of its products,

prototypes or installations which may reduce the Company’s ability to partner or sell part or all of its products.

Furthermore, when the research and development programs partially financed by the Company enter in “exploitation

phase”, the Company has to start reimbursing the funding received. The Company may not be able to reimburse such

funding under the terms of the agreements or such reimbursement may jeopardize the funding of its clinical and scientific

activities.

The Company has committed (i) to start, within three years as from the completion of its IPO, the establishment of a

significant operational site located in the Flemish region of Belgium, which site must become the Company's major effective

commercial production site within six years as from the completion of its IPO and (ii) to maintain its headquarters and

registered office in the Walloon Region and all existing activities of the Company including but not limited to production for

clinical use, clinical, R&D, sales, marketing and administration will continue to be performed and developed in the Walloon

Region, which restricts the Company's ability to determine the most convenient or cost-effective location of its premises.

The above commitments are binding contractual undertakings of the Company. If the Company would not respect its

contractual undertakings, the Company could be held liable for breach of contract.

The Company relies and will continue to rely on collaborative partners regarding the development of its

research programmes and product candidates.

The Company is and expects to continue to be dependent on collaborations with partners relating to the development and

commercialisation of its existing and future research programmes and product candidates. The Company had, has and will

continue to have discussions on potential partnering opportunities with various pharmaceutical and medical device

companies. If the Company fails to enter into or maintain collaborative agreements on reasonable terms or at all, the

Company's ability to develop its existing or future research programmes and product candidates could be delayed, the

commercial potential of its products could change and its costs of development and commercialisation could increase.

The Company's dependence on collaborative partners subjects it to a number of risks, including, but not limited to, the

following:

•

the Company may not be able to control the amount or timing of resources that collaborative partners devote

to the Company's research programs and product candidates;

the Company may be required to relinquish significant rights, including intellectual property, marketing and

distribution rights;

the Company relies on the information and data received from third parties regarding its research programs

and product candidates and will not have control of the process conducted by the third party in gathering and

composing such data and information. The Company may not have formal or appropriate guarantees from its

contract parties with respect to the quality and the completeness of such data;

a collaborative partner may develop a competing product either by itself or in collaboration with others,

including one or more of the Company's competitors;

the Company's collaborative partners' willingness or ability to complete their obligations under the Company's

collaboration arrangements may be adversely affected by business combinations or significant changes in a

collaborative partner’s business strategy; and/or

the Company may experience delays in, or increases in the costs of, the development of the Company's

research programs and product candidates due to the termination or expiration of collaborative research and

development arrangements.

The Company relies on third parties to conduct, supervise and monitor its clinical trials. If these third

parties do not successfully carry out their contractual duties or meet expected deadlines, the Company

may not be able to obtain regulatory approval for or commercialize its drug product candidates and its

business could be substantially harmed.

The Company relies on clinical research organizations, or CROs, and clinical trial sites to ensure its clinical trials are

conducted properly and on time. While the Company will have agreements governing their activities, the Company will have

limited influence over their actual performance. The Company will control only certain aspects of our CROs’ activities.

Nevertheless, the Company will be responsible for ensuring that each of its clinical trials is conducted in accordance with the

applicable protocol, legal, regulatory and scientific standards, and its reliance on the CROs does not relieve the Company of

its regulatory responsibilities.

The Company and its CROs are required to comply with the FDA’s GCPs for conducting, recording and reporting the results

of clinical trials to assure that the data and reported results are credible and accurate and that the rights, integrity and

confidentiality of clinical trial participants are protected. The FDA, the Competent Authorities of the Member States of the

EEA, and comparable foreign regulatory authorities, enforce these GCPs through periodic inspections of trial sponsors,

principal investigators and clinical trial sites. If the Company or its CROs fail to comply with applicable GCPs, the clinical data

generated in its future clinical trials may be deemed unreliable and the FDA, the EMA, or other foreign regulatory authorities
may require the Company to perform additional clinical trials before approving any marketing applications. Upon inspection,
the FDA may determine that its clinical trials did not comply with GCPs. In addition, its future clinical trials will require a
sufficient number of test subjects to evaluate the safety and effectiveness of its drug product candidates. Accordingly, if its
CROs fail to comply with these regulations or fail to recruit a sufficient number of patients, the Company may be required to
repeat such clinical trials, which would delay the regulatory approval process.

Its CROs are not the Company’s employees, and the Company is therefore unable to directly monitor whether or not they
devote sufficient time and resources to its clinical and pre-clinical programs. These CROs may also have relationships with
other commercial entities, including its competitors, for whom they may also be conducting clinical trials or other product
development activities that could harm the Company’s competitive position. If its CROs do not successfully carry out their
contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain
is compromised due to the failure to adhere to the Company’s clinical protocols or regulatory requirements, or for any other
reasons, the Company’s clinical trials may be extended, delayed or terminated, and the Company may not be able to obtain
regulatory approval for, or successfully commercialize, its drug product candidates. If any such event were to occur, the
Company’s financial results and the commercial prospects for its drug product candidates would be harmed, its costs could
increase, and its ability to generate revenues could be delayed.

If any of the Company’s relationships with these third-party CROs terminate, the Company may not be able to enter into
arrangements with alternative CROs or to do so on commercially reasonable terms. Further, switching or adding additional
CROs involves additional costs and requires management time and focus. In addition, there is a natural transition period
when a new CRO commences work. As a result, delays occur, which could materially impact its ability to meet its desired
clinical development timelines. Though the Company carefully manages our relationships with our CROs, there can be no
assurance that the Company will not encounter challenges or delays in the future or that these delays or challenges will not
have a material adverse impact on its business, financial condition and prospects.

Cell- based therapies rely on the availability of specialty raw materials, which may not be available to the
Company on acceptable terms or at all.

Engineered-cell therapies require many specialty raw materials, some of which are manufactured by small companies with
limited resources and experience to support a commercial product. The suppliers may be ill-equipped to support the
Company’s needs, especially in non-routine circumstances like an FDA inspection or medical crisis, such as widespread
contamination. The Company also does not have contracts with many of these suppliers, and may not be able to contract
with them on acceptable terms or at all. Accordingly, the Company may experience delays in receiving key raw materials to
support clinical or commercial manufacturing.

In addition, some raw materials are currently available from a single supplier, or a small number of suppliers. The Company
cannot be sure that these suppliers will remain in business, or that they will not be purchased by one of its competitors or
another Company that is not interested in continuing to produce these materials for our intended purpose.

2.7.3.4.

Risk related to the Company’s intellectual property

The Company’s patents and other intellectual property rights portfolio is relatively young and may not
adequately protect its research programmes and product candidates, which may impede the Company’s
ability to compete effectively.

The Company’s success will depend in part on the ability of the Company to obtain, maintain and enforce its patents and
other intellectual property rights. The Company’s research programmes and product candidates are covered by several
patent application families, which are either licensed to the Company or owned by the Company. Out of the numerous
patent applications filed by the Company, only two national patents have been granted in Belgium and three national patents
have been granted in the US, while the other patient applications are still pending. The Company cannot guarantee that it will
be in a position in the future to develop new patentable inventions or that the Company or its licensors will be able to obtain
or maintain these patent rights against patent offices and other third-party challenges to their validity, scope and/or
enforceability. The Company cannot guarantee that it is or has been the first to conceive an invention and to file a patent or a
patent application, notably given the fact that patent applications are not published in most countries before an 18-months
period from the date of the filing. Moreover, the Company may have no or limited control over the effectiveness of its
licensors in preventing the misappropriation of their patents and intellectual property. Because patent law in the
biopharmaceutical industry is highly uncertain, there can be no assurance that the technologies used in the Company’s
research programmes and product candidates are patentable, that patents will be granted to the Company or its licensors
under pending or future applications, or that patents will be of sufficient breadth to provide adequate and commercially
meaningful protection against competitors with similar technologies or products, or that patents granted to the Company or
its licensors will not be successfully challenged, circumvented, invalidated or rendered unenforceable by third parties, hence
enabling competitors to circumvent or use them and depriving the Company from the protection it may expect against
competitors. If the Company or its licensors do not obtain patents in respect of their technologies or if the patents of the
Company or its licensors are invalidated (for example, as a result of the discovery of prior art), third parties may use the
technologies without payment to the Company. A third party’s ability to use unpatented technologies is enhanced by the
fact that the published patent application contains a detailed description of the relevant technology.

The Company cannot guarantee that third parties, contract parties or employees will not claim ownership rights over the
patents or other intellectual property rights owned or held by the Company.

CELYAD • FINANCIAL RESULTS 2016

The Company also relies on proprietary know-how to protect its research programmes and product candidates and
Cardiopoiesis platform. Know-how is difficult to maintain and protect. The Company uses reasonable efforts to maintain its
know-how, but it cannot assure that its partners, employees, consultants, advisors or other third parties will not wilfully or
information to competitors. Furthermore, the Company’s competitors may
unintentionally disclose proprietary
independently develop equivalent knowledge and know-how, which could diminish or eliminate the Company’s competitive
advantage.

The enforcement of patents, know-how and other intellectual property is costly, time consuming and highly uncertain. The
Company cannot guarantee that it will be successful in preventing the misappropriation of its patented inventions, know-
how and other intellectual property rights and those of its licensors, and failure to do so could significantly impair the ability
of the Company to effectively compete.

As far as the Company is aware, its intellectual property has not been challenged otherwise than by patent offices in the
normal course of examination of its patent applications or misappropriated (to the exception, however, of the C-Cure®
trademark for which the Company has received a “cease and desist” request letter from SMB SA limited to the Benelux
market in the event it would be authorized by EMA to use this trademark for an approved pharmaceutical product. In view of
the therapeutic connotations of the word “C-Cure”, the Company is however not likely to be authorized by EMA to use this
mark to identify its products or services).

The Company may infringe on the patents or intellectual property rights of others and may face patent
litigation, which may be costly and time consuming.

The Company’s success will depend in part on its ability to operate without infringing on or misappropriating the intellectual
property rights of others. The Company cannot guarantee that its activities, or those of its licensors, will not infringe on the
patents or other intellectual property rights owned by others. The Company may expend significant time and effort and may
incur substantial costs in litigation if it is required to defend against patent or other intellectual property right suits brought
against the Company or its licensors regardless of whether the claims have any merit. Additionally, the Company cannot
predict whether it or its licensors will be successful in any litigation. If the Company or its licensors are found to infringe on
the patents or other intellectual property rights of others, it may be subject to substantial claims for damages, which could
materially impact the Company’s cash flow and financial position. The Company may also be required to cease development,
use or sale of the relevant research programme, product candidate or process or it may be required to obtain a licence on the
disputed rights, which may not be available on commercially reasonable terms, if at all. The Company may be unable to
develop or commercialise a product, product candidate or research programme, or may cease some of its operations, which
may have a material adverse affect on the Company’s business.

In parallel with the development of the Company’s own intellectual property, patent literature related to heart repair in
general and, more specifically, patents of competing companies, are regularly evaluated, in order to avoid infringement and
to explore the space of patentable subject matter. To date, no patent infringement claims have been made against Celyad
nor by Celyad against third parties.

There can be no assurance that the Company's efforts to search for existing proprietary rights before embarking on a
research and development programme with respect to a particular product candidate, method, process or technology will
uncover all relevant third party rights relating to such product, method, process or technology.

The Company may spend significant time and effort and may incur substantial costs if required to defend against any
infringement claims or to assert its intellectual property rights against third parties. The risk of such a procedure by a third
party may increase in view of the Company making public announcement regarding one or more of its research programmes
and product candidates. The Company may not be successful in defending its rights against such procedures or claims and
may incur as a consequence thereof significant losses, costs or delays in its intended commercialisation plans as a result
thereof.

The Company depends on intellectual property licensed from third parties and termination of any of these
licenses could result in the loss of significant rights, which would harm its business.

The Company is dependent on patents, know-how, and proprietary technology, both its own and licensed from others. Any
termination of these licenses could result in the loss of significant rights and could harm its ability to commercialize its drug
product candidates. Disputes may also arise between the Company and its licensors regarding intellectual property subject
to a license agreement, including those relating to:

the scope of rights granted under the license agreement and other interpretation-related issues;

•
• whether and the extent to which its technology and processes infringe on intellectual property of the licensor

that is not subject to the license agreement;
its right to sublicense patent and other rights to third parties under collaborative development relationships;
the amount and timing of milestone and royalty payments;

•
•
• whether the Company is complying with its diligence obligations with respect to the use of the licensed

•

technology in relation to its development and commercialization of its drug product candidates; and
the allocation of ownership of inventions and know-how resulting from the joint creation or use of intellectual
property by the Company and its partners and by its licensors.

If disputes over intellectual property that the Company has licensed prevent or impair its ability to maintain its current
licensing arrangements on acceptable terms, the Company may be unable to successfully develop and commercialize the
affected drug product candidates. The Company is generally also subject to all of the same risks with respect to protection

of intellectual property that the Company licenses as it is for intellectual property that the Company owns, which are

described below. If the Company or its licensors fail to adequately protect this intellectual property, the Company’s ability to

commercialize its products could suffer.

drug product candidates.

We could be unsuccessful in obtaining or maintaining adequate patent protection for one or more of our

The patent application process is expensive and time-consuming, and we and our current or future licensors and licensees

may not be able to apply for or prosecute patents on certain aspects of our drug product candidates or deliver technologies

at a reasonable cost, in a timely fashion, or at all. It is also possible that we or our current licensors, or any future licensors or

licensees, will fail to identify patentable aspects of inventions made in the course of development and commercialization

activities before it is too late to obtain patent protection on them. Therefore, our patents and applications may not be

prosecuted and enforced in a manner consistent with the best interests of our business. It is possible that defects of form in

the preparation or filing of our patents or patent applications may exist, or may arise in the future, such as with respect to

proper priority claims, inventorship, claim scope or patent term adjustments. Under our existing license agreements with the

Mayo Foundation for Medical Education and Research and the Trustees of Dartmouth College, we have the right, but not the

obligation, to enforce our licensed patents. If our current licensors, or any future licensors or licensees, are not fully

cooperative or disagree with us as to the prosecution, maintenance or enforcement of any patent rights, such patent rights

could be compromised and we might not be able to prevent third parties from making, using, and selling competing products.

If there are material defects in the form or preparation of our patents or patent applications, such patents or applications

may be invalid and unenforceable. Moreover, our competitors may independently develop equivalent knowledge, methods,

and know-how. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an

adverse impact on our business, financial condition and operating results.

We currently have issued patents and patent applications directed to our drug product candidates and medical devices, and

we anticipate that we will file additional patent applications in several jurisdictions, including several European Union

countries and the United States, as appropriate. However, we cannot predict:

if and when any patents will issue from patent applications;

•

the degree and range of protection any issued patents will afford us against competitors, including whether third

parties will find ways to invalidate or otherwise circumvent our patents;

• whether others will apply for or obtain patents claiming aspects similar to those covered by our patents and patent

• whether we will need to initiate litigation or administrative proceedings to defend our patent rights, which may be

applications; or

costly whether we win or lose.

We cannot be certain, however, that the claims in our pending patent applications will be considered patentable by patent

offices, or that the claims in any of our issued patents will be considered valid and enforceable by local courts.

The strength of patents in the biotechnology and pharmaceutical field can be uncertain, and evaluating the scope of such

patents involves complex legal and scientific analyses. The patent applications that we own or in-license may fail to result in

issued patents with claims that cover our drug product candidates or uses thereof in the European Union, in the United

States or in other jurisdictions. Even if the patents do successfully issue, third parties may challenge the validity,

enforceability, or scope thereof, which may result in such patents being narrowed, invalidated, or held unenforceable.

Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual

property or prevent others from designing their products to avoid being covered by our claims. If the breadth or strength of

protection provided by the patent applications we hold with respect to our drug product candidates is threatened, this could

dissuade companies from collaborating with us to develop, and could threaten our ability to commercialize, our drug product

candidates. Further, because patent applications in most countries are confidential for a period of time after filing, we cannot

be certain that we were the first to file any patent application related to our drug product candidates.

European patent EP2432482, entitled “Pharmaceutical composition for the treatment of heart diseases”, was granted by the

European Patent Office (“EPO”) on April 15, 2015. The granted claims relate to compositions comprising specific cells

committed to the generation of heart tissue. A notice of opposition to this patent was filed at the EPO on January 15, 2016

by an anonymous third party. The opposition requests revocation of the patent in its entirety. Both parties presented

additional arguments in writing, oral proceedings have been planned at the EPO on March 6, 2017. The oral proceedings

resulted in revocation of the patent, a decision that still needs to be confirmed in writing. This decision can be appealed.

US Patent No. 9,181,527, entitled “T cell receptor-deficient T cell compositions,” was issued by the USPTO on November 10,

2015. The issued claims relate to isolated primary human T cells that have been specifically modified. A request for ex parte

re-examination of claim 1 of the issued patent was filed at the USPTO on February 10, 2016 by an anonymous third party.

The request for re-examination was granted, and the proceeding has been completed. A re-examination certificate was

issued on January 6, 2017, confirming the patentability of claim 1 as amended. The patent thus remains valid and

enforceable.

A new request for ex parte re-examination of claim 3 of the same patent (US 9,181,527) was filed at the USPTO on December

27, 2016 by an anonymous third party, although an accompanying declaration was signed by an individual allegedly retained

by Cellectis SA. On March 14, 2017, the USPTO has issued a decision denying the request for re-examination, as no

substantial new question of patentability was raised. The patent thus remains valid and enforceable.

CELYAD • FINANCIAL RESULTS 2016

The Company also relies on proprietary know-how to protect its research programmes and product candidates and

Cardiopoiesis platform. Know-how is difficult to maintain and protect. The Company uses reasonable efforts to maintain its

know-how, but it cannot assure that its partners, employees, consultants, advisors or other third parties will not wilfully or

unintentionally disclose proprietary

information to competitors. Furthermore, the Company’s competitors may

independently develop equivalent knowledge and know-how, which could diminish or eliminate the Company’s competitive

advantage.

The enforcement of patents, know-how and other intellectual property is costly, time consuming and highly uncertain. The

Company cannot guarantee that it will be successful in preventing the misappropriation of its patented inventions, know-

how and other intellectual property rights and those of its licensors, and failure to do so could significantly impair the ability

of the Company to effectively compete.

As far as the Company is aware, its intellectual property has not been challenged otherwise than by patent offices in the

normal course of examination of its patent applications or misappropriated (to the exception, however, of the C-Cure®

trademark for which the Company has received a “cease and desist” request letter from SMB SA limited to the Benelux

market in the event it would be authorized by EMA to use this trademark for an approved pharmaceutical product. In view of

the therapeutic connotations of the word “C-Cure”, the Company is however not likely to be authorized by EMA to use this

mark to identify its products or services).

The Company may infringe on the patents or intellectual property rights of others and may face patent

litigation, which may be costly and time consuming.

The Company’s success will depend in part on its ability to operate without infringing on or misappropriating the intellectual

property rights of others. The Company cannot guarantee that its activities, or those of its licensors, will not infringe on the

patents or other intellectual property rights owned by others. The Company may expend significant time and effort and may

incur substantial costs in litigation if it is required to defend against patent or other intellectual property right suits brought

against the Company or its licensors regardless of whether the claims have any merit. Additionally, the Company cannot

predict whether it or its licensors will be successful in any litigation. If the Company or its licensors are found to infringe on

the patents or other intellectual property rights of others, it may be subject to substantial claims for damages, which could

materially impact the Company’s cash flow and financial position. The Company may also be required to cease development,

use or sale of the relevant research programme, product candidate or process or it may be required to obtain a licence on the

disputed rights, which may not be available on commercially reasonable terms, if at all. The Company may be unable to

develop or commercialise a product, product candidate or research programme, or may cease some of its operations, which

may have a material adverse affect on the Company’s business.

In parallel with the development of the Company’s own intellectual property, patent literature related to heart repair in

general and, more specifically, patents of competing companies, are regularly evaluated, in order to avoid infringement and

to explore the space of patentable subject matter. To date, no patent infringement claims have been made against Celyad

nor by Celyad against third parties.

There can be no assurance that the Company's efforts to search for existing proprietary rights before embarking on a

research and development programme with respect to a particular product candidate, method, process or technology will

uncover all relevant third party rights relating to such product, method, process or technology.

The Company may spend significant time and effort and may incur substantial costs if required to defend against any

infringement claims or to assert its intellectual property rights against third parties. The risk of such a procedure by a third

party may increase in view of the Company making public announcement regarding one or more of its research programmes

and product candidates. The Company may not be successful in defending its rights against such procedures or claims and

may incur as a consequence thereof significant losses, costs or delays in its intended commercialisation plans as a result

thereof.

The Company depends on intellectual property licensed from third parties and termination of any of these

licenses could result in the loss of significant rights, which would harm its business.

The Company is dependent on patents, know-how, and proprietary technology, both its own and licensed from others. Any

termination of these licenses could result in the loss of significant rights and could harm its ability to commercialize its drug

product candidates. Disputes may also arise between the Company and its licensors regarding intellectual property subject

to a license agreement, including those relating to:

•

the scope of rights granted under the license agreement and other interpretation-related issues;

• whether and the extent to which its technology and processes infringe on intellectual property of the licensor

that is not subject to the license agreement;

its right to sublicense patent and other rights to third parties under collaborative development relationships;

the amount and timing of milestone and royalty payments;

• whether the Company is complying with its diligence obligations with respect to the use of the licensed

technology in relation to its development and commercialization of its drug product candidates; and

the allocation of ownership of inventions and know-how resulting from the joint creation or use of intellectual

property by the Company and its partners and by its licensors.

If disputes over intellectual property that the Company has licensed prevent or impair its ability to maintain its current

licensing arrangements on acceptable terms, the Company may be unable to successfully develop and commercialize the

affected drug product candidates. The Company is generally also subject to all of the same risks with respect to protection

of intellectual property that the Company licenses as it is for intellectual property that the Company owns, which are
described below. If the Company or its licensors fail to adequately protect this intellectual property, the Company’s ability to
commercialize its products could suffer.

We could be unsuccessful in obtaining or maintaining adequate patent protection for one or more of our
drug product candidates.

The patent application process is expensive and time-consuming, and we and our current or future licensors and licensees
may not be able to apply for or prosecute patents on certain aspects of our drug product candidates or deliver technologies
at a reasonable cost, in a timely fashion, or at all. It is also possible that we or our current licensors, or any future licensors or
licensees, will fail to identify patentable aspects of inventions made in the course of development and commercialization
activities before it is too late to obtain patent protection on them. Therefore, our patents and applications may not be
prosecuted and enforced in a manner consistent with the best interests of our business. It is possible that defects of form in
the preparation or filing of our patents or patent applications may exist, or may arise in the future, such as with respect to
proper priority claims, inventorship, claim scope or patent term adjustments. Under our existing license agreements with the
Mayo Foundation for Medical Education and Research and the Trustees of Dartmouth College, we have the right, but not the
obligation, to enforce our licensed patents. If our current licensors, or any future licensors or licensees, are not fully
cooperative or disagree with us as to the prosecution, maintenance or enforcement of any patent rights, such patent rights
could be compromised and we might not be able to prevent third parties from making, using, and selling competing products.
If there are material defects in the form or preparation of our patents or patent applications, such patents or applications
may be invalid and unenforceable. Moreover, our competitors may independently develop equivalent knowledge, methods,
and know-how. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an
adverse impact on our business, financial condition and operating results.

We currently have issued patents and patent applications directed to our drug product candidates and medical devices, and
we anticipate that we will file additional patent applications in several jurisdictions, including several European Union
countries and the United States, as appropriate. However, we cannot predict:

•

if and when any patents will issue from patent applications;

the degree and range of protection any issued patents will afford us against competitors, including whether third
parties will find ways to invalidate or otherwise circumvent our patents;

• whether others will apply for or obtain patents claiming aspects similar to those covered by our patents and patent

applications; or

• whether we will need to initiate litigation or administrative proceedings to defend our patent rights, which may be

costly whether we win or lose.

We cannot be certain, however, that the claims in our pending patent applications will be considered patentable by patent
offices, or that the claims in any of our issued patents will be considered valid and enforceable by local courts.

The strength of patents in the biotechnology and pharmaceutical field can be uncertain, and evaluating the scope of such
patents involves complex legal and scientific analyses. The patent applications that we own or in-license may fail to result in
issued patents with claims that cover our drug product candidates or uses thereof in the European Union, in the United
States or in other jurisdictions. Even if the patents do successfully issue, third parties may challenge the validity,
enforceability, or scope thereof, which may result in such patents being narrowed, invalidated, or held unenforceable.
Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual
property or prevent others from designing their products to avoid being covered by our claims. If the breadth or strength of
protection provided by the patent applications we hold with respect to our drug product candidates is threatened, this could
dissuade companies from collaborating with us to develop, and could threaten our ability to commercialize, our drug product
candidates. Further, because patent applications in most countries are confidential for a period of time after filing, we cannot
be certain that we were the first to file any patent application related to our drug product candidates.

European patent EP2432482, entitled “Pharmaceutical composition for the treatment of heart diseases”, was granted by the
European Patent Office (“EPO”) on April 15, 2015. The granted claims relate to compositions comprising specific cells
committed to the generation of heart tissue. A notice of opposition to this patent was filed at the EPO on January 15, 2016
by an anonymous third party. The opposition requests revocation of the patent in its entirety. Both parties presented
additional arguments in writing, oral proceedings have been planned at the EPO on March 6, 2017. The oral proceedings
resulted in revocation of the patent, a decision that still needs to be confirmed in writing. This decision can be appealed.

US Patent No. 9,181,527, entitled “T cell receptor-deficient T cell compositions,” was issued by the USPTO on November 10,
2015. The issued claims relate to isolated primary human T cells that have been specifically modified. A request for ex parte
re-examination of claim 1 of the issued patent was filed at the USPTO on February 10, 2016 by an anonymous third party.
The request for re-examination was granted, and the proceeding has been completed. A re-examination certificate was
issued on January 6, 2017, confirming the patentability of claim 1 as amended. The patent thus remains valid and
enforceable.
A new request for ex parte re-examination of claim 3 of the same patent (US 9,181,527) was filed at the USPTO on December
27, 2016 by an anonymous third party, although an accompanying declaration was signed by an individual allegedly retained
by Cellectis SA. On March 14, 2017, the USPTO has issued a decision denying the request for re-examination, as no
substantial new question of patentability was raised. The patent thus remains valid and enforceable.

CELYAD • FINANCIAL RESULTS 2016

Patents have a limited lifespan. Various extensions may be available; however the life of a patent, and the protection it
affords, is limited. Further, the extensive period of time between patent filing and regulatory approval for a drug product
candidate limits the time during which we can market a drug product candidate under patent protection, which may
particularly affect the profitability of our early-stage drug product candidates. If we encounter delays in our clinical trials, the
period of time during which we could market our drug product candidates under patent protection would be reduced.
Without patent protection for our drug product candidates, we may be open to competition from biosimilar versions of our
drug product candidates.

We may not be able to protect our intellectual property rights throughout the world.

distraction to our management and employees.

Filing, prosecuting and defending patents on drug product candidates in all countries throughout the world would be
prohibitively expensive., In addition, the laws of some foreign countries do not protect intellectual property rights to the
same extent as laws in the European Union or the United States. Consequently, we may not be able to prevent third parties
from practicing our inventions in all countries, or from selling or importing products made using our inventions in and into
other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to
develop their own products and further, may export otherwise infringing products to territories where we have patent
protection but enforcement is not as strong. These products may compete with our products and our patents or other
intellectual property rights may not be effective or sufficient to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in a number
of jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the
enforcement of patents, trade secrets and other
intellectual property protection, particularly those relating to
biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing of
competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in some
jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could
put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could
provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other
remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property
rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that
we develop or license.

We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which
could be expensive, time-consuming, and unsuccessful.

Competitors may infringe our patents or the patents of our licensors. To cease such infringement or unauthorized use, we
may be required to file patent infringement claims, which can be expensive and time-consuming. In addition, in an
infringement proceeding or a declaratory judgment action against us, a court may decide that one or more of our patents is
not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that
our patents do not cover the technology in question. An adverse result in any litigation or defense proceeding could put one
or more of our patents at risk of being invalidated, held unenforceable, interpreted narrowly, or amended such that they do
not cover our drug product candidates. Such results could also put our pending patent applications at risk of not issuing.
Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial
diversion of employee resources from our business. Interference or derivation proceedings provoked by third parties may be
necessary to determine the priority of inventions with respect to, or the correct inventorship of, our patents or patent
applications or those of our licensors. An unfavorable outcome could result in a loss of our current patent rights and could
require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business
could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Litigation, interference,
or derivation proceedings may result in a decision adverse to our interests and, even if we are successful, may result in
substantial costs and distract our management and other employees.

Furthermore, because of the substantial amount of discovery required in some jurisdictions in connection with intellectual
property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this
type of litigation. In addition, there could be public announcements of the results of hearings, motions or other interim
proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a
substantial adverse effect on the price of our ordinary shares.

Issued patents covering our drug product candidates could be found invalid or unenforceable if challenged
in court or before relevant authority.

If we or one of our licensing partners initiate legal proceedings against a third party to enforce a patent covering one of our
drug product candidates, the defendant could counterclaim that the patent covering our drug product candidate is invalid or
unenforceable. Third parties may also raise similar claims before administrative bodies, even outside the context of litigation.
Such mechanisms include \ opposition or derivation proceedings. Such proceedings could result in revocation or
amendment to our patents in such a way that they no longer cover and protect our drug product candidates. The outcome
following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity of our patents, for
example, we cannot be certain that there is no invalidating prior art of which we, our patent counsel, and the patent examiner
were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we
would lose at least part, and perhaps all, of the patent protection on our drug product candidates. Such a loss of patent
protection could have a material adverse impact on our business.

We may be subject to claims that our employees, consultants, or independent contractors have wrongfully

used or disclosed confidential information of third parties.

We have received confidential and proprietary information from third parties. In addition, we employ individuals who were

previously employed at other biotechnology or pharmaceutical companies. We may be subject to claims that we or our

employees, consultants, or independent contractors have inadvertently or otherwise used or disclosed confidential

information of these third parties or our employees’ former employers. Litigation may be necessary to defend against these

claims. Even if we are successful in defending against these claims, litigation could result in substantial cost and be a

2.7.4. Risks related to the Company’s organization, structure and operation

Maintenance of high standards of manufacturing in accordance with Good Manufacturing Practices and

other manufacturing regulations.

Celyad and key third-party suppliers on which it relies currently or in the future must continuously adhere to (current) Good

Manufacturing Practices and corresponding manufacturing regulations of Competent Authorities. In complying with these

regulations, the Company and its third-party suppliers must expend significant time, money and effort in the areas of design

and development, testing, production, record-keeping and quality control to assure that the products meet applicable

specifications and other regulatory requirements. The failure to comply with these requirements could result in an

enforcement action against the Company, including the seizure of products and shutting down of production. Any of these

third-party suppliers and the Company also may be subject to audits by the Competent Authorities. If any of the Company’s

third-party suppliers or the Company itself fails to comply with (current) Good Manufacturing Practices or other applicable

manufacturing regulations, the Company’s ability to develop and commercialise the products could suffer significant

interruptions.

The Company relies on a single manufacturing facility.

The Company faces risks inherent in operating a single manufacturing facility, since any disruption, such as a fire, natural

hazards or vandalism could significantly interrupt the Company’s manufacturing capability. The Company currently does not

have alternative production plans in place or disaster-recovery facilities available. In case of a disruption, the Company will

have to establish alternative manufacturing sources. This would require substantial capital on the part of the Company,

which it may not be able to obtain on commercially acceptable terms or at all. Additionally, the Company would likely

experience months or years of manufacturing delays as it builds or locates replacement facilities and seek and obtain

necessary regulatory approvals. If this occurs, the Company will be unable to satisfy manufacturing needs on a timely basis, if

at all. Also, operating any new facilities may be more expensive than operating the Company’s current facility. Further,

business interruption insurance may not adequately compensate the Company for any losses that may occur and the

Company would have to bear the additional cost of any disruption. For these reasons, a significant disruptive event of the

manufacturing facility could have drastic consequences, including placing the financial stability of the Company at risk.

The Company will need increased manufacturing capacity.

The Company may not be able to expand the manufacturing capacity within the anticipated time frame or budget or may not

be able to obtain the requisite regulatory approvals for the increase in manufacturing capacity on a timely basis, or at all. If

the Company cannot obtain necessary approvals for this contemplated expansion in a timely manner, its ability to meet

demand for its products would be adversely affected. The Company may have difficulties in finding suitable locations or

commercially acceptable terms for the leasing of such facilities. The Company may also have difficulties in finding a

commercial partner for the construction of those facilities and/or partners for investing in the capital expenses related to

the manufacturing plants. The Company will need to obtain GMP certification of those plants for commercial products.

Obtaining those certificates may be delayed, or may not be granted.

The Company is highly dependent on its key personnel, and if the Company is not successful in attracting,

motivating and retaining highly qualified personnel, the Company may not be able to successfully

implement its business strategy.

Its ability to compete in the highly competitive biotechnology and pharmaceutical industries depends upon its ability to

attract, motivate and retain highly qualified managerial, scientific and medical personnel. The Company is highly dependent

on members of our executive committee, particularly its chief executive officer, Christian Homsy, and its scientific and

medical personnel. The loss of the services of any members of its executive committee, other key employees, and other

scientific and medical advisors, and its inability to find suitable replacements, could result in delays in product development

and harm its business.

Competition for skilled personnel in the biotechnology and pharmaceutical industries is intense and the turnover rate can be

high, which may limit the Company’s ability to hire and retain highly qualified personnel on acceptable terms or at all.

To induce valuable employees to remain within the Company, in addition to salary and cash incentives, the Company has

provided warrants that vest over time. The value to employees of these equity grants that vest over time may be

significantly affected by movements in its share price that are beyond its control, and may at any time be insufficient to

counteract more lucrative offers from other companies. The Company does not maintain “key man” insurance policies on

the lives of all of these individuals or the lives of any of its other employees.

CELYAD • FINANCIAL RESULTS 2016

Patents have a limited lifespan. Various extensions may be available; however the life of a patent, and the protection it

affords, is limited. Further, the extensive period of time between patent filing and regulatory approval for a drug product

candidate limits the time during which we can market a drug product candidate under patent protection, which may

particularly affect the profitability of our early-stage drug product candidates. If we encounter delays in our clinical trials, the

period of time during which we could market our drug product candidates under patent protection would be reduced.

Without patent protection for our drug product candidates, we may be open to competition from biosimilar versions of our

drug product candidates.

We may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting and defending patents on drug product candidates in all countries throughout the world would be

prohibitively expensive., In addition, the laws of some foreign countries do not protect intellectual property rights to the

same extent as laws in the European Union or the United States. Consequently, we may not be able to prevent third parties

from practicing our inventions in all countries, or from selling or importing products made using our inventions in and into

other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to

develop their own products and further, may export otherwise infringing products to territories where we have patent

protection but enforcement is not as strong. These products may compete with our products and our patents or other

intellectual property rights may not be effective or sufficient to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in a number

of jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the

enforcement of patents, trade secrets and other

intellectual property protection, particularly those relating to

biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing of

competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in some

jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could

put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could

provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other

remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property

rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that

we develop or license.

We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which

could be expensive, time-consuming, and unsuccessful.

Competitors may infringe our patents or the patents of our licensors. To cease such infringement or unauthorized use, we

may be required to file patent infringement claims, which can be expensive and time-consuming. In addition, in an

infringement proceeding or a declaratory judgment action against us, a court may decide that one or more of our patents is

not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that

our patents do not cover the technology in question. An adverse result in any litigation or defense proceeding could put one

or more of our patents at risk of being invalidated, held unenforceable, interpreted narrowly, or amended such that they do

not cover our drug product candidates. Such results could also put our pending patent applications at risk of not issuing.

Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial

diversion of employee resources from our business. Interference or derivation proceedings provoked by third parties may be

necessary to determine the priority of inventions with respect to, or the correct inventorship of, our patents or patent

applications or those of our licensors. An unfavorable outcome could result in a loss of our current patent rights and could

require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business

could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Litigation, interference,

or derivation proceedings may result in a decision adverse to our interests and, even if we are successful, may result in

substantial costs and distract our management and other employees.

Furthermore, because of the substantial amount of discovery required in some jurisdictions in connection with intellectual

property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this

type of litigation. In addition, there could be public announcements of the results of hearings, motions or other interim

proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a

substantial adverse effect on the price of our ordinary shares.

Issued patents covering our drug product candidates could be found invalid or unenforceable if challenged

in court or before relevant authority.

If we or one of our licensing partners initiate legal proceedings against a third party to enforce a patent covering one of our

drug product candidates, the defendant could counterclaim that the patent covering our drug product candidate is invalid or

unenforceable. Third parties may also raise similar claims before administrative bodies, even outside the context of litigation.

Such mechanisms include \ opposition or derivation proceedings. Such proceedings could result in revocation or

amendment to our patents in such a way that they no longer cover and protect our drug product candidates. The outcome

following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity of our patents, for

example, we cannot be certain that there is no invalidating prior art of which we, our patent counsel, and the patent examiner

were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we

would lose at least part, and perhaps all, of the patent protection on our drug product candidates. Such a loss of patent

protection could have a material adverse impact on our business.

We may be subject to claims that our employees, consultants, or independent contractors have wrongfully
used or disclosed confidential information of third parties.

We have received confidential and proprietary information from third parties. In addition, we employ individuals who were
previously employed at other biotechnology or pharmaceutical companies. We may be subject to claims that we or our
employees, consultants, or independent contractors have inadvertently or otherwise used or disclosed confidential
information of these third parties or our employees’ former employers. Litigation may be necessary to defend against these
claims. Even if we are successful in defending against these claims, litigation could result in substantial cost and be a
distraction to our management and employees.
2.7.4. Risks related to the Company’s organization, structure and operation

Maintenance of high standards of manufacturing in accordance with Good Manufacturing Practices and
other manufacturing regulations.

Celyad and key third-party suppliers on which it relies currently or in the future must continuously adhere to (current) Good
Manufacturing Practices and corresponding manufacturing regulations of Competent Authorities. In complying with these
regulations, the Company and its third-party suppliers must expend significant time, money and effort in the areas of design
and development, testing, production, record-keeping and quality control to assure that the products meet applicable
specifications and other regulatory requirements. The failure to comply with these requirements could result in an
enforcement action against the Company, including the seizure of products and shutting down of production. Any of these
third-party suppliers and the Company also may be subject to audits by the Competent Authorities. If any of the Company’s
third-party suppliers or the Company itself fails to comply with (current) Good Manufacturing Practices or other applicable
manufacturing regulations, the Company’s ability to develop and commercialise the products could suffer significant
interruptions.
The Company relies on a single manufacturing facility.

The Company faces risks inherent in operating a single manufacturing facility, since any disruption, such as a fire, natural
hazards or vandalism could significantly interrupt the Company’s manufacturing capability. The Company currently does not
have alternative production plans in place or disaster-recovery facilities available. In case of a disruption, the Company will
have to establish alternative manufacturing sources. This would require substantial capital on the part of the Company,
which it may not be able to obtain on commercially acceptable terms or at all. Additionally, the Company would likely
experience months or years of manufacturing delays as it builds or locates replacement facilities and seek and obtain
necessary regulatory approvals. If this occurs, the Company will be unable to satisfy manufacturing needs on a timely basis, if
at all. Also, operating any new facilities may be more expensive than operating the Company’s current facility. Further,
business interruption insurance may not adequately compensate the Company for any losses that may occur and the
Company would have to bear the additional cost of any disruption. For these reasons, a significant disruptive event of the
manufacturing facility could have drastic consequences, including placing the financial stability of the Company at risk.
The Company will need increased manufacturing capacity.

The Company may not be able to expand the manufacturing capacity within the anticipated time frame or budget or may not
be able to obtain the requisite regulatory approvals for the increase in manufacturing capacity on a timely basis, or at all. If
the Company cannot obtain necessary approvals for this contemplated expansion in a timely manner, its ability to meet
demand for its products would be adversely affected. The Company may have difficulties in finding suitable locations or
commercially acceptable terms for the leasing of such facilities. The Company may also have difficulties in finding a
commercial partner for the construction of those facilities and/or partners for investing in the capital expenses related to
the manufacturing plants. The Company will need to obtain GMP certification of those plants for commercial products.
Obtaining those certificates may be delayed, or may not be granted.

The Company is highly dependent on its key personnel, and if the Company is not successful in attracting,
motivating and retaining highly qualified personnel, the Company may not be able to successfully
implement its business strategy.

Its ability to compete in the highly competitive biotechnology and pharmaceutical industries depends upon its ability to
attract, motivate and retain highly qualified managerial, scientific and medical personnel. The Company is highly dependent
on members of our executive committee, particularly its chief executive officer, Christian Homsy, and its scientific and
medical personnel. The loss of the services of any members of its executive committee, other key employees, and other
scientific and medical advisors, and its inability to find suitable replacements, could result in delays in product development
and harm its business.

Competition for skilled personnel in the biotechnology and pharmaceutical industries is intense and the turnover rate can be
high, which may limit the Company’s ability to hire and retain highly qualified personnel on acceptable terms or at all.

To induce valuable employees to remain within the Company, in addition to salary and cash incentives, the Company has
provided warrants that vest over time. The value to employees of these equity grants that vest over time may be
significantly affected by movements in its share price that are beyond its control, and may at any time be insufficient to
counteract more lucrative offers from other companies. The Company does not maintain “key man” insurance policies on
the lives of all of these individuals or the lives of any of its other employees.

CELYAD • FINANCIAL RESULTS 2016

The Company has limited experience in sales, marketing and distribution.

Given its stage in development, the Company has never marketed a product and has therefore limited experience in the
fields of sales, marketing and distribution of therapies. The Company has currently no marketing nor sales capacity and
intends to set up its own marketing and contract sales force when the C-Cure CHART-1 primary endpoint data will be
available. As a consequence, the Company will have to acquire marketing skills and develop its own sales and marketing
infrastructure and would need to incur additional expenses, mobilize management resources, implement new skills and take
the time necessary to set up the appropriate organization and structure to market the relevant product(s), in accordance
with applicable laws.

While several managers of the Company have commercialized and launched high technology medical products there can be
no assurance that the existing limited experience would be sufficient to effectively commercialize any or all of the
Company’s product candidates. The Company may not be able to attract qualified sales and marketing personnel on
acceptable terms in the future and therefore may experience constraints that will impede the achievement of its commercial
objectives. Such events could have a material adverse effect on the Company’s business, prospects, financial situation,
earnings and growth.

The Company will need to grow the size and capabilities of our organization, and the Company may
experience difficulties in managing this growth.

As of December 31, 2016, the Company had 79 employees and six senior managers under management services
agreements, most of whom are full-time. As the Company’s drug product candidates move into later stage clinical
development and towards commercialization, the Company must add a significant number of additional managerial,
operational, sales, marketing, financial, and other personnel. Future growth will impose significant added responsibilities on
members of management, including:

identifying, recruiting, integrating, maintaining, and motivating additional employees;

•
• managing the Company’s internal development efforts effectively, including the clinical and FDA review
process for its drug product candidates, while complying with its contractual obligations to contractors and
other third parties; and
improving its operational, financial and management controls, reporting systems, and procedures.

•

The Company’s future financial performance and its ability to commercialize its drug product candidates will depend, in part,
on its ability to effectively manage any future growth, and its management may also have to divert a disproportionate
amount of its attention away from day-to-day activities in order to devote a substantial amount of time to managing these
growth activities.

If the Company is not able to effectively expand its organization by hiring new employees and expanding its groups of
consultants and contractors, the Company may not be able to successfully implement the tasks necessary to further
develop and commercialize our drug product candidates and, accordingly, may not achieve its research, development, and
commercialization goals.

If the Company engages in future acquisitions or strategic partnerships, this may increase its capital
requirements, dilute its shareholders, cause it to incur debt or assume contingent liabilities, and subject it
to other risks.

The Company may evaluate various acquisitions and strategic partnerships, including licensing or acquiring complementary
products, intellectual property rights, technologies, or businesses. Any potential acquisition or strategic partnership may
entail numerous risks, including:

•
•
•
•

•

increased operating expenses and cash requirements;
the assumption of additional indebtedness or contingent liabilities;
the issuance of its equity securities;
assimilation of operations, intellectual property and products of an acquired Company, including difficulties
associated with integrating new personnel;
the diversion of its management’s attention from its existing product programs and initiatives in pursuing such
a strategic merger or acquisition;
retention of key employees, the loss of key personnel, and uncertainties in its ability to maintain key business
relationships;
risks and uncertainties associated with the other party to such a transaction, including the prospects of that
party and their existing products or drug product candidates and regulatory approvals; and
its inability to generate revenue from acquired technology and/or products sufficient to meet its objectives in
undertaking the acquisition or even to offset the associated acquisition and maintenance costs.

In addition, if the Company undertakes acquisitions, the Company may issue dilutive securities, assume or incur debt
obligations, incur large one-time expenses and acquire intangible assets that could result in significant future amortization
expense. Moreover, the Company may not be able to locate suitable acquisition opportunities and this inability could impair
its ability to grow or obtain access to technology or products that may be important to the development of our business.

Failure to build our finance infrastructure and improve our accounting systems and controls could impair our ability to

comply with the financial reporting and internal controls requirements for publicly traded companies.

As a public company, we are operating in an increasingly demanding regulatory environment that requires us to comply with,

among things, the Sarbanes-Oxley Act of 2002, as from 31 December 2016 and related rules and regulations of the

Securities and Exchange Commission’s substantial disclosure requirements, accelerated reporting requirements and

complex accounting rules. Company responsibilities required by the Sarbanes-Oxley Act include establishing corporate

oversight and adequate internal control over financial reporting and disclosure controls and procedures. Effective internal

controls are necessary for us to produce reliable financial reports and are important to help prevent financial fraud.

We have limited accounting personnel and other resources to address our internal controls and procedures. Our

independent registered public accounting firm has not conducted an audit of our internal control over financial reporting.

Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our

management concludes that our internal control over financial reporting is effective, our independent registered public

accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our

internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the

relevant requirements differently from us. In addition, after we become a public company, our reporting obligations may

place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We

may be unable to timely complete our evaluation, testing and any required remediation.

The Company’s international operations subject it to various risks, and its failure to manage these risks could adversely

affect its results of operations.

The Company faces significant operational risks as a result of doing business internationally, such as:

•

fluctuations in foreign currency exchange rates;

potentially adverse and/or unexpected tax consequences, including penalties due to the failure of tax planning

or due to the challenge by tax authorities on the basis of transfer pricing and liabilities imposed from

inconsistent enforcement;

potential changes to the accounting standards, which may influence our financial situation and results;

becoming subject to the different, complex and changing laws, regulations and court systems of multiple

jurisdictions and compliance with a wide variety of foreign laws, treaties and regulations;

reduced protection of, or significant difficulties in enforcing, intellectual property rights in certain countries;

difficulties in attracting and retaining qualified personnel;

restrictions imposed by local labor practices and laws on the Company’s business and operations, including

unilateral cancellation or modification of contracts; and

rapid changes in global government, economic and political policies and conditions, political or civil unrest or

instability, terrorism or epidemics and other similar outbreaks or events, and potential failure in confidence of

the Company’s suppliers or customers due to such changes or events; and tariffs, trade protection measures,

import or export licensing requirements, trade embargoes and other trade barriers.

2.7.5. Audit activities

Internal audit activities are performed by the departments of Finance, for all matters related to accounting and financial

information, and Quality Assurance for all matters related to the operational activities of the Company.

As of the date of this report, there is not yet a dedicated internal audit function.

In order to properly manage identified risks, Celyad set the following audit measures:

access and security systems at the premises and offices;

establishment, under the supervision of the Quality Assurance department, of a set of procedures covering all

activities of the Company;

• weekly modifications and updates of the existing procedures;

development of electronic approval system in the existing ERP system;

implementation of extra controls in the existing ERP system;

development of a monthly financial reporting tool which allow a close monitoring of the financial information

and KPI’s;

recrutement of a Group Financial Controller.

The Internal Control project initiated in 2015 with Deloitte was completed in 2016 with the drafting and implementation of a

set of procedures on all major cycles that may have an impact on the financial statements of the Company.

2.7.6. Controls, supervision and correctives actions

Controls are performed by all persons in charge of departments and services. When deviations are identified, there are

reported to, depending of there relative importance, the head of department or the Executive Management Team.

Until the establishment of the audit committee early 2015, the responsibilities of the Audit Committee were supported by

the Board of Directors. All supervision activities were performed by the Board of Directors and the Executive Management

Team. It was their responsibility to monitor the effectiveness of the internal audit and risk analysis. At its establishment, all

these tasks have been transferred to the audit committee.

CELYAD • FINANCIAL RESULTS 2016

Failure to build our finance infrastructure and improve our accounting systems and controls could impair our ability to
comply with the financial reporting and internal controls requirements for publicly traded companies.

As a public company, we are operating in an increasingly demanding regulatory environment that requires us to comply with,
among things, the Sarbanes-Oxley Act of 2002, as from 31 December 2016 and related rules and regulations of the
Securities and Exchange Commission’s substantial disclosure requirements, accelerated reporting requirements and
complex accounting rules. Company responsibilities required by the Sarbanes-Oxley Act include establishing corporate
oversight and adequate internal control over financial reporting and disclosure controls and procedures. Effective internal
controls are necessary for us to produce reliable financial reports and are important to help prevent financial fraud.

We have limited accounting personnel and other resources to address our internal controls and procedures. Our
independent registered public accounting firm has not conducted an audit of our internal control over financial reporting.

Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our
management concludes that our internal control over financial reporting is effective, our independent registered public
accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our
internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the
relevant requirements differently from us. In addition, after we become a public company, our reporting obligations may
place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We
may be unable to timely complete our evaluation, testing and any required remediation.

The Company’s international operations subject it to various risks, and its failure to manage these risks could adversely
affect its results of operations.

The Company faces significant operational risks as a result of doing business internationally, such as:

•
•

•
•
•

•

fluctuations in foreign currency exchange rates;
potentially adverse and/or unexpected tax consequences, including penalties due to the failure of tax planning
or due to the challenge by tax authorities on the basis of transfer pricing and liabilities imposed from
inconsistent enforcement;
potential changes to the accounting standards, which may influence our financial situation and results;
becoming subject to the different, complex and changing laws, regulations and court systems of multiple
jurisdictions and compliance with a wide variety of foreign laws, treaties and regulations;
reduced protection of, or significant difficulties in enforcing, intellectual property rights in certain countries;
difficulties in attracting and retaining qualified personnel;
restrictions imposed by local labor practices and laws on the Company’s business and operations, including
unilateral cancellation or modification of contracts; and
rapid changes in global government, economic and political policies and conditions, political or civil unrest or
instability, terrorism or epidemics and other similar outbreaks or events, and potential failure in confidence of
the Company’s suppliers or customers due to such changes or events; and tariffs, trade protection measures,
import or export licensing requirements, trade embargoes and other trade barriers.

If the Company engages in future acquisitions or strategic partnerships, this may increase its capital

requirements, dilute its shareholders, cause it to incur debt or assume contingent liabilities, and subject it

2.7.5. Audit activities

Internal audit activities are performed by the departments of Finance, for all matters related to accounting and financial
information, and Quality Assurance for all matters related to the operational activities of the Company.

As of the date of this report, there is not yet a dedicated internal audit function.

In order to properly manage identified risks, Celyad set the following audit measures:

The Company has limited experience in sales, marketing and distribution.

Given its stage in development, the Company has never marketed a product and has therefore limited experience in the

fields of sales, marketing and distribution of therapies. The Company has currently no marketing nor sales capacity and

intends to set up its own marketing and contract sales force when the C-Cure CHART-1 primary endpoint data will be

available. As a consequence, the Company will have to acquire marketing skills and develop its own sales and marketing

infrastructure and would need to incur additional expenses, mobilize management resources, implement new skills and take

the time necessary to set up the appropriate organization and structure to market the relevant product(s), in accordance

with applicable laws.

While several managers of the Company have commercialized and launched high technology medical products there can be

no assurance that the existing limited experience would be sufficient to effectively commercialize any or all of the

Company’s product candidates. The Company may not be able to attract qualified sales and marketing personnel on

acceptable terms in the future and therefore may experience constraints that will impede the achievement of its commercial

objectives. Such events could have a material adverse effect on the Company’s business, prospects, financial situation,

earnings and growth.

The Company will need to grow the size and capabilities of our organization, and the Company may

experience difficulties in managing this growth.

As of December 31, 2016, the Company had 79 employees and six senior managers under management services

agreements, most of whom are full-time. As the Company’s drug product candidates move into later stage clinical

development and towards commercialization, the Company must add a significant number of additional managerial,

operational, sales, marketing, financial, and other personnel. Future growth will impose significant added responsibilities on

members of management, including:

identifying, recruiting, integrating, maintaining, and motivating additional employees;

• managing the Company’s internal development efforts effectively, including the clinical and FDA review

process for its drug product candidates, while complying with its contractual obligations to contractors and

other third parties; and

improving its operational, financial and management controls, reporting systems, and procedures.

The Company’s future financial performance and its ability to commercialize its drug product candidates will depend, in part,

on its ability to effectively manage any future growth, and its management may also have to divert a disproportionate

amount of its attention away from day-to-day activities in order to devote a substantial amount of time to managing these

If the Company is not able to effectively expand its organization by hiring new employees and expanding its groups of

consultants and contractors, the Company may not be able to successfully implement the tasks necessary to further

develop and commercialize our drug product candidates and, accordingly, may not achieve its research, development, and

growth activities.

commercialization goals.

to other risks.

The Company may evaluate various acquisitions and strategic partnerships, including licensing or acquiring complementary

products, intellectual property rights, technologies, or businesses. Any potential acquisition or strategic partnership may

entail numerous risks, including:

increased operating expenses and cash requirements;

the assumption of additional indebtedness or contingent liabilities;

the issuance of its equity securities;

assimilation of operations, intellectual property and products of an acquired Company, including difficulties

associated with integrating new personnel;

the diversion of its management’s attention from its existing product programs and initiatives in pursuing such

a strategic merger or acquisition;

relationships;

retention of key employees, the loss of key personnel, and uncertainties in its ability to maintain key business

risks and uncertainties associated with the other party to such a transaction, including the prospects of that

party and their existing products or drug product candidates and regulatory approvals; and

its inability to generate revenue from acquired technology and/or products sufficient to meet its objectives in

undertaking the acquisition or even to offset the associated acquisition and maintenance costs.

In addition, if the Company undertakes acquisitions, the Company may issue dilutive securities, assume or incur debt

obligations, incur large one-time expenses and acquire intangible assets that could result in significant future amortization

expense. Moreover, the Company may not be able to locate suitable acquisition opportunities and this inability could impair

its ability to grow or obtain access to technology or products that may be important to the development of our business.

•

development of electronic approval system in the existing ERP system;
implementation of extra controls in the existing ERP system;
development of a monthly financial reporting tool which allow a close monitoring of the financial information
and KPI’s;
recrutement of a Group Financial Controller.

access and security systems at the premises and offices;
establishment, under the supervision of the Quality Assurance department, of a set of procedures covering all
activities of the Company;

• weekly modifications and updates of the existing procedures;
•
•
•

•
•

•

The Internal Control project initiated in 2015 with Deloitte was completed in 2016 with the drafting and implementation of a
set of procedures on all major cycles that may have an impact on the financial statements of the Company.
2.7.6. Controls, supervision and correctives actions

Controls are performed by all persons in charge of departments and services. When deviations are identified, there are
reported to, depending of there relative importance, the head of department or the Executive Management Team.

Until the establishment of the audit committee early 2015, the responsibilities of the Audit Committee were supported by
the Board of Directors. All supervision activities were performed by the Board of Directors and the Executive Management
Team. It was their responsibility to monitor the effectiveness of the internal audit and risk analysis. At its establishment, all
these tasks have been transferred to the audit committee.

CELYAD • FINANCIAL RESULTS 2016

The executive team supervises the implementation of internal audit and risk management, taking into consideration the
recommendations of the audit committee.

3. SHARES AND SHAREHOLDERS

The EMT is also in charge of proposing the audit committee corrective actions when identified.

External audit

On May 5, 2014, the Annual Shareholder’s Meeting of Celyad SA engaged PricewaterhouseCoopers Reviseurs d’Entreprises
scrl, represented by Patrick Mortroux, or PwC as its new external financial auditor. This mission includes the auditing of the
statutory annual accounts, the consolidated annual accounts of Celyad SA and its subsidiaries if any.

In September 2016 and January 2017, the Company mandated an independent consultant to test and evaluate the
compliance of the Company to its internal controls procedures. Both audit did not raise material deviations other than the
lack of segregation of duties given the size of our finance and accounting team. The Management is evaluating remediation
action for all deviations identified by the independent consultant.

The Company is also subject to ad hoc audit performed by the competent authorities to ensure compliance with GMP, GCP
or other regulations.

3.1.

Capital increase and issuance of shares

On 1st January 2016, the share capital of Celyad was represented by 9,313,603 shares. In 2016, Celyad did not increase its

capital. As of 31 December 2016, the share capital of Celyad amounted to €32.6 million and was represented by 9,313,603

The evolution of the capital of the Company since its inception on 24 July 2007 is presented in the notes to the financial

shares.

statements.

All shares are issued and fully paid up and are of the same class. Each share (i) entitles its holder to one vote at the

Shareholders’ Meetings; (ii) represents an identical fraction of the capital and has the same rights and obligations and

participates equally in the profit of Celyad SA; and (iii) gives its holder a preferential subscription right to subscribe to new

shares, convertible bonds or warrants in proportion to the part of the share capital represented by the shares already held.

The preferential subscription right can be restricted or cancelled by a resolution approved by the Shareholders’ Meeting, or

by the Board of Directors subject to an authorization of the Shareholders’ Meeting, in accordance with the provisions of the

Belgian Company Code and the Company’s articles of association.

In the context of the Initial Public Offering (IPO) made on the Nasdaq on 19 June 2015, the Company issued 1,460,000 new

shares. Out of these 1,460,000 new shares, 1,168,000 shares were offered in the form of American Depositary Shares (ADS)

to US investors. As of 31 December 2016, there were 540,469 ADS outstanding.

3.2

Changes in share capital

In accordance with the Belgian Company Code, Celyad SA may increase or decrease its capital by decision of the

Extraordinary General Shareholders’ Meeting taken with a majority of 75% of the votes cast, at a meeting where at least 50%

of the share capital of the Company is present or represented. If the attendance quorum of 50% is not met, a new

Extraordinary General Shareholders’ Meeting must be convened at which the shareholders may decide on the agenda items,

irrespective of the percentage of share capital present or represented at such meeting. There are in this respect no

conditions imposed by the Company’s articles of association that are more stringent than those required by law.

Within the framework of the powers granted to it under the authorized capital, the Board of Directors may also increase the

Company’s capital as specified in its articles of association.

3.3

Anti-takeover provisions under Belgian laws

Under Belgian law, public takeover bids for all the outstanding voting securities issued by the issuer are subject to the

supervision of the FSMA. If the latter determines that a takeover violates Belgian law, it may lead to suspension of the

exercise of the rights attached to any shares that were acquired in connection with the envisaged takeover. Pursuant to the

Belgian law of 1 April 2007 on public takeovers, a mandatory takeover bid must be made when, as a result of its own

acquisition or the acquisition by persons acting in concert with it, a person owns, directly or indirectly, more than 30% of the

securities with voting rights in a company with registered office in Belgium whose securities are admitted to trading on a

regulated or recognized market. The acquirer must offer to all other shareholders the opportunity to sell their shares at the

highest of (i) the highest price offered by the acquirer for shares of the issuer during the 12 months preceding the

announcement of the bid or (ii) the weighted average price of the shares on the most liquid market of the last 30 calendar

days prior to the date on which the obligation of the acquirer to offer the takeover of the shares of other shareholders starts.

With respect to anti-takeover protection, Article 34 of the Royal Decree of 14 November 2007 requires the following

information to be included in the annual report:

• Capital Structure

The share capital of the Company is represented by ordinary shares.

Based on the transparency notifications received by the Company, the shareholders owning 5% or more of the Company’s

shares on 31 December 2016 was TOLEFI SA (2,267,844 shares). All shares are ordinary shares.

Legal or statutory restrictions to the transfer of shares

The articles of association of the Company do not contain any restriction on the transfer of the shares.

•

• Holders of securities with special control rights

Not applicable to the Company.

• Control mechanisms in case of an employee shareholding system

Not applicable to the Company.

Legal or statutory restrictions to the exercise of voting rights

The articles of association of the Company do not contain any restriction on voting rights.

CELYAD • FINANCIAL RESULTS 2016

The executive team supervises the implementation of internal audit and risk management, taking into consideration the

recommendations of the audit committee.

3. SHARES AND SHAREHOLDERS

The EMT is also in charge of proposing the audit committee corrective actions when identified.

External audit

On May 5, 2014, the Annual Shareholder’s Meeting of Celyad SA engaged PricewaterhouseCoopers Reviseurs d’Entreprises

scrl, represented by Patrick Mortroux, or PwC as its new external financial auditor. This mission includes the auditing of the

statutory annual accounts, the consolidated annual accounts of Celyad SA and its subsidiaries if any.

In September 2016 and January 2017, the Company mandated an independent consultant to test and evaluate the

compliance of the Company to its internal controls procedures. Both audit did not raise material deviations other than the

lack of segregation of duties given the size of our finance and accounting team. The Management is evaluating remediation

action for all deviations identified by the independent consultant.

The Company is also subject to ad hoc audit performed by the competent authorities to ensure compliance with GMP, GCP

or other regulations.

3.1.

Capital increase and issuance of shares

On 1st January 2016, the share capital of Celyad was represented by 9,313,603 shares. In 2016, Celyad did not increase its
capital. As of 31 December 2016, the share capital of Celyad amounted to €32.6 million and was represented by 9,313,603
shares.

The evolution of the capital of the Company since its inception on 24 July 2007 is presented in the notes to the financial
statements.

All shares are issued and fully paid up and are of the same class. Each share (i) entitles its holder to one vote at the
Shareholders’ Meetings; (ii) represents an identical fraction of the capital and has the same rights and obligations and
participates equally in the profit of Celyad SA; and (iii) gives its holder a preferential subscription right to subscribe to new
shares, convertible bonds or warrants in proportion to the part of the share capital represented by the shares already held.

The preferential subscription right can be restricted or cancelled by a resolution approved by the Shareholders’ Meeting, or
by the Board of Directors subject to an authorization of the Shareholders’ Meeting, in accordance with the provisions of the
Belgian Company Code and the Company’s articles of association.

In the context of the Initial Public Offering (IPO) made on the Nasdaq on 19 June 2015, the Company issued 1,460,000 new
shares. Out of these 1,460,000 new shares, 1,168,000 shares were offered in the form of American Depositary Shares (ADS)
to US investors. As of 31 December 2016, there were 540,469 ADS outstanding.
3.2

Changes in share capital

In accordance with the Belgian Company Code, Celyad SA may increase or decrease its capital by decision of the
Extraordinary General Shareholders’ Meeting taken with a majority of 75% of the votes cast, at a meeting where at least 50%
of the share capital of the Company is present or represented. If the attendance quorum of 50% is not met, a new
Extraordinary General Shareholders’ Meeting must be convened at which the shareholders may decide on the agenda items,
irrespective of the percentage of share capital present or represented at such meeting. There are in this respect no
conditions imposed by the Company’s articles of association that are more stringent than those required by law.

Within the framework of the powers granted to it under the authorized capital, the Board of Directors may also increase the
Company’s capital as specified in its articles of association.
3.3

Anti-takeover provisions under Belgian laws

Under Belgian law, public takeover bids for all the outstanding voting securities issued by the issuer are subject to the
supervision of the FSMA. If the latter determines that a takeover violates Belgian law, it may lead to suspension of the
exercise of the rights attached to any shares that were acquired in connection with the envisaged takeover. Pursuant to the
Belgian law of 1 April 2007 on public takeovers, a mandatory takeover bid must be made when, as a result of its own
acquisition or the acquisition by persons acting in concert with it, a person owns, directly or indirectly, more than 30% of the
securities with voting rights in a company with registered office in Belgium whose securities are admitted to trading on a
regulated or recognized market. The acquirer must offer to all other shareholders the opportunity to sell their shares at the
highest of (i) the highest price offered by the acquirer for shares of the issuer during the 12 months preceding the
announcement of the bid or (ii) the weighted average price of the shares on the most liquid market of the last 30 calendar
days prior to the date on which the obligation of the acquirer to offer the takeover of the shares of other shareholders starts.

With respect to anti-takeover protection, Article 34 of the Royal Decree of 14 November 2007 requires the following
information to be included in the annual report:

• Capital Structure

The share capital of the Company is represented by ordinary shares.

Based on the transparency notifications received by the Company, the shareholders owning 5% or more of the Company’s
shares on 31 December 2016 was TOLEFI SA (2,267,844 shares). All shares are ordinary shares.

•

Legal or statutory restrictions to the transfer of shares

The articles of association of the Company do not contain any restriction on the transfer of the shares.

• Holders of securities with special control rights

Not applicable to the Company.

• Control mechanisms in case of an employee shareholding system

Not applicable to the Company.

•

Legal or statutory restrictions to the exercise of voting rights

The articles of association of the Company do not contain any restriction on voting rights.

CELYAD • FINANCIAL RESULTS 2016

•

Shareholder agreements known to the Company and engendering restrictions to the transfer of shares and/or the
exercise of voting rights

Extraordinary General Shareholders’ Meeting must be convened at which the shareholders may decide on the agenda items,

irrespective of the percentage of share capital present or represented at such meeting.

The Company is not aware of the existence of any other shareholders’ agreements between its shareholders.

•

Powers of the Board of Directors

The Board of Directors has the most extensive powers in order to perform all acts which are useful or necessary so as to complete

the Company’s corporate purpose.

the shareholders’ meeting.

The Board of Directors has the power to perform all acts which are not expressly assigned by law or by the articles of association to

The Board of Directors has to power to establish an audit committee and other committes, the powers of which it will determine.

In accordance with Articles 603 and following of the Belgian Company Code and with the articles of association, the Extraordinary

General Shareholders’ Meeting of Celyad SA authorized the Board of Directors to increase the share capital of the Company, in

one or several times, and under certain conditions set forth in extenso in the articles of association. This authorization was given

on 9 July 2013 and is valid for a period of five years starting on 26 July 2013, i.e. until 26 July 2018. As of the date of this report, the

outstanding amount of the authorized capital is €9.160.455,93.

When increasing the share capital within the limits of the authorized capital, the Board of Directors may, in the Company’s interest,

restrict or cancel the shareholders’ preferential subscription rights, even if such restriction or cancellation is made for the benefit

of one or more specific persons other than the employees of the Company or its subsidiaries. The Board of Directors is not allowed

to buy back shares.

• Agreements on severance pay

Reference is made to section 6 of chapter 2.

3.4

Financial service

The financial services for the shares are provided by BNP Paribas Security Services.

Citibank N.A. is acting as depositary bank for the ADS issued by the Company. Citibank issued an ADS for every new shares

issued at the IPO.

Bank Degroof Petercam SA is acting as liquidity provider under a brokerage contract.

• Appointment and replacement of directors

PMV is entitled to put forward candidates for the office of director, for as long as PMV or one of its affiliated companies holds at
least 75% of the 570,571 shares jointly held by PMV and its affiliated companies at the time of the public takeover bid completed
on 9 July 2013.

Sofipôle is entitled to put forward candidates for the office of director, for as long as Sofipôle or one of its affiliated companies
holds at least 75% of the 661,172 shares jointly held by Sofipôle and its affiliated companies at the time of the public takeover bid
completed on 9 July 2013.

Each of PMV and Sofipôle (each a Reference Shareholder) must inform the Board of Directors of the identity of the candidates it
puts forward for the office of director at least six weeks prior to the shareholders’ meeting during which the directors will be
appointed.

Each Reference Shareholder is entitled to replace the director it has put forward by a person chosen on the basis of a list of at least
two candidates proposed to the Board of Directors by the Reference Shareholder (or by a member of its group, as designated by
the Reference Shareholder), subject to the same information requirements to the Board of Directors concerning the identity of
the candidates at least six weeks prior to the shareholders’ meeting during which the replacement director will be appointed.

If a Reference Shareholder entitled to put forward candidates for the office of director, does not present a list of candidates, the
shareholders’ meeting may either appoint, at its sole discretion, a director in order to fill the position for which no list of candidates
has been presented, and its term of office will last until the Reference Shareholder in question presents a list of candidates for this
position, or choose not to appoint a director.

For any new appointment to the Board, the skills, knowledge and experience already present and those needed on the Board will
be evaluated and, in the light of that evaluation, a description of the role and skills, experience and knowledge needed will be
prepared (a “profile”).

When dealing with a new appointment, the Chairman of the Board must ensure that, before considering the candidate, the Board
has received sufficient information such as the candidate’s curriculum vitae, an assessment of the candidate based on the
candidate’s initial interview, a list of the positions the candidate currently holds, and, if applicable, the necessary information for
assessing the candidate’s independence.

The Chairman of the Board is in charge of the nomination procedure. The Board is responsible for proposing members for
nomination to the shareholders’ meeting, in each case based on the recommendation of the Nomination & Remuneration
Committee.

If a legal entity is appointed as a director, it is obliged to appoint, in accordance with the provisions of the Belgian Company Code, a
natural person as a permanent representative, who may represent the legal entity in all its dealings with the Company. The legal
entity director may not dismiss its permanent representative without simultaneously appointing a new representative.

Any proposal for the appointment of a director by the shareholders’ meeting should include a recommendation from the Board
based on the advice of the Nomination & Remuneration Committee. This provision also applies to shareholders’ proposals for
appointment. The proposal must specify the proposed term of the mandate, which must not exceed four years. It must be
accompanied by relevant information on the candidate’s professional qualifications together with a list of the positions the
candidate already holds. The Board will indicate whether the candidate satisfies the independence criteria.

Outgoing directors will remain in office for as long as the shareholders’ meeting, for whatever reason, has not filled the vacancy.

Appointments are generally made for a maximum term of four years. Outgoing directors will be eligible for re-election. However,
when an independent director has served on the Board for three consecutive terms, he is in not eligible for a fourth term, as he
cannot be an independent director of the Company for more than twelve years. Before proposing any director for re-election, the
Board should take into account the evaluations made by the Nomination & Remuneration Committee. The mandates of those
directors who are not re-appointed for a new term will terminate immediately after the shareholders’ meeting which decides on
any re-appointment or appointment.

The directors may be revoked by the shareholders’ meeting at any time.

If at any time a vacancy is created on the board of directors, the remaining directors may temporarily appoint a director to the
board to fill the vacancy. Any director so appointed will hold office for the remainder of the term of appointment of the director
that it replaces.

The definitive appointment of the replacing director is added to the agenda of the following shareholders’ meeting.

• Amendment of the articles of association

Pursuant to the Belgian Company Code, any amendment to the articles of association such as an increase or decrease in the
capital of the Company, and certain other matters such as the approval of the dissolution, merger or de-merger may only be
authorized with the approval of at least 75% of the votes validly cast at an Extraordinary General Shareholders’ Meeting where at
least 50% of the Company’s share capital is present or represented. If the attendance quorum of 50% is not met, a new

CELYAD • FINANCIAL RESULTS 2016

Shareholder agreements known to the Company and engendering restrictions to the transfer of shares and/or the

•

exercise of voting rights

Extraordinary General Shareholders’ Meeting must be convened at which the shareholders may decide on the agenda items,
irrespective of the percentage of share capital present or represented at such meeting.

The Company is not aware of the existence of any other shareholders’ agreements between its shareholders.

•

Powers of the Board of Directors

The Board of Directors has the most extensive powers in order to perform all acts which are useful or necessary so as to complete
the Company’s corporate purpose.

The Board of Directors has the power to perform all acts which are not expressly assigned by law or by the articles of association to
the shareholders’ meeting.

The Board of Directors has to power to establish an audit committee and other committes, the powers of which it will determine.

In accordance with Articles 603 and following of the Belgian Company Code and with the articles of association, the Extraordinary
General Shareholders’ Meeting of Celyad SA authorized the Board of Directors to increase the share capital of the Company, in
one or several times, and under certain conditions set forth in extenso in the articles of association. This authorization was given
on 9 July 2013 and is valid for a period of five years starting on 26 July 2013, i.e. until 26 July 2018. As of the date of this report, the
outstanding amount of the authorized capital is €9.160.455,93.

When increasing the share capital within the limits of the authorized capital, the Board of Directors may, in the Company’s interest,
restrict or cancel the shareholders’ preferential subscription rights, even if such restriction or cancellation is made for the benefit
of one or more specific persons other than the employees of the Company or its subsidiaries. The Board of Directors is not allowed
to buy back shares.

• Agreements on severance pay
Reference is made to section 6 of chapter 2.

3.4

Financial service

The financial services for the shares are provided by BNP Paribas Security Services.

Citibank N.A. is acting as depositary bank for the ADS issued by the Company. Citibank issued an ADS for every new shares
issued at the IPO.

Bank Degroof Petercam SA is acting as liquidity provider under a brokerage contract.

• Appointment and replacement of directors

PMV is entitled to put forward candidates for the office of director, for as long as PMV or one of its affiliated companies holds at

least 75% of the 570,571 shares jointly held by PMV and its affiliated companies at the time of the public takeover bid completed

Sofipôle is entitled to put forward candidates for the office of director, for as long as Sofipôle or one of its affiliated companies

holds at least 75% of the 661,172 shares jointly held by Sofipôle and its affiliated companies at the time of the public takeover bid

Each of PMV and Sofipôle (each a Reference Shareholder) must inform the Board of Directors of the identity of the candidates it

puts forward for the office of director at least six weeks prior to the shareholders’ meeting during which the directors will be

on 9 July 2013.

completed on 9 July 2013.

appointed.

Each Reference Shareholder is entitled to replace the director it has put forward by a person chosen on the basis of a list of at least

two candidates proposed to the Board of Directors by the Reference Shareholder (or by a member of its group, as designated by

the Reference Shareholder), subject to the same information requirements to the Board of Directors concerning the identity of

the candidates at least six weeks prior to the shareholders’ meeting during which the replacement director will be appointed.

If a Reference Shareholder entitled to put forward candidates for the office of director, does not present a list of candidates, the

shareholders’ meeting may either appoint, at its sole discretion, a director in order to fill the position for which no list of candidates

has been presented, and its term of office will last until the Reference Shareholder in question presents a list of candidates for this

position, or choose not to appoint a director.

For any new appointment to the Board, the skills, knowledge and experience already present and those needed on the Board will

be evaluated and, in the light of that evaluation, a description of the role and skills, experience and knowledge needed will be

prepared (a “profile”).

When dealing with a new appointment, the Chairman of the Board must ensure that, before considering the candidate, the Board

has received sufficient information such as the candidate’s curriculum vitae, an assessment of the candidate based on the

candidate’s initial interview, a list of the positions the candidate currently holds, and, if applicable, the necessary information for

assessing the candidate’s independence.

The Chairman of the Board is in charge of the nomination procedure. The Board is responsible for proposing members for

nomination to the shareholders’ meeting, in each case based on the recommendation of the Nomination & Remuneration

Committee.

If a legal entity is appointed as a director, it is obliged to appoint, in accordance with the provisions of the Belgian Company Code, a

natural person as a permanent representative, who may represent the legal entity in all its dealings with the Company. The legal

entity director may not dismiss its permanent representative without simultaneously appointing a new representative.

Any proposal for the appointment of a director by the shareholders’ meeting should include a recommendation from the Board

based on the advice of the Nomination & Remuneration Committee. This provision also applies to shareholders’ proposals for

appointment. The proposal must specify the proposed term of the mandate, which must not exceed four years. It must be

accompanied by relevant information on the candidate’s professional qualifications together with a list of the positions the

candidate already holds. The Board will indicate whether the candidate satisfies the independence criteria.

Outgoing directors will remain in office for as long as the shareholders’ meeting, for whatever reason, has not filled the vacancy.

Appointments are generally made for a maximum term of four years. Outgoing directors will be eligible for re-election. However,

when an independent director has served on the Board for three consecutive terms, he is in not eligible for a fourth term, as he

cannot be an independent director of the Company for more than twelve years. Before proposing any director for re-election, the

Board should take into account the evaluations made by the Nomination & Remuneration Committee. The mandates of those

directors who are not re-appointed for a new term will terminate immediately after the shareholders’ meeting which decides on

any re-appointment or appointment.

The directors may be revoked by the shareholders’ meeting at any time.

If at any time a vacancy is created on the board of directors, the remaining directors may temporarily appoint a director to the

board to fill the vacancy. Any director so appointed will hold office for the remainder of the term of appointment of the director

that it replaces.

The definitive appointment of the replacing director is added to the agenda of the following shareholders’ meeting.

• Amendment of the articles of association

Pursuant to the Belgian Company Code, any amendment to the articles of association such as an increase or decrease in the

capital of the Company, and certain other matters such as the approval of the dissolution, merger or de-merger may only be

authorized with the approval of at least 75% of the votes validly cast at an Extraordinary General Shareholders’ Meeting where at

least 50% of the Company’s share capital is present or represented. If the attendance quorum of 50% is not met, a new

CELYAD • FINANCIAL RESULTS 2016

4. CONSOLIDATED FINANCIAL STATEMENTS

4.1.

Responsibility statement

We hereby certify that, to the best of our knowledge, the consolidated financial statements as of 31 December 2016,
prepared in accordance with the International Financial Reporting Standards, as adopted by the European Union, and the
legal requirements applicable in Belgium, give a true and fair view of the assets, liabilities, financial position and loss of the
Group and the undertakings included in the consolidation taken as a whole, and that the management report includes a fair
review of the development and the performance of the business and the position of the Group and the undertakings included
in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

On behalf of the Board of Directors,

Michel Lussier

Chairman

LSS Consulting SPRL, represented by its permanent
representative Christian Homsy

CEO

4.2

Statutory auditor’s report on the consolidated accounts for the year ended 31 December 2016

To the Shareholders of Celyad SA

STATUTORY AUDITOR'S REPORT TO THE GENERAL SHAREHOLDERS’ MEETING ON THE

CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 2016

In accordance with the legal requirements, we report to you on the performance of our mandate of statutory auditor. This

report includes our opinion on the consolidated accounts, as well as the required additional statement. The consolidated

accounts comprise the consolidated statement of financial position as at 31 December 2016 and the consolidated

statements of comprehensive loss, changes in equity and cash flows for the year then ended, and notes, comprising a

summary of significant accounting policies and other explanatory information.

Report on the consolidated accounts – Unqualified opinion

We have audited the consolidated accounts of Celyad SA (“the Company”) and its subsidiaries (jointly “the Group”) for the

year ended 31 December 2016, prepared in accordance with International Financial Reporting Standards as adopted by the

European Union, and with the legal and regulatory requirements applicable in Belgium. The total of the consolidated

statement of financial position amounts to 000’ EUR 138.806 and the consolidated statement of comprehensive loss shows

a loss for the year of 000’ EUR 23.436.

Board of directors’ responsibility for the preparation of the consolidated accounts

The board of directors is responsible for the preparation and fair presentation of these consolidated accounts in accordance

with International Financial Reporting Standards as adopted by the European Union, and with the legal and regulatory

requirements applicable in Belgium, and for such internal control as the board of directors determines, is necessary to enable

the preparation of consolidated accounts that are free from material misstatement, whether due to fraud or error.

Statutory auditor’s responsibility

Our responsibility is to express an opinion on these consolidated accounts based on our audit. We conducted our audit in

accordance with International Standards on Auditing (ISAs) as endorsed in Belgium. Those standards require that we comply

with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated

accounts are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated

accounts. The procedures selected depend on the statutory auditor’s judgment, including the assessment of the risks of

material misstatement of the consolidated accounts, whether due to fraud or error. In making those risk assessments, the

statutory auditor considers internal control relevant to the Group’s preparation and fair presentation of the consolidated

accounts in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of

expressing an opinion on the effectiveness of the Group’s internal control. An audit also includes evaluating the

appropriateness of accounting policies used and the reasonableness of accounting estimates made by the board of

directors, as well as evaluating the overall presentation of the consolidated accounts. We have obtained from the board of

directors and the company’s officials the explanations and information necessary for performing our audit.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Unqualified Opinion

In our opinion, the consolidated accounts give a true and fair view of the Group’s net equity and consolidated financial

position as at 31 December 2016 and of its consolidated financial performance and its consolidated cash flows for the year

then ended in accordance with International Financial Reporting Standards as adopted by the European Union, and with the

legal and regulatory requirements applicable in Belgium.

CELYAD • FINANCIAL RESULTS 2016

4. CONSOLIDATED FINANCIAL STATEMENTS

4.1.

Responsibility statement

We hereby certify that, to the best of our knowledge, the consolidated financial statements as of 31 December 2016,

prepared in accordance with the International Financial Reporting Standards, as adopted by the European Union, and the

legal requirements applicable in Belgium, give a true and fair view of the assets, liabilities, financial position and loss of the

Group and the undertakings included in the consolidation taken as a whole, and that the management report includes a fair

review of the development and the performance of the business and the position of the Group and the undertakings included

in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

On behalf of the Board of Directors,

Michel Lussier

Chairman

LSS Consulting SPRL, represented by its permanent

representative Christian Homsy

CEO

4.2

Statutory auditor’s report on the consolidated accounts for the year ended 31 December 2016

To the Shareholders of Celyad SA

STATUTORY AUDITOR'S REPORT TO THE GENERAL SHAREHOLDERS’ MEETING ON THE
CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 2016

In accordance with the legal requirements, we report to you on the performance of our mandate of statutory auditor. This
report includes our opinion on the consolidated accounts, as well as the required additional statement. The consolidated
accounts comprise the consolidated statement of financial position as at 31 December 2016 and the consolidated
statements of comprehensive loss, changes in equity and cash flows for the year then ended, and notes, comprising a
summary of significant accounting policies and other explanatory information.

Report on the consolidated accounts – Unqualified opinion

We have audited the consolidated accounts of Celyad SA (“the Company”) and its subsidiaries (jointly “the Group”) for the
year ended 31 December 2016, prepared in accordance with International Financial Reporting Standards as adopted by the
European Union, and with the legal and regulatory requirements applicable in Belgium. The total of the consolidated
statement of financial position amounts to 000’ EUR 138.806 and the consolidated statement of comprehensive loss shows
a loss for the year of 000’ EUR 23.436.

Board of directors’ responsibility for the preparation of the consolidated accounts

The board of directors is responsible for the preparation and fair presentation of these consolidated accounts in accordance
with International Financial Reporting Standards as adopted by the European Union, and with the legal and regulatory
requirements applicable in Belgium, and for such internal control as the board of directors determines, is necessary to enable
the preparation of consolidated accounts that are free from material misstatement, whether due to fraud or error.

Statutory auditor’s responsibility

Our responsibility is to express an opinion on these consolidated accounts based on our audit. We conducted our audit in
accordance with International Standards on Auditing (ISAs) as endorsed in Belgium. Those standards require that we comply
with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated
accounts are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
accounts. The procedures selected depend on the statutory auditor’s judgment, including the assessment of the risks of
material misstatement of the consolidated accounts, whether due to fraud or error. In making those risk assessments, the
statutory auditor considers internal control relevant to the Group’s preparation and fair presentation of the consolidated
accounts in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Group’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by the board of
directors, as well as evaluating the overall presentation of the consolidated accounts. We have obtained from the board of
directors and the company’s officials the explanations and information necessary for performing our audit.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Unqualified Opinion

In our opinion, the consolidated accounts give a true and fair view of the Group’s net equity and consolidated financial
position as at 31 December 2016 and of its consolidated financial performance and its consolidated cash flows for the year
then ended in accordance with International Financial Reporting Standards as adopted by the European Union, and with the
legal and regulatory requirements applicable in Belgium.

CELYAD • FINANCIAL RESULTS 2016

Report on other legal and regulatory requirements

4.3

Consolidated financial statements as of 31 December 2016 and 2015 under IFRS

The board of directors is responsible for the preparation and the content of the directors’ report on the consolidated
accounts.

In the context of our mandate and in accordance with the Belgian standard which is complementary to the International
Standards on Auditing (ISAs) as applicable in Belgium, our responsibility is to verify, in all material respects, compliance with
certain legal and regulatory requirements. On this basis, we provide the following additional statement which does not
impact our opinion on the consolidated financial statements:

The directors’ report on the consolidated accounts includes the information required by law, is consistent with the
consolidated accounts and does not present any material inconsistencies with the information that we became aware of
during the performance of our mandate.

Liège, 4 April 2017

The Statutory Auditor

PwC Reviseurs d’Entreprises SCCRL

Represented by

Patrick Mortroux

Réviseur d’Entreprises

4.3.1. Consolidated statement of financial position

(€’000)

For the year ended 31 December

Notes

2016

2015

NON-CURRENT ASSETS

Intangible assets

Property, Plant and Equipment

Other non-current assets

CURRENT ASSETS

Trade and Other Receivables

Grants receivables

Other current assets

Short term investments

Cash and cash equivalents

TOTAL ASSETS

EQUITY

Share Capital

Share premium

Other reserves

Retained loss

NON-CURRENT LIABILITIES

Bank loans

Finance leases

Advances repayable

Contingent liabilities

Post employment benefits

Other non current liabilities

CURRENT LIABILITIES

Bank loans

Finance leases

Advances repayable

Trade payables

Other current liabilities

5.6

5.7

5.8

5.9

5.10

5.11

5.14

5.22

5.17

5.20

5.16

5.17

5.18

53,440

49,566

3,563

311

85,367

1,359

1,420

34,230

48,357

138,806

90,885

32,571

158,010

24,329

(124,026)

36,646

536

381

7,330

28,179

204

207

354

1,108

8,098

1,508

50,105

48,789

1,136

180

109,419

549

104

1,254

7,338

100,175

159,525

111,473

32,571

158,010

21,205

(100,313)

36,562

427

10,484

25,529

121

248

898

8,576

1,768

11,275

11,490

TOTAL EQUITY AND LIABILITIES

138,806

159,525

CELYAD • FINANCIAL RESULTS 2016

In the context of our mandate and in accordance with the Belgian standard which is complementary to the International

Standards on Auditing (ISAs) as applicable in Belgium, our responsibility is to verify, in all material respects, compliance with

certain legal and regulatory requirements. On this basis, we provide the following additional statement which does not

impact our opinion on the consolidated financial statements:

The directors’ report on the consolidated accounts includes the information required by law, is consistent with the

consolidated accounts and does not present any material inconsistencies with the information that we became aware of

during the performance of our mandate.

Liège, 4 April 2017

The Statutory Auditor

PwC Reviseurs d’Entreprises SCCRL

Represented by

Patrick Mortroux

Réviseur d’Entreprises

Report on other legal and regulatory requirements

4.3

Consolidated financial statements as of 31 December 2016 and 2015 under IFRS

The board of directors is responsible for the preparation and the content of the directors’ report on the consolidated

4.3.1. Consolidated statement of financial position

accounts.

(€’000)

For the year ended 31 December

Notes

2016

2015

NON-CURRENT ASSETS

Intangible assets

Property, Plant and Equipment

Other non-current assets

CURRENT ASSETS

Trade and Other Receivables

Grants receivables

Other current assets

Short term investments

Cash and cash equivalents

TOTAL ASSETS

EQUITY

Share Capital

Share premium

Other reserves

Retained loss

NON-CURRENT LIABILITIES

Bank loans

Finance leases

Advances repayable

Contingent liabilities

Post employment benefits

Other non current liabilities

CURRENT LIABILITIES

Bank loans

Finance leases

Advances repayable

Trade payables

Other current liabilities

5.6

5.7

5.8

5.9

5.10

5.11

5.14

5.22

5.17

5.20

5.16

5.17

5.18

53,440

49,566

3,563

311

85,367

1,359

1,420

34,230

48,357

138,806

90,885

32,571

158,010

24,329

(124,026)

36,646

536

381

7,330

28,179

204

50,105

48,789

1,136

180

109,419

549

104

1,254

7,338

100,175

159,525

111,473

32,571

158,010

21,205

(100,313)

36,562

427

10,484

25,529

121

11,275

11,490

207

354

1,108

8,098

1,508

248

898

8,576

1,768

TOTAL EQUITY AND LIABILITIES

138,806

159,525

CELYAD • FINANCIAL RESULTS 2016

4.3.2. Consolidated statement of comprehensive loss

4.3.3. Consolidated statement of changes in equity

(€'000)

Revenues

Cost of sales

Gross profit

Research and Development expenses

General administrative expenses

Other operating income

Operating Loss

Financial income

Financial expenses

Share of Loss of investments accounted for using the equity method

Loss before taxes

Income taxes

Loss for the year [2]

Basic and diluted loss per share (in €)

Other comprehensive loss

Items that will not be reclassified to profit and loss

Remeasurements of post employment benefit obligations, net of tax

Items that may be subsequently reclassified to profit or loss

Currency translation differences

Other comprehensive loss for the year, net of tax

Total comprehensive loss for the year

Total comprehensive loss for the year attributable to Equity Holders [1]

Notes

5.23

5.24

5.25

5.28

5.30

5.13

For the year ended 31 December

2016

2015

8,523

(53)

8,471
(27,675)

(9,744)

3,340
(25,609)

2,204

(207)

(1)

2
(22,766)

(7,230)

322
(29,672)

542

(236)

252

(23,612)

(29,114)

6
(23,606)

-
(29,114)

5.31

(2.53)

(3.43)

(107)

277

170

(23,436)

485

501

(28,613)

[1]

For 2016 and 2015, the Group does not have any non-controlling interests and the losses for the year are fully attributable
to owners of the parent.

Share capital

(Note 5.14)

Share premium

Other reserves

(Note 5.14)

(Note 5.22)

24.615

7,607

326

53.302

112,104

3,126

196

(10,776)

Total transactions with owners, recognized

7,956

104,709

(€’000)

Balance as of 1st January 2015

Capital increase in cash

Capital increase (Acquisition Oncyte)

Exercise of warrants

Share-based payments

Transaction costs associated with capital

increases

directly in equity

Loss for the year

Currency Translation differences

Remeasurements of defined benefit

obligation

Total comprehensive gain/(loss) for the year

Balance as of 1st January 2016

Capital increase

Exercise of warrants

Share-based payments

Transaction costs associated with capital

Total transactions with owners, recognized

increases

directly in equity

Loss for the year

Currency Translation differences

Remeasurements of defined benefit

obligation

Total comprehensive gain/(loss) for the year

32,571

158,010

Retained

loss

(71.215)

(29,114)

(29,098)

(100,313)

(107)

(23,713)

(124,026)

19.982

736

487

21,205

2,848

277

24,330

Total

Equity

26.684

119,711

3,452

219

795

(10,776)

113,401

(29,114)

487

(28,611)

111,473

2,848

277

(107)

(23,436)

90,885

2,848

(23,606)

Balance as of 31 December 2016

32.571

158,010

CELYAD • FINANCIAL RESULTS 2016

4.3.2. Consolidated statement of comprehensive loss

4.3.3. Consolidated statement of changes in equity

Share of Loss of investments accounted for using the equity method

(23,612)

(29,114)

Research and Development expenses

General administrative expenses

Other operating income

(€'000)

Revenues

Cost of sales

Gross profit

Operating Loss

Financial income

Financial expenses

Loss before taxes

Income taxes

Loss for the year [2]

Basic and diluted loss per share (in €)

Other comprehensive loss

Items that will not be reclassified to profit and loss

Remeasurements of post employment benefit obligations, net of tax

Items that may be subsequently reclassified to profit or loss

Currency translation differences

Other comprehensive loss for the year, net of tax

Total comprehensive loss for the year

Total comprehensive loss for the year attributable to Equity Holders [1]

Notes

5.23

5.24

5.25

5.28

5.30

5.13

For the year ended 31 December

2016

2015

8,523

(53)

8,471

(27,675)

(9,744)

3,340

(25,609)

2,204

(207)

(23,606)

(107)

277

170

(23,436)

(1)

(22,766)

(7,230)

322

(29,672)

542

(236)

252

(29,114)

485

501

(28,613)

5.31

(2.53)

(3.43)

[1]

For 2016 and 2015, the Group does not have any non-controlling interests and the losses for the year are fully attributable

to owners of the parent.

(€’000)

Balance as of 1st January 2015

Capital increase in cash

Capital increase (Acquisition Oncyte)

Exercise of warrants

Share-based payments

Transaction costs associated with capital
increases
Total transactions with owners, recognized
directly in equity
Loss for the year

Currency Translation differences

Remeasurements of defined benefit
obligation
Total comprehensive gain/(loss) for the year
Balance as of 1st January 2016

Capital increase

Exercise of warrants

Share-based payments

Transaction costs associated with capital
increases
Total transactions with owners, recognized
directly in equity
Loss for the year

Currency Translation differences

Remeasurements of defined benefit
obligation
Total comprehensive gain/(loss) for the year

Share capital
(Note 5.14)

Share premium
(Note 5.14)

Other reserves
(Note 5.22)

24.615

7,607

326

53.302

112,104

3,126

196

(10,776)

7,956

104,709

32,571

158,010

19.982

736

487

21,205

2,848

277

24,330

Balance as of 31 December 2016

32.571

158,010

Retained
loss

(71.215)

(29,114)

(29,098)

(100,313)

Total
Equity

26.684

119,711

3,452

219

795

(10,776)

113,401

(29,114)

487

(28,611)

111,473

2,848

(23,606)

(107)

(23,713)

(124,026)

277

(107)

(23,436)

90,885

CELYAD • FINANCIAL RESULTS 2016

4.3.4. Consolidated statement of Cash flows

(€'000)

Cash Flow from operating activities

Net Loss for the year

Non-cash adjustments

Depreciation

Amortisation

Post Employment Benefit

Deconsolidation of. CELYAD Asia Ltd.

Change in fair value valuation of Contingent liabilities

Change in fair value valuation of RCA’s

Proceeds of grants and advances

Currency translation adjustment

Share-based payments

Change in working capital

Trade receivables, other receivables

Trade payables, other payable and accruals

Net cash (used in)/from operations

Cash Flow from investing activities

Acquisitions of Property, Plant & Equipment

Acquisitions of Intangible assets

Disposals of fixed assets

Acquisition of short term investment

Proceeds from Short Term Investments

Acquisition of BMS SA

Acquisition of Oncyte LLC

Net cash used in investing activities

Cash flows from financing activities

Proceeds from borrowings

Repayments of finance leases

Proceeds from issuance of shares and exercise of warrants

Proceeds from RCAs & other grants

Repayment of advances

Net cash from financing activities

Net cash and cash equivalents at beginning of the period

Change in net cash and cash equivalents

Net cash and cash equivalents at the end of the period

Notes

For the year ended 31 December

2016

2015

(23,606)

(29,114)

5.7

5.6

5.16

5.13

5.28

5.15

5.7

5.6

5.10

5.12

5.13

5.14

5.28

760

756

(24)

1,633

(2,154)

(3,003)

(144)

2,847

(1,018)

(740)

(24,692)

(1,687)

(95)

(34,230)

7,338

(1,560)

(30,157)

1,165

(399)

3,107

(842)

3,031

100,174

(51,818)

48,357

273

760

(45)

(84)

(1,647)

(21)

795

653

1,066

(27,303)

(811)

(27)

(5,000)

333

(5,186)

(10,691)

451

(188)

109,154

1,647

(529)

110,535

27,633

72,542

100,175

5. Notes to the consolidated financial statements

5.1

General information

Celyad SA (“the Company”) and its subsidiaries (together, “the Group”) is a a biopharmaceutical company, specialized in cell

therapy, that is developing landmark technologies aimed at treating severe diseases with poor prognosis. Our scientific

approach is inspired by the natural mechanisms that are used by the body to fight disease.

The group has four fully owned subsidiaries located in Belgium, Biological Manufacturing Services SA , and in the United

States, Celyad Inc, Corquest Medical Inc and OnCyte LLC. OnCyte LLC. Biological Manufacturing Services SA was acquired in

May 2016.

Celyad SA was incorporated on July 24, 2007 under the name “Cardio3 BioSciences”. Celyad is a limited liability company

(“Société Anonyme”) governed by Belgian law with its registered office at Axis Parc, Rue Edouard Belin 12, B-1435 Mont-

Saint-Guibert, Belgium (company number 0891.118.115). The Company’s ordinary shares are listed on NYSE Euronext

Brussels and NYSE Euronext Paris regulated markets and the Company’s ADS are listed on the NASDAQ Global Market under

the ticker symbol CYAD.

These consolidated financial statements of Celyad for the twelve months ended 31 December 2016 (the ‘Period’) include

Celyad SA and its subsidiaries. These statements were approved by the Board of Directors on [17 March 2017]. These

statements were audited by PwC Reviseurs d’Entreprise SCCRL, the statutory auditor of the Company.

5.2

Summary of significant accounting policies

The significant accounting policies used for preparing the consolidated financial statements are explained here below.

The consolidated financial statements have been prepared on a historical cost basis. The consolidated financial statements

have been approved for issue by the Board of Directors of Celyad on 17 March 2017.

The consolidated financial statements are presented in euro and all values are presented in thousands (€000) except when

Basis of preparation

otherwise indicated.

Statement of compliance

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting

Standards (IFRS) and IFRS Interpretations Committee (IFRS IC) interpretations applicable to companies reporting under

IFRS. These standards have been endorsed by the European Union.

The preparation of the consolidated financial statements in accordance 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, are areas where assumptions and

estimates are significant to the financial statements. They are disclosed in Note 5.4.

Going concern

The Group is pursuing a strategy to develop therapies to treat unmet medical needs in both cardiology and oncology.

Management has prepared detailed budgets and cash flow forecasts for the years 2017 and 2018. These forecasts reflect

the strategy of the Group and include significant expenses and cash outflows in relation to the development of selected

research programs and products candidates.

Based on its current scope of activities, the Group estimates its cash position as of 31 December 2016 (including short term

investments) is sufficient to cover its cash requirements until mid of 2019, therefore until the readout of the CAR-T NKR-2

T-cells THINK trial. After due consideration of the above, the Board of Directors determined that management has an

appropriate basis to conclude on the continuity over the next 12 months of the Group’s business and hence it is appropriate

to prepare the financial statements on a going concern basis.

Changes to accounting standards and interpretations

The following interpretation and amendments to standards are mandatory for the first time for the financial year beginning 1

January 2016:

ü Amendment to IAS 16 'Property, plant and equipment' and IAS 38 'Intangible assets' on depreciation and amortisation,

effective for annual periods beginning on or after 1 January 2016. In this amendment the IASB has clarified that the use

of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue generated by

an activity that includes the use of an asset generally reflects factors other than the consumption of the economic

benefits embodied in the asset. The IASB has also clarified that revenue is generally presumed to be an inappropriate

basis for measuring the consumption of the economic benefits embodied in an intangible asset.

ü Amendments to IAS 27 ‘Separate financial statements’ on the equity method, effective for annual periods beginning on

or after 1 January 2016. These amendments allow entities to use the equity method to account for investments in

subsidiaries, joint ventures and associates in their separate financial statements.

CELYAD • FINANCIAL RESULTS 2016

4.3.4. Consolidated statement of Cash flows

(€'000)

Cash Flow from operating activities

Net Loss for the year

Non-cash adjustments

Depreciation

Amortisation

Post Employment Benefit

Deconsolidation of. CELYAD Asia Ltd.

Change in fair value valuation of Contingent liabilities

Change in fair value valuation of RCA’s

Proceeds of grants and advances

Currency translation adjustment

Share-based payments

Change in working capital

Trade receivables, other receivables

Trade payables, other payable and accruals

Net cash (used in)/from operations

Cash Flow from investing activities

Acquisitions of Property, Plant & Equipment

Acquisitions of Intangible assets

Disposals of fixed assets

Acquisition of short term investment

Proceeds from Short Term Investments

Acquisition of BMS SA

Acquisition of Oncyte LLC

Net cash used in investing activities

Cash flows from financing activities

Proceeds from borrowings

Repayments of finance leases

Proceeds from issuance of shares and exercise of warrants

Proceeds from RCAs & other grants

Repayment of advances

Net cash from financing activities

Net cash and cash equivalents at beginning of the period

Change in net cash and cash equivalents

Net cash and cash equivalents at the end of the period

5.7

5.6

5.16

5.13

5.28

5.15

5.7

5.6

5.10

5.12

5.13

5.14

5.28

Notes

For the year ended 31 December

2016

2015

(23,606)

(29,114)

760

756

(24)

1,633

(2,154)

(3,003)

(144)

2,847

(1,018)

(740)

(24,692)

(1,687)

(95)

(34,230)

7,338

(1,560)

(30,157)

1,165

(399)

3,107

(842)

3,031

100,174

(51,818)

48,357

273

760

(45)

(84)

(1,647)

(21)

795

653

1,066

(27,303)

(811)

(27)

(5,000)

333

(5,186)

(10,691)

451

(188)

109,154

1,647

(529)

110,535

27,633

72,542

100,175

5. Notes to the consolidated financial statements

5.1

General information

Celyad SA (“the Company”) and its subsidiaries (together, “the Group”) is a a biopharmaceutical company, specialized in cell
therapy, that is developing landmark technologies aimed at treating severe diseases with poor prognosis. Our scientific
approach is inspired by the natural mechanisms that are used by the body to fight disease.

The group has four fully owned subsidiaries located in Belgium, Biological Manufacturing Services SA , and in the United
States, Celyad Inc, Corquest Medical Inc and OnCyte LLC. OnCyte LLC. Biological Manufacturing Services SA was acquired in
May 2016.

Celyad SA was incorporated on July 24, 2007 under the name “Cardio3 BioSciences”. Celyad is a limited liability company
(“Société Anonyme”) governed by Belgian law with its registered office at Axis Parc, Rue Edouard Belin 12, B-1435 Mont-
Saint-Guibert, Belgium (company number 0891.118.115). The Company’s ordinary shares are listed on NYSE Euronext
Brussels and NYSE Euronext Paris regulated markets and the Company’s ADS are listed on the NASDAQ Global Market under
the ticker symbol CYAD.

These consolidated financial statements of Celyad for the twelve months ended 31 December 2016 (the ‘Period’) include
Celyad SA and its subsidiaries. These statements were approved by the Board of Directors on [17 March 2017]. These
statements were audited by PwC Reviseurs d’Entreprise SCCRL, the statutory auditor of the Company.
5.2

Summary of significant accounting policies

The significant accounting policies used for preparing the consolidated financial statements are explained here below.

Basis of preparation

The consolidated financial statements have been prepared on a historical cost basis. The consolidated financial statements
have been approved for issue by the Board of Directors of Celyad on 17 March 2017.

The consolidated financial statements are presented in euro and all values are presented in thousands (€000) except when
otherwise indicated.
Statement of compliance

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting
Standards (IFRS) and IFRS Interpretations Committee (IFRS IC) interpretations applicable to companies reporting under
IFRS. These standards have been endorsed by the European Union.

The preparation of the consolidated financial statements in accordance 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, are areas where assumptions and
estimates are significant to the financial statements. They are disclosed in Note 5.4.
Going concern

Based on its current scope of activities, the Group estimates its cash position as of 31 December 2016 (including short term
investments) is sufficient to cover its cash requirements until mid of 2019, therefore until the readout of the CAR-T NKR-2
T-cells THINK trial. After due consideration of the above, the Board of Directors determined that management has an
appropriate basis to conclude on the continuity over the next 12 months of the Group’s business and hence it is appropriate
to prepare the financial statements on a going concern basis.
Changes to accounting standards and interpretations

The following interpretation and amendments to standards are mandatory for the first time for the financial year beginning 1
January 2016:
ü Amendment to IAS 16 'Property, plant and equipment' and IAS 38 'Intangible assets' on depreciation and amortisation,
effective for annual periods beginning on or after 1 January 2016. In this amendment the IASB has clarified that the use
of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue generated by
an activity that includes the use of an asset generally reflects factors other than the consumption of the economic
benefits embodied in the asset. The IASB has also clarified that revenue is generally presumed to be an inappropriate
basis for measuring the consumption of the economic benefits embodied in an intangible asset.

ü Amendments to IAS 27 ‘Separate financial statements’ on the equity method, effective for annual periods beginning on
or after 1 January 2016. These amendments allow entities to use the equity method to account for investments in
subsidiaries, joint ventures and associates in their separate financial statements.

CELYAD • FINANCIAL RESULTS 2016

ü Amendments to IAS 1 ‘Presentation of financial statements’, effective for annual periods beginning on or after 1
January 2016. The amendments to IAS 1 are part of the initiative of the IASB to improve presentation and disclosure in
financial reports and are designed to further encourage companies to apply professional judgment in determining what
information to disclose in their financial statements. The amendments make clear that materiality applies to the whole
of financial statements and that the inclusion of immaterial information can inhibit the usefulness of financial
disclosures. Furthermore, the amendments clarify that companies should use professional judgment in determining
where and in what order information is presented in the financial disclosures.

ü Amendment to IAS 19, 'Employee benefits', on defined benefit plans (effective 1 July 2014 and endorsed for 1 February
2015). These narrow scope amendments apply to contributions from employees or third parties to defined benefit
plans. The objective of the amendments is to simplify the accounting for contributions that are independent of the
number of years of employee service, for example, employee contributions that are calculated according to a fixed
percentage of salary

ü Annual improvements 2010-2012 (effective 1 July 2014 and endorsed for 1 February 2015). These amendments
include changes from the 2010-12 cycle of the annual improvements project, that affect 7 standards: IFRS 2, ‘Share-
based payment’, IFRS 3, ‘Business Combinations’, IFRS 8, ‘Operating segments’, IFRS 13, ‘Fair value measurement’, IAS
16, ‘Property, plant and equipment’, and IAS 38, ‘Intangible assets’, Consequential amendments to IFRS 9, ‘Financial
instruments’, IAS 37, ‘Provisions, contingent liabilities and contingent assets’, and IAS 39, Financial instruments –
Recognition and measurement’.

ü Annual improvements 2012-2014 (effective and endorsed for 1 January 2016). These set of amendments impacts 4
standards: IFRS 5, ‘Non-current assets held for sale and discontinued operations’ regarding methods of disposal; IFRS
7, ‘Financial instruments: Disclosures’, (with consequential amendments to IFRS 1) regarding servicing contracts; IAS
19,
‘Interim financial reporting’ regarding disclosure
IAS 34,
of information.

‘Employee benefits’ regarding discount rates;

ü Amendments to IFRS 10 ‘Consolidated financial statements’, IFRS 12 ‘Disclosure of interests in other entities’ and IAS
28, ‘Investments in associates and joint ventures’, effective for annual periods beginning on or after 1 January 2016.
These amendments clarify the application of the consolidation exception for investment entities and their subsidiaries.

The following new standards and amendments to standards have been issued, but are not mandatory for the first time for
the financial year beginning 1 January 2016 and have been endorsed by the European Union:
ü

IFRS 15 ‘Revenue from contracts with customers’. The standard will improve comparability of the top line in financial
statements globally. Companies using IFRS will be required to apply the revenue standard for annual periods beginning
on or after 1 January 2018, subject to EU endorsement.
IFRS 9 ‘Financial instruments’, effective for annual periods beginning on or after 1 January 2018. The standard
addresses the classification, measurement, derecognition of financial assets and financial liabilities and general hedge
accounting.

The following new standards and amendments to standards have been issued, but are not mandatory for the first time for
the financial year beginning 1 January 2016 and have not been endorsed by the European Union:
ü

IFRS 16 ’Leases’. This standard replaces the current guidance in IAS 17 and is a far reaching change in accounting by
lessees in particular. Under IAS 17, lessees were required to make a distinction between a finance lease (on balance
sheet) and an operating lease (off balance sheet). IFRS 16 requires lessees to recognise a lease liability reflecting future
lease payments and a ‘right-of-use asset’ for virtually all lease contracts. For lessors, the accounting stays almost the
same. However, as the IASB has updated the guidance on the definition of a lease (as well as the guidance on the
combination and separation of contracts), lessors will also be affected by the new standard. Under IFRS 16, a contract
is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in
exchange for consideration.

ü Amendments to IFRS 10, 'Consolidated financial statements' and IAS 28,'Investments in associates and joint ventures',
for which the effective date still has to be determined. These amendments address an inconsistency between the
requirements in IFRS 10 and those in IAS 28 in dealing with the sale or contribution of assets between an investor and
its associate or joint venture. The main consequence of the amendments is that a full gain or loss is recognised when a
transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognised when a
transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary.

ü Amendments to IAS 12,'Income taxes' on Recognition of deferred tax assets for unrealised losses (effective 1 January
2017). These amendments on the recognition of deferred tax assets for unrealised losses clarify how to account for
deferred tax assets related to debt instruments measured at fair value.

ü Amendments to IAS 7, Statement of cash flows (effective 1 January 2017). These amendments to IAS 7 introduce an
additional disclosure that will enable users of financial statements to evaluate changes in liabilities arising from
financing activities. The amendment is part of the IASB’s Disclosure Initiative, which continues to explore how financial
statement disclosure can be improved.

ü Amendments to IFRS 15, 'Revenue from contracts with customers' - Clarifications (effective 1 January 2018). These
amendments compromise clarification guidance on identifying performance obligations, accounting for licences of
intellectual property and the principle versus agent assessment. The amendment also includes more illustrative
examples.

ü Amendments to IFRS 2: Share-based payments (effective 1 January 2018): The amendment clarifies the measurement
basis for cash-settled payments and the accounting for modifications that change an award from cash settled to equity
settled. It also introduces an exception to the principles in IFRS 2 that will require an award to be treated as if it was

wholly equity-settled, where an employer is obliged to withhold an amount for the employee’s tax obligation

associated with a share-based payment and pay the amount to the tax authorities.

ü Annual improvements 2014-2016. This set of amendments impacts 3 standards: IFRS 1 ‘First-time adoption of

International Financial Reporting Standards’ regarding short-term exemptions for first-time adopters (effective 1

January 2018), IFRS 12 ‘ Disclosure of interests in other entities’ regarding the scope of the Standard (effective 1

January 2017), and IAS 28 ‘Investments in associates and joint ventures’ regarding measuring an associate or joint

venture at fair value (effective 1 January 2018).

IFRIC 22 ‘Foreign currency transactions and advance considerations’ (effective 1 January 2018). This Interpretation

addresses how to determine the date of the transaction for the purpose of determining the exchange rate to use on

initial recognition of the related asset, expense or income on the derecognition of a non-monetary asset or liability

arising from the payment or receipt of advance consideration in a foreign currency.

Consolidation

Subsidiaries

Subsidiaries are all entities (including structured 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 deconsolidated from the date control ceases.

The Group applies the acquisition method to account for business combinations.

The consideration transferred for the acquisition of a subsidiary is measured at the aggregate of the fair values of the assets

transferred, the liabilities incurred or assumed and the equity interests issued by the Group at the date of the acquisition.

The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration

arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are

measured initially at their fair values at the acquisition date.

Acquisition-related costs are expensed as incurred.

Any contingent consideration to be transferred by the Group is recognized at fair value at the acquisition date. Subsequent

changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognized in accordance

with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified

as equity is not re-measured, and its subsequent settlement is accounted for within equity.

Inter-company transactions, balances and unrealized gains on transactions between group companies are eliminated.

Unrealized losses are also eliminated. When necessary, amounts reported by subsidiaries have been adjusted to conform

with the Group’s accounting policies.

Foreign currency translation

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 Euros, which is the Group’s presentation currency.

Transactions and balances

Foreign currency transactions (mainly USD) are translated into functional currency using the applicable exchange rate on the

transaction dates. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional

currency spot rate of exchange ruling at the reporting date.

Foreign currency exchange gains and losses arising from settling foreign currency transactions and from the retranslation of

monetary assets and liabilities denominated in foreign currencies at the reporting date are recognised in the income

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange

rates as of the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are

translated using the exchange rates at the date when the fair value is determined.

statement.

Group companies

The results and financial position of all group entities that have 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 income statement are translated at average exchange rate (unless this average

is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in

which case income and expenses are translated at the rate on the dates of the transactions); and

• All resulting exchange differences are recognized in other comprehensive income.

CELYAD • FINANCIAL RESULTS 2016

wholly equity-settled, where an employer is obliged to withhold an amount for the employee’s tax obligation
associated with a share-based payment and pay the amount to the tax authorities.

ü Annual improvements 2014-2016. This set of amendments impacts 3 standards: IFRS 1 ‘First-time adoption of
International Financial Reporting Standards’ regarding short-term exemptions for first-time adopters (effective 1
January 2018), IFRS 12 ‘ Disclosure of interests in other entities’ regarding the scope of the Standard (effective 1
January 2017), and IAS 28 ‘Investments in associates and joint ventures’ regarding measuring an associate or joint
venture at fair value (effective 1 January 2018).
IFRIC 22 ‘Foreign currency transactions and advance considerations’ (effective 1 January 2018). This Interpretation
addresses how to determine the date of the transaction for the purpose of determining the exchange rate to use on
initial recognition of the related asset, expense or income on the derecognition of a non-monetary asset or liability
arising from the payment or receipt of advance consideration in a foreign currency.
Consolidation

ü Amendments to IAS 1 ‘Presentation of financial statements’, effective for annual periods beginning on or after 1

January 2016. The amendments to IAS 1 are part of the initiative of the IASB to improve presentation and disclosure in

financial reports and are designed to further encourage companies to apply professional judgment in determining what

information to disclose in their financial statements. The amendments make clear that materiality applies to the whole

of financial statements and that the inclusion of immaterial information can inhibit the usefulness of financial

disclosures. Furthermore, the amendments clarify that companies should use professional judgment in determining

where and in what order information is presented in the financial disclosures.

ü Amendment to IAS 19, 'Employee benefits', on defined benefit plans (effective 1 July 2014 and endorsed for 1 February

2015). These narrow scope amendments apply to contributions from employees or third parties to defined benefit

plans. The objective of the amendments is to simplify the accounting for contributions that are independent of the

number of years of employee service, for example, employee contributions that are calculated according to a fixed

percentage of salary

ü Annual improvements 2010-2012 (effective 1 July 2014 and endorsed for 1 February 2015). These amendments

include changes from the 2010-12 cycle of the annual improvements project, that affect 7 standards: IFRS 2, ‘Share-

based payment’, IFRS 3, ‘Business Combinations’, IFRS 8, ‘Operating segments’, IFRS 13, ‘Fair value measurement’, IAS

16, ‘Property, plant and equipment’, and IAS 38, ‘Intangible assets’, Consequential amendments to IFRS 9, ‘Financial

instruments’, IAS 37, ‘Provisions, contingent liabilities and contingent assets’, and IAS 39, Financial instruments –

Recognition and measurement’.

ü Annual improvements 2012-2014 (effective and endorsed for 1 January 2016). These set of amendments impacts 4

standards: IFRS 5, ‘Non-current assets held for sale and discontinued operations’ regarding methods of disposal; IFRS

7, ‘Financial instruments: Disclosures’, (with consequential amendments to IFRS 1) regarding servicing contracts; IAS

19,

‘Employee benefits’ regarding discount rates;

IAS 34,

‘Interim financial reporting’ regarding disclosure

of information.

ü Amendments to IFRS 10 ‘Consolidated financial statements’, IFRS 12 ‘Disclosure of interests in other entities’ and IAS

28, ‘Investments in associates and joint ventures’, effective for annual periods beginning on or after 1 January 2016.

These amendments clarify the application of the consolidation exception for investment entities and their subsidiaries.

the financial year beginning 1 January 2016 and have been endorsed by the European Union:

IFRS 15 ‘Revenue from contracts with customers’. The standard will improve comparability of the top line in financial

statements globally. Companies using IFRS will be required to apply the revenue standard for annual periods beginning

on or after 1 January 2018, subject to EU endorsement.

IFRS 9 ‘Financial instruments’, effective for annual periods beginning on or after 1 January 2018. The standard

addresses the classification, measurement, derecognition of financial assets and financial liabilities and general hedge

accounting.

The following new standards and amendments to standards have been issued, but are not mandatory for the first time for

the financial year beginning 1 January 2016 and have not been endorsed by the European Union:

IFRS 16 ’Leases’. This standard replaces the current guidance in IAS 17 and is a far reaching change in accounting by

lessees in particular. Under IAS 17, lessees were required to make a distinction between a finance lease (on balance

sheet) and an operating lease (off balance sheet). IFRS 16 requires lessees to recognise a lease liability reflecting future

lease payments and a ‘right-of-use asset’ for virtually all lease contracts. For lessors, the accounting stays almost the

same. However, as the IASB has updated the guidance on the definition of a lease (as well as the guidance on the

combination and separation of contracts), lessors will also be affected by the new standard. Under IFRS 16, a contract

is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in

exchange for consideration.

ü Amendments to IFRS 10, 'Consolidated financial statements' and IAS 28,'Investments in associates and joint ventures',

for which the effective date still has to be determined. These amendments address an inconsistency between the

requirements in IFRS 10 and those in IAS 28 in dealing with the sale or contribution of assets between an investor and

its associate or joint venture. The main consequence of the amendments is that a full gain or loss is recognised when a

transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognised when a

transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary.

ü Amendments to IAS 12,'Income taxes' on Recognition of deferred tax assets for unrealised losses (effective 1 January

2017). These amendments on the recognition of deferred tax assets for unrealised losses clarify how to account for

deferred tax assets related to debt instruments measured at fair value.

ü Amendments to IAS 7, Statement of cash flows (effective 1 January 2017). These amendments to IAS 7 introduce an

additional disclosure that will enable users of financial statements to evaluate changes in liabilities arising from

financing activities. The amendment is part of the IASB’s Disclosure Initiative, which continues to explore how financial

statement disclosure can be improved.

ü Amendments to IFRS 15, 'Revenue from contracts with customers' - Clarifications (effective 1 January 2018). These

amendments compromise clarification guidance on identifying performance obligations, accounting for licences of

intellectual property and the principle versus agent assessment. The amendment also includes more illustrative

examples.

ü Amendments to IFRS 2: Share-based payments (effective 1 January 2018): The amendment clarifies the measurement

basis for cash-settled payments and the accounting for modifications that change an award from cash settled to equity

settled. It also introduces an exception to the principles in IFRS 2 that will require an award to be treated as if it was

The following new standards and amendments to standards have been issued, but are not mandatory for the first time for

Acquisition-related costs are expensed as incurred.

Subsidiaries

Subsidiaries are all entities (including structured 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 deconsolidated from the date control ceases.

The Group applies the acquisition method to account for business combinations.

The consideration transferred for the acquisition of a subsidiary is measured at the aggregate of the fair values of the assets
transferred, the liabilities incurred or assumed and the equity interests issued by the Group at the date of the acquisition.
The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration
arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are
measured initially at their fair values at the acquisition date.

Any contingent consideration to be transferred by the Group is recognized at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognized in accordance
with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified
as equity is not re-measured, and its subsequent settlement is accounted for within equity.

Inter-company transactions, balances and unrealized gains on transactions between group companies are eliminated.
Unrealized losses are also eliminated. When necessary, amounts reported by subsidiaries have been adjusted to conform
with the Group’s accounting policies.

Foreign currency translation
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 Euros, which is the Group’s presentation currency.
Transactions and balances

Foreign currency transactions (mainly USD) are translated into functional currency using the applicable exchange rate on the
transaction dates. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional
currency spot rate of exchange ruling at the reporting date.

Foreign currency exchange gains and losses arising from settling foreign currency transactions and from the retranslation of
monetary assets and liabilities denominated in foreign currencies at the reporting date are recognised in the income
statement.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange
rates as of the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are
translated using the exchange rates at the date when the fair value is determined.
Group companies

The results and financial position of all group entities that have 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 income statement are translated at average exchange rate (unless this average
is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in
which case income and expenses are translated at the rate on the dates of the transactions); and

• All resulting exchange differences are recognized in other comprehensive income.

•

CELYAD • FINANCIAL RESULTS 2016

Revenue

Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for
goods supplied in the ordinary course of the Group activities, stated net of discounts, returns and value added taxes. The
Company recognizes revenue when the amount of revenue can be reliably measured and when it is probable that future
economic benefits will flow to the entity. The amount of revenue is not considered to be reliably measured until all
contingencies relating to the sale have been resolved.

Revenue from the sale of goods is recognized when:

•
•

•
•
•

The significant risks and rewards of the ownership of goods are transferred to the buyer;
The Group retains neither continuing managerial involvement to the degree usually associated with ownership
nor effective control over the goods sold;
The amount of revenue can be measured reliably;
It is probable that the economic benefits associated with the transaction will flow to the entity; and
The costs incurred or to be incurred in respect of the transaction can be measured reliably.

For 2016 and 2015, sales generated by the Group are associated with C-Cathez, its proprietary catheter, and are marginal
compared to its operating expenses. In 2016, the group recognized the non refundable payment received from ONO
Pharmaceuticals associated to the License Agreement executed in July 2016.
Licensing revenues

The license agreement with ONO contracted in July 2016 includes non-refundable upfront fees, milestone payments (the
receipt of which is dependent upon the achievement of certain clinical, regulatory or commercial milestones), royalties on
sales and sales milestones. The revenue recognition policies can be summarized as follows:

Upfront payments

Non-refundable upfront payments received in connection with research and development collaboration agreements and for
which there are subsequent deliverables are initially reported as deferred income and are recognized as revenue when
earned over the period of the development collaboration. However, when non-refundable upfront payments are received
without further performance obligations, these are recognised when they become receivable

Milestone payments

Research milestone payments are recognized as revenues when achieved. In addition, the payments have to be acquired
irrevocably and the milestone payment amount needs to be substantive and commensurate with the magnitude of the
related achievement. Milestone payments that are not substantive, not commensurate or that are not irrevocable are
recorded as deferred revenue. Revenue from these activities can vary significantly from period to period due to the timing of
milestones.

Other operating income

The Group’s current operating income is generated from (i) government grants received from the European Commission
under the Seventh Framework Program (“FP7”) and (ii) government grants received from the Regional government (“Walloon
Region” or “Region”) in the form of recoverable cash advances (RCAs).
Government Grant

Government grants are recognised at their fair value where there is a reasonable assurance that the grant will be received
and the Group will comply with all attached conditions. Once a government grant is recognized, any related contingent
liability (or contingent asset) is treated in accordance with IAS 39/IFRS9.

Government grants relating to costs are deferred and recognised in the income statement over the period necessary to
match them with the costs that they are intended to compensate.

Recoverable cash advances (RCAs)

As explained above, the Group receives grants from the Regional government in the form of recoverable cash advances
(RCAs).

RCAs are dedicated to support specific development programs. All RCA contracts, in essence, consist of three phases, i.e.,
the “research phase”, the “decision phase” and the “exploitation phase”. During the research phase, the Group receives
funds from the Region based on statements of expenses.

The RCAs are recognized in profit or loss on a systematic basis over the periods in which the entity recognizes as expenses
the related costs for which the grants are intended to compensate.

At the end of the research phase, the Group should within a period of six months decide whether or not to exploit the results
of the research phase (decision phase). The exploitation phase may have a duration of up to 10 years. In the event the Group
decides to exploit the results under an RCA, the relevant RCA becomes contingently refundable and the company applies the
recognition criteria of IAS 39 related to liability recognition, with any amounts being recognized as a reduction of other
operating income in the income statement.

When the Group does not exploit (or does not continue to exploit) the results under an RCA, it has to notify the Region of this

decision. This decision is of the sole responsibility of the Group. The RCA associated to the decision does not become

refundable (respectively is no longer refundable as of the calendar year after such decision), and the rights related to such

results will be transferred to the Region. Also when the Group decides to renounce to its rights to patents which may result

from the research, title to such patents will be transferred to the Region.

Other government grants

The Group has received and will continue to apply grants to European (FP7) and Regional authorities. These grants are

dedicated to partially finance early stage projects such as fundamental research, applied research, prototype design, etc.

As per 31 December 2016, all grants received are not associated to any conditions. As per contract, grants are paid upon

submission by the Group of statement of expenses. The Company incurs project expenses first and asks for partial refunding

according to the terms of the contracts.

The government grants are recognized in profit or loss on a systematic basis over the periods in which the entity

recognizes as expenses the related costs for which the grants are intended to compensate.

Intangible assets

Intangible assets acquired from third parties are measured on initial recognition at cost. Following initial recognition,

intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses.

Internally generated intangible assets, excluding capitalised development costs (when conditions are met), are not

capitalised. Expenditure is reflected in the income statement in the year in which the expenditure is incurred.

The useful life of intangible assets is assessed as finite. They are amortised over the expected useful economic life and

assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period

and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year end.

Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the

asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in

accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the income statement

of in the expense category consistent with the function of the intangible asset.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal

proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is derecognised.

Goodwill

accordance with IFRS 3).

A goodwill is an asset representing the future economic benefits arising from other assets acquired in a business

combination that are not individually identified and separately recognised. Goodwill is measured as a residual at the

acquisition date, as the excess of the fair value of the consideration transferred and the assets and liabilities recognised (in

Goodwill has an indefinite useful life and is tested for impairment at least annually or more frequently whenever events or

changes in circumstances indicate that goodwill may be impaired, as set forth in IAS 36 (Impairment of Assets)

In process research and development costs

The In-process research and development costs (“IPRD”) are capitalized as an indefinite-lived intangible asset until project

has been completed or abandoned. IPRD is measured at fair value at the date of acquisition and that fair value becomes the

new historical cost for future subsequent amortization.

The IPRD is not eligible for the revaluation model under IAS 38 “Intangible assets” because it is not traded on an active

market, which is the requirement under IAS 38 for an intangible asset to avail of the revaluation model. Therefore, the IPRD

cannot be subsequently revalued at fair value.

Subsequent R&D expenditure can be capitalized as part of the IPRD only to the extent that IPRD is in development stage, i.e.

when such expenditure meets the recognition criteria of IAS 38. Assuming that under Celyad, development stage is reached

when the intangible asset nears regulatory approval in Phase III, any R&D expenditure between the acquisition date and the

development stage should be treated as part of research phase and expensed in the income statement.

Research and development costs

asset when the Group can demonstrate:

Research costs are expensed as incurred. Development expenditures on an individual project are recognised as an intangible

•

the technical feasibility of completing the intangible asset so that it will be available for use or sale.

its intention to complete the intangible asset and use or sell it.

its ability to use or sell the intangible asset.

how the intangible asset will generate probable future economic benefits. Among other things, the entity can

demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if

it is to be

used internally, the usefulness of the intangible asset.

CELYAD • FINANCIAL RESULTS 2016

Licensing revenues

Upfront payments

Milestone payments

Revenue

Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for

goods supplied in the ordinary course of the Group activities, stated net of discounts, returns and value added taxes. The

Company recognizes revenue when the amount of revenue can be reliably measured and when it is probable that future

economic benefits will flow to the entity. The amount of revenue is not considered to be reliably measured until all

contingencies relating to the sale have been resolved.

Revenue from the sale of goods is recognized when:

•

The significant risks and rewards of the ownership of goods are transferred to the buyer;

The Group retains neither continuing managerial involvement to the degree usually associated with ownership

nor effective control over the goods sold;

The amount of revenue can be measured reliably;

It is probable that the economic benefits associated with the transaction will flow to the entity; and

The costs incurred or to be incurred in respect of the transaction can be measured reliably.

For 2016 and 2015, sales generated by the Group are associated with C-Cathez, its proprietary catheter, and are marginal

compared to its operating expenses. In 2016, the group recognized the non refundable payment received from ONO

Pharmaceuticals associated to the License Agreement executed in July 2016.

The license agreement with ONO contracted in July 2016 includes non-refundable upfront fees, milestone payments (the

receipt of which is dependent upon the achievement of certain clinical, regulatory or commercial milestones), royalties on

sales and sales milestones. The revenue recognition policies can be summarized as follows:

Non-refundable upfront payments received in connection with research and development collaboration agreements and for

which there are subsequent deliverables are initially reported as deferred income and are recognized as revenue when

earned over the period of the development collaboration. However, when non-refundable upfront payments are received

without further performance obligations, these are recognised when they become receivable

Research milestone payments are recognized as revenues when achieved. In addition, the payments have to be acquired

irrevocably and the milestone payment amount needs to be substantive and commensurate with the magnitude of the

related achievement. Milestone payments that are not substantive, not commensurate or that are not irrevocable are

recorded as deferred revenue. Revenue from these activities can vary significantly from period to period due to the timing of

milestones.

Other operating income

The Group’s current operating income is generated from (i) government grants received from the European Commission

under the Seventh Framework Program (“FP7”) and (ii) government grants received from the Regional government (“Walloon

Region” or “Region”) in the form of recoverable cash advances (RCAs).

Government Grant

Government grants are recognised at their fair value where there is a reasonable assurance that the grant will be received

and the Group will comply with all attached conditions. Once a government grant is recognized, any related contingent

liability (or contingent asset) is treated in accordance with IAS 39/IFRS9.

Government grants relating to costs are deferred and recognised in the income statement over the period necessary to

match them with the costs that they are intended to compensate.

Recoverable cash advances (RCAs)

(RCAs).

As explained above, the Group receives grants from the Regional government in the form of recoverable cash advances

RCAs are dedicated to support specific development programs. All RCA contracts, in essence, consist of three phases, i.e.,

the “research phase”, the “decision phase” and the “exploitation phase”. During the research phase, the Group receives

funds from the Region based on statements of expenses.

The RCAs are recognized in profit or loss on a systematic basis over the periods in which the entity recognizes as expenses

the related costs for which the grants are intended to compensate.

At the end of the research phase, the Group should within a period of six months decide whether or not to exploit the results

of the research phase (decision phase). The exploitation phase may have a duration of up to 10 years. In the event the Group

decides to exploit the results under an RCA, the relevant RCA becomes contingently refundable and the company applies the

recognition criteria of IAS 39 related to liability recognition, with any amounts being recognized as a reduction of other

operating income in the income statement.

When the Group does not exploit (or does not continue to exploit) the results under an RCA, it has to notify the Region of this
decision. This decision is of the sole responsibility of the Group. The RCA associated to the decision does not become
refundable (respectively is no longer refundable as of the calendar year after such decision), and the rights related to such
results will be transferred to the Region. Also when the Group decides to renounce to its rights to patents which may result
from the research, title to such patents will be transferred to the Region.

Other government grants

The Group has received and will continue to apply grants to European (FP7) and Regional authorities. These grants are
dedicated to partially finance early stage projects such as fundamental research, applied research, prototype design, etc.

As per 31 December 2016, all grants received are not associated to any conditions. As per contract, grants are paid upon
submission by the Group of statement of expenses. The Company incurs project expenses first and asks for partial refunding
according to the terms of the contracts.

The government grants are recognized in profit or loss on a systematic basis over the periods in which the entity
recognizes as expenses the related costs for which the grants are intended to compensate.

Intangible assets

Intangible assets acquired from third parties are measured on initial recognition at cost. Following initial recognition,
intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses.

Internally generated intangible assets, excluding capitalised development costs (when conditions are met), are not
capitalised. Expenditure is reflected in the income statement in the year in which the expenditure is incurred.

The useful life of intangible assets is assessed as finite. They are amortised over the expected useful economic life and
assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period
and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year end.
Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the
asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in
accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the income statement
of in the expense category consistent with the function of the intangible asset.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is derecognised.

Goodwill

A goodwill is an asset representing the future economic benefits arising from other assets acquired in a business
combination that are not individually identified and separately recognised. Goodwill is measured as a residual at the
acquisition date, as the excess of the fair value of the consideration transferred and the assets and liabilities recognised (in
accordance with IFRS 3).

Goodwill has an indefinite useful life and is tested for impairment at least annually or more frequently whenever events or
changes in circumstances indicate that goodwill may be impaired, as set forth in IAS 36 (Impairment of Assets)

In process research and development costs

The In-process research and development costs (“IPRD”) are capitalized as an indefinite-lived intangible asset until project
has been completed or abandoned. IPRD is measured at fair value at the date of acquisition and that fair value becomes the
new historical cost for future subsequent amortization.

The IPRD is not eligible for the revaluation model under IAS 38 “Intangible assets” because it is not traded on an active
market, which is the requirement under IAS 38 for an intangible asset to avail of the revaluation model. Therefore, the IPRD
cannot be subsequently revalued at fair value.

Subsequent R&D expenditure can be capitalized as part of the IPRD only to the extent that IPRD is in development stage, i.e.
when such expenditure meets the recognition criteria of IAS 38. Assuming that under Celyad, development stage is reached
when the intangible asset nears regulatory approval in Phase III, any R&D expenditure between the acquisition date and the
development stage should be treated as part of research phase and expensed in the income statement.
Research and development costs

Research costs are expensed as incurred. Development expenditures on an individual project are recognised as an intangible
asset when the Group can demonstrate:

•
•
•
•
•

•

the technical feasibility of completing the intangible asset so that it will be available for use or sale.
its intention to complete the intangible asset and use or sell it.
its ability to use or sell the intangible asset.
how the intangible asset will generate probable future economic benefits. Among other things, the entity can
demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if
it is to be
used internally, the usefulness of the intangible asset.

CELYAD • FINANCIAL RESULTS 2016

•

•
•

the availability of adequate technical, financial and other resources to complete the development and to use or
sell the
intangible asset.
its ability to measure reliably the expenditure attributable to the intangible asset during its development.

For the industry in which the Group operates, the life science industry, criteria a) and d) tend to be the most difficult to
achieve. Experience shows that in the Biotechnology sector technical feasibility of completing the project is met when such
project completes successfully Phase III of its development. For medical devices this is usually met at the moment of CE
marking.

Following initial recognition of the development expenditure as an asset, the cost model is applied requiring the asset to be
carried at cost less any accumulated amortisation and accumulated impairment losses.

Amortisation of the asset begins when development has been completed and the asset is available for use. It is amortised
over the period of expected future benefit. Amortisation is recorded in Research & Development expenses. During the
period of development, the asset is tested for impairment annually.

As per 31 December 2016, only the development costs of C-Cathez are capitalized and amortized over a period of 17 years
which corresponds to the period over which the intellectual property is protected.
Patents, Licences and Trademarks

Payments related to the acquisition of technology rights are capitalised as intangible assets when the two following criteria
are met:

•

it is probable that the expected future economic benefits that are attributable to the asset will flow to the
entity; and
the cost of the asset can be measured reliably.

Licences for the use of intellectual property are granted for a period corresponding to the intellectual property of the assets
licensed. Amortisation is calculated on a straight-line basis over this useful life.

Patents and licences are amortized over the period corresponding to the IP protection and are assessed for impairment
whenever there is an indication these assets may be impaired. Indication of impairment is related to the value of the patent
demonstrated by the pre-clinical and clinical results of the technology.
Software

Software only concerns acquired computer software licences. Software is capitalised on the basis of the costs incurred to
acquire and bring to use the specific software. These costs are amortised over their estimated useful lives of three years on a
straight-line basis.

Property, plant and equipment

Plant and equipment is stated at cost, net of accumulated depreciation and/or accumulated impairment losses, if any. Repair
and maintenance costs are recognised in the income statement of as incurred.

Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:

•
•
•
•
•

Land and buildings: 15 to 20 years
Plant and equipment: 5 to 15 years
Laboratory equipment: 3 to 5 years
Furniture: 3 to 10 years
Leasehold improvements: 3 to 10 years (based on duration of office building lease)

An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when
no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset
(calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the
income statement when the asset is derecognised.

The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year end, and adjusted
prospectively, if applicable.

Leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at
inception date: whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the
arrangement conveys a right to use the asset.

Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item,
are capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of
the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability
so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in the
income statement.

Leased assets are depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group

will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the

asset and the lease term.

Operating lease payments are recognised as an expense in the income statement on a straight line basis over the lease term.

The Group has performed sale and leaseback transactions. If the sale and leaseback transaction results in a finance lease, any

excess of sales proceeds over the carrying amount is deferred and amortised over the lease term. If the transaction results in

an operating lease and the transaction occurred at fair value, any profit or loss is recognised immediately.

Impairment of non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication

exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An

asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs to sell and its

value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely

independent of those from other assets or group of assets. Where the carrying amount of an asset or CGU exceeds its

recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in

use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current

market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell,

an appropriate valuation model is used based on the discounted cash-flow model.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment

losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or cash-

generating unit’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in

the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The

reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying

amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior

years. Such reversal is recognised in the income statement unless the asset is carried at a revalued amount, in which case the

reversal is treated as a revaluation increase.

The Group has four cash-generating units which consist of the development and commercialization activities on its the

following products, C-Cure, C-Cathez, Heart-Xs and NKR-T. Indicators of impairment used by the Group are the pre-clinical

and clinical results obtained with the technology.

Cash and cash equivalents

Cash and cash equivalents in the statement of financial position comprise cash at banks and on hand and short-term

deposits with an original maturity of three months or less.

Financial assets

5.2.11.1 Classification

initial recognition.

The Group classifies its financial assets in the following category: loans and receivables. The classification depends on the

purpose for which the financial assets were acquired. Management determines the classification of its financial assets at

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an

active market. They are included in current assets, except for maturities greater than 12 months after the end of the

reporting period. These are classified as non-current assets. The Group’s loans and receivables comprise “cash and cash

equivalents”, “short-term deposits”, “trade and other receivables” and ”Deposits”.

5.2.11.2 Initial recognition and measurement

All financial assets are recognised initially at fair value plus directly attributable transaction costs.

5.2.11.3 Subsequent measurement

After initial measurement, loans and receivables are subsequently measured at amortised cost using the effective interest

rate method (EIR), less impairment. Amortised cost is calculated by taking into account any discount or premium on

acquisition and fee or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the

income statement. The losses arising from impairment are recognised in the income statement.

5.2.11.4 Impairment of financial assets

The Group assesses at each reporting date whether there is any objective evidence that a financial asset or a group of

financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is

objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset

and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets

that can be reliably estimated.

CELYAD • FINANCIAL RESULTS 2016

•

the availability of adequate technical, financial and other resources to complete the development and to use or

sell the

intangible asset.

its ability to measure reliably the expenditure attributable to the intangible asset during its development.

For the industry in which the Group operates, the life science industry, criteria a) and d) tend to be the most difficult to

achieve. Experience shows that in the Biotechnology sector technical feasibility of completing the project is met when such

project completes successfully Phase III of its development. For medical devices this is usually met at the moment of CE

marking.

Following initial recognition of the development expenditure as an asset, the cost model is applied requiring the asset to be

carried at cost less any accumulated amortisation and accumulated impairment losses.

Amortisation of the asset begins when development has been completed and the asset is available for use. It is amortised

over the period of expected future benefit. Amortisation is recorded in Research & Development expenses. During the

period of development, the asset is tested for impairment annually.

As per 31 December 2016, only the development costs of C-Cathez are capitalized and amortized over a period of 17 years

which corresponds to the period over which the intellectual property is protected.

Patents, Licences and Trademarks

are met:

Payments related to the acquisition of technology rights are capitalised as intangible assets when the two following criteria

it is probable that the expected future economic benefits that are attributable to the asset will flow to the

entity; and

the cost of the asset can be measured reliably.

Licences for the use of intellectual property are granted for a period corresponding to the intellectual property of the assets

licensed. Amortisation is calculated on a straight-line basis over this useful life.

Patents and licences are amortized over the period corresponding to the IP protection and are assessed for impairment

whenever there is an indication these assets may be impaired. Indication of impairment is related to the value of the patent

demonstrated by the pre-clinical and clinical results of the technology.

Software only concerns acquired computer software licences. Software is capitalised on the basis of the costs incurred to

acquire and bring to use the specific software. These costs are amortised over their estimated useful lives of three years on a

Software

straight-line basis.

Property, plant and equipment

Plant and equipment is stated at cost, net of accumulated depreciation and/or accumulated impairment losses, if any. Repair

and maintenance costs are recognised in the income statement of as incurred.

Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:

Land and buildings: 15 to 20 years

Plant and equipment: 5 to 15 years

Laboratory equipment: 3 to 5 years

Furniture: 3 to 10 years

Leasehold improvements: 3 to 10 years (based on duration of office building lease)

An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when

no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset

(calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the

income statement when the asset is derecognised.

The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year end, and adjusted

prospectively, if applicable.

Leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at

inception date: whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the

arrangement conveys a right to use the asset.

Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item,

are capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of

the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability

so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in the

income statement.

Leased assets are depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group
will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the
asset and the lease term.

Operating lease payments are recognised as an expense in the income statement on a straight line basis over the lease term.

The Group has performed sale and leaseback transactions. If the sale and leaseback transaction results in a finance lease, any
excess of sales proceeds over the carrying amount is deferred and amortised over the lease term. If the transaction results in
an operating lease and the transaction occurred at fair value, any profit or loss is recognised immediately.

Impairment of non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication
exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An
asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs to sell and its
value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely
independent of those from other assets or group of assets. Where the carrying amount of an asset or CGU exceeds its
recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in
use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell,
an appropriate valuation model is used based on the discounted cash-flow model.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment
losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or cash-
generating unit’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in
the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The
reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying
amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior
years. Such reversal is recognised in the income statement unless the asset is carried at a revalued amount, in which case the
reversal is treated as a revaluation increase.

The Group has four cash-generating units which consist of the development and commercialization activities on its the
following products, C-Cure, C-Cathez, Heart-Xs and NKR-T. Indicators of impairment used by the Group are the pre-clinical
and clinical results obtained with the technology.
Cash and cash equivalents

Cash and cash equivalents in the statement of financial position comprise cash at banks and on hand and short-term
deposits with an original maturity of three months or less.

Financial assets

5.2.11.1 Classification

The Group classifies its financial assets in the following category: loans and receivables. The classification depends on the
purpose for which the financial assets were acquired. Management determines the classification of its financial assets at
initial recognition.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. They are included in current assets, except for maturities greater than 12 months after the end of the
reporting period. These are classified as non-current assets. The Group’s loans and receivables comprise “cash and cash
equivalents”, “short-term deposits”, “trade and other receivables” and ”Deposits”.

5.2.11.2 Initial recognition and measurement

All financial assets are recognised initially at fair value plus directly attributable transaction costs.

5.2.11.3 Subsequent measurement

After initial measurement, loans and receivables are subsequently measured at amortised cost using the effective interest
rate method (EIR), less impairment. Amortised cost is calculated by taking into account any discount or premium on
acquisition and fee or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the
income statement. The losses arising from impairment are recognised in the income statement.

5.2.11.4 Impairment of financial assets

The Group assesses at each reporting date whether there is any objective evidence that a financial asset or a group of
financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is
objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset
and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets
that can be reliably estimated.

CELYAD • FINANCIAL RESULTS 2016

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial
difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other
financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash
flows, such as changes in arrears or economic conditions that correlate with defaults.
Financial assets carried at amortised cost

For financial assets carried at amortised cost the Group first assesses individually whether objective evidence of impairment
exists individually for financial assets that are individually significant, or collectively for financial assets that are not
individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed
financial asset, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively
assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or
continues to be, recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has incurred, the amount of the loss is measured as the difference
between the asset’s carrying amount and the present value of estimated future cash flows.

The present value of the estimated future cash flows is discounted at the financial assets’ original effective interest rate. If a
loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate.

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is
recognised in the income statement. Interest income continues to be accrued on the reduced carrying amount and is
accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.
The interest income is recorded as part of finance income in the income statement. Loans together with the associated
allowance are written off when there is no realistic prospect of future recovery. If, in a subsequent year, the amount of the
estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the
previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is
later recovered, the recovery is credited to the income statement.

Financial liabilities

5.2.12.1 Classification

The Group’s financial liabilities include contingent consideration trade and other payables, bank overdrafts and loans and
borrowings. The Group classifies its financial liabilities in the following category: financial liabilities measured at amortised
cost using the effective interest method.

5.2.12.2 Initial recognition and measurement

All financial liabilities are recognised initially at fair value and in the case of loans and borrowings, plus directly attributable
transaction costs.

5.2.12.3 Subsequent measurement

The measurement of financial liabilities depends on their classification as follows:

Contingent consideration

The contingent consideration is recognized and measured at fair value at the acquisition date and classified as a long term
liability. After initial recognition, contingent consideration arrangements that are classified as liabilities are re-measured at
fair value with changes in fair value recognized in the income statement in accordance with IFRS 3 and IAS 39. Therefore,
contingent payments will not be eligible for capitalization but will simply reduce the contingent consideration liability.

Details regarding the valuation of the contingent consideration are disclosed in Note 5.13.2.
Trade payables and other payables

After initial recognition, trade payables and other payables are measured at amortised cost using the effective interest
method.
Loans and borrowings

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the
effective interest rate method. Gains and losses are recognised in the income statement when the liabilities are
derecognised.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fee or costs that are an
integral part of the EIR. The EIR amortisation is included in finance expense in the income statement.

5.2.12.4 Derecognition

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms
of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original

liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the

income statement.

Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is

probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable

estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed,

for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the

reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any

reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate

that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due

to the passage of time is recognised as a finance cost.

On July 8, 2016, following the unsuccessful outcome of the conciliation procedure organized under Swiss laws, a Swiss

company named AtonRâ Partners SA has formalized its claim against us before the Tribunal of First Instance of Geneva

(Switzerland). AtonRâ Partners SA claims the payment of respectively 95.250 EUR and 300.300 USD as alleged broker

intermediary commissions in the context of our fund raising of 3 March 2015 and our Initial Public Offering (IPO) on the

NASDAQ on 18 June 2015. We fully contest the merits of the claim and the jurisdiction of the Tribunal as Atonrâ was not a

party of the bank syndicate of these two placements. The procedure is pending and the Tribunal has not fixed the judgment

date. The decision is subject to appeal in accordance with Swiss laws. No accrual is booked as of December 31, 2016 on this

claim.

5.2.13.1 Employee benefits

Defined contribution plan

The Group operates a pension plan which requires contributions to be made by the Group to an insurance company. The

pension plans is classified as a defined contribution plan. A defined contribution plan is a pension plan under which the Group

pays fixed contributions per employee into a separate fund. The Group has no legal or constructive obligations to pay further

contributions if the fund does not hold sufficient assets to pay all employees the benefits they are entitled to under the

existing schemes.

However, because of the Belgian legislation applicable to 2nd pillar pension plans (so-called "Law Vandenbroucke"), all

Belgian defined contribution plans have to be considered under IFRS as defined benefit plans. Law Vandenbroucke states

that in the context of defined contribution plans, the employer must guarantee a minimum return of 3.75% on employee

contributions and 3.25% on employer contributions. Because of this minimum guaranteed return for defined contributions

plans in Belgium, the employer is exposed to a financial risk (there is a legal obligation to pay further contributions if the fund

does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods).

Prior to 2014, the Group did not apply the defined benefit accounting for these plans because higher discount rates were

applicable and the return on plan assets provided by the insurance company was sufficient to cover the minimum guaranteed

return. As a result of continuous low interest rates offered by the European financial markets, in 2014 Celyad has decided to

measure and account for the potential impact of defined benefit accounting for these pension plans with a minimum fixed

guaranteed return because of the higher financial risk related to these plans than in the past. The prior year financial

statements were not revised due to such effect not being material.

The Group has calculated the provision for employee benefit pension plans with the assistance of an independent third-party

actuarial firm The calculation is based on the projected unit credit method.

The liability recognized in the balance sheet in respect of the pension plans is the present value of the defined benefit

obligation at the end of the reporting period less the fair value of plan assets. The present value of the defined benefit

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 obligation.

The current service cost of the defined benefit plan, recognized in the income statement as part of the operating costs,

reflects the increase in the defined benefit obligation resulting from employee service in the current year, benefit changes,

curtailments and settlements.

Past-service costs are recognized immediately in the income statement.

The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the

fair value of plan assets. This cost is included in the operating costs in the income statement.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited

to other comprehensive income in the period in which they arise.

Short term benefits

Short-term employee benefits are those expected to be settled wholly before twelve months after the end of the annual

reporting period during which employee services are rendered, but do not include termination benefits such as wages,

salaries, profit-sharing and bonuses and non-monetary benefits paid to current employees.

CELYAD • FINANCIAL RESULTS 2016

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial

difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other

financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash

flows, such as changes in arrears or economic conditions that correlate with defaults.

Financial assets carried at amortised cost

For financial assets carried at amortised cost the Group first assesses individually whether objective evidence of impairment

exists individually for financial assets that are individually significant, or collectively for financial assets that are not

individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed

financial asset, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively

assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or

continues to be, recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has incurred, the amount of the loss is measured as the difference

between the asset’s carrying amount and the present value of estimated future cash flows.

The present value of the estimated future cash flows is discounted at the financial assets’ original effective interest rate. If a

loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate.

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is

recognised in the income statement. Interest income continues to be accrued on the reduced carrying amount and is

accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

The interest income is recorded as part of finance income in the income statement. Loans together with the associated

allowance are written off when there is no realistic prospect of future recovery. If, in a subsequent year, the amount of the

estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the

previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is

later recovered, the recovery is credited to the income statement.

The Group’s financial liabilities include contingent consideration trade and other payables, bank overdrafts and loans and

borrowings. The Group classifies its financial liabilities in the following category: financial liabilities measured at amortised

Financial liabilities

5.2.12.1 Classification

cost using the effective interest method.

5.2.12.2 Initial recognition and measurement

transaction costs.

5.2.12.3 Subsequent measurement

Contingent consideration

All financial liabilities are recognised initially at fair value and in the case of loans and borrowings, plus directly attributable

The measurement of financial liabilities depends on their classification as follows:

The contingent consideration is recognized and measured at fair value at the acquisition date and classified as a long term

liability. After initial recognition, contingent consideration arrangements that are classified as liabilities are re-measured at

fair value with changes in fair value recognized in the income statement in accordance with IFRS 3 and IAS 39. Therefore,

contingent payments will not be eligible for capitalization but will simply reduce the contingent consideration liability.

Details regarding the valuation of the contingent consideration are disclosed in Note 5.13.2.

Trade payables and other payables

After initial recognition, trade payables and other payables are measured at amortised cost using the effective interest

method.

Loans and borrowings

derecognised.

5.2.12.4 Derecognition

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the

effective interest rate method. Gains and losses are recognised in the income statement when the liabilities are

Amortised cost is calculated by taking into account any discount or premium on acquisition and fee or costs that are an

integral part of the EIR. The EIR amortisation is included in finance expense in the income statement.

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms

of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original

liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the
income statement.

Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed,
for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the
reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any
reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate
that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due
to the passage of time is recognised as a finance cost.

On July 8, 2016, following the unsuccessful outcome of the conciliation procedure organized under Swiss laws, a Swiss
company named AtonRâ Partners SA has formalized its claim against us before the Tribunal of First Instance of Geneva
(Switzerland). AtonRâ Partners SA claims the payment of respectively 95.250 EUR and 300.300 USD as alleged broker
intermediary commissions in the context of our fund raising of 3 March 2015 and our Initial Public Offering (IPO) on the
NASDAQ on 18 June 2015. We fully contest the merits of the claim and the jurisdiction of the Tribunal as Atonrâ was not a
party of the bank syndicate of these two placements. The procedure is pending and the Tribunal has not fixed the judgment
date. The decision is subject to appeal in accordance with Swiss laws. No accrual is booked as of December 31, 2016 on this
claim.

5.2.13.1 Employee benefits
Defined contribution plan

The Group operates a pension plan which requires contributions to be made by the Group to an insurance company. The
pension plans is classified as a defined contribution plan. A defined contribution plan is a pension plan under which the Group
pays fixed contributions per employee into a separate fund. The Group has no legal or constructive obligations to pay further
contributions if the fund does not hold sufficient assets to pay all employees the benefits they are entitled to under the
existing schemes.

However, because of the Belgian legislation applicable to 2nd pillar pension plans (so-called "Law Vandenbroucke"), all
Belgian defined contribution plans have to be considered under IFRS as defined benefit plans. Law Vandenbroucke states
that in the context of defined contribution plans, the employer must guarantee a minimum return of 3.75% on employee
contributions and 3.25% on employer contributions. Because of this minimum guaranteed return for defined contributions
plans in Belgium, the employer is exposed to a financial risk (there is a legal obligation to pay further contributions if the fund
does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods).

Prior to 2014, the Group did not apply the defined benefit accounting for these plans because higher discount rates were
applicable and the return on plan assets provided by the insurance company was sufficient to cover the minimum guaranteed
return. As a result of continuous low interest rates offered by the European financial markets, in 2014 Celyad has decided to
measure and account for the potential impact of defined benefit accounting for these pension plans with a minimum fixed
guaranteed return because of the higher financial risk related to these plans than in the past. The prior year financial
statements were not revised due to such effect not being material.

The Group has calculated the provision for employee benefit pension plans with the assistance of an independent third-party
actuarial firm The calculation is based on the projected unit credit method.

The liability recognized in the balance sheet in respect of the pension plans is the present value of the defined benefit
obligation at the end of the reporting period less the fair value of plan assets. The present value of the defined benefit
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 obligation.

The current service cost of the defined benefit plan, recognized in the income statement as part of the operating costs,
reflects the increase in the defined benefit obligation resulting from employee service in the current year, benefit changes,
curtailments and settlements.

Past-service costs are recognized immediately in the income statement.

The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the
fair value of plan assets. This cost is included in the operating costs in the income statement.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited
to other comprehensive income in the period in which they arise.
Short term benefits

Short-term employee benefits are those expected to be settled wholly before twelve months after the end of the annual
reporting period during which employee services are rendered, but do not include termination benefits such as wages,
salaries, profit-sharing and bonuses and non-monetary benefits paid to current employees.

CELYAD • FINANCIAL RESULTS 2016

The undiscounted amount of the benefits expected to be paid in respect of service rendered by employees in an accounting
period is recognised in that period. The expected cost of short-term compensated absences is recognised as the employees
render service that increases their entitlement or, in the case of non-accumulating absences, when the absences occur, and
includes any additional amounts an entity expects to pay as a result of unused entitlements at the end of the period.
Share-based payments

Certain employees, managers and members of the Board of Directors of the Group receive remuneration, as compensation
for services rendered, in the form of share-based payments. It concerns “equity-settled” share-based payments.
Measurement

The cost of equity-settled share-based payments is measured by reference to the fair value at the date on which they are
granted. The fair value is determined by using an appropriate pricing model, further details are given in the Note 5.15.
Recognition

The cost of equity-settled share-based payments is recognised, together with a corresponding increase in equity, over the
period in which the service conditions are fulfilled. The cumulative expense recognised for equity-settled transactions at
each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best
estimate of the number of equity instruments that will ultimately vest.

The expense or credit for a period accounted for in the income statement represents the movement in cumulative expense
recognised as of the beginning and end of that period.
Modification

Where the terms of an equity-settled transaction award are modified, the minimum expense recognised is the expense as if
the terms had not been modified, if the original terms of the award were met. An additional expense is recognised for any
modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the
employee as measured at the date of modification.
Cancellation

An equity-settled award can be cancelled with the departure of a beneficiary before the end of the vesting period, or
cancelled and replaced by a new equity settled award. Where an equity-settled award is cancelled, the previously recognised
expenses is offset directly in the equity of the Group and credited against the retained earnings. However, if a new award is
substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and
new awards are treated as if they were a modification of the original award, as described in the previous paragraph. All
cancellations of equity-settled transaction awards are treated equally.

Taxes

Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive
income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity,
respectively.
Deferred tax

Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of
assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

• Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a
transaction that is not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss;
In respect of taxable temporary differences associated with investments in subsidiaries, associates and
interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled
and it is probable that the temporary differences will not reverse in the foreseeable future.

•

Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused
tax losses(except if the deferred tax asset arises from the initial recognition of an asset or liability in a transaction other than
a business combination and that, at the time of the transaction affects neither accounting nor taxable profit or loss), to the
extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the
carry forward of unused tax credits and unused tax losses can be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is not
probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised
deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that
future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is
realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the
reporting date.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets

against current income tax liabilities and the deferred taxes relate to income taxes levied by the same taxation authority or

either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Earnings (loss) per share

period.

The basic net profit/(loss) per share is calculated based on the weighted average number of shares outstanding during the

The diluted net profit/(loss) per share is calculated based on the weighted average number of shares outstanding including

the dilutive effect of potentially dilutive ordinary shares such as warrants and convertible debts. Potentially dilutive ordinary

shares should be included in diluted earnings (loss) per share when and only when their conversion to ordinary shares would

decrease the net profit per share (or increase net loss per share).

5.3

Risk Management

Financial risk factors

Interest rate risk

Credit risk

The interest rate risk is very limited as the Group has only a limited amount of finance leases and no outstanding loans. So far,

because of the materiality of the exposure, the Group did not enter into any interest hedging arrangements.

Seen the limited amount of trade receivables due to the fact that sales to third parties are not significant, credit risk arises

mainly from cash and cash equivalents and deposits with banks and financial institutions. The Group only works with

international reputable commercial banks and financial institutions.

Foreign exchange risk

The Group is exposed to foreign exchange risk as certain collaborations or supply agreements of raw materials are

denominated in USD. Moreover, the Group has also investments in foreign operations, whose net assets are exposed to

foreign currency translation risk (USD). So far, because of the materiality of the exposure, the Group did not enter into any

currency hedging arrangements. No sensitivity has been performed on the foreign exchange risk as up till now this risk is still

considered as immaterial by the Group.

Liquidity risk

The Group monitors its risk to a shortage of funds using a recurring liquidity planning tool.

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank deposit

and finance leases.

The Group is exposed to liabilities and contingent liabilities as a result of the RCAs it has received from the Walloon

Government. Out of the RCAs contracted as of 31 December 2016, €21.2 million has been effectively paid out.

In 2017 and 2018, the Group will have to make an exploitation decision on the remaining RCAs (Agreement 5951, 7246 and

7502) with a potential recognition of an additional liability of €4.9 million based on the contractual values.

We refer to Note 5.19 for an analysis of the Group’s non-derivative financial liabilities into relevant maturity groupings based

on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are

the contractual undiscounted cash flows.

Capital management

The Group’s objectives when managing capital are to safeguard Celyad’ ability to continue as a going concern in order to

provide returns for shareholders and benefits for other stakeholders and to maintain an adequate structure to limit to costs

of capital.

5.4

Critical accounting estimates and judgments

The preparation of the Group’s financial statements requires management to make judgments, estimates and assumptions

that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at

the end of the reporting period.

Estimates and judgements 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. Uncertainty about these

assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset

or liability affected in future periods.

In the process of applying the Group’s accounting policies, management has made judgments and has used 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 within the next financial year are addressed below.

CELYAD • FINANCIAL RESULTS 2016

The undiscounted amount of the benefits expected to be paid in respect of service rendered by employees in an accounting

period is recognised in that period. The expected cost of short-term compensated absences is recognised as the employees

render service that increases their entitlement or, in the case of non-accumulating absences, when the absences occur, and

includes any additional amounts an entity expects to pay as a result of unused entitlements at the end of the period.

Share-based payments

Measurement

Recognition

Certain employees, managers and members of the Board of Directors of the Group receive remuneration, as compensation

for services rendered, in the form of share-based payments. It concerns “equity-settled” share-based payments.

The cost of equity-settled share-based payments is measured by reference to the fair value at the date on which they are

granted. The fair value is determined by using an appropriate pricing model, further details are given in the Note 5.15.

The cost of equity-settled share-based payments is recognised, together with a corresponding increase in equity, over the

period in which the service conditions are fulfilled. The cumulative expense recognised for equity-settled transactions at

each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best

estimate of the number of equity instruments that will ultimately vest.

The expense or credit for a period accounted for in the income statement represents the movement in cumulative expense

recognised as of the beginning and end of that period.

Modification

Where the terms of an equity-settled transaction award are modified, the minimum expense recognised is the expense as if

the terms had not been modified, if the original terms of the award were met. An additional expense is recognised for any

modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the

employee as measured at the date of modification.

Cancellation

An equity-settled award can be cancelled with the departure of a beneficiary before the end of the vesting period, or

cancelled and replaced by a new equity settled award. Where an equity-settled award is cancelled, the previously recognised

expenses is offset directly in the equity of the Group and credited against the retained earnings. However, if a new award is

substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and

new awards are treated as if they were a modification of the original award, as described in the previous paragraph. All

cancellations of equity-settled transaction awards are treated equally.

Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive

income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity,

Taxes

respectively.

Deferred tax

Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of

assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

• Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a

transaction that is not a business combination and, at the time of the transaction, affects neither the

accounting profit nor taxable profit or loss;

•

In respect of taxable temporary differences associated with investments in subsidiaries, associates and

interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled

and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused

tax losses(except if the deferred tax asset arises from the initial recognition of an asset or liability in a transaction other than

a business combination and that, at the time of the transaction affects neither accounting nor taxable profit or loss), to the

extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the

carry forward of unused tax credits and unused tax losses can be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is not

probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised

deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that

future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is

realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the

reporting date.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets
against current income tax liabilities and the deferred taxes relate to income taxes levied by the same taxation authority or
either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Earnings (loss) per share

The basic net profit/(loss) per share is calculated based on the weighted average number of shares outstanding during the
period.

The diluted net profit/(loss) per share is calculated based on the weighted average number of shares outstanding including
the dilutive effect of potentially dilutive ordinary shares such as warrants and convertible debts. Potentially dilutive ordinary
shares should be included in diluted earnings (loss) per share when and only when their conversion to ordinary shares would
decrease the net profit per share (or increase net loss per share).
5.3
Financial risk factors
Interest rate risk

Risk Management

The interest rate risk is very limited as the Group has only a limited amount of finance leases and no outstanding loans. So far,
because of the materiality of the exposure, the Group did not enter into any interest hedging arrangements.
Credit risk

Seen the limited amount of trade receivables due to the fact that sales to third parties are not significant, credit risk arises
mainly from cash and cash equivalents and deposits with banks and financial institutions. The Group only works with
international reputable commercial banks and financial institutions.
Foreign exchange risk

The Group is exposed to foreign exchange risk as certain collaborations or supply agreements of raw materials are
denominated in USD. Moreover, the Group has also investments in foreign operations, whose net assets are exposed to
foreign currency translation risk (USD). So far, because of the materiality of the exposure, the Group did not enter into any
currency hedging arrangements. No sensitivity has been performed on the foreign exchange risk as up till now this risk is still
considered as immaterial by the Group.
Liquidity risk

The Group monitors its risk to a shortage of funds using a recurring liquidity planning tool.

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank deposit
and finance leases.

The Group is exposed to liabilities and contingent liabilities as a result of the RCAs it has received from the Walloon
Government. Out of the RCAs contracted as of 31 December 2016, €21.2 million has been effectively paid out.

In 2017 and 2018, the Group will have to make an exploitation decision on the remaining RCAs (Agreement 5951, 7246 and
7502) with a potential recognition of an additional liability of €4.9 million based on the contractual values.

We refer to Note 5.19 for an analysis of the Group’s non-derivative financial liabilities into relevant maturity groupings based
on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are
the contractual undiscounted cash flows.
Capital management

The Group’s objectives when managing capital are to safeguard Celyad’ ability to continue as a going concern in order to
provide returns for shareholders and benefits for other stakeholders and to maintain an adequate structure to limit to costs
of capital.
5.4

Critical accounting estimates and judgments

The preparation of the Group’s financial statements requires management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at
the end of the reporting period.

Estimates and judgements 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. Uncertainty about these
assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset
or liability affected in future periods.

In the process of applying the Group’s accounting policies, management has made judgments and has used 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 within the next financial year are addressed below.

CELYAD • FINANCIAL RESULTS 2016

Advances received from the Walloon Region: recognition of a contingent liability

Contingent consideration provisions

Change in accounting policy - RCA accounting

Following the IFRS IC interpretation rejection regarding IAS 20 ‘Accounting for Government Grants and Disclosure for
Government Assistance – Accounting for repayable cash receipt’ issued in May 2016, Celyad decided to change its
accounting policy regarding its RCAs. The IFRS IC has concluded that contingently repayable cash received from a
government to finance a research and development (R&D) project is a financial liability under IAS 39 ’Financial Instruments:
Recognition and Measurement’. The liability should be initially recognised at fair value and any difference between, the cash
received and the fair value of the liability should be considered as a government grant, accounted for under IAS 20,
‘Government Grants’.

Previously, Celyad accounted for RCAs as government grant under IAS 20 which resulted in all cash received to be recorded
as operating income. A provision for cash repayable was recognised under IAS 37 when Celyad notified the Walloon Region of
its decision to exploit the outcome of the research financed.

Given the clarification issued by IFRS IC, Celyad has decided to amend its accounting policy in respect of cash advance
received from the Walloon Region which are now considered, at inception, as a financial liability that should be recognised in
accordance with IAS 39. In that context, Celyad has also chosen the fair value option for subsequent measurement of RCAs
on the basis that all RCAs financial liabilities are managed on a fair value basis.

Such change in accounting policy requires the restatement of comparative figures. In this regards, Celyad has performed the
valuation of the financial liability at 31 December 2015 and at 31 December 2016 based on assumptions regarding the
probability of success for respective projects that existed as at those dates without hindsight. The assumptions included the
estimation of the timing and the probability of successful commercialisation of the R&D results. In accordance with the RCA
agreements, the following two components were assessed when calculating estimated future cash flows:

•
•

30% of the initial RCA is repayable when the company exploit the outcome of the research financed, and
The remaining amount is repayable based on future sales milestones and the actual cash paid-out might range from
50% to 200% of the initial RCA, including interest depending on RCA agreement.

Estimated future cash flows are discounted to their present value using discount rates ranging from 1.5 % to 12.5 % that
reflect relevant risks related to each cash flow at 31 December 2015 and at 31 December 2016.

The financial liability of the comparative period has been computed and found as not materially different from the previous
provision recorded under IAS 37 for advances repayable as at 31 December 2015. Consequently, there is no restatement for
comparative figures and a reclassification from provision to financial liability has been made.

As per this clarification paper, RCA’s should be recognised as a financial liability in accordance with IFRS9/IAS 39. The
Company applied the recommended accounting treatment retrospectively as of 31 December 2015 and no material
difference was observed compared to the previous accounting treatment applied by the Company. Therefore, no
restatement of the consolidated financial position of the group is required as per IAS 8.

Advances received from the Walloon Region only become contingently reimbursable if the Company notifies the Region of
its decision to exploit the outcome of the research program funded with the advances received. At the end of this research
phase, the Group should, within a period of six months, decide whether or not to exploit the results of the research programs
(‘decision phase’). In the event the Group decides to exploit the results under an RCA, the relevant RCA becomes
contingently repayable to the Walloon Region and the Company determines its liability under IAS 39. When a contingent
liability is recognised, estimates are required to determine the discount rate used to calculate the present value of those
contingent liabilities as well as the determination of the estimated cash flows.

The reimbursements of the RCAs to the Walloon Region consist of two elements, i.e., sales-dependent reimbursements (a
percentage of sales) and sales-independent reimbursements (an annual lump-sum). For more information we refer to Note
4.18.
Measurement of non-financial assets

Non current non financial assets are subject to impairment testing if the Group believes there are material facts of evidences
that justify such measurement. Measuring the fair value of a non financial assets requires judgement and estimates by
management. These estimates could change substantially over time as new facts emerge or new strategies are taken by the
Group. Further details are contained in Note 5.6.
Business combinations

In respect of acquired businesses by the Group, significant judgement is made to determine whether these acquisitions are
to be considered as an asset deal or as a business combination. Determining whether a particular set of assets and activities
is a business should be based on whether the integrated set is capable of being conducted and managed as a business by a
market participant. Moreover, management judgement is particularly involved in the recognition and fair value measurement
of the acquired assets, liabilities, contingent liabilities and contingent consideration. In making this assessment management
considers the underlying economic substance of the items concerned in addition to the contractual terms. For more
information, we refer to Note 5.13.

The Group makes provision for the estimated fair value of contingent consideration arrangements arising from business

combinations (see Note 5.13). The estimated amounts are the expected payments, determined by considering the possible

scenarios of forecast sales and other performance criteria, the amount to be paid under each scenario, and the probability of

each scenario, which is then discounted to a net present value. The estimates could change substantially over time as new

facts emerge and each scenario develops.

Deferred Tax Assets

Deferred tax assets for unused tax losses are recognised to the extent that it is probable that taxable profit will be available

against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred

tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax

planning strategies. Further details are contained in Note 5.21.

Share-based payment transactions

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity

instruments at the date at which they are granted. Estimating fair value for share-based payment transactions requires

determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This

estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the

share option, volatility and dividend yield and making assumptions about them. The assumptions and models used for

estimating fair value for share-based payment transactions are disclosed in Note 5.15.

5.5

Operating segment information

The chief operating decision-maker (“CODM”), who is responsible for allocating resources and assessing performance of the

Group, has been identified as the Board of Directors that makes strategic decisions.

In 2015, the management and the CODM have determined that as from 2015, there are two operating segments,

respectively the cardiology segment, regrouping the Cardiopoiesis platform, the Corquest platform and C-Cathez, and the

immuno-oncology segment regrouping all assets developed based on the platform acquired from Oncyte LLC.

Although the Group is currently active in Europe and in the US, no geographical financial information is currently available

given the fact that the core operations are currently still in a study phase. No disaggregated information on product level or

geographical level or any other level is currently existing and hence also not considered by the Board for assessing

performance or allocating resources.

CODM is not reviewing assets by segments, hence no segment information per assets is disclosed. As per 31 December

2016, all of the Group non-current assets are located in Belgium, except (i) the Corquest intellectual property, valued at €1,5

million which is located in the US, (ii) the goodwill and IPRD of Oncyte also located in the US and (iii) the leasehold

improvements made in the offices of Celyad Inc located in Boston, USA.

During 2015, marginal revenues were generated from external customers. All revenues generated relate to sales of C-

Cathez to a limited number of customers located in the US.

€ '000

For the year at end of 2015

Cardiology

Corporate

Group Total

Immuno-

oncology

Research & Development expenses

(20,634)

(2,132)

Revenue

Cost of Sales

Gross Profit

General & Administrative expenses

Other operating Income & Charges

Operating Profit (Loss)

Net Financial Charges

equity method

Profit (Loss) before taxes

Income Taxes

Share of Loss of investments accounted for using the

(1)

218

104

(7,230)

306

252

(22,766)

(7,230)

(1)

322

306

252

(20,414)

(2,028)

(6,672)

(29,114)

(20,414)

(2,028)

(7,230)

(29,672)

Profit (Loss) for the year 2015

(20,414)

(2,028)

(6,672))

(29.114)

In August 2016, the Group has received a non-refundable upfront payment as a result of the ONO agreement. This upfront

payment has been fully recognised upon receipt as there are no performance obligations nor subsequent deliverables

associated to the payment. The non-refundable upfront payment was rather received as a consideration for the sale of

licence to ONO. In 2016, the total revenue generated through sales of C-Cathez was € 0.1 million.All revenues generated

relate to sales of C-Cathez to a limited number of customers located in the US.

CELYAD • FINANCIAL RESULTS 2016

Advances received from the Walloon Region: recognition of a contingent liability

Contingent consideration provisions

The Group makes provision for the estimated fair value of contingent consideration arrangements arising from business
combinations (see Note 5.13). The estimated amounts are the expected payments, determined by considering the possible
scenarios of forecast sales and other performance criteria, the amount to be paid under each scenario, and the probability of
each scenario, which is then discounted to a net present value. The estimates could change substantially over time as new
facts emerge and each scenario develops.
Deferred Tax Assets

Deferred tax assets for unused tax losses are recognised to the extent that it is probable that taxable profit will be available
against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred
tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax
planning strategies. Further details are contained in Note 5.21.
Share-based payment transactions

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity
instruments at the date at which they are granted. Estimating fair value for share-based payment transactions requires
determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This
estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the
share option, volatility and dividend yield and making assumptions about them. The assumptions and models used for
estimating fair value for share-based payment transactions are disclosed in Note 5.15.
5.5

Operating segment information

The chief operating decision-maker (“CODM”), who is responsible for allocating resources and assessing performance of the
Group, has been identified as the Board of Directors that makes strategic decisions.

In 2015, the management and the CODM have determined that as from 2015, there are two operating segments,
respectively the cardiology segment, regrouping the Cardiopoiesis platform, the Corquest platform and C-Cathez, and the
immuno-oncology segment regrouping all assets developed based on the platform acquired from Oncyte LLC.

Although the Group is currently active in Europe and in the US, no geographical financial information is currently available
given the fact that the core operations are currently still in a study phase. No disaggregated information on product level or
geographical level or any other level is currently existing and hence also not considered by the Board for assessing
performance or allocating resources.

CODM is not reviewing assets by segments, hence no segment information per assets is disclosed. As per 31 December
2016, all of the Group non-current assets are located in Belgium, except (i) the Corquest intellectual property, valued at €1,5
million which is located in the US, (ii) the goodwill and IPRD of Oncyte also located in the US and (iii) the leasehold
improvements made in the offices of Celyad Inc located in Boston, USA.

During 2015, marginal revenues were generated from external customers. All revenues generated relate to sales of C-
Cathez to a limited number of customers located in the US.

Change in accounting policy - RCA accounting

Following the IFRS IC interpretation rejection regarding IAS 20 ‘Accounting for Government Grants and Disclosure for

Government Assistance – Accounting for repayable cash receipt’ issued in May 2016, Celyad decided to change its

accounting policy regarding its RCAs. The IFRS IC has concluded that contingently repayable cash received from a

government to finance a research and development (R&D) project is a financial liability under IAS 39 ’Financial Instruments:

Recognition and Measurement’. The liability should be initially recognised at fair value and any difference between, the cash

received and the fair value of the liability should be considered as a government grant, accounted for under IAS 20,

‘Government Grants’.

Previously, Celyad accounted for RCAs as government grant under IAS 20 which resulted in all cash received to be recorded

as operating income. A provision for cash repayable was recognised under IAS 37 when Celyad notified the Walloon Region of

its decision to exploit the outcome of the research financed.

Given the clarification issued by IFRS IC, Celyad has decided to amend its accounting policy in respect of cash advance

received from the Walloon Region which are now considered, at inception, as a financial liability that should be recognised in

accordance with IAS 39. In that context, Celyad has also chosen the fair value option for subsequent measurement of RCAs

on the basis that all RCAs financial liabilities are managed on a fair value basis.

Such change in accounting policy requires the restatement of comparative figures. In this regards, Celyad has performed the

valuation of the financial liability at 31 December 2015 and at 31 December 2016 based on assumptions regarding the

probability of success for respective projects that existed as at those dates without hindsight. The assumptions included the

estimation of the timing and the probability of successful commercialisation of the R&D results. In accordance with the RCA

agreements, the following two components were assessed when calculating estimated future cash flows:

•

30% of the initial RCA is repayable when the company exploit the outcome of the research financed, and

The remaining amount is repayable based on future sales milestones and the actual cash paid-out might range from

50% to 200% of the initial RCA, including interest depending on RCA agreement.

Estimated future cash flows are discounted to their present value using discount rates ranging from 1.5 % to 12.5 % that

reflect relevant risks related to each cash flow at 31 December 2015 and at 31 December 2016.

The financial liability of the comparative period has been computed and found as not materially different from the previous

provision recorded under IAS 37 for advances repayable as at 31 December 2015. Consequently, there is no restatement for

comparative figures and a reclassification from provision to financial liability has been made.

As per this clarification paper, RCA’s should be recognised as a financial liability in accordance with IFRS9/IAS 39. The

Company applied the recommended accounting treatment retrospectively as of 31 December 2015 and no material

difference was observed compared to the previous accounting treatment applied by the Company. Therefore, no

restatement of the consolidated financial position of the group is required as per IAS 8.

Advances received from the Walloon Region only become contingently reimbursable if the Company notifies the Region of

its decision to exploit the outcome of the research program funded with the advances received. At the end of this research

phase, the Group should, within a period of six months, decide whether or not to exploit the results of the research programs

(‘decision phase’). In the event the Group decides to exploit the results under an RCA, the relevant RCA becomes

contingently repayable to the Walloon Region and the Company determines its liability under IAS 39. When a contingent

liability is recognised, estimates are required to determine the discount rate used to calculate the present value of those

contingent liabilities as well as the determination of the estimated cash flows.

The reimbursements of the RCAs to the Walloon Region consist of two elements, i.e., sales-dependent reimbursements (a

percentage of sales) and sales-independent reimbursements (an annual lump-sum). For more information we refer to Note

4.18.

Measurement of non-financial assets

Group. Further details are contained in Note 5.6.

Business combinations

Non current non financial assets are subject to impairment testing if the Group believes there are material facts of evidences

that justify such measurement. Measuring the fair value of a non financial assets requires judgement and estimates by

management. These estimates could change substantially over time as new facts emerge or new strategies are taken by the

In respect of acquired businesses by the Group, significant judgement is made to determine whether these acquisitions are

to be considered as an asset deal or as a business combination. Determining whether a particular set of assets and activities

is a business should be based on whether the integrated set is capable of being conducted and managed as a business by a

market participant. Moreover, management judgement is particularly involved in the recognition and fair value measurement

of the acquired assets, liabilities, contingent liabilities and contingent consideration. In making this assessment management

considers the underlying economic substance of the items concerned in addition to the contractual terms. For more

information, we refer to Note 5.13.

Operating Profit (Loss)

(20,414)

(2,028)

(7,230)

(29,672)

Net Financial Charges
Share of Loss of investments accounted for using the
equity method

306

252

306

252

Profit (Loss) before taxes

Income Taxes

(20,414)

(2,028)

(6,672)

(29,114)

Profit (Loss) for the year 2015

(20,414)

(2,028)

(6,672))

(29.114)

In August 2016, the Group has received a non-refundable upfront payment as a result of the ONO agreement. This upfront
payment has been fully recognised upon receipt as there are no performance obligations nor subsequent deliverables
associated to the payment. The non-refundable upfront payment was rather received as a consideration for the sale of
licence to ONO. In 2016, the total revenue generated through sales of C-Cathez was € 0.1 million.All revenues generated
relate to sales of C-Cathez to a limited number of customers located in the US.

Research & Development expenses

(20,634)

(2,132)

General & Administrative expenses

Other operating Income & Charges

218

104

(7,230)

For the year at end of 2015

Cardiology

Immuno-
oncology

Corporate

Group Total

(1)

€ '000

Revenue

Cost of Sales

Gross Profit

(1)

(22,766)

(7,230)

322

CELYAD • FINANCIAL RESULTS 2016

€ '000

Revenues

Cost of Sales

Gross Profit

Research & Development expenses

General & Administrative expenses

Other operating Income & Charges

Operating Profit (Loss)

Net Financial Charges

Profit (Loss) before taxes

Income Taxes

Profit (Loss) for the year 2016

5.6 Intangible assets

The intangible assets are broken down as follow:

For the year at end of 2016
Immuno-
oncology

Corporate

Group Total

Cardiology

(53)

(12,704)

1,540

(11,133)

8,440

8,440-

(14,971)

1,800

(4,731)

(11,133)

(4,731)

8,523

(53)

8,471

(27,675)

(9,744)

3,340

(25,609)

1,997

(23,612)

(9,744)

1,997

(7,747)

(11,133)

(4,731)

(7,742)

(23,606)

(€'000)

Cost:

At 1 January 2015

Additions

Goodwill

In-process
research and
development

Development
costs

Patents, licences,
trademarks

Software

Total

1,057

13,337

110

Acquisition of Oncyte LLC

1,003

38,254

Divestiture

At 31 December 2015

1,003

38,254

1,084

13,337

Additions

Currency translation adjustements

1,401

Divestiture

(3)

107

14,504

39,257

(3)

53,785

1,438

At 31 December 2016

1,040

39,655

1,084

13,337

203

55,318

Accumated amortisation

At 1 January 2015

Amortisation charge

At 31 December 2015

Amortisation charge

Divestiture

At 31 December 2016

Net book value

Cost

Accumulated amortisation

As at 31 December 2015

Cost

Accumulated amortisation

1,003

38,254

1,003

1,040

38,254

39,655

As at 31 December 2016

1,040

39,655

(146)

(66)

(212)

(66)

(4,023)

(675)

(4,698)

(675)

(69)

(19)

(85)

(15)

(4,238)

(760)

(4,995)

(756)

(279)

(5,373)

(100)

(5,752)

1,084

(213)

871

1,084

(279)

805

13,337

(4,698)

8,639

13,337

(5,373)

7,964

107

(85)

203

(100)

103

53,785

(4,995)

48,789

55,318

(5,752)

49,566

The capitalised development costs relate to the development of C-Cathez. Since May 2012 and the CE marking of C-Cathez,
the development costs of C-Cathez are capitalized and depreciated over the estimate residual intellectual property
protection as of the CE marking (14 and 15 years respectively in 2015 and 2014). No other development costs have been
capitalised up till now. All C-Cure and CAR-T NKR-2 related development costs have been assessed as not being eligible for
capitalisation and have therefore been recognised in the income statement as research and development expenses.
Software are amortized over a period of 3 to 5 years.

Goodwill, In-process R&DPatents, Licenses and Trademarks relate to the following items:

• Goodwill and In-process research and development resulted from the purchase price allocation exercise performed

after the acquisition of Oncyte LLC (cfr. Note 5.13.2). As of 31 December 2016, Goodwill and In-Process Research

and Development are not amortized.

• A licence, granted in August 2007 by Mayo Clinic (for an amount of k€9,500) upon the Group’s inception and an

extension to the licensed field of use, granted on 29 October 2010 for a total amount of k€2,344. The licence and its

extension are amortised straight line over a period of 20 years.

•

Patents acquired upon the acquisition of CorQuest LLC in November 2014. The fair value of these intellectual rights

was estimated at k€1,492 (cfr. Note 5.13.1). These patents are amortised over 18 years, corresponding to the

remaining intellectual property protection filed for the first patent application in 2012.

Management has not identified any impairment indicators in relation to the intangible assets as mentioned above. Therefore,

no impairment exercise was performed and hence no impairment losses were recognized.

Oncyte LLC goodwill and IPRD impairment test

Goodwill and In-process research and development (IPRD) exclusively relate to the acquisition of Oncyte LLC which was

acquired in 2015. The Group performed annual impairment test on goodwill and on 'indefinite lived asset' that are not

amortized in accordance with the accounting policies stated in Notes 5.2.6 and 5.2.9. The impairment test has been

performed at the level the CGU to which the goodwill and the IPRD belongs which represent the immuno-oncology segment.

The recoverable amount has been calculated based on value-in-use calculations which require the use of assumptions. The

calculations use cash flow projections based on 8-year period business plan based on probability of success of the CAR-T

NKR-2 products as well as extrapolations of projected cash flows resulting from the future expected sales associated with

CAR-T NKR-2. Recoverable values of the CGU exceeded its carrying amounts. Accordingly, no impairment loss was

recognized on goodwill nor on the IPRD intangible assets for the year ended 31 December 2016.

Management’s key assumptions about projected cash flows when determining value in use are as follows:

• Discount rate

•

Variance on Sales Price

17,5% (industry standard for product candidate in Phase I)

variance of 5 and 10% of the estimated product price

The sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. The following

table presents the sensitivity analyses of the recoverable amount of the CGU associated to Oncyte LLC:

Discount rate

17,5%

82%

91%

90%

95%

100%

20%

56%

63%

70%

22,5%

39%

44%

50%

Even at the lower sales price and higher discount rate, the recoverable value of the CGU exceeded its carrying amount as of

31 December 2016.

C-Cure impairment test

In June 2016, the clinical results of the CHART-1 European Phase III trial evaluating C-Cure® cell therapy did not meet its

primary endpoint. Consequently, in accordance with the Group’s policies described in Note5.2.9, the Group performed an

impairment test on the cash-generating unit (CGU) associated to the C-Cure products, including the Mayo licence. The

recoverable value of the CGU was determined based on a 15-year business plan based on probability of success of the C-

Cure products as well as extrapolations of projected cash flows resulting from the future expected sales associated with the

C-Cure products. The recoverable value of the CGU exceeded its carrying amount. Accordingly, no impairment loss was

recognized on the CGU related to C-Cure products for the year ended 31 December 2016.

Management’s main assumptions about projected cash flows when determining value in use of the CGU associated to C-

Cure products are as follows:

•

• Discount rate

the asset)

Estimated probability of success

55% (industry standard for product candidate in Phase III)

7% (management estimate based on clinical development stage of

Sensitivity analyses of the recoverable amount of the CGU associated to C-Cure products were calculated based on

reasonably possible changes to each key assumption without considering simultaneous changes to these key assumptions.

The following table presents the sensitivity analysis as follow:

CELYAD • FINANCIAL RESULTS 2016

For the year at end of 2016

Cardiology

Corporate

Group Total

Immuno-

oncology

8,440

8,440-

(14,971)

1,800

(4,731)

(53)

(12,704)

1,540

(11,133)

8,523

(53)

8,471

(27,675)

(9,744)

3,340

(25,609)

1,997

(23,612)

(9,744)

1,997

(7,747)

(11,133)

(4,731)

(11,133)

(4,731)

(7,742)

(23,606)

€ '000

Revenues

Cost of Sales

Gross Profit

Research & Development expenses

General & Administrative expenses

Other operating Income & Charges

Operating Profit (Loss)

Net Financial Charges

Profit (Loss) before taxes

Income Taxes

Profit (Loss) for the year 2016

5.6 Intangible assets

(€'000)

Cost:

At 1 January 2015

Additions

Divestiture

Additions

Divestiture

Accumated amortisation

At 1 January 2015

Amortisation charge

At 31 December 2015

Amortisation charge

Divestiture

At 31 December 2016

Net book value

Cost

Accumulated amortisation

As at 31 December 2015

Cost

Accumulated amortisation

The intangible assets are broken down as follow:

Goodwill

In-process

Development

Patents, licences,

Software

Total

research and

development

costs

trademarks

13,337

110

14,504

Acquisition of Oncyte LLC

1,003

38,254

At 31 December 2015

1,003

38,254

1,084

13,337

Currency translation adjustements

1,401

At 31 December 2016

1,040

39,655

1,084

13,337

203

55,318

1,057

(146)

(66)

(212)

(66)

1,084

(213)

871

1,084

(279)

805

39,257

53,785

(3)

1,438

(4,238)

(760)

(4,995)

(756)

53,785

(4,995)

48,789

55,318

(5,752)

49,566

(3)

107

(69)

(19)

(85)

(15)

107

(85)

203

(100)

103

(4,023)

(675)

(4,698)

(675)

13,337

(4,698)

8,639

13,337

(5,373)

7,964

(279)

(5,373)

(100)

(5,752)

1,003

38,254

1,003

1,040

38,254

39,655

As at 31 December 2016

1,040

39,655

The capitalised development costs relate to the development of C-Cathez. Since May 2012 and the CE marking of C-Cathez,

the development costs of C-Cathez are capitalized and depreciated over the estimate residual intellectual property

protection as of the CE marking (14 and 15 years respectively in 2015 and 2014). No other development costs have been

capitalised up till now. All C-Cure and CAR-T NKR-2 related development costs have been assessed as not being eligible for

capitalisation and have therefore been recognised in the income statement as research and development expenses.

Software are amortized over a period of 3 to 5 years.

Goodwill, In-process R&DPatents, Licenses and Trademarks relate to the following items:

• Goodwill and In-process research and development resulted from the purchase price allocation exercise performed
after the acquisition of Oncyte LLC (cfr. Note 5.13.2). As of 31 December 2016, Goodwill and In-Process Research
and Development are not amortized.

• A licence, granted in August 2007 by Mayo Clinic (for an amount of k€9,500) upon the Group’s inception and an
extension to the licensed field of use, granted on 29 October 2010 for a total amount of k€2,344. The licence and its
extension are amortised straight line over a period of 20 years.
Patents acquired upon the acquisition of CorQuest LLC in November 2014. The fair value of these intellectual rights
was estimated at k€1,492 (cfr. Note 5.13.1). These patents are amortised over 18 years, corresponding to the
remaining intellectual property protection filed for the first patent application in 2012.

•

Management has not identified any impairment indicators in relation to the intangible assets as mentioned above. Therefore,
no impairment exercise was performed and hence no impairment losses were recognized.

Oncyte LLC goodwill and IPRD impairment test

Goodwill and In-process research and development (IPRD) exclusively relate to the acquisition of Oncyte LLC which was
acquired in 2015. The Group performed annual impairment test on goodwill and on 'indefinite lived asset' that are not
amortized in accordance with the accounting policies stated in Notes 5.2.6 and 5.2.9. The impairment test has been
performed at the level the CGU to which the goodwill and the IPRD belongs which represent the immuno-oncology segment.
The recoverable amount has been calculated based on value-in-use calculations which require the use of assumptions. The
calculations use cash flow projections based on 8-year period business plan based on probability of success of the CAR-T
NKR-2 products as well as extrapolations of projected cash flows resulting from the future expected sales associated with
CAR-T NKR-2. Recoverable values of the CGU exceeded its carrying amounts. Accordingly, no impairment loss was
recognized on goodwill nor on the IPRD intangible assets for the year ended 31 December 2016.

Management’s key assumptions about projected cash flows when determining value in use are as follows:

• Discount rate
•

Variance on Sales Price

17,5% (industry standard for product candidate in Phase I)
variance of 5 and 10% of the estimated product price

The sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. The following
table presents the sensitivity analyses of the recoverable amount of the CGU associated to Oncyte LLC:

e
c
i
r
P
e
a
S
n
o
e
c
n
a
i
r
a
V

Discount rate

17,5%

82%

91%

90%

95%

100%

20%

56%

63%

70%

22,5%

39%

44%

50%

Even at the lower sales price and higher discount rate, the recoverable value of the CGU exceeded its carrying amount as of
31 December 2016.

C-Cure impairment test

In June 2016, the clinical results of the CHART-1 European Phase III trial evaluating C-Cure® cell therapy did not meet its
primary endpoint. Consequently, in accordance with the Group’s policies described in Note5.2.9, the Group performed an
impairment test on the cash-generating unit (CGU) associated to the C-Cure products, including the Mayo licence. The
recoverable value of the CGU was determined based on a 15-year business plan based on probability of success of the C-
Cure products as well as extrapolations of projected cash flows resulting from the future expected sales associated with the
C-Cure products. The recoverable value of the CGU exceeded its carrying amount. Accordingly, no impairment loss was
recognized on the CGU related to C-Cure products for the year ended 31 December 2016.

Management’s main assumptions about projected cash flows when determining value in use of the CGU associated to C-
Cure products are as follows:

Estimated probability of success

•
• Discount rate
the asset)

55% (industry standard for product candidate in Phase III)
7% (management estimate based on clinical development stage of

Sensitivity analyses of the recoverable amount of the CGU associated to C-Cure products were calculated based on
reasonably possible changes to each key assumption without considering simultaneous changes to these key assumptions.
The following table presents the sensitivity analysis as follow:

CELYAD • FINANCIAL RESULTS 2016

s
s
e
c
c
u
s
f
o
y
t
i
l
i

b
a
b
o
r
P

25%

40%

55%

Discount rate

47%

73%

100%

11%

32%

50%

68%

15%

22%

35%

47%

Even at the lower probability of success and higher discount rate, the recoverable value of the CGU exceeded its carrying
amount as of 31 December 2016.
5.7

Property, plant and equipment

(€’000)

Cost:

At 1 January 2015

Additions

Disposals

At 31 December 2015

Additions

Acquisition of BMS SA

Disposals

At 31 December 2016

Accumulated depreciation:

At 1 January 2015

Depreciation charge (note 5.26)

Disposals

At 31 December 2015

Depreciation charge (note 5.26)

Acquisition of BMS SA

Disposals

At 31 December 2016

Net book value

Cost

Accumulated depreciation

As at 31 December 2015

Cost

Accumulated depreciation

As at 31 December 2016

Equipment

Furnitures

Leasehold

1,901

486

(12)

2,375

610

1,065

(51)

3,999

(1,346)

(255)

(1,589)

(380)

(790)

(2,752)

2,375

(1,589)

786

3,999

(2,752)

1,246

167

(17)

150

315

465

(167)

(150)

(33)

(184)

150

(150)

465

(184)

281

590

325

915

2,066

(34)

2,947

(547)

(18)

(565)

(347)

(912)

915

(565)

350

2,947

(912)

2,035

Total

2,658

811

(29)

3,440

2,990

1,065

(85)

7,410

(2,060)

(273)

(2,304)

(760)

(790)

(3,847)

3,440

(2,304)

1,136

7,410

(3,847)

3,563

Property, Plant and Equipment is mainly composed of office furniture, leasehold improvements, and laboratory machinery
and equipment.

The acquisition of BMS was accounted for as an asset deal. The fair value of the assets acquired is concentrated in one
identifiable asset, i.e. the GMP laboratories. The difference between the purchase price and the net assets of BMS at the date
of acquisition is then allocated entirely to the Property, Plant and Equipment.
Finance leases

Lease contracts considered as finance lease relate to some contracts with financial institutions and relate to laboratory and
office equipment. All finance leases have a maturity of three years. A key common feature is that they include an option to
purchase the leased asset at the end of the three-year-lease term. The carrying value of plant and equipment held under
finance leases at 31 December 2016 was €727k (31 December 2015 was €670k). The carrying value corresponds to the net
investment in finance lease at the end of period and includes the purchase option price.

The non-current financial assets are composed of security deposits paid to the lessors of the building leased by the Group

and to Social Security Contribution.

Trade receivable, advances and other current assets

5.8

Non current financial assets

(€'000)

Deposits

Total

5.9

(€'000)

Trade receivable

Advance deposits

Other receivables

Total Trade and Other receivables

Grants and Recoverable Cash Advances

Prepaid expenses

VAT receivable

Other receivables

Total Other current assets

made to the THINK trial clinical vendors.

Advances and grants agreements.

Short term investments

(€'000)

Total

(€'000)

Total

Cash at bank and on hand

As of 31 December

As of 1 January

2014

2016

311

2015

180

As of 31 December

As of 1 January

2016

2015

2014

1,359

663

643

615

393

413

288

199

549

104

544

273

437

1,420

1,254

As of 31 December

As per 1 January

2016

34,230

2015

7,338

2014

As of 31 December

As per 1 January

2014

2016

48,357

2015

100,175

As of 31 December 2016, other receivables mainly relate to credit notes to be received from suppliers and advance deposits

Grants and Recoverable Cash Advances refer to amounts due by the Walloon Region and are related to Recoverable Cash

Impairment of receivables is assessed on an individual basis at the end of each accounting year.

As per 31 December 2016 and 31 December 2015, no receivable was overdue. There were no carrying amounts for trade and

other receivables denominated in foreign currencies and no impairments were recorded.

5.10 Short term investments

Amounts recorded as short term investments in the current assets correspond to short term deposits with fixed interest

rates. Short-term deposits are made for variable periods depending on the short term cash requirements of the Group.

Interest is calculated at the respective short-term deposit rates.

5.11 Cash and cash equivalents

Cash at banks earn interest at floating rates based on daily bank deposit rates.

The credit quality of cash and cash equivalents and short-term deposit balances may be categorised between A-2 and A+

based on Standard and Poor's rating at 31 December 2016.

5.12 Subsidiaries fully consolidated

Name

Nature of Business

Proportion of ordinary

Country of

Incorporation and

Place of Business

shares directly

shares held by the

held by parent (%)

group (%)

shares held by non-

controlling interests

(%)

Celyad Inc

USA

Biopharma

100%

CELYAD • FINANCIAL RESULTS 2016

25%

40%

55%

Discount rate

47%

73%

100%

11%

32%

50%

68%

15%

22%

35%

47%

Even at the lower probability of success and higher discount rate, the recoverable value of the CGU exceeded its carrying

amount as of 31 December 2016.

5.7

Property, plant and equipment

Equipment

Furnitures

Leasehold

1,901

486

(12)

2,375

610

1,065

(51)

3,999

(1,346)

(255)

(1,589)

(380)

(790)

(2,752)

2,375

(1,589)

786

3,999

(2,752)

1,246

167

(17)

150

315

465

(167)

(150)

(33)

(184)

150

(150)

465

(184)

281

590

325

915

2,066

(34)

2,947

(547)

(18)

(565)

(347)

(912)

915

(565)

350

2,947

(912)

2,035

Total

2,658

811

(29)

3,440

2,990

1,065

(85)

7,410

(2,060)

(273)

(2,304)

(760)

(790)

(3,847)

3,440

(2,304)

1,136

7,410

(3,847)

3,563

(€’000)

Cost:

At 1 January 2015

Additions

Disposals

Additions

Disposals

At 31 December 2015

Acquisition of BMS SA

At 31 December 2016

Accumulated depreciation:

At 1 January 2015

Depreciation charge (note 5.26)

Disposals

At 31 December 2015

Depreciation charge (note 5.26)

Acquisition of BMS SA

Disposals

At 31 December 2016

Net book value

Cost

Accumulated depreciation

As at 31 December 2015

Cost

Accumulated depreciation

As at 31 December 2016

and equipment.

Finance leases

Property, Plant and Equipment is mainly composed of office furniture, leasehold improvements, and laboratory machinery

The acquisition of BMS was accounted for as an asset deal. The fair value of the assets acquired is concentrated in one

identifiable asset, i.e. the GMP laboratories. The difference between the purchase price and the net assets of BMS at the date

of acquisition is then allocated entirely to the Property, Plant and Equipment.

Lease contracts considered as finance lease relate to some contracts with financial institutions and relate to laboratory and

office equipment. All finance leases have a maturity of three years. A key common feature is that they include an option to

purchase the leased asset at the end of the three-year-lease term. The carrying value of plant and equipment held under

finance leases at 31 December 2016 was €727k (31 December 2015 was €670k). The carrying value corresponds to the net

investment in finance lease at the end of period and includes the purchase option price.

5.8

Non current financial assets

(€'000)

Deposits

Total

As of 31 December

As of 1 January

2016

311

2015

180

2014

The non-current financial assets are composed of security deposits paid to the lessors of the building leased by the Group
and to Social Security Contribution.
5.9

Trade receivable, advances and other current assets

(€'000)

Trade receivable

Advance deposits

Other receivables

Total Trade and Other receivables

Grants and Recoverable Cash Advances

Prepaid expenses

VAT receivable

Other receivables

Total Other current assets

As of 31 December

As of 1 January

2016

2015

2014

663

643

1,359

615

393

413

288

199

549

104

544

273

437

1,420

1,254

As of 31 December 2016, other receivables mainly relate to credit notes to be received from suppliers and advance deposits
made to the THINK trial clinical vendors.

Grants and Recoverable Cash Advances refer to amounts due by the Walloon Region and are related to Recoverable Cash
Advances and grants agreements.

Impairment of receivables is assessed on an individual basis at the end of each accounting year.

As per 31 December 2016 and 31 December 2015, no receivable was overdue. There were no carrying amounts for trade and
other receivables denominated in foreign currencies and no impairments were recorded.
5.10 Short term investments

(€'000)

Short term investments

Total

As of 31 December

As per 1 January

2016

34,230

2015

7,338

2014

Amounts recorded as short term investments in the current assets correspond to short term deposits with fixed interest
rates. Short-term deposits are made for variable periods depending on the short term cash requirements of the Group.
Interest is calculated at the respective short-term deposit rates.
5.11 Cash and cash equivalents

(€'000)

Cash at bank and on hand

Total

As of 31 December

As per 1 January

2016

48,357

2015

100,175

2014

Cash at banks earn interest at floating rates based on daily bank deposit rates.

The credit quality of cash and cash equivalents and short-term deposit balances may be categorised between A-2 and A+
based on Standard and Poor's rating at 31 December 2016.
5.12 Subsidiaries fully consolidated

Name

Country of
Incorporation and
Place of Business

Nature of Business

Proportion of ordinary
shares directly
held by parent (%)

Proportion of ordinary
shares held by the
group (%)

Proportion of ordinary
shares held by non-
controlling interests
(%)

Celyad Inc

USA

Biopharma

100%

CELYAD • FINANCIAL RESULTS 2016

Oncyte LLC

CorQuest Inc

USA

Biopharma

Medical Device

Biological Manufacturing
Services SA

Belgium

GMP laboratories

100%

Biologicial Manufacturing Services SA (BMS) was acquired in May 2016. BMS owns GMP laboratories. BMS rent its
laboratories to Celyad SA since 2009 and until 30 April 2016. BMS was considered as a related party to Celyad.

Cardio3 Inc was incorporated in 2011 to support clinical and regulatory activities of the Group in the US. Cardio3 Inc was
renamed in Celyad Inc in 2015. The growth of the activities of celyad Inc is associated to the development of the US clinical
and regulatory activities of the Group in the US. Celyad Inc shows a net loss for the year ended 31 December 2016 and 31
December 2015 of respectively $2,634K and $1,144K.

Corquest Inc was acquired on 5 November 2014. Corquest Inc. is developing Heart XS, a new access route to the left atrium.
Oncyte LLC was acquired on 21 January 2015. Oncyte LLC is the company holding the CAR T-Cell portfolio of clinical-stage
immuno-oncology assets. Further details on the acquisition are disclosed in Note 5.13.2.
5.13 Business Combinations

5.13.1 Corquest Medical, Inc.

On 5 November 2014 the Group acquired a 100% interest in CorQuest Medical, Inc. (‘CorQuest’), a US private company
based in Miami (Florida), through a single cash payment of €1.5 million. With this acquisition, the Group intended to
strengthen its Medical Device division. The CorQuest technology platform is fully complementary with Celyad’ C-Cathez®
and C-Cure® programs.

Although no workforce was transferred, this transaction was considered as a business combination since the Group acquired
inputs and processes in the form of intellectual property and will be able to progress this intellectual property further
through the appropriate clinical and regulatory approval processes with the aim of obtaining CE mark approval in 2017 which
would allow commercialisation in Europe. In order to guarantee the transfer of knowledge an exclusive consultancy
agreement was concluded with one of the sellers.

The following table summarises the consideration paid for Corquest as well as the fair value of assets acquired at the
acquisition date.

Consideration at 05 November 2014 (€'000)

Cash

Total consideration transferred

Recognised amounts of identifiable assets acquired (€'000)

Licences & Patents

Trade and Other Receivables

Total identifiable net assets

1,500

1,493

1,500

This acquisition has been subject to a Purchase Price Allocation process which consists in booking, at “fair value”, all the
assets and liabilities of a target company acquired in the consolidated balance sheet of the acquiring company. The acquired
assets and liabilities have been valued at fair value by an independent firm.

The “Licences and Patents” of CorQuest can be considered as its only significant asset. It has been valued using a Risk-
Adjusted Net Present Value (“rNPV”) method. Patents acquired are depreciated over 18 years, corresponding to the
remaining intellectual property protection filed for the first patent application in 2012.

There were no revenues contributed by Corquest Medical, Inc in the consolidated statement of comprehensive loss. Since 5
November 2014 all expenses associated to the development of the assets acquired were incurred by celyad SA.
5.13.2 Oncyte LLC

On 21 January 2015, the Company acquired 100% of the share capital of Oncyte LLC from Celdara Medical LLC in exchange
for a cash consideration of $11 million (of which $6 million paid upfront and $5 million when first cohort of NKR-2 trial is
completed) and 93,087 new shares of Celyad for a total value of $4 million, or (€3,451,680). The fair value of the 93,087
ordinary shares issued as part of the consideration paid for Oncyte LLC was based on a share price of €37.08, the share price
at the acquisition.

Oncyte LLC is the company holding the CAR T-Cell portfolio of clinical-stage immuno-oncology assets. The portfolio
includes three autologous CAR T-Cell cell therapy products and an allogeneic T-Cell platform, targeting a broad range of
cancer indications. CAR T-Cell immuno-oncology represents one of the most promising cancer treatment areas today.

Although no workforce is transferred, this transaction is considered as a business combination since the Group will be able to
produce outputs based on the inputs acquired and processes transferred in the form of intellectual property. The transfer of
knowledge to the Group is guaranteed by the conclusion of a service agreement between the Group and the seller.

This acquisition has been subject to a Purchase Price Allocation, process which consists in booking, at “fair value”, all the

assets and liabilities of a target company acquired in the consolidated balance sheet of the acquiring company. The acquired

assets and liabilities have been valued at fair value by the Group with the assistance of an independent third-party valuation

The following table summarises the consideration paid for Oncyte LLC, the fair value of assets acquired and liabilities

firm.

assumed at the acquisition date.

Consideration ('000)

Cash upfront paid on 21 January 2015

Equity instruments (93,087 ordinary shares)

Deferred cash payment

Contingent Consideration

CTA

Total consideration transferred

Goodwill

In-Process Research and Development

Total identifiable net assets

Recognised amounts of identifiable assets acquired and liabilities assumed ('000)

USD

6,000

4,000

5,000

27,896

42,896

USD

1,096

41,800

42,896

EUR

5,186

3,452

4,576

25,529

514

39,257

EUR

1,003

38,254

39,257

The sales price also includes a contingent consideration payment, the potential remaining part of the purchase price, based

on future outcome of the research and development and potential future sales that are estimated at year end 2016, through

a risk-adjusted Net Present Value, at $29.7 million, considering the impact of the discount and the probability of success

(€28.2 million). For the successful development of the most advanced product CAR-T NKR-2, the seller could receive up to

$45 million in development and regulatory milestones until market approval. The seller will be eligible to additional payments

on the other products upon achievement of development and regulatory milestones totalling up to $36.5 million per product.

In addition, the seller will receive up to $80 million in sales milestones when net sales will exceed $1 billion and royalties

ranging from 5 to 8%.

No deferred taxes have been taken up in the overview of fair value of assets acquired and liabilities assumed since the

company elected for IRS Section 338 which lead to creating a tax deductible depreciation in the US Tax books.

Except the contingent consideration resulting from the business combination mentioned above, the carrying amount of all

other financial assets and financial liabilities is a reasonable approximation of the fair value. There were no changes in

valuation techniques during the period.

(€'000)

Assets

Total Assets

Liabilities

Contingent consideration

Total Liabilities

Level I

Level II

Level III

Total

28,179

Fair value measurements using significant unobservable inputs (Level 3):

(€'000)

Opening balanace at 1st January 2015

Acquisition of OnCyte LLC

Closing balance at 31 December 2015

Year end 2016 Fair value adjsutment

CTA

Closing balance at 31 December 2016

Contingent consideration in a business

combination

25,529

1,715

935

28,179

The 2016 fair value adjustment of the contingent liability resulted from the progresses made in the clinical development of

CAR-NKR-2 and therefore the increase of likelihood of the payment of the next clinical development milestones.

CELYAD • FINANCIAL RESULTS 2016

USA

Biopharma

Medical Device

100%

Biological Manufacturing

Belgium

GMP laboratories

Oncyte LLC

CorQuest Inc

Services SA

Biologicial Manufacturing Services SA (BMS) was acquired in May 2016. BMS owns GMP laboratories. BMS rent its

laboratories to Celyad SA since 2009 and until 30 April 2016. BMS was considered as a related party to Celyad.

Cardio3 Inc was incorporated in 2011 to support clinical and regulatory activities of the Group in the US. Cardio3 Inc was

renamed in Celyad Inc in 2015. The growth of the activities of celyad Inc is associated to the development of the US clinical

and regulatory activities of the Group in the US. Celyad Inc shows a net loss for the year ended 31 December 2016 and 31

December 2015 of respectively $2,634K and $1,144K.

Corquest Inc was acquired on 5 November 2014. Corquest Inc. is developing Heart XS, a new access route to the left atrium.

Oncyte LLC was acquired on 21 January 2015. Oncyte LLC is the company holding the CAR T-Cell portfolio of clinical-stage

immuno-oncology assets. Further details on the acquisition are disclosed in Note 5.13.2.

5.13 Business Combinations

5.13.1 Corquest Medical, Inc.

On 5 November 2014 the Group acquired a 100% interest in CorQuest Medical, Inc. (‘CorQuest’), a US private company

based in Miami (Florida), through a single cash payment of €1.5 million. With this acquisition, the Group intended to

strengthen its Medical Device division. The CorQuest technology platform is fully complementary with Celyad’ C-Cathez®

and C-Cure® programs.

Although no workforce was transferred, this transaction was considered as a business combination since the Group acquired

inputs and processes in the form of intellectual property and will be able to progress this intellectual property further

through the appropriate clinical and regulatory approval processes with the aim of obtaining CE mark approval in 2017 which

would allow commercialisation in Europe. In order to guarantee the transfer of knowledge an exclusive consultancy

agreement was concluded with one of the sellers.

The following table summarises the consideration paid for Corquest as well as the fair value of assets acquired at the

acquisition date.

Consideration at 05 November 2014 (€'000)

Cash

Total consideration transferred

Recognised amounts of identifiable assets acquired (€'000)

Licences & Patents

Trade and Other Receivables

Total identifiable net assets

This acquisition has been subject to a Purchase Price Allocation process which consists in booking, at “fair value”, all the

assets and liabilities of a target company acquired in the consolidated balance sheet of the acquiring company. The acquired

assets and liabilities have been valued at fair value by an independent firm.

The “Licences and Patents” of CorQuest can be considered as its only significant asset. It has been valued using a Risk-

Adjusted Net Present Value (“rNPV”) method. Patents acquired are depreciated over 18 years, corresponding to the

remaining intellectual property protection filed for the first patent application in 2012.

There were no revenues contributed by Corquest Medical, Inc in the consolidated statement of comprehensive loss. Since 5

November 2014 all expenses associated to the development of the assets acquired were incurred by celyad SA.

5.13.2 Oncyte LLC

On 21 January 2015, the Company acquired 100% of the share capital of Oncyte LLC from Celdara Medical LLC in exchange

for a cash consideration of $11 million (of which $6 million paid upfront and $5 million when first cohort of NKR-2 trial is

completed) and 93,087 new shares of Celyad for a total value of $4 million, or (€3,451,680). The fair value of the 93,087

ordinary shares issued as part of the consideration paid for Oncyte LLC was based on a share price of €37.08, the share price

at the acquisition.

Oncyte LLC is the company holding the CAR T-Cell portfolio of clinical-stage immuno-oncology assets. The portfolio

includes three autologous CAR T-Cell cell therapy products and an allogeneic T-Cell platform, targeting a broad range of

cancer indications. CAR T-Cell immuno-oncology represents one of the most promising cancer treatment areas today.

Although no workforce is transferred, this transaction is considered as a business combination since the Group will be able to

produce outputs based on the inputs acquired and processes transferred in the form of intellectual property. The transfer of

knowledge to the Group is guaranteed by the conclusion of a service agreement between the Group and the seller.

This acquisition has been subject to a Purchase Price Allocation, process which consists in booking, at “fair value”, all the
assets and liabilities of a target company acquired in the consolidated balance sheet of the acquiring company. The acquired
assets and liabilities have been valued at fair value by the Group with the assistance of an independent third-party valuation
firm.

The following table summarises the consideration paid for Oncyte LLC, the fair value of assets acquired and liabilities
assumed at the acquisition date.

Consideration ('000)

Cash upfront paid on 21 January 2015

Equity instruments (93,087 ordinary shares)

Deferred cash payment

Contingent Consideration

CTA

Total consideration transferred

Recognised amounts of identifiable assets acquired and liabilities assumed ('000)

Goodwill

In-Process Research and Development

Total identifiable net assets

USD

6,000

4,000

5,000

27,896

42,896

USD

1,096

41,800

42,896

EUR

5,186

3,452

4,576

25,529

514

39,257

EUR

1,003

38,254

39,257

The sales price also includes a contingent consideration payment, the potential remaining part of the purchase price, based
on future outcome of the research and development and potential future sales that are estimated at year end 2016, through
a risk-adjusted Net Present Value, at $29.7 million, considering the impact of the discount and the probability of success
(€28.2 million). For the successful development of the most advanced product CAR-T NKR-2, the seller could receive up to
$45 million in development and regulatory milestones until market approval. The seller will be eligible to additional payments
on the other products upon achievement of development and regulatory milestones totalling up to $36.5 million per product.
In addition, the seller will receive up to $80 million in sales milestones when net sales will exceed $1 billion and royalties
ranging from 5 to 8%.

No deferred taxes have been taken up in the overview of fair value of assets acquired and liabilities assumed since the
company elected for IRS Section 338 which lead to creating a tax deductible depreciation in the US Tax books.

Except the contingent consideration resulting from the business combination mentioned above, the carrying amount of all
other financial assets and financial liabilities is a reasonable approximation of the fair value. There were no changes in
valuation techniques during the period.

1,500

1,493

1,500

(€'000)

Assets

Total Assets

Liabilities

Contingent consideration

Total Liabilities

Level I

Level II

Level III

Total

28,179

Fair value measurements using significant unobservable inputs (Level 3):

(€'000)

Opening balanace at 1st January 2015

Acquisition of OnCyte LLC

Closing balance at 31 December 2015

Year end 2016 Fair value adjsutment

CTA

Closing balance at 31 December 2016

Contingent consideration in a business
combination

25,529

1,715

935

28,179

The 2016 fair value adjustment of the contingent liability resulted from the progresses made in the clinical development of
CAR-NKR-2 and therefore the increase of likelihood of the payment of the next clinical development milestones.

CELYAD • FINANCIAL RESULTS 2016

Sensitivity analysis performed on the main assumptions driving the fair value of the contingent consideration:

Discount rate

15,5%

16,5%

17,5%

18,5%

19,5%

Cont. consideration (MUSD)

31,42

29,59

27,90

26,32

24,86

Impact (%)

-6%

Sales

80%

90%

100%

110%

120%

Cont. consideration (MUSD)

24,76

26,33

27,90

30,04

32,00

Impact (%)

-6%

Probabilities

98%

99%

100%

101%

102%

Cont. consideration (MUSD)

26,05

26,96

27,90

28,86

29,85

Impact (%)

-3%

5.14 Share Capital

The number of shares issued is expressed in units.

Number of ordinary shares

Share Capital (€'000)

Total number of issued and outstanding shares

Total share capital (€'000)

As of 31 December

2016

2015

9,313,603

32,571

9,313,603

32,571

9,313,603

32,571

9,313,603

32,571

As of 31 December 2016, the share capital amounts to €32,571k represented by 9,313,603 fully authorized and subscribed
and paid-up shares with a nominal value of €3.50. This number does not include warrants issued by the Company and granted
to certain directors, employees and non-employees of the Company.

History of the capital of the Company

The Company has been incorporated on 24 July 2007 with a share capital of €62,500 by the issuance of 409,375 class A
shares. On 31 August 2007, the Company has issued 261,732 class A shares to Mayo Clinic by way of a contribution in kind of
the upfront fee that was due upon execution of the Mayo Licence for a total amount of €9,500,000.

Round B Investors have participated in a capital increase of the Company by way of a contribution in kind of a convertible loan
(€2,387,049) and a contribution in cash (€4,849,624 of which €1,949,624 uncalled) on 23 December 2008; 204,652 class B
shares have been issued at the occasion of that capital increase. Since then, the capital is divided in 875,759 shares, of which
671,107 are class A shares and 204,652 are class B shares.

On 29 October 2010, the Company closed its third financing round resulting in a capital increase totalling €12,100,809. The
capital increase can be detailed as follows:

capital increase in cash by certain existing investors for a total amount of €2,609,320.48 by the issuance of 73,793
class B shares at a price of €35.36 per share;
capital increase in cash by certain existing investors for a total amount of €471,240 by the issuance of 21,000 class
B shares at a price of €22.44 per share;
capital increase in cash by certain new investors for a total amount of €399,921.60 by the issuance of 9,048 class B
shares at a price of €44.20 per share;
exercise of 12,300 warrants (“Warrants A”) granted to the Round C investors with total proceeds of €276,012 and
issuance of 12,300 class B shares. The exercise price was €22.44 per Warrant A;
contribution in kind by means of conversion of the loan C for a total amount of €3,255,524.48 (accrued interest
included) by the issuance of 92,068 class B shares at a conversion price of €35.36 per share;

•

contribution in kind by means of conversion of the loan D for a total amount of €2,018,879.20 (accrued interest

included) by the issuance of 57,095 class B shares at a conversion price of €35.36 per share. The loan D is a

convertible loan granted by certain investors to the Company on 14 October 2010 for a nominal amount of

contribution in kind of a payable towards Mayo Foundation for Medical Education and Research for a total amount of

€3,069,911 by the issuance of 69,455 class B shares at a price of €44.20 per share. The payable towards Mayo Clinic

was related to (i) research undertaken by Mayo Clinic in the years 2009 and 2010, (ii) delivery of certain materials, (iii)

expansion of the Mayo Clinical Technology Licence Contract by way the Second Amendment dated 18 October

•

€2,010,000.

2010.

On 5 May 2011, pursuant the decision of the Extraordinary General Meeting, the capital was reduced by an amount of

€18,925,474 equivalent to the outstanding net loss as of 31 December 2010.

On 31 May 2013, the Company closed its fourth financing round, the ‘Round D financing’. The convertible loans E, F, G and H

previously recorded as financial debt were converted in shares which led to an increase in equity for a total amount of

€28,645k of which € 5,026k is accounted for as capital and € 6,988k as share premium. The remainder (€ 16,613k) is

accounted for as other reserves. Furthermore, a contribution in cash by existing shareholders of the Company led to an

increase in share capital and issue premium by an amount of €7,000k.

At the Extraordinary Shareholders Meeting of 11 June 2013 all existing classes of shares of the Company have been

converted into ordinary shares. Preferred shares have been converted at a 1 for 1 ratio and subsequently.

On 5 July 2013, the Company completed its Initial Public Offering. The Company issued 1,381,500 new shares at €16.65 per

shares, corresponding to a total of €23,002k.

On 15 July 2013, the over-allotment option was fully exercised for a total amount of €3,450k corresponding to 207,225 new

shares. The total IPO proceeds amounted to €26,452k and the capital and the share premium of the Company increased

accordingly. The costs relating to the capital increases performed in 2013 amounted to €2.8 million and are presented in

deduction of share premium.

On 11 June 2013, the Extraordinary General Shareholders’ Meeting of Celyad SA authorized the Board of Directors to

increase the share capital of the Company, in one or several times, and under certain conditions set forth in extenso in the

articles of association. This authorization is valid for a period of five years starting on 26 July 2013 and until 26 July 2018. The

Board of Directors may increase the share capital of the Company within the framework of the authorized capital for an

amount of up to €21,413k.

Over the course of 2014, the capital of the Company was increased in June 2014 by way of a capital increase of €25,000k

represented by 568,180 new shares fully subscribed by Medisun International Limited.

In 2014, the capital of the Company was also increased by way of exercise of Company warrants. Over four different exercise

periods, 139,415 warrants were exercised resulting in the issuance of 139,415 new shares. The capital and the share

premium of the Company were therefore increased respectively by €488k and €500k.

In January 2015, the shares of Oncyte LLC were contributed to the capital of the Company, resulting in a capital increase of

€3,452k and the issuance of 93,087 new shares.

In 2015, the Company conducted two fund raising. A private placement was closed in March resulting in a capital increase of

€31,745k represented by 713,380 new shares. The Company also completed an IPO on Nasdaq in June, resulting in a capital

increase of €87,965k represented by 1,460,000 new shares.

Also in 2015, the capital of the Company was also increased by way of exercise of Company warrants. Over three different

exercise periods, 6,749 warrants were exercised resulting in the issuance of 6,749 new shares. The capital and the share

premium of the Company were therefore increased respectively by €23k and €196k.

There was no capital increase in 2016. As of 31 December 2016 all shares issued have been fully paid.

The following share issuances occurred since the incorporation of the Company: